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REVISED PRELIMINARY COPY. CONFIDENTIAL, FOR
USE OF THE COMMISSION ONLY
REGISTRATION NO. [ ]
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10
------------------------
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(B) OR (G) OF
THE SECURITIES EXCHANGE ACT OF 1934
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NEW RALCORP HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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MISSOURI 43-1668051
(State of Incorporation) (I.R.S. Employer Identification No.)
800 MARKET ST., 63101
ST. LOUIS, MISSOURI (Zip Code)
(Address of Principal Executive Offices)
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(314) 877-7000
(Registrant's Telephone Number, Including Area Code)
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Securities to be registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE ON WHICH
TITLE OF EACH CLASS TO BE SO REGISTERED
EACH CLASS IS TO BE REGISTERED
Common Stock, $.01 par value.......................New York Stock Exchange, Inc.
Common Stock Purchase Rights.......................New York Stock Exchange, Inc.
Securities to be registered pursuant to Section 12(g) of the Act: None
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NEW RALCORP HOLDINGS, INC.
I. INFORMATION INCLUDED IN INFORMATION STATEMENT
CROSS-REFERENCE SHEET BETWEEN INFORMATION STATEMENT
AND ITEMS OF FORM 10
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ITEM
NO. ITEM CAPTION LOCATION IN INFORMATION STATEMENT
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1. Business.................................. BUSINESS SEGMENT INFORMATION; BUSINESS AND
PROPERTIES
2. Financial Information..................... SUMMARY SELECTED HISTORICAL FINANCIAL
INFORMATION; DISCUSSION OF UNAUDITED PRO
FORMA COMBINED FINANCIAL INFORMATION;
UNAUDITED PRO FORMA COMBINED FINANCIAL
INFORMATION; MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS; BUSINESS SEGMENT
INFORMATION
3. Properties................................ BUSINESS AND PROPERTIES--Properties
4. Security Ownership of Certain Beneficial
Owners and Management..................... SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS OF NEW RALCORP STOCK
5. Directors and Executive Officers.......... MANAGEMENT
6. Executive Compensation.................... EXECUTIVE COMPENSATION
7. Certain Relationships and Related
Transactions.............................. AGREEMENTS AMONG RALCORP, GENERAL MILLS,
AND NEW RALCORP; CERTAIN TRANSACTIONS
8. Legal Proceedings......................... BUSINESS AND PROPERTIES--Litigation
9. Market Price of and Dividends on the
Registrant's Common Equity and Related
Stockholder Matters....................... THE DISTRIBUTION--Listing and Trading of
New Ralcorp Common Stock
11. Description of Registrant's Securities to
be Registered............................. DESCRIPTION OF NEW RALCORP CAPITAL STOCK;
ANTI-TAKEOVER EFFECTS OF CERTAIN
PROVISIONS
12. Indemnification of Directors and
Officers.................................. INDEMNIFICATION OF OFFICERS AND DIRECTORS
OF NEW RALCORP
13. Financial Statements and Supplementary
Data...................................... INDEX TO FINANCIAL INFORMATION
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II. INFORMATION NOT INCLUDED IN INFORMATION STATEMENT
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
New Ralcorp Holdings, Inc. ("New Ralcorp") was incorporated as a Missouri
corporation on October 23, 1996. It issued 1000 shares of its $.01 par value
common stock to Ralcorp Holdings, Inc. ("Ralcorp"), a Missouri corporation, on
that date in consideration of Ralcorp's capital contribution of $10. Such
issuance was exempt from registration under the Securities Act of 1933, as
amended, pursuant to Section 4(2) thereof because such issuance did not involve
any public offering of securities.
ITEM 14. DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements -- See Index to Financial Information
(b) Exhibits:
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EXHIBIT NO. DESCRIPTION
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2.1 Form of Reorganization Agreement
2.2 Form of Tax Sharing Agreement
2.3 Form of Transition Services--Supply Agreement
2.4 Form of Technology Agreement
2.5 Form of Trademark Agreement
2.6 Form of Agreement and Plan of Merger
3.1 Form of Articles of Incorporation of New Ralcorp Holdings, Inc.
3.2 Form of Bylaws of New Ralcorp Holdings, Inc.
4.1 Form of Shareholder Protection Rights Agreement between New Ralcorp
Holdings, Inc. and Boatmen's Trust Company, as Rights Agent
10.01 Form of New Ralcorp Incentive Stock Plan
10.02 Forest Services Permits (P)
10.03 Form of Management Continuity Agreement
10.04 Form of Employment Agreement For Mr. Joe R. Micheletto
10.05(a) Form of Employment Agreement for Mr. James A. Nichols
10.05(b) Form of Employment Agreement for Mr. Kevin J. Hunt
10.05(c) Form of Employment Agreement for Mr. Robert W. Lockwood
10.05(d) Form of Employment Agreement for Mr. David P. Skarie
10.06 Change in Control Severance Plan
10.07 Split Dollar Second to Die Life Insurance Arrangement
10.08 Deferred Compensation Plan For Non-Management Directors
10.09 Deferred Compensation Plan For Key Employees
10.10 Executive Life Insurance Plan
10.11 Executive Health Plan
10.12 Executive Long Term Disability Plan
10.13 Form of Indemnification Agreement
10.14 Supplemental Retirement Plan
10.15 Executive Savings Investment Plan
10.16 Stock Purchase Agreement By and Among Vail Resorts, Inc., Ralston Foods,
Inc. and Ralston Resorts, Inc. dated July 22, 1996.
21 List of New Ralcorp Subsidiaries
27 Financial Data Schedule
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SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned thereunto duly authorized.
NEW RALCORP HOLDINGS, INC.
By: /s/ Joe R. Micheletto
------------------------------------
Joe R. Micheletto
Chief Executive Officer and
President
December 27, 1996
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INFORMATION STATEMENT
RALCORP HOLDINGS, INC.
SPINOFF OF
NEW RALCORP
THROUGH A COMMON STOCK DISTRIBUTION
We are sending you this Information Statement together with a separate
Proxy Statement-Prospectus, which describes the proposed sale of Ralcorp's
brand-name cereals and snacks businesses to General Mills, Inc. We intend to
accomplish that transaction by transferring all our other businesses to a new
company (New Ralcorp), spinning off New Ralcorp to our shareholders, and then
merging the remaining brand-name cereals and snacks businesses with General
Mills.
This Information Statement provides important information on the business
and financial condition of New Ralcorp after the spinoff and merger. You should
read the entire document very carefully. For a more detailed description of the
new company's businesses, please review the pro forma financial information
beginning on page 7 and the section Business and Properties beginning on page
45. Because we are a new company with no operating history, pay particular
attention to Risk Factors beginning on page 15. For more detailed information on
the spinoff and merger, see the Proxy Statement-Prospectus.
We are asking our shareholders to vote in favor of a tax-free spinoff and
merger that, if approved, will result in the following changes.
AFTER THE SPINOFF
New Ralcorp will own and operate:
- the private label cereal business;
- the Beech-Nut baby food business;
- the Bremner cracker and cookie business; and
- three ski resorts in Colorado.
We have agreed to sell the ski resorts to Vail Resorts, Inc. before or soon
after the spinoff and merger are complete if the appropriate governmental and/or
court approvals are obtained.
AFTER THE MERGER
Ralcorp will:
- own and operate only the branded cereals and snack mix businesses;
- merge with a subsidiary of General Mills; and
- be owned by General Mills.
Neither the spinoff nor the merger will occur unless both the spinoff and
the merger are approved by the Ralcorp shareholders. If both are approved at the
shareholders' meeting, we expect them to occur on January 31, 1997. If you own
Ralcorp common stock on the date the spinoff and merger occur, we will mail you
new stock certificates to represent your ownership in New Ralcorp. It is a share
for share exchange. Also, General Mills will send you instructions on exchanging
each share of Ralcorp common stock you own on the date the spinoff and merger
occur for a fractional share of General Mills common stock.
We expect New Ralcorp's common stock to trade on the New York Stock
Exchange under the symbol "RAH." New Ralcorp will change its name to Ralcorp
Holdings, Inc., after the spinoff and merger are complete.
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NEITHER THE SEC NOR ANY STATE SECURITIES REGULATORS HAVE APPROVED THE NEW
RALCORP COMMON STOCK TO BE ISSUED OR DETERMINED IF THIS DOCUMENT IS ACCURATE OR
ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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THIS INFORMATION STATEMENT WAS FIRST MAILED TO SHAREHOLDERS ON DECEMBER 30,
1996.
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INFORMATION STATEMENT
TABLE OF CONTENTS
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DESCRIPTION PAGE
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QUESTIONS AND ANSWERS ABOUT THE SPINOFF OF
NEW RALCORP COMMON STOCK.................. 1
SUMMARY OF CERTAIN INFORMATION.............. 2
DISCUSSION OF UNAUDITED PRO FORMA COMBINED
FINANCIAL INFORMATION..................... 4
UNAUDITED PRO FORMA COMBINED FINANCIAL
INFORMATION............................... 7
SUMMARY SELECTED HISTORICAL FINANCIAL
INFORMATION............................... 11
WHERE YOU CAN FIND MORE INFORMATION......... 12
INTRODUCTION................................ 13
RISK FACTORS................................ 15
No Operating History as an Independent
Company; Pro forma and Projected
Losses.................................. 15
Retention of Contingent Liabilities
Associated with Divested Operations..... 15
No Prior Market for New Ralcorp Common
Stock................................... 15
Absence of Dividends...................... 16
Certain Anti-takeover Effects............. 16
Certain Federal Income Tax
Considerations.......................... 16
Indemnification Agreement with General
Mills................................... 16
Requirement of New Ralcorp to Maintain a
Minimum Net Worth....................... 17
Competition Has Intensified in the Cereal
Category................................ 17
Prices of Key Ingredients Can Be
Volatile................................ 17
Significant Ownership of Vail Stock If
Resort Operations Sold.................. 18
High Debt Level and Restrictive Covenants
if Resort Operations Not Sold........... 18
Financial Risks Associated with Operating
Ski Resorts............................. 18
Inability to Attract or Retain Key
Personnel............................... 18
THE DISTRIBUTION............................ 19
Background and Reasons for the
Distribution............................ 19
Manner of Effecting the Distribution...... 19
Certain Federal Income Tax
Considerations.......................... 20
Listing and Trading of New Ralcorp Common
Stock................................... 22
Disposition of New Ralcorp Common Stock
Received by Benefit Plans............... 23
REGULATORY APPROVALS........................ 23
AGREEMENTS AMONG RALCORP, GENERAL MILLS AND
NEW RALCORP............................... 24
Reorganization Agreement.................. 24
Terms of the Other Ancillary Agreements... 28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS................................ 35
Overview.................................. 35
Operating Results......................... 36
Fiscal 1996 Compared to Fiscal 1995....... 36
Fiscal 1995 Compared to Fiscal 1994....... 38
Liquidity and Capital Resources........... 39
Outlook................................... 41
Environmental Matters..................... 41
Accounting Pronouncements................. 42
Inflation................................. 42
Cautionary Statement on Forward-Looking
Statements.............................. 42
BUSINESS SEGMENT INFORMATION................ 44
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DESCRIPTION PAGE
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BUSINESS AND PROPERTIES..................... 45
Overview.................................. 45
Strategy.................................. 45
Private Label Cereal Business............. 46
Baby Food Business........................ 46
Cracker and Cookie Business............... 46
Resort Operations......................... 47
Competition............................... 47
Employees................................. 48
Potential Adverse Effects of Economic
Slowdown................................ 48
Raw Materials............................. 48
Governmental Regulation; Environmental
Matters................................. 48
Properties................................ 49
Litigation................................ 49
Cautionary Statement on Forward-Looking
Statements.............................. 50
DESCRIPTION OF CERTAIN NEW RALCORP
INDEBTEDNESS.............................. 50
MANAGEMENT.................................. 52
Directors of New Ralcorp.................. 52
Directors' Meetings, Fees and
Committees.............................. 53
Executive Officers of New Ralcorp......... 54
EXECUTIVE COMPENSATION...................... 55
Introduction and Summary.................. 55
Stock Options............................. 56
Compensation Pursuant to Plans............ 57
Employment/Severance Agreements........... 57
Retirement Plan........................... 58
Incentive Stock Plan...................... 59
Savings Investment Plan................... 61
Deferred Compensation Plan for Key
Employees............................... 62
Other Benefit Plans....................... 62
CERTAIN TRANSACTIONS........................ 63
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS OF NEW RALCORP COMMON STOCK........ 64
DESCRIPTION OF NEW RALCORP CAPITAL STOCK.... 66
Authorized Capital Stock.................. 66
New Ralcorp Common Stock.................. 66
New Ralcorp Preferred Stock............... 66
Common Stock Purchase Rights.............. 66
ANTI-TAKEOVER EFFECTS OF CERTAIN
PROVISIONS................................ 68
Limitations on Changes in Board
Composition and Other Actions by
Shareholders............................ 68
Preferred and Common Stock................ 69
Fair Price Provisions..................... 70
Amendment of Certain Provisions of the New
Ralcorp Articles and Bylaws............. 70
Rights.................................... 70
Management Continuity Agreements; Other
Severance Arrangements.................. 70
Statutory Provisions...................... 70
INDEMNIFICATION OF OFFICERS AND DIRECTORS OF
NEW RALCORP............................... 70
SHAREHOLDER PROPOSALS....................... 71
INDEPENDENT ACCOUNTANTS..................... 71
INDEX OF DEFINED TERMS...................... 72
INDEX TO FINANCIAL INFORMATION.............. F-i
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QUESTIONS AND ANSWERS ABOUT
THE SPINOFF OF NEW RALCORP COMMON STOCK
Q. WHEN WILL THE SPINOFF OCCUR?
A: If the Ralcorp shareholders approve the spinoff and merger, the parties will
complete the transactions as soon as possible. Currently, the parties
anticipate completing the spinoff and the merger on the last business day of
the month in which shareholder approval is received (anticipated to be
January 31, 1997). You should receive your New Ralcorp common stock
certificate within several weeks after the completion of the transactions.
Q. WHAT BUSINESSES WILL NEW RALCORP OWN?
A. After the spinoff, New Ralcorp will own the private label cereal and cracker
and cookie businesses and Beech-Nut baby food business currently owned by
Ralcorp. Additionally, if Ralcorp's ski resort operations are sold prior to
the spinoff, New Ralcorp will own approximately 22% of Vail Resorts common
stock. If the sale is not completed prior to the spinoff, New Ralcorp will
also own the ski operations currently owned by Ralcorp. Please read the
information on New Ralcorp's businesses and the associated risks beginning on
pages 45 and 15.
Q. WHAT WILL I RECEIVE IN THE SPINOFF?
A. For every share of Ralcorp stock, you will receive one share of New Ralcorp
common stock. You will also receive a common stock purchase right similar to
the rights you have with your existing Ralcorp shares. These rights are
designed to encourage a potential acquiror of a large percentage of New
Ralcorp common stock to negotiate with the New Ralcorp Board of Directors
before making a large purchase. They are also designed to protect
shareholders in the event that someone makes a large purchase of New Ralcorp
common stock that the New Ralcorp Board of Directors concludes is not in the
best interests of the Company and its shareholders. A description of the
rights begins on page 66.
Q. WILL NEW RALCORP PAY DIVIDENDS?
A. The Board of Directors does not expect to pay cash dividends on New Ralcorp
stock. New Ralcorp expects to incur a loss in fiscal year 1997 and any excess
cash will be used to fund working capital, future acquisitions and capital
expenditures, and purchase its own stock.
Q. DO I HAVE TO PAY TAXES ON THE RECEIPT OF NEW RALCORP COMMON STOCK?
A. The spinoff of New Ralcorp common stock will be tax-free to Ralcorp
shareholders for federal income tax purposes. To review the tax consequences
of the spinoff and merger in greater detail, see page 20.
Q. WILL MY NEW RALCORP STOCK BE LISTED ON THE NEW YORK STOCK EXCHANGE?
A. Yes, we anticipate that New Ralcorp common stock will be trading under the
symbol "RAH" subject to official notice.
Q. WHAT HAPPENS TO MY EXISTING RALCORP STOCK?
A. You will receive written instructions for exchanging your existing Ralcorp
stock for shares of General Mills common stock.
Q. WHAT WILL HAPPEN TO THE TRADING OF RALCORP AND NEW RALCORP STOCK?
A. Beginning on or about January 29, 1997, and continuing through January 31,
1997, you will only be able to sell your Ralcorp stock with due bills for New
Ralcorp stock. This means that you will give up your right to receive New
Ralcorp stock if you sell your Ralcorp stock during this time. The New
Ralcorp stock certificates will have to be delivered by the seller to the
buyer once the seller receives the certificates. After January 31, 1997,
there will be no trading in Ralcorp stock.
Beginning on or about February 3, 1997, we expect that investors will be able
to buy and sell New Ralcorp stock on a when-issued basis until the actual
certificates are available.
You should consult your own financial advisors before you attempt to make any
of these types of sales and make sure that these advisors understand your
intentions with respect to the sale.
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SUMMARY OF CERTAIN INFORMATION
This summary highlights selected information from this document. It may not
contain all of the information that is important to you. To better understand
the transactions and for a more complete description of the legal terms of the
spinoff and the merger, you should read carefully this entire document, the
Proxy Statement-Prospectus relating to the merger, and other documents referred
to in the summary.
THE SPINOFF
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If you have questions about Ralcorp, New If you have questions about the mailing or
Ralcorp or your stockholdings in either receipt of your New Ralcorp stock
company, please contact: certificates, please contact:
Ralcorp Holdings, Inc. Boatmen's Trust Company
800 Market Street, Suite 2900 100 North Broadway
St. Louis, Missouri 63101 St. Louis, Missouri 63101
(314) 877-7046 (314) 466-3000
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WHY RALCORP IS DISTRIBUTING NEW RALCORP COMMON STOCK
General Mills and Ralcorp have agreed that General Mills will acquire the
Ralcorp business which manufactures and sells branded cereals and snack mix,
which we refer to as the "Branded Business." In order to separate the Branded
Business from the rest of the Ralcorp businesses, it is necessary to transfer
these other businesses to a new subsidiary (New Ralcorp) and distribute the
shares of New Ralcorp to our shareholders.
The stock of New Ralcorp will be distributed to existing Ralcorp
shareholders as a dividend, leaving behind only the Branded Business in Ralcorp
and another new Ralcorp subsidiary. We refer to this other Ralcorp subsidiary as
the "Branded Subsidiary." New Ralcorp will own all of Ralcorp's businesses
except the Branded Business at the time of this distribution, which is commonly
referred to as a spinoff.
Immediately after the spinoff, General Mills will exchange its common stock
for Ralcorp common stock. As a result, General Mills will own Ralcorp and the
Branded Subsidiary. Former Ralcorp shareholders will retain their interest in
the businesses to be run by New Ralcorp. Additionally, former Ralcorp
shareholders will own General Mills common stock.
New Ralcorp will change its name to Ralcorp Holdings, Inc.
THE NEW RALCORP BUSINESSES
After completion of the spinoff and the merger, New Ralcorp will focus on
private label consumer products and baby foods. Management believes that the new
focus, along with a planned reduction in its cost structure, will enhance the
prospects for profitability in these businesses.
Private Label Cereal Business. New Ralcorp will remain in the private label
cereal business, where it holds an estimated 55% to 60% of the sales volume in
the private label, ready-to-eat cereal segment. Excluding New Ralcorp's
Keystone, Breckenridge and Arapahoe Basin ski resorts in Colorado (Resort
Operations), it is expected that approximately 50% of New Ralcorp's total sales
will come from this business.
Baby Food Business. New Ralcorp's Beech-Nut baby food business is the
second largest manufacturer of baby food, juices and cereals in the United
States. Excluding Resort Operations, it is expected that about 33% of New
Ralcorp's total sales will be generated from this business.
Bremner Cracker and Cookie Business. New Ralcorp will continue
manufacturing private label crackers and cookies and Ry-Krisp brand crackers for
sale in the United States. Management believes that New Ralcorp is a leader in
this business. New Ralcorp has recently expanded its product lines to include
shredded
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wheat crackers. Excluding Resort Operations, management expects this business
will generate about 17% of New Ralcorp's total sales.
Resort Operations. New Ralcorp will continue to own the Keystone,
Breckenridge and Arapahoe Basin ski resorts in Colorado. New Ralcorp has decided
to sell the ski resorts to Vail Resorts, Inc. (Vail). The transaction is subject
to governmental approval and possibly court approval which may or may not be
received. If the transaction is approved, Vail will pay for the ski resorts by
issuing common stock to New Ralcorp representing approximately 22% of the
outstanding stock of Vail and assuming the ski resorts' debt. If the transaction
is not approved, management will review whether to retain the ski resorts and
operate them as a core business or explore other strategic alternatives with
respect to the ski resorts.
RELATIONSHIP BETWEEN NEW RALCORP AND GENERAL MILLS AFTER THE SPINOFF AND MERGER
After the spinoff, New Ralcorp will be a separate company. Ralcorp, General
Mills and New Ralcorp will enter into agreements to help in the separation and
transition of the Branded Business. The agreements deal with many operational
issues, including:
(a) the separation of the Branded Business from the remaining businesses;
(b) transitional services to be provided by New Ralcorp to Ralcorp once
Ralcorp is owned by General Mills;
(c) the sharing of technology between the Branded Business and New Ralcorp;
(d) the supply of specific cereal products by New Ralcorp to General Mills
and Ralcorp; and
(e) the allocation of certain tax and other liabilities among New Ralcorp,
General Mills and Ralcorp.
Under these agreements, General Mills and Ralcorp, on one hand, and New
Ralcorp, on the other hand, agree to compensate each other after the spinoff for
certain losses, damages, claims and liabilities resulting from the operations of
the Branded Business. Additionally, General Mills and New Ralcorp will each
agree to reimburse the other for certain tax liabilities. Detailed information
about these agreements can be found in the section titled "AGREEMENTS AMONG
RALCORP, GENERAL MILLS, AND NEW RALCORP."
RISK FACTORS
Shareholders should carefully review the matters discussed under the
section titled "RISK FACTORS."
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NEW RALCORP HOLDINGS, INC.
DISCUSSION OF UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following discussion deals solely with the unaudited pro forma
financial condition and results of operations of the New Ralcorp businesses,
under scenarios that exclude and include the Resort Operations. Although New
Ralcorp management is presently committed to the sale of its Resort Operations
to Vail, it remains a possibility that the contemplated sale will not receive
the requisite governmental approval. Therefore, we discuss New Ralcorp under
both circumstances. Please refer to the section "UNAUDITED PRO FORMA COMBINED
FINANCIAL INFORMATION" for presentation of the unaudited pro forma combined
financial statements and associated pro forma adjustments made to historical
financial information. Since New Ralcorp was not in existence for the period
shown, the unaudited pro forma information may not necessarily reflect future
results of operations or what the results of operations would have been had the
formation of New Ralcorp and its related businesses occurred at the beginning of
the period shown.
OVERVIEW
New Ralcorp manufactures, distributes and markets private label
ready-to-eat and hot cereals, branded baby foods and private label crackers and
cookies in the United States and owns three ski resorts in Colorado. In
addition, if the sale of New Ralcorp's ski resorts is completed, as presently
contemplated, New Ralcorp will maintain a 22% equity interest in Vail. All
industries in which New Ralcorp participates are both highly competitive and
price sensitive. Management, however, believes that a renewed focus on solely
private label consumer food products and branded baby foods, as well as a
significant reduction in the Company's current consumer foods cost structure,
should allow New Ralcorp to operate profitably in the future. New Ralcorp's
businesses including the Resort Operations are expected to maintain a $200
million credit facility (with an initial funded amount expected to be
approximately $137 million) and $28.3 million in pre-existing long-term debt
associated with the Resort Operations. If management determines that a lower
debt level for New Ralcorp is advisable, then Ralcorp may assign General Mills
more than the currently anticipated $210 to $240 million in Ralcorp debt.
However, Ralcorp and General Mills have agreed that General Mills will not
assume more than $300 million in Ralcorp debt. If the sales of the Resort
Operations and the branded ready-to-eat cereal and snack mix businesses are
completed, as currently structured, New Ralcorp will have little or no debt
obligations. In such event, New Ralcorp would maintain a $50 million credit
facility to fund working capital needs.
PRO FORMA RESULTS OF OPERATIONS
Included in the Pro Forma Combined Statement of Earnings for the year ended
September 30, 1996 are significant restructuring and nonrecurring charges. The
restructuring charge reflects New Ralcorp's allocation of certain restructuring
costs related to the Company's private label cereal operations ($14.0 million,
pre-tax) and the nonrecurring charges reflect the impairment of long-lived
assets related to the Company's private label cereal and consumer hot cereal
operations ($109.5 million, pre-tax).
Pro forma sales of the New Ralcorp businesses for the year ended September
30, 1996 were $505.3 million excluding Resort Operations and $640.7 million
including Resort Operations. Pro forma operating loss of the New Ralcorp
businesses, exclusive of Resort Operations, for the year ended September 30,
1996 was $11.3 million, which reflects the difficult operating environment
currently faced by New Ralcorp's private label cereal business, and the fact
that significant planned reductions to New Ralcorp's operating cost structure
have not yet occurred. The Pro Forma Combined Statement of Earnings presents a
revenue base that excludes branded cereals and snacks, while the reflected cost
structure was designed to service a much larger combined branded and private
label consumer foods company. Including Resort Operations, New Ralcorp operating
profit was $11.7 million for the same period. The following provides a
reconciliation of the
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pro forma operating results for the year ended September 30, 1996 to the loss
before income taxes reflected on the Pro Forma Combined Statement of Earnings
for the same period:
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YEAR ENDED
SEPTEMBER 30, 1996
--------------------------
WITHOUT WITH
RESORT RESORT
OPERATIONS OPERATIONS
---------- ----------
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Operating (Loss) Profit............................................... $ (11.3) $ 11.7
------ ------
Restructuring charge.................................................. (14.0) (14.0)
Nonrecurring charges.................................................. (109.5) (109.5)
Interest expense...................................................... (1.0) (11.5)
Equity earnings in Vail Resorts....................................... 4.5
Unallocated Corporate and Miscellaneous expense....................... (10.6) (10.6)
------ ------
(Loss) Earnings before Income Taxes................................... $ (141.9) $ (133.9)
------ ------
Income Taxes.......................................................... (53.0) (49.4)
------ ------
Net (Loss) Earnings................................................... (88.9) (84.5)
Restructuring and Nonrecurring charges, net of tax.................... (77.6) (77.6)
------ ------
Net (Loss) Earnings excluding Restructuring and Nonrecurring
charges............................................................. $ (11.3) $ (6.9)
====== ======
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The pro forma net loss of New Ralcorp, exclusive of Resort Operations and
the previously mentioned restructuring and nonrecurring charges, was $11.3
million for the year ended September 30, 1996. After giving effect to the Resort
Operations earnings, and eliminating the equity earnings in Vail Resorts, the
New Ralcorp pro forma net loss was $6.9 million for fiscal 1996. Management
believes that operating results exclusive of any restructuring or nonrecurring
charges provides the most pertinent presentation of New Ralcorp's operations.
Including the restructuring and nonrecurring charges, the pro forma net loss for
the year ended September 30, 1996 was $88.9 million, excluding Resort
Operations, as reflected on the Pro Forma Combined Statement of Earnings. New
Ralcorp pro forma net loss, including Resort Operations and the restructuring
and nonrecurring charges, was $84.5 million for this same period. Significant in
the determination of New Ralcorp's pro forma net loss is the reduction of
interest expense that will benefit New Ralcorp assuming completion of both
contemplated sale transactions or only the sale of the branded cereal and snack
business. The Pro Forma Combined Statement of Earnings does not reflect a
restructuring charge New Ralcorp expects to record early in fiscal 1997 after
completion of the Merger. See further discussion of this restructuring charge in
the "Outlook" section of this "DISCUSSION OF UNAUDITED PRO FORMA COMBINED
FINANCIAL INFORMATION."
LIQUIDITY AND FINANCIAL CONDITION
New Ralcorp, while a part of the Company, obtained the funds for its
operating and working capital needs through the Company's centrally managed
credit facility and corporate cash management functions. After giving effect to
the spinoff and the merger, New Ralcorp is expected to maintain a $200 million
credit facility and the $28.3 million in pre-existing long-term debt associated
with the Resort Operations. Upon the planned sale of Resort Operations, New
Ralcorp would be essentially debt free. New Ralcorp would not need a long-term
credit facility after the sale of Resort Operations and would instead maintain a
working capital facility estimated at $50 million. Management is presently
negotiating with several lending institutions with respect to its credit
requirements. Management is confident that New Ralcorp will be able to secure
the necessary credit arrangements on satisfactory terms, although the terms may
be more restrictive than those of Ralcorp's current credit facility.
The businesses of New Ralcorp have historically focused on generating
positive cash flows through operations. Management believes that New Ralcorp,
with or without Resort Operations, will continue to generate operating cash flow
through its mix of businesses and expects that future liquidity requirements
will be met through a combination of operating cash flow and strategic use of
borrowings available under credit
5
<PAGE> 12
arrangements. Capital expenditures for fiscal 1997 are expected to be
approximately $25-$30 million or $45-$50 million including Resort Operations. In
future years, management expects to maintain capital spending in line with New
Ralcorp's annual depreciation and amortization expenses, which are estimated to
be approximately $21 million in fiscal 1997 excluding Resort Operations, or
approximately $38 million including Resort Operations.
OUTLOOK
Management expects that New Ralcorp will continue to be negatively affected
by the competitive environment that exists in the ready-to-eat cereal category
which has experienced wholesale price reductions. To be successful, New Ralcorp
must achieve and maintain an effective price gap between its private label
products and the products of top branded cereal competitors. New Ralcorp
management intends to take the steps necessary to remove excess costs from its
cereal operations in order to attain a cost basis that will allow maintenance of
an adequate price gap and still provide a quality alternative to branded
cereals. However, management anticipates that it will take time to identify and
act on those cost saving initiatives, and that during this transition the
financial results of New Ralcorp's cereal operations will be under significant
pressure. Excluding Resort Operations, management anticipates that New Ralcorp
will record an operating loss for fiscal 1997. This loss will be partially
mitigated by anticipated positive operating results from Beech-Nut and Bremner.
Should New Ralcorp operate the ski resort business through the second quarter of
fiscal 1997, the time period in which Resort Operations historically records
more than the entire fiscal year's operating profit, management anticipates that
New Ralcorp would record an operating profit for its full fiscal 1997 year.
In light of the anticipated losses and cost restructuring during the
transition described above, it is anticipated that New Ralcorp will take a
restructuring charge in fiscal 1997, after completion of the distribution and
the merger. The amount of the restructuring charge is currently estimated to be
in the range of $20-$25 million and will cover both process efficiency
initiatives and headcount reductions throughout all cereal operations and
corporate support groups. This anticipated restructuring charge has not been
recorded as of September 30, 1996 because the requirements of applicable
accounting pronouncements have not currently been met. In addition, the merger
is subject to shareholder approval and any restructuring charge is directly
attributable to completion of the merger. Accordingly, the anticipated
restructuring charge will be recorded in the same period in which the merger is
completed.
The outlook for the remainder of New Ralcorp's businesses is generally
positive. In baby foods, despite a declining birth rate in the United States,
over the past several fiscal years Beech-Nut has been able to record operating
profit increases by continuing to focus on the production of high quality baby
food products. The production of quality products, maintaining its presence in
key regional areas and continued emphasis on controlling and cutting costs,
create a positive outlook for Beech-Nut. The baby food business does, however,
face significant competitive pressures, principally from the leading baby food
manufacturer, Gerber Products Company. The Bremner cracker and cookie business
has performed reasonably well after two years, fiscal years 1993 and 1994, of
operating losses resulting from the forced relocation of its primary production
facility. Management anticipates continuing to improve earnings through new
product introductions, adding new customers and improving sales mix towards
higher margin products. However, the cracker and cookie business faces
significant competition from large branded and small regional private label
manufacturers. A major capital project at the Bremner manufacturing plant was
completed during the fourth quarter of fiscal 1996 which should allow the
production and shipping of private label shredded wheat cereals and crackers to
begin in early fiscal 1997. Operating results of New Ralcorp are heavily
dependent on the completion of the sale transaction with Vail and the timing of
any such sale. Should New Ralcorp operate the ski resorts business through the
historically profitable second quarter of fiscal 1997, New Ralcorp will likely
generate operating profit for the full year. Resort Operations' results are,
however, highly dependent on weather conditions and consumers' discretionary
spending trends, both of which are out of the control of New Ralcorp's
management.
Please read the sections "RISK FACTORS" and "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Cautionary
Statement on Forward-Looking Statements."
6
<PAGE> 13
NEW RALCORP HOLDINGS, INC.
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
New Ralcorp was organized for the purpose of effecting the spinoff and the
merger and has no operating history as an independent company. The Ralcorp
historical financial statements presented in the "Ralcorp Historical" columns on
the following unaudited pro forma combined financial statements reflect periods
during which the various spun-off businesses operated as divisions or
subsidiaries of Ralcorp. Because these historical financial statements are the
historical financial statements of Ralcorp, they also include the results of
operations and financial position of the Branded Business which Ralcorp has
agreed to sell to General Mills, and the Resort Operations, which Ralcorp has
agreed to sell to Vail. Therefore, the historical financial statements do not
reflect the combined results of operations or financial position that would have
existed had New Ralcorp been an independent company. Since New Ralcorp was not
in existence for the period shown, the unaudited pro forma information may not
necessarily reflect future results of operations or what the results of
operations would have been had the formation of New Ralcorp and its related
businesses occurred at the beginning of the period shown.
The pro forma combined statement of earnings for the year ended September
30, 1996 presents the combined results of New Ralcorp's operations assuming that
the distribution and the sale of the Resort Operations had occurred as of
October 1, 1995. This statement of earnings has been prepared by adjusting the
historical statement of earnings for the effect of costs and expenses and the
recapitalization which might have occurred had the spinoff and the sale of the
Resort Operations occurred on October 1, 1995.
The pro forma combined balance sheet at September 30, 1996 presents the
combined financial position of New Ralcorp assuming the spinoff and the sale of
the Resort Operations had occurred at that date. This balance sheet data has
been prepared by adjusting the historical balance sheet for the effect of
assets, liabilities and recapitalization which might have occurred had the
spinoff and the sale of the Resort Operations occurred on September 30, 1996.
The "Branded Business" and "Resort Operations" columns in the pro forma
combined statement of earnings represents the combined historical results of
operations of the Branded Business and the Resort Operations, respectively. The
"Branded Business" column in the pro forma combined balance sheet at September
30, 1996 represents the specific assets and liabilities of the Branded Business
that will be acquired by General Mills once the spinoff has been effected. Such
assets and liabilities are not representative of those assets and liabilities
reflected on the September 30, 1996 historical balance sheet of the Branded
Business presented in the Proxy Statement-Prospectus. The "Resort Operations"
column in the pro forma combined balance sheet at September 30, 1996 represents
the combined financial position of the Resort Operations at September 30, 1996.
Please read the notes to the Unaudited Pro Forma Combined Financial
Information beginning on page 10 for a discussion of adjustments made to
Ralcorp's historical financial information in order to calculate the New Ralcorp
pro forma financial information.
7
<PAGE> 14
NEW RALCORP HOLDINGS, INC.
PRO FORMA COMBINED STATEMENT OF EARNINGS
(IN MILLIONS EXCEPT PER SHARE DATA)
YEAR ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
RESORT
BRANDED BUSINESS OPERATIONS
DISPOSITION DISPOSITION
ADJUSTMENTS NEW RALCORP ADJUSTMENTS NEW RALCORP
RALCORP BRANDED ---------------- WITH RESORT RESORT ---------------- WITHOUT RESORT
HISTORICAL BUSINESS DEBIT CREDIT OPERATIONS OPERATIONS DEBIT CREDIT OPERATIONS
---------- -------- ----- ------ ----------- ---------- ----- ------ --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales........... $ 1,027.4 $ (386.7) $ -- $ -- $ 640.7 $ (135.4) $ -- $ -- $ 505.3
-------- ------- ----- ----- ------- ------- ---- ---- ----
Costs and expenses:
Cost of products
sold............ 536.8 (114.1) 5.7(a) 428.4 (91.7) 336.7
Selling, general
and
administrative... 177.6 (52.5) 15.3(a) 140.4 (14.6) 125.8
Advertising and
promotion....... 233.3 (162.5) 70.8 (6.1) 64.7
Equity earnings in
Vail Resorts.... 4.5(b) (4.5)
Interest.......... 26.8 (4.2) 11.1(c) 11.5 (10.5) 1.0
Nonrecurring
charges......... 109.5 109.5 109.5
Restructuring
charge.......... 16.5 (2.5) -- -- 14.0 -- -- -- 14.0
-------- ------- ----- ----- ------- ------- ---- ---- ----
1,100.5 (335.8) 21.0 11.1 774.6 (122.9) -- 4.5 647.2
-------- ------- ----- ----- ------- ------- ---- ---- ----
(Loss) earnings
before income
taxes............. (73.1) (50.9) 21.0 11.1 (133.9) (12.5) 4.5 (141.9)
Income taxes........ (26.3) (19.3) -- 3.8(d) (49.4) (5.3) 1.7 (d) -- (53.0)
-------- ------- ----- ----- ------- ------- ---- ---- ----
Net (loss)
earnings.......... $ (46.8) $ (31.6) $21.0 $ 14.9 $ (84.5) $ (7.2) $1.7 $4.5 $ (88.9)
======== ======= ===== ===== ======= ======= ==== ==== ====
(Loss) earnings per
common share(e)... $ (1.42) $ (2.56) $ (2.69)
======== ======= ====
Outstanding shares
of common
stock(e).......... 33.0 33.0 33.0
======== ======= ====
</TABLE>
8
<PAGE> 15
NEW RALCORP HOLDINGS, INC.
PRO FORMA COMBINED BALANCE SHEET
(IN MILLIONS EXCEPT SHARES)
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
RESORT
BRANDED BUSINESS NEW OPERATIONS NEW
DISPOSITION RALCORP DISPOSITION RALCORP
ADJUSTMENTS WITH ADJUSTMENTS WITHOUT
RALCORP BRANDED ------------------ RESORT RESORT -------------- RESORT
HISTORICAL BUSINESS DEBIT CREDIT OPERATIONS OPERATIONS DEBIT CREDIT OPERATIONS
---------- -------- ------ ------ ---------- ---------- ----- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash..................... $ -- $ -- $ 13.6(f) $ 13.6(g) $ -- $ -- $ -- $-- $ --
Receivables, less
allowance for doubtful
accounts............... 75.5 75.5 (6.3) 69.2
Inventories.............. 103.3 (24.2) 79.1 (3.8) 75.3
Prepaid expenses......... 14.2 -- -- 0.7(h) 13.5 (0.8) -- -- 12.7
------ ------ ------ ------ ------ ------- ----- --- ------
Total current
assets............. 193.0 (24.2) 13.6 14.3 168.1 (10.9) 157.2
Equity investment in Vail
Resorts.................. 41.8 (i) 41.8
Deferred income taxes...... 23.4 2.8(h) 26.2 12.3 38.5
Investments and other
assets................... 88.1 -- -- -- 88.1 (77.9) -- -- 10.2
------ ------ ------ ------ ------ ------- ----- --- ------
Property at cost........... 537.0 (85.7) 451.3 (218.9) 232.4
Accumulated
depreciation....... 214.4 (48.4) -- -- 166.0 (71.5) -- -- 94.5
------ ------ ------ ------ ------ ------- ----- --- ------
322.6 (37.3) -- -- 285.3 (147.4) -- -- 137.9
------ ------ ------ ------ ------ ------- ----- --- ------
Total assets......... $627.1 $(61.5) $ 16.4 $ 14.3 $567.7 $ (223.9) $41.8 $-- $385.6
====== ====== ====== ====== ====== ======= ===== === ======
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of
long-term debt......... $ 1.8 $ -- $ -- $ -- $ 1.8 $ (1.8) $ -- $-- $ --
Accounts payable and
accrued liabilities.... 100.6 (10.6) -- -- 90.0 (15.1) -- -- 74.9
------ ------ ------ ------ ------ ------- ----- --- ------
Total current
liabilities........ 102.4 (10.6) 91.8 (16.9) 74.9
Long-term debt............. 376.6 227.0(j) 13.6(f) 163.2 (163.2)
Other liabilities.......... 40.7 (4.9) 35.8 (2.0) 33.8
Commitments and
contingencies............
General Mills common
stock.................... 343.0(j) 343.0(k)
Equity:
Shareholders' equity:
Common stock -- $.01
par value, issued
shares 33,924,848,
outstanding shares
32,916,916........... 0.3 0.3 0.3
Capital in excess of
par value............ 130.9 22.7(l) 108.2 108.2
Retained (deficit)
earnings............. (0.2) 4.7(g) 516.3(j) 168.4 168.4
343.0(k)
Common stock in treasury,
at cost -- 1,007,932
shares................... (22.7) 22.7(l)
Unearned portion of
restricted stock
awards................... (0.9) -- -- 0.9(m) -- -- -- -- --
------ ------ ------ ------ ------ ------- ----- --- ------
Total shareholders'
equity............. 107.4 -- 370.4 539.9 276.9 -- -- -- 276.9
------ ------ ------ ------ ------ ------- ----- --- ------
Total liabilities and
shareholders'
equity............. $627.1 $(15.5) $940.4 $896.5 $567.7 $ (182.1) $ -- $-- $385.6
====== ====== ====== ====== ====== ======= ===== === ======
</TABLE>
9
<PAGE> 16
NEW RALCORP HOLDINGS, INC.
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
(a) To reflect the fixed costs (i.e., fixed manufacturing, information
systems, general administrative and corporate overhead) included in the
combined historical results of operations of the Branded Business that
will be absorbed by New Ralcorp upon completion of the sale of the
Branded Business.
(b) To reflect New Ralcorp's equity earnings in Vail Resorts. The equity
earnings include $1.9 million of amortization income. The amortization
income is the result of the basis difference between the net book value
of the Resort Operations' net assets contributed to Vail Resorts and
New Ralcorp's 22% equity interest in Vail Resorts' net assets. This
basis difference is being amortized ratably over 20 years.
(c) To reduce interest expense due to General Mills assuming $227.0 million
of Ralcorp debt upon completion of the sale of the Branded Business.
Residual interest expense shown of $1.0 million is related to estimated
revolving credit facility debt needed to finance working capital.
(d) To reflect the tax effect of the pro forma adjustments shown at an
effective rate of 38%.
(e) The weighted average number of shares used to compute New Ralcorp
earnings per share is based on the weighted average number of Ralcorp
common shares outstanding during fiscal year 1996.
(f) To record $13.6 million of new indebtedness to be incurred by New
Ralcorp immediately prior to the merger and to be assumed by General
Mills as a result of the merger. Cash proceeds from this debt will be
primarily used for the settlement of transaction expenses described in
footnote (g).
(g) Adjustment to reflect payment of transaction expenses. Expenses
incurred in connection with the dispositions are estimated at
approximately $13.6 million, consisting of payments for legal,
accounting and investment banking fees, redemption of common stock
purchase rights, accelerated vesting and cash settlement of stock
options and the net assets adjustment. Payments estimated at $4.7
million for the accelerated vesting and cash settlement of stock
options will not be recorded as a reduction to the gain described in
footnote (j).
(h) To reflect the write off of the current and deferred tax assets and
liabilities associated with the specific assets and liabilities of the
Branded Business that will be acquired by General Mills once the
distribution has been effected.
(i) To record New Ralcorp's equity investment in Vail Resorts, which
represents the book value of the net assets contributed to Vail
Resorts, as presented in the "Resorts Operations" column of the pro
forma combined balance sheet. Due to the structure of the transaction,
it is accounted for as a non-monetary exchange. Accordingly, no gain or
loss on sale will be recorded by New Ralcorp.
(j) To record the disposition of the Branded Business and the related gain
on sale. Proceeds of $570 million are comprised of approximately $343.0
million of General Mills common stock, received by Ralcorp
shareholders, and the assumption of approximately $227.0 million in
debt and accrued interest by General Mills. Following is the
calculation of the gain on sale to be recorded by New Ralcorp:
<TABLE>
<S> <C>
Proceeds....................................................... 570.0
Net assets of Branded Business................................. (46.0)(n)
Current deferred tax assets.................................... (0.7)(h)
Deferred tax liabilities....................................... 2.8(h)
Transaction expenses........................................... (13.6)(g)
Cash settlement of stock options............................... 4.7(g)
Accelerated amortization of restricted stock awards............ (0.9)(m)
-----
Gain on sale............................................... 516.3(j)
=====
</TABLE>
(k) To reflect the deemed distribution of approximately $343.0 million of
the proceeds from the sale of the Branded Business. These proceeds are
in the form of General Mills common stock distributed by General Mills
directly to Ralcorp shareholders in the merger.
(l) To retire treasury stock outstanding as of the merger date.
(m) To record the accelerated amortization of restricted stock awards.
(n) Amount represents the specific net assets of the Branded Business,
which are reflected in the "Branded Business" column of the pro forma
combined balance sheet, that will be acquired by General Mills once the
distribution has been effected. While General Mills will acquire all
the operations of the Branded Business, certain assets and liabilities
reflected in the historical balance sheet of the Branded Business will
not be transferred to General Mills and, therefore, the amounts
reflected in the "Branded Business" column of the pro forma combined
balance sheet vary from the amounts shown in the Branded Business
historical balance sheet that is set forth in the Proxy
Statement-Prospectus that was mailed to Ralcorp shareholders with this
Information Statement. The most significant differences are (i) the
elimination of historical receivables associated with the Branded
Business, which are being retained by New Ralcorp because it is
impracticable to separate the Branded Business receivables from the
receivables associated with Ralcorp's remaining private label foods
businesses, and (ii) the elimination of fixed assets associated with
manufacturing plants (other than Ralcorp's Cincinnati plant, which will
be transferred to General Mills) that historically have produced both
Branded Business products and private label products, and that will be
retained by New Ralcorp. In addition, a portion of Ralcorp's long-term
debt was allocated to the Branded Business for purposes of the
historical balance sheet, but is not reflected under the column
"Branded Business" because the transfer of Ralcorp debt is separately
reflected under the column "Branded Business Disposition Adjustments."
10
<PAGE> 17
SUMMARY SELECTED HISTORICAL FINANCIAL INFORMATION
When we report our historical financial information under the federal
securities laws, New Ralcorp must continue to include the operations of the
Branded Business and the Resort Operations. Our historical financial statements
do not reflect what the results of operations or financial positions would have
been if we had operated as a separate company. We took the following selected
financial information from the consolidated financial statements we included in
this document. This selected financial information does not reflect our future
performance as an independent company. It is important that you read the
sections titled "DISCUSSION OF UNAUDITED PRO FORMA COMBINED FINANCIAL
INFORMATION" and "UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION" for
reference to what New Ralcorp's results of operations and financial condition
might have been had New Ralcorp operated as an independent company. The
financial data set forth below should also be read together with the Ralcorp
Holdings, Inc. Consolidated Financial Statements and the notes thereto found
elsewhere in this Information Statement. See "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" and "INDEX TO
FINANCIAL INFORMATION." Earnings per share data is presented elsewhere in this
Information Statement on a pro forma basis only (see "UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION").
NEW RALCORP HOLDINGS, INC.
FIVE YEAR FINANCIAL SUMMARY
STATEMENT OF EARNINGS DATA
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
--------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- ------ ------ ------
(IN MILLIONS, EXCEPT PERCENTAGE DATA)
<S> <C> <C> <C> <C> <C>
Net Sales.......................................... $1,027.4 $1,013.4 $987.0 $902.8 $870.6
Depreciation and Amortization...................... 46.4 46.7 44.2 35.3 29.2
(Loss) Earnings before Income Taxes,
Interest Expense and Cumulative Effect of
Accounting Changes............................... (46.3) 83.0 100.2 87.7 63.5
As a Percent of Sales............................ (4.5)% 8.2% 10.2% 9.7% 7.3%
(Loss) Earnings before Income Taxes and Cumulative
Effect of Accounting Changes..................... $ (73.1) $ 54.8 $ 87.9 $ 85.1 $ 61.2
Income Taxes....................................... (26.3) 21.4 34.3 33.2 23.0
(Loss) Earnings before Cumulative Effect of
Accounting Changes............................... (46.8) 33.4 53.6 51.9 38.2
Net (Loss) Earnings(a,b,c,d)....................... (46.8) 33.4 53.6 42.6 38.2
</TABLE>
BALANCE SHEET DATA
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
Working Capital(e)................................. $ 92.4 $ 104.7 $ 81.8 $ 54.8 $ 57.2
Property at Cost, Net.............................. 322.6 417.1 416.2 412.6 352.2
Additions (during the period).................... 60.2 59.3 38.2 50.8 64.3
Depreciation (during the period)................. 43.5 44.1 41.7 34.0 28.5
Total Assets....................................... 627.1 716.2 700.1 626.4 519.9
Long-Term Debt..................................... 376.6 395.4 389.4 30.3 27.9
Shareholders' Equity............................... 107.4 162.4 141.2
Ralston Equity Investment.......................... 474.4 380.0
</TABLE>
- -------------------------
(a) Includes, in 1996, a $109.5 pre-tax impairment charge ($68.8 after taxes)
related to its private label ready-to-eat cereal and consumer hot cereal
operations.
(b) Includes, in 1996, a $16.5 pre-tax restructuring charge ($10.4 after taxes)
to recognize the costs related to the restructuring of its ready-to-eat
cereal subsidiary, Ralston Foods, Inc. The original charge of $20.7 was
taken in the third quarter of 1996. In the fourth quarter of 1996, Ralcorp
reversed $4.2 of that original amount. This reversal was offset by $4.0
($2.5 after taxes) of transaction fees related to the proposed sale of the
Resort Operations.
(c) Includes, in 1995, $21.9 pre-tax nonrecurring charges ($13.6 after taxes)
related to exit of industrial oats and oats milling operations and
impairment of the consumer hot cereal business.
(d) The cumulative effect of accounting changes for postretirement benefits
other than pensions and for income taxes reduced earnings by $9.3, after
taxes, in the year ended September 30, 1993.
(e) Excludes cash and current maturities of long-term debt, where applicable.
11
<PAGE> 18
WHERE YOU CAN FIND MORE INFORMATION
Ralcorp files (and New Ralcorp will file) annual, quarterly and special
reports, proxy statements and other information with the Securities and Exchange
Commission (the "SEC" or the "Commission"). You may read and copy any reports,
statements or other information we file at the SEC's public reference rooms in
Washington, D.C., New York, New York and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms.
Ralcorp's and New Ralcorp's SEC filings are also available to the public from
commercial document retrieval services and at the web site maintained by the SEC
at "http://www.sec.gov."
New Ralcorp has filed with the SEC a Registration Statement on Form 10 (as
amended, the "Company Form 10") under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") covering the New Ralcorp Common Stock. This
Information Statement does not contain all of the information in the Company
Form 10 and the related exhibits and schedules. Statements in this Information
Statement as to the contents of any contract, agreement or other document are
summaries only and are not necessarily complete. For complete information as to
these matters, refer to the applicable exhibit or schedule to the Company Form
10. The Company Form 10 and the related exhibits filed by New Ralcorp may be
inspected at the public reference facilities of the Commission listed above.
The principal office of New Ralcorp is located at 800 Market Street, Suite
2900, St. Louis, Missouri 63101 (telephone: 314/877-7000).
Questions concerning the distribution and merger should be directed to New
Ralcorp's Shareholder Relations Department, 800 Market Street, Suite 2900, St.
Louis, Missouri 63101 (telephone: 314/877-7046).
- --------------------------------------------------------------------------------
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS INFORMATION STATEMENT, AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED.
- --------------------------------------------------------------------------------
12
<PAGE> 19
INTRODUCTION
This Information Statement (the "Information Statement") is being furnished
to shareholders of Ralcorp Holdings, Inc., a Missouri corporation ("Ralcorp"),
in connection with the contemplated pro rata distribution (the "Distribution")
to Ralcorp shareholders of shares of common stock, par value $0.01 per share
("New Ralcorp Common Stock"), of New Ralcorp Holdings, Inc., a Missouri
corporation and wholly owned subsidiary of Ralcorp ("New Ralcorp" or the
"Company"). The holders of Ralcorp common stock, par value $0.01 per share
("Ralcorp Common Stock"), will receive one share of New Ralcorp Common Stock,
together with an associated common stock purchase right (a "Right"), with
respect to each share of Ralcorp Common Stock held by such holder on the record
date for the Distribution (the "Distribution Record Date") (references
hereinafter to New Ralcorp Common Stock shall be deemed to include a reference
to the associated Rights). The Distribution will result in 100% of the
outstanding shares of New Ralcorp Common Stock being distributed to Ralcorp
shareholders on a share-for-share basis. The Distribution is being effected by
Ralcorp in connection with the acquisition by General Mills, Inc., a Delaware
corporation ("General Mills"), of Ralcorp's branded cereals and snacks
businesses, including certain assets and liabilities related thereto (the
"Branded Business"), pursuant to a merger (the "Merger") of a newly formed
subsidiary of General Mills with and into Ralcorp following the Distribution.
After the Merger, Ralcorp will be renamed "General Mills Missouri, Inc." and New
Ralcorp will assume the name "Ralcorp Holdings, Inc."
At the time of the Distribution, the Company will own all of Ralcorp's
businesses, assets and liabilities, other than the Branded Business. Immediately
prior to the time the Distribution is effected, and subject to the satisfaction
or waiver of each condition to the consummation of the Merger, (a) Ralston
Foods, Inc., a Nevada corporation and a wholly owned subsidiary of Ralcorp
("Ralston Foods"), will be merged (the "Internal Merger") with and into the
Company, with the Company being the surviving corporation, as provided in the
Reorganization Agreement (as it may be amended, supplemented or modified from
time to time, the "Reorganization Agreement") to be executed by Ralcorp, the
Company, Ralston Foods, the Branded Subsidiary and General Mills; (b) the
Branded Business currently operated by Ralston Foods, will be contributed (the
"Branded Contribution") to Chex Inc., a newly formed subsidiary of New Ralcorp
(the "Branded Subsidiary"), as provided in the Reorganization Agreement, and (c)
all the stock of the Branded Subsidiary will be distributed by the Company to
Ralcorp (the "Internal Spinoff," and together with the Internal Merger, the
Branded Contribution and the Distribution, the "Reorganization"). A form of the
Reorganization Agreement governing the foregoing is an exhibit to the Company
Form 10 and is attached as Appendix B to the Proxy Statement-Prospectus (the
"Proxy Statement-Prospectus") which was mailed to the shareholders of Ralcorp
together with this Information Statement.
No consideration will be paid by Ralcorp shareholders for the shares of New
Ralcorp Common Stock to be received by them in the Distribution. There is
currently no public trading market for trading the shares of New Ralcorp Common
Stock. The Company intends to list the New Ralcorp Common Stock on the New York
Stock Exchange, Inc. ("NYSE") where it will be traded under the symbol "RAH."
In connection with the Merger and the Reorganization (collectively, the
"Transactions") and pursuant to the Reorganization Agreement, each of General
Mills and Ralcorp on the one hand, and the Company and Ralston Foods, on the
other hand, will agree to indemnify each other after the Distribution with
respect to certain losses, damages, claims and liabilities arising primarily
from the conduct of the Branded Business. See "AGREEMENTS AMONG RALCORP, GENERAL
MILLS AND NEW RALCORP." In addition, pursuant to a Tax Sharing Agreement (as it
may be amended, supplemented or modified from time to time, the "Tax Sharing
Agreement") to be entered into by and between General Mills, Ralcorp and New
Ralcorp, each of General Mills and New Ralcorp will agree to indemnify the other
against certain tax liabilities. Also, in connection with the Transactions, the
parties will (i) transfer certain technology rights to each other pursuant to a
Technology Agreement (as it may be amended, supplemented or modified from time
to time, the "Technology Agreement"), to be entered into by and between Ralcorp,
New Ralcorp and the Branded Subsidiary, (ii) transfer certain trademarks to each
other pursuant to a Trademark Agreement (as it may be amended, supplemented or
modified from time to time, the "Trademark Agreement") to be entered into by and
between Ralcorp, New Ralcorp and the Branded Subsidiary and (iii) make certain
arrangements regarding the supply of products and services related to the
Branded Business pursuant to a Transition
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Services--Supply Agreement (as it may be amended, supplemented or modified from
time to time, the "Supply Agreement") to be entered into by and between Ralcorp
and New Ralcorp (the Tax Sharing Agreement, the Technology Agreement, the
Trademark Agreement and the Supply Agreement are referred to collectively herein
as the "Ancillary Agreements"). The foregoing is a brief summary of certain
terms of the Distribution. The Ancillary Agreements are more fully described
herein under "AGREEMENTS AMONG RALCORP, GENERAL MILLS AND NEW RALCORP." A
description of the Merger and Merger Agreement may be found in the Proxy
Statement-Prospectus.
The Distribution has been declared by the Ralcorp Board of Directors (the
"Ralcorp Board") contingent upon shareholder approval of the Distribution and
Merger. The day that the Distribution and Merger occur has been set as the
Distribution Record Date. The Distribution may be abandoned at any time prior to
the date of its effectiveness by the Ralcorp Board in the event of the
termination of the Agreement and Plan of Merger, dated as of August 13, 1996 (as
it may be amended, supplemented or otherwise modified from time to time, the
"Merger Agreement"), among Ralcorp, General Mills and General Mills Missouri,
Inc., a Missouri corporation ("General Mills Missouri"), which is attached as
Appendix A to the Proxy Statement-Prospectus. See "AGREEMENTS AMONG RALCORP,
GENERAL MILLS AND NEW RALCORP -- Reorganization Agreement -- Termination."
The Transactions are conditioned upon the receipt of a tax ruling (the
"Private Letter Ruling") from the U.S. Internal Revenue Service ("IRS") or, if
the parties agree, the receipt of opinions of Bryan Cave LLP, special counsel to
Ralcorp, and Wachtell, Lipton, Rosen & Katz, special counsel to General Mills
(together the "Tax Opinions"), principally to the effect that the receipt of New
Ralcorp Common Stock and associated Rights in the Distribution will be tax-free
to holders of Ralcorp Common Stock and to Ralcorp for federal income tax
purposes and that the receipt of General Mills Common Stock in the Merger will
also be tax-free. The parties do not currently intend to seek the Private Letter
Ruling and, instead, intend to proceed on the basis of the Tax Opinions. General
Mills and Ralcorp will not complete the Distribution and the Merger unless they
receive the Tax Opinions. See "THE DISTRIBUTION -- Certain Federal Income Tax
Considerations."
The following terms will be used throughout this Information Statement:
BABY FOOD BUSINESS............ The Company's business consisting of the
manufacture, distribution and sale of Beech-Nut
baby food, juices and cereal. This business
uses one jarred baby food plant and one baby
food cereal plant.
BRANDED BUSINESS.............. The Company's business consisting of the
manufacture, distribution and sale of branded
ready-to-eat cereal and cereal based snack mix,
including one cereal plant, which is being
acquired by General Mills pursuant to the
Merger Agreement.
CRACKER AND COOKIE BUSINESS... The Company's business consisting of the
manufacture, distribution and sale of private
label crackers and cookies through its one
private label cracker and cookie plant and
Ry-Krisp crackers through one cracker plant.
PRIVATE LABEL CEREAL
BUSINESS...................... The Company's business consisting of the
manufacture, distribution and sale of private
label ready-to-eat and hot cereals for sale
principally in the United States. The Company
has three ready-to-eat cereal plants and one
hot cereal plant.
RESORT OPERATIONS............. The Company's business consisting of the three
ski resorts in Summit County, Colorado --
Keystone, Breckenridge and Arapahoe Basin.
NEW RALCORP BUSINESSES........ The Private Label Cereal Business, Baby Food
Business, Cracker and Cookie Business and
Resort Operations.
The Company has filed the Company Form 10 pursuant to the Exchange Act,
covering shares of New Ralcorp Common Stock to be received by Ralcorp
shareholders in the Distribution. This Information Statement constitutes a part
of the Company Form 10.
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RISK FACTORS
Shareholders should carefully review the following risk factors, together
with the other information contained herein, in evaluating the Company and its
businesses.
NO OPERATING HISTORY AS AN INDEPENDENT COMPANY; PRO FORMA AND PROJECTED LOSSES
New Ralcorp was formed on October 23, 1996 for the purpose of effecting the
Distribution and the Merger. New Ralcorp does not have an operating history as
an independent public company. While the New Ralcorp Businesses, along with the
Branded Business in the aggregate were profitable since being spun-off from
Ralston Purina Company ("Ralston Purina") in April 1994 (the "1994 Spin-off"),
there is no assurance that the New Ralcorp Businesses can be operated profitably
as a stand alone company. On a pro forma basis, the New Ralcorp Businesses
sustained a net loss of $11.3 million for fiscal year 1996 excluding Resort
Operations and restructuring and nonrecurring charges. Management expects that
in fiscal year 1997, New Ralcorp will sustain a net loss on a pro forma basis
assuming Resort Operations is sold. A portion of the anticipated loss in fiscal
year 1997 is attributable to New Ralcorp incurring substantial restructuring
costs as it reduces its administrative staffing and modifies its distribution
system and production operations to reflect the sale of the Branded Business and
the need to substantially reduce costs in light of increased competition in the
breakfast food category. New Ralcorp management expects to take the steps
necessary to remove excess costs from its cereal operations in order to attain a
cost basis that will allow maintenance of an adequate price gap between
competitors' branded products and the Company's private label emulations and to
make the Company profitable. It must be cautioned, however, that it will take
time to identify and act on the initiatives that must be undertaken to achieve
New Ralcorp's goals for its cereal business and there can be no assurance that
these goals will be achieved. The New Ralcorp Businesses have relied on Ralcorp
credit arrangements for sources of cash, and after the Distribution, New Ralcorp
must maintain its own credit arrangements, which may be at interest rates higher
than Ralcorp's. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS -- Liquidity and Capital Resources" and "-- Outlook."
RETENTION OF CONTINGENT LIABILITIES ASSOCIATED WITH DIVESTED OPERATIONS
On July 22, 1996, Ralston Foods entered into an agreement to sell Ralston
Resorts, Inc. ("Resorts") to Vail Resorts, Inc. ("Vail") for the stock of Vail
and assumption of Resorts' debt. The completion of this transaction is subject
to various governmental approvals, which may or may not be received. Pursuant to
such agreement, Ralston Foods has agreed to indemnify Vail for breaches of
representations and warranties made by Ralston Foods to Vail regarding the
Resort Operations; the indemnification survives for two years following the
closing of the sale.
On February 29, 1996, Ralston Foods sold its coupon business, American
Redemption Systems, Inc. ("ARS"), to NuWorld Marketing Limited ("NuWorld") and
agreed to indemnify NuWorld for breaches of representations and warranties made
by Ralston Foods to NuWorld regarding the coupon business; the indemnification
survives until July 31, 1997. See also the information under "Indemnification
Agreement with General Mills" below.
NO PRIOR MARKET FOR NEW RALCORP COMMON STOCK
There has been no prior trading market for New Ralcorp Common Stock and
there can be no assurance as to the prices at which the New Ralcorp Common Stock
will trade before or after the date on which the Distribution is effected (the
"Distribution Date"). Until the New Ralcorp Common Stock is fully distributed
and an orderly market develops, the prices at which the New Ralcorp Common Stock
trades may fluctuate significantly. Prices for the New Ralcorp Common Stock will
be determined in the trading markets and may be influenced by many factors,
including the depth and liquidity of the market for New Ralcorp Common Stock,
investor perceptions of New Ralcorp and the prospects for its businesses, the
amount of New Ralcorp's reported earnings or losses, New Ralcorp's dividend
policy and general economic and market conditions. See "Listing and Trading of
New Ralcorp Common Stock" on page 22.
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ABSENCE OF DIVIDENDS
The payment and level of cash dividends, if any, by New Ralcorp after the
Distribution will be at the discretion of the New Ralcorp Board of Directors,
based primarily upon the earnings, cash flow and financial requirements of its
businesses. The New Ralcorp Board of Directors currently intends that initially
no cash dividends will be paid on New Ralcorp Common Stock in light of
anticipated losses and in order to make funds available for working capital
needs, future acquisitions, capital expenditures, repurchases of New Ralcorp
Common Stock and such other purposes as the New Ralcorp Board of Directors may
determine and as allowed under credit facilities. The New Ralcorp Board of
Directors may change its policy on dividends at any time. See "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS --
Liquidity and Capital Resources."
CERTAIN ANTI-TAKEOVER EFFECTS
The New Ralcorp Articles of Incorporation, Bylaws and Rights, and the
General and Business Corporation Law of Missouri ("GBCL"), contain several
provisions that could have the effect of delaying, deferring or preventing a
change of control of New Ralcorp in a transaction not approved by the New
Ralcorp Board of Directors. In addition, the New Ralcorp Board of Directors has
adopted certain other programs, plans and agreements with its management and/or
employees which may make such a change of control more expensive. See "Certain
Federal Income Tax Considerations" below and "ANTI-TAKEOVER EFFECTS OF CERTAIN
PROVISIONS."
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
As a condition to the Distribution, Ralcorp must receive the Private Letter
Ruling or Tax Opinions to the effect that, among other things, for federal
income tax purposes the reorganizations and the Distribution contemplated in the
Reorganization Agreement will be tax-free under Sections 368(a)(1)(D) and 355 of
the Internal Revenue Code of 1986, as amended (the "Code"). See "THE
DISTRIBUTION -- Certain Federal Income Tax Considerations." The Private Letter
Ruling or the Tax Opinions will be based, in part, on certain factual
representations and assumptions. New Ralcorp has agreed to certain restrictions
on its future actions for a period of time following the Distribution to provide
further assurances that the Distribution will qualify as a tax-free
distribution. If the Distribution were taxable, then (i) corporate level income
taxes would be payable by the consolidated group of which Ralcorp is the common
parent, based upon the amount by which the fair market value of the Ralcorp
Common Stock distributed in the Distribution exceeds Ralcorp's basis therein and
(ii) each holder of Ralcorp Common Stock who receives shares of New Ralcorp
Common Stock in the Distribution would be treated as if such shareholder
received a taxable distribution, taxed as a dividend to the extent of such
shareholder's pro rata share of Ralcorp's current and accumulated earnings and
profits. New Ralcorp has agreed to indemnify Ralcorp and General Mills
shareholders if its actions result in such tax liability. See "AGREEMENTS AMONG
RALCORP, GENERAL MILLS AND NEW RALCORP -- Tax Sharing Agreement." The potential
corporate tax liability which could arise from an acquisition of New Ralcorp for
a period of time following the Distribution, together with the foregoing
indemnification arrangements, could have an anti-takeover effect with respect to
any potential acquisition of control of New Ralcorp.
INDEMNIFICATION AGREEMENT WITH GENERAL MILLS
Pursuant to the Merger Agreement and Reorganization Agreement, New Ralcorp
will indemnify General Mills, its employees, directors, benefit plan
fiduciaries, shareholders, agents, consultants, representatives, successors,
transferees and assigns for liabilities arising from certain matters.
Specifically, New Ralcorp will provide indemnification for the following
matters: (i) liabilities assumed by New Ralcorp in the Reorganization Agreement;
(ii) certain liabilities associated with operation of the Branded Business prior
to the Distribution; (iii) breach of any covenant to be performed by New Ralcorp
in the Merger Agreement, the Reorganization Agreement or any agreements
ancillary thereto; (iv) liabilities associated with the operation of the Ralcorp
Businesses; (v) breach of any representation or warranty made by Ralcorp in the
Merger Agreement or made by New Ralcorp in the Reorganization Agreement; (vi)
third party claims relating to actions of the Ralcorp
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<PAGE> 23
Board in approving the Distribution or the Merger; or (vii) third party claims
relating to disclosures contained in this Information Statement. The foregoing
indemnification is limited in certain instances in duration and in the case of
clauses (ii) and (v) must first exceed $6,000,000 before New Ralcorp would be
obligated to indemnify General Mills or the related indemnitees. See "AGREEMENTS
AMONG RALCORP, GENERAL MILLS AND NEW RALCORP."
REQUIREMENT OF NEW RALCORP TO MAINTAIN A MINIMUM NET WORTH
Because of New Ralcorp's continuing indemnification obligations to General
Mills, as described above, the Reorganization Agreement provides that New
Ralcorp and its subsidiaries will maintain certain minimum net worth levels, on
a consolidated basis, for up to five years after the Distribution Date. Such net
worth covenant could impair the Company's ability to incur debt, make capital
expenditures, acquisitions, divestitures or distributions to shareholders, or
fund operating losses. Generally, the following net worth levels must be
maintained: (i) first two years following the Distribution Date - $100 million;
(ii) unless clause (iii) applies, during the third and fourth years following
the Distribution Date - $25 million plus outstanding indemnification claims;
(iii) if certain agreements with Ralston Purina contemplated in the Merger
Agreement are not entered into: for the third year following the Distribution
Date - $75 million plus an amount equal to all outstanding indemnification
claims; for the fourth year following the Distribution Date - $50 million plus
an amount equal to all outstanding indemnification claims as of the end of the
third year; and for the fifth year following the Distribution Date - $25 million
plus an amount equal to all outstanding indemnification claims as of the end of
the fourth year. In no event, though, will such net worth be required to be in
excess of $100 million. New Ralcorp's pro forma combined aggregate net worth, at
September 30, 1996 was $276.9 million.
COMPETITION HAS INTENSIFIED IN THE CEREAL CATEGORY
New Ralcorp faces intense competition in all of its businesses. In
particular, significant wholesale price declines in the branded cereal products
of major cereal manufacturers have had a dramatic and continuing negative impact
on the profitability of the Private Label Cereal Business. Additionally, other
manufacturers of private label cereals have excess capacity and in light of the
aforementioned branded cereal price declines, such private label cereal
manufacturers may increase the competition for private label customers.
Currently, the ready-to-eat cereal category is experiencing an overall volume
decline in grocery channels as more competing breakfast food items, such as
bagels, breakfast bars and toasted pastries, have grown in popularity and as a
result, Ralcorp expects increased competition for less volume in this category.
See "BUSINESS AND PROPERTIES -- Competition" and "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
PRICES OF KEY INGREDIENTS CAN BE VOLATILE
The Company's products require a large volume of various agricultural
products, including fruits and vegetables, grain and grain products, flours,
sugar and high fructose corn syrup. The principal raw materials used by the
Company in the manufacture of its products are subject to significant price
fluctuations. Commodity prices for the Company's ingredients experienced
significant increases during fiscal 1996. Operating results may be affected by
the price volatility of agricultural commodities, which represented 30% to 50%
of the Company's cost of products sold during the 1996 fiscal year. The Company
believes that adequate supplies of its agricultural products requirements are
available at the present time, but cannot predict future availability or prices
of such products and materials. There can be no assurance that the Company will
be able to pass increases in raw material costs through to its customers in the
form of price increases, and any such inability would have an adverse impact
upon the profitability of the Company. See "BUSINESS AND PROPERTIES -- Raw
Materials" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- Results of Operations."
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SIGNIFICANT OWNERSHIP OF VAIL STOCK IF RESORT OPERATIONS SOLD
Ralcorp has agreed to sell its Resort Operations to Vail. Upon consummation
of the transaction, New Ralcorp will own Vail common stock representing
approximately 22% of the outstanding equity in Vail. Currently, Vail's common
stock is not publicly traded, and, so long as its common stock is not publicly
traded, New Ralcorp may not be able to easily sell the Vail common stock.
Additionally, if the Vail common stock becomes publicly traded, its value, like
that of any publicly traded stock, can fluctuate significantly. Considering the
significance of the Company's anticipated ownership of Vail common stock in
comparison to New Ralcorp's earnings, changes in the price of Vail common stock
or the Company's inability to easily sell the Vail common stock, may negatively
affect the value of the New Ralcorp Common Stock. Moreover, pursuant to the
Shareholder Agreement expected to be entered into in connection with the
acquisition of the Vail common stock, New Ralcorp will agree to certain
restrictions on the resale of its Vail common stock. New Ralcorp will agree not
to transfer or sell its shares of Vail common stock, without the prior approval
of a majority of the Vail Board of Directors, other than (i) to affiliates or
New Ralcorp's stockholders; (ii) pursuant to a demand or piggy-back registration
under the federal securities laws as allowed under the Shareholder Agreement;
(iii) if an initial public offering has not been consummated by December 31,
1998, a transfer pursuant to Rule 144 of the Securities Act of 1933, as amended
(the "Securities Act") or a transfer where such transferee agrees to be bound by
the Shareholder Agreement; or (iv) a transfer eighteen months after the closing
date of the sale of the Resort Operations, provided the transferee will not own
more than 10% of the then outstanding voting securities of Vail and agrees to be
bound by the Shareholder Agreement. In addition, New Ralcorp will agree that if
it transfers its shares under the provisions of either clause (iii) or (iv)
above, it will provide Vail with a right of first refusal, affording Vail the
right to purchase such shares under the same terms and conditions, and will
provide Vail's largest shareholder the right of second refusal.
HIGH DEBT LEVEL AND RESTRICTIVE COVENANTS IF RESORT OPERATIONS NOT SOLD
If the sale of the Resort Operations is not completed prior to the
Distribution, New Ralcorp could have approximately $165 million in principal
amount of debt associated with the Resort Operations. Of the $165 million in
debt, $135 to $140 million would be funded through a bank credit arrangement
with a total commitment of approximately $200 million. In light of such a high
debt level, New Ralcorp is expected to be subject to restrictive conditions in
its credit facilities. Such restrictions could prohibit the incurrence of
additional debt, payment of dividends, repurchase of stock, creation of liens,
acquisitions or mergers, and divestitures and would require the maintenance of
specified financial ratios. Additionally, New Ralcorp may be required to secure
all or a part of its borrowings under the facility. New Ralcorp's failure to
meet such specified ratios, could lead to a default under New Ralcorp's credit
facilities. See "MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- Liquidity and Capital Resources and "DESCRIPTION OF NEW
RALCORP INDEBTEDNESS."
FINANCIAL RISKS ASSOCIATED WITH OPERATING SKI RESORTS
The nature of the Resort Operations' business is very different from the
other New Ralcorp Businesses. For example the Resort Operations' earnings are
highly seasonal with the segment's earnings being realized entirely in the
second fiscal quarter of every year. The inability to borrow during other
periods would have a material adverse impact on the Company's operations.
Additionally, the level of Resort Operations' success is highly dependent on
weather conditions, consumers' discretionary spending trends, and the business'
relations with the United States Forest Service. See "BUSINESS AND PROPERTIES."
INABILITY TO ATTRACT OR RETAIN KEY PERSONNEL
New Ralcorp is and will be dependent upon the services and management
experience of its executive officers and other key management employees.
However, there can be no assurance that any particular manager will remain in
New Ralcorp's employ. Recently, the Company has experienced a higher than normal
number of resignations of key personnel. The failure of the Company to attract
or retain key personnel could impair New Ralcorp's operations and thereby
adversely affect its business and results of operations.
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THE DISTRIBUTION
BACKGROUND AND REASONS FOR THE DISTRIBUTION
From the 1994 Spin-off to early 1996, Ralcorp's overall ready-to-eat cereal
business recorded substantial profits. However, wholesale price discounting in
the ready-to-eat cereal category by major branded manufacturers has
substantially reduced the profitability of Ralcorp's combined branded and
private label ready-to-eat cereal business. In light of the foregoing, in May
1996, Ralcorp began to take steps to significantly lower its operating costs by
reducing administrative headquarters staffing by 25% and closing part of its
Battle Creek cereal plant. Concurrently with implementing such steps, Ralcorp
reviewed the advisability of remaining a small branded cereal producer versus
selling its branded cereal and snack mix businesses. Ralcorp management
concluded that in light of the competitive price pressures on branded cereal,
the added pressure to utilize increased advertising and promotion spending to
gain long-term growth of branded products and the difficulty in developing
sustainable new branded cereal products, a sale of the Branded Business in a
tax-free transaction would be in the best interests of the Ralcorp shareholders.
Ralcorp believes that the New Ralcorp Businesses will be, subsequent to the sale
of the Branded Business, better able to focus on private label consumer food
products and quality branded baby food. Once the Distribution is completed, New
Ralcorp intends to substantially restructure its operations and staffing of the
Private Label Cereal Business and its administrative functions so that the
Company can operate such businesses in a substantially reduced cost structure.
See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- Cautionary Statement on Forward-Looking Statements."
In addition, the Distribution and the Merger will afford holders of Ralcorp
Common Stock the option of continuing their investment in either (or both) a
major branded cereal and consumer foods company and New Ralcorp, a private label
cereal, cracker and cookie and branded baby food company.
MANNER OF EFFECTING THE DISTRIBUTION
The Distribution is expected to be made effective on the Distribution Date
immediately prior to the effective time of the Merger (the "Effective Time"), to
holders of record of Ralcorp Common Stock at the close of business on the
Distribution Record Date. Immediately after the Distribution Date, the New
Ralcorp Common Stock will be delivered to the Distribution Agent. As soon as
practicable thereafter, New Ralcorp will begin mailing share certificates for
New Ralcorp Common Stock to holders of Ralcorp Common Stock as of the close of
business on the Distribution Record Date on the basis of one share of New
Ralcorp Common Stock for every one share of Ralcorp Common Stock held on the
Distribution Record Date. Based on the number of shares of Ralcorp Common Stock
issued and outstanding at October 23, 1996, approximately 33 million shares of
New Ralcorp Common Stock would be issued. All shares of New Ralcorp Common Stock
will be fully paid, nonassessable and free of preemptive rights. The New Ralcorp
Board of Directors is expected to adopt a Shareholder Protection Rights Plan and
declare a distribution of one Right for every outstanding share of New Ralcorp
Common Stock, which Rights will be evidenced by the outstanding certificates of
New Ralcorp Common Stock distributed in the Distribution. Each Right, among
other things, could allow shareholders to purchase additional shares of New
Ralcorp Common Stock upon the occurrence of certain takeover related events. See
"DESCRIPTION OF RALCORP CAPITAL STOCK -- Common Stock Purchase Rights." No
fractional shares of New Ralcorp Common Stock will be issued to shareholders
because the Distribution will not yield fractional shares.
Immediately following the Distribution, General Mills, through the Merger,
will acquire the Branded Business and each share of Ralcorp Common Stock will,
at the Effective Time, be converted into a right to receive a fraction of a
share of General Mills common stock ("General Mills Common Stock"). Shares of
Ralcorp Common Stock owned by General Mills or Ralcorp and their wholly owned
subsidiaries or owned by shareholders with perfected dissenters rights under
Missouri law will not be so converted. See "AGREEMENTS AMONG GENERAL MILLS,
RALCORP AND NEW RALCORP."
Following the Distribution, approximately 267 million shares of New Ralcorp
Common Stock will remain authorized but unissued, of which approximately 66
million will be reserved for issuance pursuant to the Rights and incentive
compensation awards.
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NO HOLDER OF RALCORP COMMON STOCK WILL BE REQUIRED TO PAY ANY CASH OR OTHER
CONSIDERATION FOR THE SHARES OF NEW RALCORP COMMON STOCK TO BE RECEIVED IN THE
DISTRIBUTION OR TO SURRENDER OR EXCHANGE SHARES OF RALCORP COMMON STOCK (OTHER
THAN IN REGARD TO THE EXCHANGE AS PART OF THE MERGER AS DESCRIBED IN THE PROXY
STATEMENT-PROSPECTUS) OR TO TAKE ANY OTHER ACTION IN ORDER TO RECEIVE NEW
RALCORP COMMON STOCK.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Bryan Cave LLP, special counsel to Ralcorp, and Wachtell,
Lipton, Rosen & Katz, special counsel to General Mills, the following discussion
is an accurate general discussion of the material United States federal income
tax consequences of the Transactions. The discussion which follows is based on
the Code, Treasury regulations promulgated thereunder, and judicial and
administrative interpretations thereof, all as in effect on the date hereof, and
is subject to any changes in these or other laws occurring after such date. The
discussion below does not address the effects of any state, local or foreign tax
laws.
GENERAL
The tax treatment of a shareholder may vary depending upon his or her
particular situation, and certain shareholders (including individuals who hold
restricted stock of Ralcorp, individuals who hold options in respect of Ralcorp
Common Stock, insurance companies, tax-exempt organizations, financial
institutions or broker-dealers, persons who do not hold the Ralcorp Common Stock
as capital assets and persons who are neither citizens nor residents of the
United States, or who are foreign corporations, foreign partnerships or foreign
estates or trusts as to the United States) may be subject to special rules not
discussed below.
Earlier this year, the President's budget recommendations to Congress
called for new legislations, generally effective retroactive to March 19, 1996,
which, if enacted, would require Ralcorp to pay federal income tax upon the
consummation of the transactions on gain equal to the excess of the value of the
New Ralcorp Common Stock distributed to the shareholders over Ralcorp's basis in
such stock. Such legislation has not yet been introduced in Congress. Senate
Finance Committee Chairman William V. Roth, Jr. and House Ways and Means
Committee Chairman Bill Archer publicly announced on March 29, 1996 in a joint
statement that any such legislation, if enacted, would be effective "no earlier
than the date of appropriate Congressional action." Subsequently, Senator Daniel
Patrick Moynihan, the ranking minority member of the Senate Finance Committee,
and Representative Sam M. Gibbons, the ranking minority member of the House Ways
and Means Committee, and Representative Charles B. Rangel issued statements
supporting the substance of that joint statement.
As a result of such legislative climate, however, General Mills' and
Ralcorp's respective obligations to consummate the Merger is conditioned upon
there not being any legislation introduced in bill form and pending
congressional action which, if enacted, would have the effect of amending the
Code so as to alter in any materially adverse respect any of the tax
consequences described below to Ralcorp, New Ralcorp, any of their respective
subsidiaries or Ralcorp's shareholders with respect to the Reorganization.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE TRANSACTIONS
As indicated above, prior to the Transactions, Ralcorp will receive a
Private Letter Ruling or the Tax Opinions from Bryan Cave LLP, special counsel
to Ralcorp, and Wachtell, Lipton, Rosen & Katz, special counsel to General
Mills, as to certain of the federal income tax consequences of the Transactions.
The parties do not currently intend to seek the Private Letter Ruling and,
instead, intend to proceed on the basis of the Tax Opinions. The Tax Opinions
are expected to conclude that the Internal Merger will qualify as a
reorganization within the meaning of Section 368(a)(1)(F), the Branded
Contribution and the Distribution and related prior property transfers to New
Ralcorp will each qualify as reorganizations within the meaning of Section
368(a)(1)(D) of the Code, the Internal Spinoff, as well as the Distribution,
will each qualify as a distribution described in Code Section 355 and the Merger
will qualify as a "reorganization" under Code Section 368(a)(1)(B).
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If the Transactions so qualify, then the following consequences will
result:
(a) No gain or loss will be recognized by Ralcorp, the Branded
Subsidiary or New Ralcorp as a result of the Internal Merger, Branded
Contribution, Internal Spinoff and/or the Distribution.
(b) No gain or loss will be recognized by (and no amount will be
included in the income of) the Ralcorp shareholders as a result of their
receipt of New Ralcorp Common Stock (and the associated stock purchase
rights) in the Distribution.
(c) The aggregate basis of New Ralcorp Common Stock and Ralcorp Common
Stock in the hands of the Ralcorp shareholders immediately after the
Distribution will be the same as the aggregate basis of Ralcorp Common
Stock held immediately before the Distribution and such tax basis will be
allocated between the New Ralcorp Common Stock and Ralcorp Common Stock
based upon relative fair market value at the time of the Distribution.
(d) The holding period of New Ralcorp Common Stock received by a
holder in the Distribution will include the period during which the
shareholder held Ralcorp Common Stock provided that the Ralcorp Common
Stock was held as a capital asset.
(e) Except for any cash received in lieu of fractional shares, a
shareholder will not recognize any income, gain or loss as a result of the
receipt of General Mills Common Stock (and the associated stock purchase
rights) in the Merger.
(f) A shareholder's tax basis for shares of General Mills Common Stock
received in the Merger, including any fractional share interest for which
cash is received, will equal such shareholder's basis in Ralcorp Common
Stock surrendered (as determined immediately following the Distribution as
adjusted in (c) above).
(g) A shareholder's holding period for the shares of General Mills
Common Stock received in the Merger, including any fractional share
interest for which cash is received, will include the period for which the
shares of Ralcorp Common Stock were held, provided such shares were held as
capital assets.
General Mills and Ralcorp will not complete the Distribution and the Merger
unless they receive the Tax Opinions. Shareholders should be aware, however,
that an opinion of counsel is not binding on the Internal Revenue Service
("IRS") or the courts. Further, the opinions of Bryan Cave LLP and Wachtell,
Lipton, Rosen & Katz will be based on current law and certain representations as
to factual matters made by, among others, Ralcorp, New Ralcorp and General Mills
which, if incorrect in certain material respects, would jeopardize the
conclusions reached by counsel in their opinions. Neither Ralcorp, New Ralcorp
nor General Mills is currently aware of any facts and circumstances which would
cause any such representations to Bryan Cave LLP and Wachtell, Lipton, Rosen &
Katz to be untrue or incorrect in any material respect. In addition, General
Mills and New Ralcorp have agreed to certain covenants restricting their
respective future actions to provide further assurances that the Distribution,
Merger and Reorganization will be tax-free.
If the Reorganization and the Distribution were not to qualify for tax-free
treatment under Code Sections 368(a)(1)(D) and 355, Ralcorp would recognize a
gain equal to the excess of the fair market value of the New Ralcorp Common
Stock distributed to its shareholders over Ralcorp's basis in such stock, and
could recognize an additional gain in an amount equal to the excess of the fair
market value of the stock of the Branded Subsidiary over its basis in such
stock. Any resulting corporate income tax on such gain would be payable by
Ralcorp. New Ralcorp has agreed to indemnify General Mills and Ralcorp for such
tax liability, unless the failure of the Merger, Reorganization or the
Distribution to qualify under those sections of the Code, is the result of
General Mills' breach of the covenants referred to in the preceding paragraph.
In addition, each Ralcorp shareholder who received shares of New Ralcorp Common
Stock would be generally treated as if it had received a taxable distribution in
an amount equal to the fair market value of New Ralcorp Common Stock received.
Further, if the Merger fails to qualify as a "reorganization" under Code Section
368(a)(1)(B) each Ralcorp shareholder who receives shares of General Mills
Common Stock would recognize a gain or loss equal to the difference between the
fair market value of the General Mills Common Stock received and his or her
basis in the shares of Ralcorp Common Stock surrendered. Failure of the
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Merger to qualify as a tax-free reorganization could jeopardize the tax-free
treatment of the Reorganization and the Distribution under Code Sections
368(a)(1)(D) and 355.
As soon as practicable following the Distribution, Ralcorp intends to make
available to its shareholders information regarding the allocation of basis
between Ralcorp Common Stock and New Ralcorp Common Stock.
THE FOREGOING IS ONLY A SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES
OF THE DISTRIBUTION UNDER CURRENT LAW AND IS INTENDED FOR GENERAL INFORMATION
ONLY. EACH SHAREHOLDER SHOULD CONSULT HIS OR HER TAX ADVISOR AS TO THE
PARTICULAR CONSEQUENCES OF THE DISTRIBUTION TO SUCH SHAREHOLDER, INCLUDING THE
APPLICATION OF FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS.
For a description of the agreements pursuant to which Ralcorp and New
Ralcorp have provided for various tax matters, see "AGREEMENTS AMONG RALCORP,
GENERAL MILLS AND NEW RALCORP -- Reorganization Agreement" and "-- Terms of the
Other Ancillary Agreements".
BACKUP WITHHOLDING
Under the backup withholding rules, a holder of New Ralcorp Common Stock
and General Mills Common Stock may be subject to backup withholding at the rate
of 31% with respect to dividends and proceeds of redemption, unless such
shareholder (a) is a corporation or comes within certain other exempt categories
and, when required, demonstrates this fact or (b) provides a correct taxpayer
identification number, certifies as to no loss of exemption from backup
withholding and otherwise complies with applicable requirements of the backup
withholding rules. Any amount withheld under these rules will be credited
against the shareholder's federal income tax liability. New Ralcorp or General
Mills may require holders of New Ralcorp Common Stock or General Mills Common
Stock to establish an exemption from backup withholding or to make arrangements
satisfactory to New Ralcorp or General Mills with respect to the payment of
backup withholding. A shareholder who does not provide New Ralcorp or General
Mills with his or her current taxpayer identification number may be subject to
penalties imposed by the IRS.
LISTING AND TRADING OF NEW RALCORP COMMON STOCK
The New Ralcorp Common Stock has been approved for listing on the NYSE,
subject to official notice of issuance, under the symbol "RAH". There is
currently no public trading market for New Ralcorp Common Stock. Prices at which
New Ralcorp Common Stock may trade prior to the Distribution on a "when-issued"
basis, or after the Distribution, cannot be predicted. See "RISK FACTORS -- No
Prior Market for New Ralcorp Common Stock" and "-- Absence of Dividends" and
"ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS." A "when-issued" trading market is
expected to develop on or about the Distribution Record Date. The term
"when-issued" means that shares can be traded prior to the time certificates are
actually available or issued. Prices at which the shares of New Ralcorp Common
Stock may trade on a "when-issued" basis or after the Distribution cannot be
predicted.
As of the Distribution Record Date, New Ralcorp expects to have
approximately 20,462 shareholders of record, based upon the number of holders of
record of Ralcorp Common Stock as of November 30, 1996. The Transfer Agent and
Registrar for the New Ralcorp Common Stock will be Boatmen's Trust Company,
located at 100 North Broadway, St. Louis, Missouri 63101. Approximately
1,226,000 options to acquire shares of Ralcorp Common Stock are currently held
by employees of Ralcorp. It is expected that all employees will have their
options vested and accelerated prior to the Distribution and the value thereof
will be paid in cash by Ralcorp prior to the Distribution. For additional
information regarding options to purchase New Ralcorp Common Stock that are
expected to be outstanding after the Distribution, see "AGREEMENTS AMONG
RALCORP, GENERAL MILLS AND NEW RALCORP -- Reorganization," "EXECUTIVE
COMPENSATION," and "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS OF NEW
RALCORP STOCK."
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Shares of New Ralcorp Common Stock distributed to shareholders of Ralcorp
Common Stock in the Distribution will be freely transferable, except for shares
received by persons who may be deemed to be "affiliates" of New Ralcorp under
the Securities Act. Persons who may be deemed to be affiliates of New Ralcorp
after the Distribution generally include individuals or entities that control,
are controlled by, or are under common control with, New Ralcorp and may include
certain officers and directors of New Ralcorp as well as principal shareholders
of New Ralcorp, if any. Persons who are affiliates of New Ralcorp will be
permitted to sell their shares of New Ralcorp Common Stock only pursuant to an
effective registration statement under the Securities Act or an exemption from
the registration requirements of the Securities Act, such as the exemptions
afforded by Section 4(2) of the Securities Act and Rule 144 thereunder.
DISPOSITION OF NEW RALCORP COMMON STOCK RECEIVED BY BENEFIT PLANS
Shares of New Ralcorp Common Stock distributed in respect of Ralcorp Common
Stock held by the trustee for the New Ralcorp Savings Investment Plan ("New
Ralcorp SIP"), Vanguard Fiduciary Trust Company, will be maintained in the New
Ralcorp SIP or sold as directed by the individual participants to whom such
shares are attributed pursuant to the terms of the New Ralcorp SIP.
REGULATORY APPROVALS
No material federal or state regulatory approvals will be required in
connection with the Distribution which have not been obtained other than as
described below.
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
("HSR Act"), and the rules and regulations promulgated thereunder, certain
transactions, including the Merger, may not be consummated unless certain
waiting period requirements have been satisfied. On August 19, 1996, General
Mills and Ralcorp each filed Premerger Notification and Report Forms pursuant to
the HSR Act with the United States Department of Justice ("DOJ") and the Federal
Trade Commission ("FTC"). On September 18, 1996, Ralcorp and General Mills each
received a request for additional information under the HSR Act from the FTC. On
December 9, 1996, General Mills signed an agreement (the "Consent Agreement")
relating to a proposed consent order with the FTC (the "Proposed FTC Order").
The FTC accepted the Consent Agreement for public comment on December 24, 1996,
at which time the FTC granted early termination of the required waiting period
under the HSR Act with respect to the Merger.
The Proposed FTC Order will become final if the FTC enters the Proposed FTC
Order after a 60-day public comment period. Pending entry of the Proposed FTC
Order, General Mills has agreed to comply with it (but General Mills will no
longer be bound by the Proposed FTC Order if the FTC withdraws its acceptance of
the Consent Agreement). Under the Proposed FTC Order, General Mills would permit
New Ralcorp to compete against General Mills by producing and selling a
Chex-type private label cereal as soon as the Merger is completed, and would
permit a third party to acquire this right. General Mills and Ralcorp had
originally agreed that New Ralcorp would not produce and sell a Chex-type
private label cereal for 18 months after the Merger. The parties intend to
complete the Merger as soon as they satisfy all the conditions to the Merger,
even if the public comment period has not expired and the Proposed FTC Order is
not final. Notwithstanding the Consent Agreement and the Proposed FTC Order, at
any time before or after the Effective Time, the FTC, the DOJ or others could
take action under the antitrust laws with respect to the Merger, including
seeking to enjoin the consummation of the Merger, to rescind the Merger or to
require divestiture of substantial assets of Ralcorp, General Mills or the
corporation surviving the Merger (the "Surviving Corporation"). There can be no
assurance that a challenge to the Merger on antitrust grounds will not be made
or, if such a challenge is made, that it would not be successful.
The Merger Agreement provides that, subject to certain terms and
conditions, the parties to the Merger Agreement agree to use their reasonable
best efforts to take, or cause to be taken, all actions and to do, or cause to
be done, all things necessary, proper or advisable to consummate and make
effective as promptly as practicable the transactions contemplated by the Merger
Agreement and to cooperate with each other in connection with the foregoing,
including, but not limited to, (a) defending all lawsuits or other legal
proceedings challenging the Merger Agreement, or the transactions contemplated
thereby, (b) attempting to lift or rescind any injunction or restraining order
or other order adversely affecting the ability of the parties to
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<PAGE> 30
consummate the transactions contemplated by the Merger Agreement, and (c)
effecting all necessary filings and submissions of information requested by
governmental authorities.
The Merger Agreement provides that Ralcorp and General Mills will promptly
make any filings requested pursuant to the HSR Act or which may be necessary to
consummate the transactions contemplated by the Merger Agreement.
Notwithstanding the foregoing or any other provision of the Merger Agreement,
(a) neither Ralcorp nor any of its subsidiaries will, without General Mills'
prior written consent, agree or commit to any divestiture, hold-separate order
or other restriction relating to the Branded Business and (b) neither General
Mills nor any of its subsidiaries will be required to agree or commit to any
divestiture, hold-separate order or other restriction relating to the Branded
Business or to any of its existing businesses or any other governmental order or
obligation that otherwise imposes any conditions or limitations in connection
with General Mills' acquisition of the Branded Business.
AGREEMENTS AMONG RALCORP, GENERAL MILLS
AND NEW RALCORP
For the purpose of effecting the Distribution and governing certain of the
relationships among Ralcorp, General Mills and New Ralcorp after the
Distribution, Ralcorp, General Mills and New Ralcorp have entered or will enter
into the various agreements described below. The agreements summarized below
have been filed as exhibits to the Company Form 10. The following descriptions
do not purport to be complete and are qualified in their entirety by reference
to such agreements.
REORGANIZATION AGREEMENT
General Description of the Reorganization. The Reorganization involves the
following steps, which will be taken pursuant to the terms of the Reorganization
Agreement:
(a) Ralston Foods will merge into New Ralcorp, with New Ralcorp being
the surviving corporation. (Step (a) constitutes the Internal Merger.)
(b) New Ralcorp will transfer the assets of the Branded Business to
the Branded Subsidiary in exchange for capital stock of the Branded
Subsidiary. The Branded Subsidiary will also assume certain liabilities
associated with the Branded Business. (Step (b) constitutes the Branded
Contribution.)
(c) New Ralcorp will distribute the capital stock of the Branded
Subsidiary to Ralcorp. (Step (c) constitutes the Internal Spinoff.)
(d) Ralcorp will distribute the capital stock of New Ralcorp to its
shareholders in the Distribution. The Distribution will be made pro rata to
the shareholders of Ralcorp, as described below under "-- Method of
Effecting the Distribution."
Immediately after the Distribution, General Mills will acquire Ralcorp (and the
Branded Subsidiary) through the Merger.
The Branded Contribution; Assumption of Branded Liabilities. Pursuant to
the terms of the Reorganization Agreement, immediately prior to the
Distribution, New Ralcorp will contribute specified assets of the Branded
Business (the "Branded Assets") to the Branded Subsidiary. These assets consist
primarily of: (a) the Branded Plant; (b) the equipment and inventory currently
used by Ralston Foods to conduct the Branded Business at the Branded Plant; and
(c) certain contract and intellectual property rights related to or used in the
conduct of the Branded Business.
In connection with the Branded Contribution, the Branded Subsidiary will
assume the Branded Liabilities (as defined herein), subject to the
indemnification obligations of New Ralcorp described below under "--
Indemnification." The "Branded Liabilities" are defined in the Reorganization
Agreement as the following: (a) all of the liabilities arising out of, relating
to or resulting from the ownership, use or possession of the Branded Assets or
the operation of the Branded Business (other than those portions of the Branded
Business that are not conveyed to or retained by Ralcorp and the Branded
Subsidiary under the Reorganiza-
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<PAGE> 31
tion Agreement) as of immediately after 11:59 p.m. (the "Distribution Time") on
the Distribution Date, whether arising prior to or after the Closing Date; (b)
certain liabilities identified on Schedule 1.1(d) to the Reorganization
Agreement, which consist of certain pending litigation matters (collectively,
the "Scheduled Branded Litigation"); and (c) the liabilities included in the
combined balance sheet (but not the notes to such balance sheet) of Ralcorp and
the Branded Subsidiary as of the Closing Date as contemplated by Schedule 2.3 to
the Merger Agreement for purposes of calculating the Closing Date Net Asset
Value, regardless of the sufficiency of the amount of any accrual thereon, and
certain liabilities identified on Schedule 1.1(c) to the Reorganization
Agreement, which consist of debt and other contract obligations (collectively,
the "Known Branded Liabilities"). The liabilities referred to in clause (a)
above include product liability claims relating to Branded Business products
produced prior to the Distribution Time, regardless of whether such products
were produced at the Branded Plant, but do not include employee, environmental,
occupational safety, health and similar liabilities related to any facility
other than the Branded Plant.
The Reorganization Agreement also provides that Ralcorp will contribute to
New Ralcorp, immediately prior to the Distribution Time, any interest it may
have in any assets other than the Branded Assets (the "New Ralcorp Assets"). In
addition, the Reorganization Agreement provides that New Ralcorp will assume and
retain all liabilities other than the Branded Liabilities (the "New Ralcorp
Liabilities").
Accounts Receivable. The Reorganization Agreement provides that the
customer accounts receivable (including for any products of the Branded Business
shipped but not invoiced, which products will be relieved from inventory)
outstanding at the close of business on the Distribution Date will remain assets
of New Ralcorp. New Ralcorp will be entitled to collection and receipt of all
such receivables, subject to specified rules for allocation of customer payments
and deductions.
Representations and Warranties of New Ralcorp. In the Reorganization
Agreement, New Ralcorp will make certain representations and warranties to
Ralcorp and the Branded Subsidiary with respect to: (a) its due organization,
good standing and corporate power; (b) its power and authority to execute the
Reorganization Agreement and the other Ancillary Agreements to which it is or
will be party and to consummate the transactions contemplated thereby; (c) the
enforceability of the Reorganization Agreement and the other Ancillary
Agreements to which it is or will be party; and (d) the noncontravention of laws
and agreements and the absence of the need for governmental or third-party
consents in connection with the execution, delivery and performance by it of the
Reorganization Agreement and the other Ancillary Agreements to which it is or
will be party.
Internal Merger. Prior to the Branded Contribution and the Internal
Spinoff, Ralston Foods will merge with and into New Ralcorp, with New Ralcorp
being the surviving corporation. The purpose of the Internal Merger is to move
Ralston Foods' state of incorporation from Nevada to Missouri, where its
headquarters are located.
Internal Spinoff. After the Internal Merger, but before the Distribution,
New Ralcorp will effect the Internal Spinoff by distributing the capital stock
of the Branded Subsidiary to Ralcorp. The Internal Spinoff is necessary in order
to separate the Branded Business (which will be owned by New Ralcorp and the
Branded Subsidiary after the Internal Merger and the Branded Contribution) from
the businesses to be retained by New Ralcorp.
Method of Effecting the Distribution. The Reorganization Agreement provides
that, effective at the Distribution Time, Ralcorp will distribute all
outstanding shares of New Ralcorp Common Stock to holders of record of Ralcorp
Common Stock on the Distribution Record Date on the basis of one share of New
Ralcorp Common Stock for each share of Ralcorp Common Stock outstanding on the
Distribution Record Date.
Employee Benefits and Labor Matters. For purposes of allocating employee
benefit liabilities and obligations, the Reorganization Agreement defines the
employees that will be employees of the Branded Business after the Merger as
"Branded Employees." Specifically, a "Branded Employee" is any individual who on
the Distribution Date is (a) actively employed at the Branded Plant, (b) who is
set forth on Schedule 1.1(b) to the Reorganization Agreement (which Schedule
will be updated by mutual agreement of
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New Ralcorp and General Mills prior to the Effective Time), or (c) who is on
leave or layoff (with recall rights) from active employment but who, immediately
prior to commencement of such leave or layoff, was employed at the Branded
Plant, except that "Branded Employee" does not include any individual who, as of
the Distribution Date, (i) has been determined to be disabled under the Ralcorp
Holdings Long Term Disability Plan (the "LTD Plan"), the Ralcorp Holdings Group
Life Insurance Plan or the Ralcorp Holdings Retirement Plan for Sales,
Administrative, Clerical and Production Employees, or (ii) is on leave during a
waiting period prior to a determination of disability under the LTD Plan.
In general, the Reorganization Agreement requires Ralcorp to amend its
employee benefit and executive compensation plans to remove Ralcorp as sponsor
and named fiduciary and substitute New Ralcorp in its place prior to the
Distribution Date. Also prior to the Distribution Date, General Mills is
required to establish new plans, or amend existing plans, in order to make
available to all Branded Employees approximately the same benefits as were
available to them (with the same vesting or service credit status where
applicable) prior to the Merger. The Reorganization Agreement also provides that
the appropriate amount of plan assets, in the case of funded benefit plans, will
be transferred from the current Ralcorp plans to General Mills plans in order to
provide benefits to the Branded Employees after the Closing. Branded Employees
will be permitted to rollover their Ralcorp Holdings, Inc. Savings Investment
Plan account balances into the General Mills savings plan, subject to its terms.
Ralcorp and New Ralcorp will agree to cooperate with each other in order to
transfer plan records and make all appropriate governmental filings.
Indemnification. Pursuant to the Reorganization Agreement, General Mills,
Ralcorp and the Branded Subsidiary, on the one hand, and New Ralcorp, on the
other hand, will agree to indemnify each other for losses, liabilities, claims,
damages, obligations, payments, costs and expenses (including, without
limitation, reasonable attorneys' fees) (collectively, "Indemnifiable Losses"),
arising from certain matters. The indemnification provided by the Reorganization
Agreement will also apply to the indemnified parties' respective affiliates,
employees, directors, benefit plan fiduciaries, shareholders, agents,
consultants, representatives, successors, transferees and assigns.
Specifically, General Mills, Ralcorp and the Branded Subsidiary will agree
to jointly and severally indemnify New Ralcorp against Indemnifiable Losses
arising from the following:
(a) any and all Branded Liabilities (except for the Scheduled Branded
Litigation and the "Unknown Branded Liabilities" (defined as all Branded
Liabilities other than the Known Branded Liabilities, the Scheduled Branded
Litigation and the Post-Closing Branded Liabilities (as defined herein)),
to the extent that New Ralcorp is obligated to indemnify Ralcorp and the
Branded Subsidiary therefor as described below) assumed by the Branded
Subsidiary pursuant to the Reorganization Agreement;
(b) any breach or violation of any covenant made in the Merger
Agreement, the Reorganization Agreement or any other Ancillary Agreement by
General Mills, or, with respect to covenants to be performed after the
Effective Time, by Ralcorp or the Branded Subsidiary; or
(c) subject to the limitations described below, any breach or
violation of any representation or warranty (without regard to materiality
qualifications contained therein) made by General Mills and/or General
Mills Missouri in the Merger Agreement.
New Ralcorp will agree to indemnify General Mills, Ralcorp and the Branded
Subsidiary against Indemnifiable Losses arising from the following:
(a) any and all liabilities assumed by New Ralcorp pursuant to the
Reorganization Agreement;
(b) subject to the limitations described below, any and all Branded
Liabilities other than (i) the Known Branded Liabilities and (ii) the
"Post-Closing Branded Liabilities," which are defined as Branded
Liabilities relating to or arising from the ownership, use or possession of
the Branded Assets or the operation of the Branded Business after the
Effective Time;
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(c) any breach or violation of any covenant made in the Merger
Agreement, the Reorganization Agreement or any other Ancillary Agreement by
New Ralcorp or, with respect to covenants to be performed before the
Effective Time, by Ralcorp or the Branded Subsidiary;
(d) the ownership, use or possession of the New Ralcorp Assets or the
operation of the New Ralcorp Business, whether relating to or arising out
of occurrences prior to or after the Effective Time, except to the extent
liability therefor is assumed by the Branded Subsidiary pursuant to the
Reorganization Agreement;
(e) subject to the limitations described below, any breach or
violation of any representation or warranty (without regard to materiality
qualifications contained therein) made by Ralcorp in the Merger Agreement
or made by New Ralcorp in the Reorganization Agreement;
(f) any third party claim to the extent relating to the actions of the
Ralcorp Board in authorizing the Distribution or the Merger; or
(g) any third party claim arising out of the disclosures contained in
this Information Statement, other than disclosures based on information
provided by or on behalf of General Mills for inclusion herein.
In addition, Ralcorp and New Ralcorp will agree to allocate liability for,
and indemnify each other against, any amounts payable on account of the exercise
of any Ralcorp shareholder of appraisal rights.
The indemnification obligations described above will be subject to the
following limitations:
(a) Notwithstanding the expiration of the representations and
warranties in the Merger Agreement or anything else to the contrary in the
Merger Agreement, the indemnification obligations described above with
respect to breaches of representations or warranties will survive the
Distribution Date for eighteen months, at which time they will expire
automatically, except with respect to written claims for indemnification
made in good faith prior to such expiration (which claims will survive such
expiration);
(b) The indemnification obligation of New Ralcorp described in
paragraph (b) above with respect to certain pre-Closing Branded Liabilities
will survive the Distribution Date for five years, at which time it will
expire automatically, except with respect to written claims for
indemnification made in good faith prior to such expiration (which claims
will survive such expiration);
(c) The indemnification obligations of General Mills, Ralcorp and the
Branded Subsidiary for breaches of representations or warranties will apply
only to the extent Indemnifiable Losses exceed $6 million in the aggregate;
and
(d) The indemnification obligations of New Ralcorp for breaches of
representations or warranties and for certain pre-Closing Branded
Liabilities will apply only to the extent Indemnifiable Losses therefrom
exceed $6 million in the aggregate.
Net Worth Covenant. The Reorganization Agreement provides that New Ralcorp
and its subsidiaries will maintain certain minimum net worth levels for up to
five years after the Distribution Date, as follows:
(a) For a period of two years following the Distribution Date, New
Ralcorp and its subsidiaries, on a consolidated basis, will maintain at all
times a net worth (determined in accordance with generally accepted
accounting principles, consistently applied) of not less than $100 million.
(b) Except as provided in paragraph (c) below, for a period of two
years commencing on the second anniversary of the Distribution Date, New
Ralcorp and its subsidiaries, on a consolidated basis, will maintain at all
times a net worth (determined in accordance with generally accepted
accounting principles, consistently applied) of not less than the lesser of
(i) the sum of $25 million plus the aggregate of all claims for
indemnification made against New Ralcorp pursuant to the Reorganization
Agreement (subject to the limitations described above) unresolved and
pending on the second anniversary of the Distribution Date, and (ii) $100
million.
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(c) Notwithstanding the foregoing paragraph (b), in the event an
agreement between Ralcorp and Ralston Purina as contemplated by the Merger
Agreement is not entered into prior to the second anniversary of the
Distribution Date, for a period of three years commencing on the second
anniversary of the Distribution Date, New Ralcorp and its subsidiaries, on
a consolidated basis, will maintain at all times a net worth (determined in
accordance with generally accepted accounting principles, consistently
applied) of not less than the amounts specified below:
(i) during the first year of such three-year period, the lesser of
(A) the sum of $75 million plus the aggregate of all claims for
indemnification made against New Ralcorp pursuant to the Reorganization
Agreement (subject to the limitations described above) unresolved and
pending on the second anniversary of the Distribution Date, and (B) $100
million;
(ii) during the second year of such three-year period, the lesser
of (A) the sum of $50 million plus the aggregate of all claims for
indemnification made against New Ralcorp pursuant to the Reorganization
Agreement (subject to the limitations described above) unresolved and
pending on the third anniversary of the Distribution Date, and (B) the
amount specified in clause (i) of this paragraph (c); and
(iii) during the third year of such three-year period, the lesser
of (A) the sum of $25 million plus the aggregate of all claims for
indemnification made against New Ralcorp pursuant to the Reorganization
Agreement (subject to the limitations described above) unresolved and
pending on the fourth anniversary of the Distribution Date, and (B) the
amount specified in clause (ii) of this paragraph (c).
TERMS OF THE OTHER ANCILLARY AGREEMENTS
THE TECHNOLOGY AGREEMENT
The Technology Agreement will be entered into as of the Distribution Date
by and among Ralcorp, New Ralcorp and the Branded Subsidiary. It will facilitate
the assignment and/or license of certain Technical Information and Know How (as
defined herein) among Ralcorp, New Ralcorp and the Branded Subsidiary. As used
in the Technology Agreement, the term "Technical Information and Know How"
refers to all the information owned or licensed from third parties by Ralcorp
and its subsidiaries, and which, as of the date of the Technology Agreement, has
been used or reduced to practice for use by the Branded Business or the New
Ralcorp Business or by Ralston Purina in connection with either of such
businesses, including trade secrets, product formulas, processing and equipment
design and information, specifications, know how, manufacturing, research,
software, inventions, patent applications, patents and industrial property
rights and other technical information. For purposes of the Technology
Agreement, the term Branded Business refers to the business of manufacturing,
distributing and selling branded ready-to-eat cereal and branded cereal-based
snacks and snack mixes, as ever conducted by Ralcorp, Ralston Foods, or Ralston
Purina prior to the Distribution Date and the term New Ralcorp Business refers
to any business (including any of the same businesses as previously conducted by
Ralston Purina) as ever conducted by Ralcorp, Ralston Foods or any of their
affiliates prior to the Distribution Date, other than the Branded Business.
Assignments of Technical Information and Know How. The parties will assign
certain of the Technical Information and Know How to each other pursuant to the
Technology Agreement. Ralcorp will assign to New Ralcorp all of its right,
title, and interest in and to the "Assigned Technical Information and Know How,"
which term refers to the Technical Information and Know How that is or has in
the past been used exclusively in, or reduced to practice for use exclusively
by, the New Ralcorp Business and that same business as it was previously
conducted by Ralston Purina. New Ralcorp will assign to Branded Subsidiary all
of its right, title and interest, in the United States of America and all
foreign countries, in and to (a) the Shared Technical Information and Know How
(as defined herein) and (b) the Branded Technical Information and Know How (as
defined herein).
The term "Shared Technical Information and Know How" refers to the
Technical Information and Know How that is or has in the past been used or
reduced to practice for use by (a) the Branded Business and
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that same business as it was previously conducted by Ralston Purina for any
products which are not Designated Products (as defined herein) and (b) both the
Branded Business and the New Ralcorp Business and those same businesses as they
were previously conducted by Ralston Purina. The term "Branded Technical
Information and Know How" refers to the Technical Information and Know How that
is or has in the past been used exclusively, or reduced to practice for use
exclusively, by Ralcorp, its subsidiaries or Ralston Purina to produce
Designated Products, including all cereal-based snacks and snack mixes that are
Designated Products. The term "Designated Products" refers to cereals, cereal
based snacks and snack mixes, and products which are identical to or
substantially similar in form or in overall appearance to those products, which
have been offered for sale in connection with any form of the Chex trademark or
the Cookie Crisp trademark prior to the date of the Trademark Agreement, whether
or not any of such products are (a) similar in flavor to those products which
have been offered for sale in connection with such trademarks or (b) used in
association with ingredients different from the ingredients used in the products
which have been offered for sale in connection with such trademarks; provided,
however, that this term does not include the hexagonally shaped products
currently sold under the Crispy Hexagon designation or those wheat cereals
denominated or described as Shredded Wheat and similar in nature to other
shredded wheat products currently offered by other cereal manufacturers.
License Grants Relating to the Technical Information and Know How. Each of
Ralcorp and Branded Subsidiary will grant to New Ralcorp certain licenses
relating to the Shared Technical Information and Know How and the Branded
Technical Information and Know How. These licenses will be subject to the terms,
covenants, conditions, and limitations set forth in, among other agreements, the
prior Technology Agreement entered into between Ralcorp and Ralston Purina in
connection with the 1994 Spin-off (the "Prior Technology Agreement"). The
licenses will include an irrevocable, non-exclusive, royalty-free license to
use: (a) the Shared Technical Information and Know How from and after the date
of the Technology Agreement until March 31, 1999 in the Western Hemisphere in a
manner which does not violate the limited, short-term business restrictions
agreed upon by the parties (as described below); (b) the Shared Technical
Information and Know How from and after March 31, 1999, worldwide, in
perpetuity, in a manner which does not violate the limited, short-term business
restrictions agreed upon by the parties; (c) the Branded Technical Information
and Know How to produce any products exclusively for Ralcorp alone or for
Ralston Purina pursuant to the Distributorship Agreement, in each case,
commencing as of the Distribution Date; (d) the Branded Technical Information
and Know How to produce (i) any products, other than snack mix products or
Cookie Crisp-type products, commencing on the Distribution Date and (ii) any
Cookie Crisp-type products, commencing eighteen (18) months after the
Distribution Date, in each case in the United States, its territories,
possessions, military installations and the Commonwealth of Puerto Rico for any
third parties; (e) the Branded Technical Information and Know How to produce any
products, other than snack mix products, commencing five (5) years after the
Distribution Date, in all other countries for any third parties; (f) the Branded
Technical Information and Know How to produce any snack mix products other than
those containing products, or a product substantially similar to, or identical
to, products which have been, prior to the date of the Technology Agreement,
offered for sale in connection with any form of the Chex trademark, including
products sold under the Crispy Hexagon designation, commencing two (2) years
after the Distribution Date, worldwide for any third parties; (g) the Branded
Technical Information and Know How to produce any snack mix products, commencing
five (5) years after the Distribution Date, worldwide, for any third parties;
and (h) the invention claimed in U.S. Patent No. 5,188,860 entitled "Process for
the Production for a Fiber Containing Cereal Product", worldwide, in perpetuity.
In the event the FTC withdraws its acceptance of the Consent Agreement, the
limits on the license of Branded Technical Information and Know How described
above that apply to production of Cookie Crisp-type products will also apply to
Chex-type products.
Limited, Short-Term Business Restrictions. The Technology Agreement
contains certain provisions pursuant to which New Ralcorp, on behalf of itself
and its successors in interest and present and future subsidiaries and
affiliates other than the Branded Subsidiary, will agree not to make certain
products for certain periods of time, except as may otherwise be provided in the
Supply Agreement or in the Distributorship Agreement. New Ralcorp, on behalf of
the same parties, will also agree not to use on its products any snack mix
recipes that have been used in the three years prior to the Distribution Date in
connection with
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Chex products. The Technology Agreement provides that New Ralcorp will not make
or sell (a) any ready-to-eat cereals that are Cookie Crisp-type Designated
Products in the United States, its territories, possessions, military
installations or the Commonwealth of Puerto Rico for the eighteen (18) month
period commencing upon the Distribution Date; (b) any ready-to-eat cereals that
are Designated Products outside of the United States, its territories,
possessions, military installations or the Commonwealth of Puerto Rico for the
five (5) year period commencing upon the Distribution Date; (c) any snack mix,
cereal-based or otherwise, anywhere in the world for the two (2) year period
commencing upon the Distribution Date; and (d) any snack mix containing those
products, or a product substantially similar to, or identical to, products which
have been, prior to the date of the Technology Agreement, offered for sale in
connection with any form of the Chex trademark, which shall include products
sold under the Crispy Hexagon designation, for the five (5) year period
commencing upon the Distribution Date. In the event the FTC withdraws its
acceptance of the Consent Agreement, the restrictions on making and selling
Cookie Crisp-type Designated Products described in clause (a) above will also
apply to Chex-type Designated Products.
The foregoing restrictions on snack mix products will not apply to snack
mix products of an enterprise acquired by New Ralcorp if such snack mix business
generates less than 20% of the annual gross revenues of such enterprise and less
than $7,000,000 in annual sales. In addition, none of these provisions will
serve to restrict the existing business of any third party which acquires New
Ralcorp (although an acquiring third party would be restricted from using the
Shared Technical Information and Know How and the Branded Technical Information
and Know How in violation of the limited, short-term business restrictions
agreed upon by the parties). Moreover, the restrictions will not interfere with
the ability of New Ralcorp to meet its obligations to Ralcorp under the Supply
Agreement. Similarly, the limited, short-term business restrictions agreed upon
by the parties will not interfere with the ability of New Ralcorp to meet its
obligations to Ralston Purina as set forth in the Distributorship Agreement.
However, New Ralcorp will agree to terminate by September 1, 1999 the
Distributorship Agreement insofar as it may require the production or sale of
any Designated Products for Ralston Purina.
Provisions Relating to Confidentiality and Transferability. The parties
will each agree pursuant to the Technology Agreement to treat all Technical
Information and Know How as confidential and not to disclose any portion thereof
to any third party. However, New Ralcorp will have the right to license or
disclose the Shared Technical Information and Know How and Branded Technical
Information and Know How, in confidence, in accordance with the terms of the
Prior Technology Agreement and the Technology Agreement. Similarly, Ralcorp and
the Branded Subsidiary will have the right to license or disclose the Shared
Technical Information and Know How and the Branded Technical Information and
Know How, in confidence, in accordance with the terms of the Prior Technology
Agreement.
The Prior Technology Agreement provides that any party who is a sublicensee
of Technical Information and Know How must agree (a) to treat the same as
confidential and not to disclose it to any third parties without the written
consent of Ralston Purina and (b) to obtain a written agreement from each of its
employees, agents, officers and/or directors that any such Technical Information
and Know How will be kept confidential at all times by such parties and that
such information will not be disclosed to any third parties.
Pursuant to the Technology Agreement, upon New Ralcorp's request each of
Ralcorp and Branded Subsidiary will license the Shared Technical Information and
Know How and the Branded Technical Information and Know How to any subsidiaries
or affiliates of New Ralcorp (regardless of when any such relationship with New
Ralcorp may arise) and (unless the FTC withdraws its acceptance of the Consent
Agreement) to any third party that acquires substantially all of the Private
Label Business, or the business of producing Chex-type private label cereals,
from New Ralcorp. Any such license(s) will be on the same terms as set forth in
the Technology Agreement. A license to an affiliate or subsidiary of New Ralcorp
will remain in effect only for so long as such entity continues to be a
subsidiary or affiliate of New Ralcorp. Upon the granting of a license to a
third party as described above, New Ralcorp's license with respect to any such
technology will automatically terminate. All licensees will be bound by all
restrictions set forth in the Technology Agreement and the Trademark Agreement
as to such Technical Information and Know How.
Miscellaneous Provisions. The Technology Agreement provides that New
Ralcorp will assume from Ralcorp all of the technical assistance obligations
owed to Ralston Purina by Ralcorp pursuant to the Prior
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Technology Agreement. In addition, none of the parties to the Technology
Agreement will have an ongoing obligation to assign, license, share or provide
to the others any Technical Information and Know How created or developed after
the Distribution Date.
THE TRADEMARK AGREEMENT
The Trademark Agreement will be entered into as of the Distribution Date by
and among Ralcorp, New Ralcorp and the Branded Subsidiary. It will facilitate
the assignment and/or license among Ralcorp, New Ralcorp and the Branded
Subsidiary of certain trademarks, service marks, trade dress, and copyrights and
the registrations and applications for registrations relating thereto
(collectively, "Trademarks").
Assignments and Licenses. Effective as of the Distribution Date, New
Ralcorp will (a) assign to the Branded Subsidiary all of New Ralcorp's rights,
title and interest in the Branded Trademarks (as defined herein) and (b) grant
to the Branded Subsidiary a non-exclusive royalty free right to use the Ralston,
Ralston Foods, and red, stylized R trademarks (collectively, the "Ralston
Trademarks") in the United States, its territories and possessions and the
Commonwealth of Puerto Rico and military installations on packaging, promotional
or advertising materials for a period of one (1) year following the Distribution
Date. The "Branded Trademarks" refer to (a) all the Trademarks, other than the
Ralston Trademarks and the Sun Flakes and Spider-Man Trademarks, previously used
or currently owned by Ralston Foods or licensed to Ralston Foods or its
subsidiaries which are or have been almost always associated with the Branded
Business or intended almost always for use therein and (b) certain recipe names
used in connection with snack mix products produced by the Branded Business. The
license term relating to the use of the Ralston Trademarks may be extended for a
period of no more than one (1) additional year for the purpose of permitting the
Branded Subsidiary to use, sell or otherwise dispose of product packaging and
advertising or promotional materials that remain on hand on the one year
anniversary of the Distribution Date. The Branded Subsidiary will agree that it
will (a) make reasonable efforts to conclude the use of such product packaging
and promotional and advertising materials by the one year anniversary of the
Distribution Date and (b) not place any orders for such product packaging and
advertising or promotional materials at any time after the one year anniversary
of the Distribution Date.
Effective as of the Distribution Date, Ralcorp will assign to New Ralcorp,
on a quitclaim basis, all of Ralcorp's rights, title and interest in and to any
Trademarks owned by Ralcorp, other than the Branded Trademarks (collectively,
the "Other Trademarks"). Neither Ralcorp nor the Branded Subsidiary will have
any rights in the Other Trademarks, except with respect to use of the Ralston
Trademarks pursuant to the license grant.
Limitations on the Use of Trademarks by New Ralcorp. The Trademark
Agreement provides certain limitations on the ability of New Ralcorp and its
affiliates to use certain Trademarks. New Ralcorp may not use, register, seek to
register, license or otherwise grant rights in the Branded Trademarks or any
Trademarks or trade names confusingly similar to any of such Branded Trademarks.
However, New Ralcorp and its affiliates will be permitted to use the Branded
Trademarks in connection with any legally permissible comparative advertising.
These obligations will remain in effect as long as (a) the Branded Subsidiary
and its affiliates, successors in interest, assigns and licensees shall not have
abandoned all use of the applicable Branded Trademark, and Trademarks
confusingly similar thereto and (b) all registrations for the applicable Branded
Trademark and all Trademarks confusingly similar thereto shall not have expired.
Similarly, in connection with the Designated Products, New Ralcorp may not
use, register, seek to register, license or otherwise grant rights in the
following Trademarks: Purina, Checkerboard, any checkerboard or checkered logo
or symbol, and any Trademarks or trade names confusingly similar thereto.
Moreover, New Ralcorp may not make any statements in connection with its
products which indicates that any Chex-type ready-to-eat cereal Designated
Products were produced at any time prior to the Distribution Date, or that any
other Designated Products were produced at any time prior to the date which is
18 months after the Distribution Date, in either case by Ralston Purina or New
Ralcorp or their affiliates. In the event the FTC withdraws its acceptance of
the Consent Agreement, the foregoing restriction that applies to all other
Designated Products will also apply to Chex-type ready-to-eat cereal Designated
Products. Each of these
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obligations will remain in effect as long as the Branded Subsidiary and its
affiliates, successors in interest, assigns and licensees shall not have
permanently discontinued offering all products which are identical to or
substantially similar to the applicable Designated Product.
Moreover, as to the Designated Products, for the three (3) year period
following the Distribution Date, New Ralcorp may not use, register, seek to
register, license or otherwise grant rights in any trademarks or trade names,
other than those trademarks and trade names owned by a grocery retailer, a
wholesaler, or broker and which are used by such persons or entities to identify
grocery products sold by such parties or entities and in which New Ralcorp and
its affiliates have no rights, except for the right to produce products
utilizing such Trademarks and trade names for such parties or entities or their
licensees ("Private Label Trademarks"). Notwithstanding this limitation,
commencing two (2) years after the Distribution Date in connection with any
Designated Products, and commencing immediately after the Distribution Date with
any other products, New Ralcorp will have the right to use the Ralston
Trademarks as a Control Brand (as defined below) and the right to use any other
Control Brands. The term "Control Brand" refers to those Trademarks and trade
names which are utilized by New Ralcorp and/or its subsidiaries on a line of
products which are typically offered by New Ralcorp to re-sellers of grocery
products for use on such products in lieu of a Private Label Trademark on such
products. None of the foregoing restrictions will in and of themselves restrict
the use of any preexisting Trademarks, or Trademarks confusingly similar
thereto, in the business of any third party which may acquire New Ralcorp or its
affiliates through a merger, consolidation or other acquisition transaction.
New Ralcorp will have no rights to use the Ralston Trademarks on the
Designated Products other than as a Control Brand for the three years following
the Distribution Date. Thereafter, New Ralcorp will have the right to use the
Ralston Trademarks in connection with the Designated Products only as a house
brand in the same manner as it does for its other cereal products and only on
the condition that the Ralston Trademarks are less prominently displayed than
the primary trademark or product name in all uses on the principal display
panels of the products and in the advertising of such products. Also, the
Ralston Trademarks will not be permitted to be used as part of the product name
on the Designated Products.
Rights and Liabilities Related to Trademarks. The Trademark Agreement
provides that each of New Ralcorp and the Branded Subsidiary will assume the
limitations, undertakings and liabilities related to the Branded Trademarks or
the Other Trademarks, as applicable, pursuant to, and in accordance with, the
terms of the Reorganization Agreement. These will include the limitations,
undertakings and liabilities arising out of the prior Trademark Agreement
entered into between Ralcorp and Ralston Purina in connection with the 1994
Spin-off and the obligations arising out of certain license agreements and other
contracts related to the Branded Trademarks or the Other Trademarks, as
applicable. The rights under these license agreements and contracts will be
assigned, effective as of the Distribution Date, to the Branded Subsidiary or
New Ralcorp, as applicable, pursuant to the Trademark Agreement.
SUPPLY AGREEMENT
The Supply Agreement will be entered into as of the Distribution Date by
Ralcorp (which, after the Merger, will be named General Mills Missouri, Inc.)
and New Ralcorp. Pursuant to the Supply Agreement, New Ralcorp will agree to
produce (i) ready to eat cereals that have been packaged using the Cookie Crisp
trademark, and products substantially similar thereto ("Cookie Crisp"), and (ii)
rice-based cereals that have been packaged using the Chex trademark, and
products substantially similar thereto ("Rice Chex," and together with Cookie
Crisp, the "Products"), for General Mills Missouri and to provide certain other
transition services to General Mills Missouri for certain periods of time
following the Merger.
Supply Arrangements
Term. New Ralcorp's obligations pursuant to the Supply Agreement will
commence immediately after the Closing Date of the Merger Agreement and will
expire eighteen months after the Closing Date, subject to extension under
certain circumstances.
Production System and Materials. Pursuant to the Supply Agreement, New
Ralcorp will provide all equipment and personnel necessary to produce, package
and ship Products without any additional costs to General Mills Missouri beyond
those incorporated into the respective Product prices and/or rates set forth in
the Supply Agreement. The Supply Agreement provides that each of New Ralcorp and
General Mills
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Missouri will provide certain ingredients and materials ("Materials") for use in
connection with the manufacturing and packaging of the Products.
Sampling and Testing Obligations. The Supply Agreement requires New Ralcorp
to sample and test (i) all Materials received by New Ralcorp to be used to
produce or package Products, and (ii) the Products, in each case in accordance
with certain specifications (the "Specifications").
Storage and Disposal Obligations. Pursuant to the Supply Agreement, New
Ralcorp will provide suitable storage and warehousing space and disposal
services for Materials at rates set forth in the Supply Agreement (subject to
certain exceptions). The Supply Agreement requires General Mills Missouri to
promptly provide New Ralcorp with instructions with respect to the disposition
of unusable Materials.
Nonconforming Products. For purposes of the Supply Agreement, the term
"Nonconforming Products" means Products which do not comply with certain
applicable laws or the Specifications. Pursuant to the terms of the Supply
Agreement, in the event that New Ralcorp produces any Nonconforming Products,
New Ralcorp will be required to promptly replace such Products at no cost to
General Mills Missouri, except to the extent such nonconformance was the result
of General Mills Missouri actions. The Supply Agreement provides that any
Materials which do not comply with the requirements of the Specifications will
not be used by New Ralcorp for any reason in connection with the Products.
Inspection of Records and Plant. The Supply Agreement provides that General
Mills Missouri will be entitled to inspect New Ralcorp's records relating to the
Products and to take inventory of Materials and finished Products produced by
New Ralcorp for General Mills Missouri.
Supply Quantities. The Supply Agreement is designed to ensure that General
Mills Missouri will have sufficient Products during the first 18 months of the
transition following the Merger (and an additional six months with respect to
Cookie Crisp cereal in the event that General Mills Missouri exercises its
option to renew the Supply Agreement for such products). The Supply Agreement
specifies General Mills Missouri's rights to New Ralcorp's and its subsidiaries'
and affiliates' capacity to make Products at all of their plants and facilities.
Such rights will not prevent New Ralcorp from meeting its obligations to Ralston
Purina under the Distributorship Agreement. The Supply Agreement provides that
New Ralcorp's obligation to supply General Mills Missouri with the Products will
not exceed New Ralcorp's stated capacity to produce such products, which
capacity is subject to certain adjustments. Pursuant to the Supply Agreement,
General Mills Missouri agrees to order certain minimum amounts of Cookie Crisp
and Rice Chex cereals, subject to certain exceptions.
Payment Terms. The Supply Agreement specifies the prices that General Mills
Missouri will pay to New Ralcorp for supply of Cookie Crisp and Rice Chex
cereals for the periods covered by the Supply Agreement. General Mills Missouri
will also be obligated to pay New Ralcorp an amount equal to actual costs for
all Materials provided by New Ralcorp in connection with Rice Chex and Cookie
Crisp cereals produced and packaged in accordance with the Supply Agreement,
subject to certain yield losses. In addition, the Supply Agreement requires
General Mills Missouri to pay a fixed amount for each month in the period
commencing on the first date of the term of the Supply Agreement and ending upon
the earlier of the expiration of the term of the Supply Agreement or any
termination of the Supply Agreement with respect to Rice Chex cereal by General
Mills Missouri.
Indemnification. Pursuant to the Supply Agreement, New Ralcorp will
indemnify General Mills Missouri for all liabilities (excluding consequential
damages (which shall include but not be limited to lost profits)) incurred by
General Mills Missouri arising out of (i) material breaches of any of New
Ralcorp's warranties, representations or agreements under the Supply Agreement,
(ii) certain injuries or damages to third parties, (iii) certain injuries to
person or property occurring on New Ralcorp's premises, (iv) certain fines,
penalties and similar liabilities, (v) certain claims alleging infringement of
third party rights, and (vi) certain recalls of Products.
Pursuant to the Supply Agreement, General Mills Missouri will indemnify New
Ralcorp for all liabilities incurred by New Ralcorp arising out of (i) material
breaches of any of General Mills Missouri's warranties, representations or
agreements under the Supply Agreement, (ii) certain injuries or damages to third
parties,
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(iii) certain fines, penalties and similar liabilities, and (iv) certain claims
alleging infringement of third party rights.
Termination. The Supply Agreement may be terminated by either party in the
event of the occurrence of any material breach not cured within thirty (30) days
of written notice of such breach. Moreover, upon any change of control of New
Ralcorp, General Mills Missouri may terminate the Supply Agreement effective
immediately upon written notice to New Ralcorp.
Transition Services Arrangements
Services. From and after the effective date of the Supply Agreement for a
period up to ninety days after the Closing Date, New Ralcorp will make certain
services available to General Mills Missouri, including (but not limited to)
services related to data processing, finished product distribution and raw
material supply (the "Services"). In consideration for the Services, General
Mills Missouri will pay to New Ralcorp an amount equal to the reasonable costs
to New Ralcorp in providing such Services.
Liability; Indemnification. The Supply Agreement provides that New Ralcorp
will have no liability to General Mills Missouri with respect to its furnishing
any of the Services except for its willful misconduct or gross negligence.
Moreover, pursuant to the Supply Agreement, General Mills Missouri will
indemnify New Ralcorp and its affiliates and certain related parties for any and
all liabilities arising from New Ralcorp's furnishing or failing to furnish the
Services, other than liabilities arising out of the willful misconduct or gross
negligence of New Ralcorp or its affiliates or such related parties.
TAX SHARING AGREEMENT
The Tax Sharing Agreement provides that each of Ralcorp and New Ralcorp
will be responsible for and will indemnify the other party against its (and its
respective affiliates) allocable share of tax liabilities before and after the
Distribution Date. New Ralcorp will be liable for all taxes of (a) New Ralcorp
or any of its affiliates for any pre- or post-Distribution Date tax period, (b)
Ralcorp or any Ralcorp affiliate for any pre-Distribution Date tax period,
including any liabilities resulting from an audit or other adjustment to
previously filed tax returns and (c) any person arising out of or directly
resulting from any of the transactions set forth in the Reorganization
Agreement, the Ancillary Agreements or the Merger Agreement unless such
liability results from a breach of certain covenants by Ralcorp with respect to
taxes. Ralcorp will be liable for all taxes of Ralcorp or any Ralcorp affiliate
attributable to any post-Distribution Date tax period. In the Tax Sharing
Agreement, Ralcorp and New Ralcorp will agree to cooperate with respect to the
preparation and filing of tax returns and with respect to any tax-related
challenges or proceedings.
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NEW RALCORP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
For financial reporting purposes, New Ralcorp is a "successor registrant"
to Ralcorp and, as such, all financial information of New Ralcorp included in
this discussion and in the historical financial statements beginning on page F-2
represent the historical financial information of Ralcorp. Therefore, references
to the "Company" in this discussion and in the related historical financial
statements are references to Ralcorp, without giving effect to the Distribution
or the Merger.
Ralcorp operates in two business segments, the "Consumer Foods" segment,
comprised of the cereals and snacks, baby food and crackers and cookie
businesses, and the "Resort Operations" segment, consisting of the Keystone,
Breckenridge and Arapahoe Basin ski resorts.
OVERVIEW
Fiscal 1996 proved to be a year in which the Company's businesses achieved
varying performance levels. The Beech-Nut baby food business performed well in
the first half of the fiscal year, but increased competitive pressure in the
third and fourth quarters slowed Beech-Nut's operating profit growth. The
Bremner cracker and cookie business recorded significant growth through new
product sales and by adding new accounts throughout the year. A good winter ski
season provided the ski resorts business with favorable year to year profit
comparisons. Dramatic changes throughout the ready-to-eat cereal category and
especially in the category's pricing structure had a significant negative impact
on the operating results of the Ralston Foods cereal business. Cereal volume,
both branded and private label, declined significantly for the year. The branded
decline occurred primarily in the minor branded cereal products, a consistent
negative trend, while the larger mainline Chex franchise performed reasonably
well in a declining category, with only a slight year to year volume decline.
Private label cereal volume was hurt most by the difficult pricing environment
within the cereal category, as the price gap between private label products and
their branded counterparts significantly narrowed. Mitigating some of the
unfavorable results of cereal operations was the continued growth experienced by
the Ralston Foods' Chex Mix snack product.
On August 14, 1996, the Company announced an agreement to sell its branded
cereal and snack business to General Mills for General Mills common stock and
the assumption of debt and accrued interest not to exceed $300 million, together
valued at $570 million. Currently, the Company estimates that the debt assumed
will be between $210 and $240 million. The transaction will be accomplished
through a tax-free merger of the Company's branded cereal and snack business
with a subsidiary of General Mills and the spin-off of the Company's remaining
businesses to the Company's shareholders. Subsequent to the close of the
transaction, shareholders of the Company will hold shares of General Mills
common stock and shares of the spun-off company. The completion of the
transaction is subject to governmental approval and approval by the Company's
shareholders. It is possible that such approvals may not be received.
On December 9, 1996, General Mills signed the Consent Agreement relating to
the Proposed FTC Order. The FTC accepted the Consent Agreement for public
comment on December 24, 1996, at which time the FTC granted early termination of
the required waiting period under the HSR Act with respect to the Merger. The
Proposed FTC Order will become final if the FTC enters the Proposed FTC Order
after a 60-day public comment period. Pending entry of the Proposed FTC Order,
General Mills has agreed to comply with it (but General Mills will no longer be
bound by the Proposed FTC Order if the FTC withdraws its acceptance of the
Consent Agreement). Under the Proposed FTC Order, General Mills would permit New
Ralcorp to compete against General Mills by producing and selling a Chex-type
private label cereal as soon as the Merger is completed, and would permit a
third party to acquire this right. General Mills and Ralcorp had originally
agreed that New Ralcorp would not produce and sell a Chex-type private label
cereal for 18 months after the Merger. The parties intend to complete the Merger
as soon as they satisfy all the conditions to the Merger, even if the public
comment period has not expired and the Proposed FTC Order is not final.
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On July 23, 1996, the Company announced an agreement to sell its Resort
Operations to Vail in a transaction valued in excess of $310 million. The sale
would allow the Company to significantly reduce its debt by $165 million and
also retain an approximate 22% ownership interest in a newly combined company
that would feature five of the premier ski resorts in North America. The
completion of the transaction is subject to various government approvals, which
may or may not be received.
The sale of the Resort Operations is being investigated by the DOJ. The
Company and Vail have complied with the request for additional information
issued by the DOJ pursuant to the HSR Act. The Company and Vail have agreed to
extend the time in which the DOJ has to review the proposed sale. Management
believes a decision by the DOJ regarding whether the DOJ will challenge the
proposed sale will be made prior to the end of December. Unless extended by the
parties, the contract for the sale of Resort Operations to Vail terminates on
January 10, 1997. If the Resort Operations are not sold to Vail, management will
review whether to retain the Resort Operations and operate them as a core
business or explore other strategic alternatives with respect to the Resort
Operations.
If the sale of the Resort Operations is not completed prior to the Merger
and the Distribution, the debt to be assumed by General Mills could exceed $240
million, thereby reducing the amount of General Mills Common Stock to be issued
in the Merger. The increased debt assumption would occur if New Ralcorp was
unable to obtain financing for the Resort Operations' unsecured debt on
satisfactory terms.
Please refer to the "UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION"
section for presentation of financial information that assumes completion of the
above referenced transactions.
OPERATING RESULTS
Operating results for fiscal 1996 and fiscal 1995 were impacted by certain
significant one-time charges, which make year to year comparisons difficult. In
fiscal 1996, the Company recorded a $109.5 million pre-tax impairment charge
($68.8 million after taxes or $2.09 per share) related to its private label
cereal and consumer hot cereal operations. This charge was recorded under the
provisions of Statement of Financial Accounting Standards No. 121 "Accounting
for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of"
("FAS 121"); see the "Nonrecurring Charges" footnote in the Notes to
Consolidated Financial Statements. Also, in fiscal 1996, the Company recorded a
pre-tax charge of $16.5 million ($10.4 million after taxes or $.31 per share) to
recognize the costs related to the restructuring of its ready-to-eat cereal
operations; see the "Restructuring Charge" footnote in the Notes to Consolidated
Financial Statements. In fiscal 1995, the Company recorded pre-tax nonrecurring
charges totaling $21.9 million ($13.6 million after taxes or $.41 per share)
related to management's decision to exit the industrial oats business, close
oats milling operations and impair certain long-lived assets related to the
remaining consumer hot cereal business; see the "Nonrecurring Charges" footnote
in the Notes to Consolidated Financial Statements. The fiscal 1995 nonrecurring
charges were also determined under the provisions of FAS 121.
Including the above referenced charges, the Company recorded a net loss of
$46.8 million or $1.42 per share for fiscal 1996, compared to net earnings of
$33.4 million or $1.00 per share for fiscal 1995. Exclusive of the charges,
fiscal 1996 resulted in net earnings of $32.4 million or $.98 per share compared
to fiscal 1995 net earnings of $47.0 million or $1.41 per share. Net sales in
fiscal 1996 were $1,027.4 million compared to $1,013.4 million in fiscal 1995,
an improvement of $14.0 million or 1.4%. This slight increase is attributable
primarily to Chex Mix and the Resort Operations, as well as favorable volume
gains in both the cracker and cookie and baby food businesses, which were
substantially offset by the significant cereal volume declines.
FISCAL 1996 COMPARED TO FISCAL 1995
Consumer Foods
Consumer Foods sales were essentially flat from 1995 to 1996, as segment
sales went from $886.0 million in fiscal 1995 to $892.0 million in fiscal 1996.
This slight increase was driven by significantly higher Chex Mix snack volume
(which continued to realize the positive effects of a successful restage),
increased cereal prices taken in advance of the category-wide pricing declines,
higher baby food prices and volume, and improved
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<PAGE> 43
cracker and cookie volumes. Substantially offsetting these positive factors were
the significantly lower branded and private label cereal volumes. Dramatic price
decreases coupled with promotional activities during fiscal 1996, directly and
negatively effected the Company's cereal volumes. Branded cereal volume declined
approximately 10% in the year and private label cereal volume declined
approximately 4%. Although minor branded cereal products volumes were down
significantly, the mainline CHEX franchise continued to perform reasonably well,
down only slightly from a year ago. Sales of branded cereal is somewhat seasonal
because the Company's Chex Party Mix holiday promotion. Management believes that
erosion of a portion of the price gap between branded and private label cereal
products, occurring primarily in the third and fourth quarters of fiscal 1996,
resulted in the Company's first private label cereal volume decline.
As referred to earlier, Consumer Foods operating results for both fiscal
1996 and 1995 included certain significant one-time charges that make year to
year comparisons difficult. Therefore, in an effort to present an analysis of
the most comparable operating results, the following discussion of Consumer
Foods operating profit excludes those charges.
Operating profit for the segment decreased 29.5% in 1996 to $67.3 million
compared to $95.5 million in the previous year. The significant decline is due
primarily to lower cereal results partially offset by improvements in Chex Mix
and the baby food and cracker and cookie businesses. In the cereal and snack
business, operating profit declined as a result of higher advertising and
promotion expense, the continued negative impact of increased ingredient costs
and higher information systems costs, partially offset by the strong performance
of Chex Mix snacks and cereal pricing increases taken in advance of the
category-wide pricing decline. Spider-Man cereal, introduced in fiscal 1995's
fourth quarter, was an earnings disappointment with volumes significantly below
expectations. Production of Spider-Man cereal has been discontinued. The
Beech-Nut baby food business results improved primarily on strong domestic
volume gains and favorable pricing, partially offset by higher ingredient costs.
In addition, baby food operations were slowed in the second half of fiscal 1996
due to increased competitive pressures. The Bremner cracker and cookie business
increased its operating results in fiscal 1996 by adding new product sales and
new accounts, resulting in additional volume, and by continuing to lower
production costs.
Resort Operations
Resort Operations sales improved 6.3% in fiscal 1996 to $135.4 million
compared to $127.4 million in 1995. The sales increase resulted primarily from a
5% improvement in skier visits, as well as an approximate 3% increase in room
nights. Total skier visits for fiscal 1996 were 2.7 million. These improvements
were the direct result of good ski conditions during the key winter months. As a
result of these factors, Resort Operations recorded a record $23.0 million
operating profit in fiscal 1996 compared to $17.1 million in the prior year, or
an improvement of 34.5%
The skiing industry is mature, with slow overall growth, and is highly
competitive. The Company's ski resorts compete with all types of recreation and
vacation alternatives for the consumers' discretionary spending. In order to
compete successfully, the resorts must aggressively promote in order to attract
more skiers while implementing substantial cost reductions.
Operating results for this segment are highly seasonal. Historically, the
resorts have earned more than the entire fiscal year's operating profit during
the fiscal second quarter, which contains the peak of the ski season.
Consolidated
Consolidated net sales increased 1.4% in fiscal 1996 to $1,027.4 million
due to improved revenues of Chex Mix and the Resort Operations, as well as
favorable volume gains in both the cracker and cookie and baby food businesses.
Cost of products sold as a percentage of sales was 52.3% in both fiscal 1996 and
1995 as increased Resort Operations revenues offset the increase in ingredient
costs that affected the Company's other businesses. Selling, general and
administrative expenses increased to 17.3% of sales in 1996 compared to 16.3% of
sales in 1995 due to higher information systems costs and the inclusion, in
fiscal 1996, of approximately $4.0 million of transaction costs related to the
Company's proposed sale of its Resort Operations. Advertising and promotion
expense as a percentage of sales increased to 22.7% of sales in fiscal
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<PAGE> 44
1996 from 21.0% in fiscal 1995. A significant portion of this increase is due to
spending associated with Spider-Man, a new branded cereal in fiscal 1996, which
has been discontinued, and stepped up promotional spending necessary to protect
the Company's mainline Chex franchise and its declining private label cereal
business. Advertising and promotion spending in support of the very successful
Chex Mix restage was also higher in fiscal 1996. Income taxes, which include
federal and state taxes, were 36.0% of pre-tax losses in fiscal 1996 compared to
39.1% of pre-tax earnings in fiscal 1995. This decline in the effective tax rate
is primarily due to the Company recording significant one-time charges in fiscal
1996. Tax provisions on earnings generally reflect statutory tax rates.
FISCAL 1995 COMPARED TO FISCAL 1994
Consumer Foods
Consumer Foods sales increased 3.7% in fiscal 1995 to $886.0 million due to
higher sales in all businesses. The increase was driven by significantly higher
Chex Mix snack volume following a successful restage, higher branded cereal
prices and higher private label cereal volumes at Ralston Foods, higher baby
food prices and an improvement in cracker and cookie volumes which were
partially offset by lower branded cereal volumes. In cereals, volumes in
mainline Chex again increased compared to the prior year while sales of Cookie
Crisp dropped after a strong fiscal 1994 increase and minor share brands
continued to decline. Sales of the Consumer Foods segment tend to be somewhat
seasonal due to strong first quarter performance associated with the Chex Party
Mix holiday promotion.
During fiscal 1995, the Company made a decision to close its industrial
oats and oats milling operations in Cedar Rapids, Iowa. As a result of this
decision, the Company recorded nonrecurring pre-tax charges totaling $21.9
million, comprised of a $10.1 million charge to cover the costs of exit,
primarily for the write-down of related fixed assets, and $11.8 million
representing the impairment of the remaining intangible and fixed assets related
to the consumer hot cereal business. The decision to exit the industrial
business and close milling operations was reached due to excess industry
capacity which depressed selling prices despite significantly higher raw
ingredient costs and the location of the milling operations which placed the
Company at a competitive disadvantage due to higher freight costs. Operating
loss in the fiscal year ended September 30, 1995 for the operations affected by
the exit decision was approximately $3.7 million. See the "Nonrecurring Charges"
footnote, in the Notes to Consolidated Financial Statements, for further
discussion of these charges.
Excluding the oats-related charges, operating profit for the segment
increased 15% in fiscal 1995 to $95.5 million compared to $82.9 million in the
previous year. The most significant factor behind the increase was the return to
profitability of the Company's Bremner operation in fiscal 1995 after a
significant fiscal 1994 loss. Compared to fiscal 1994, which was adversely
affected by the forced relocation of Bremner's only facility, fiscal 1995
benefited from significantly lower production costs and higher volumes. Baby
Food results increased on improved pricing partially offset by lower volume and
higher advertising and promotion expenses. Operating profit for Ralston Foods
declined moderately reflecting higher expenses related to the Company's
accelerated cost reduction program and higher administrative expenses, primarily
for information systems, partially offset by higher branded cereal prices and
higher private label cereal volume.
Resort Operations
Resort sales fell 4% in fiscal 1995 to $127.4 million compared to $132.6
million in 1994. The sales decline resulted from a drop in skier visits
associated with unfavorable weather conditions during the most important period
of the ski season which was only partially offset by more favorable pricing.
Poor winter results were partially offset by unexpected late season snowfalls
which allowed the Company's Arapahoe Basin resort to remain open through early
August 1995, and by increased summer conference business. As a result of these
factors, operating profit declined to $17.1 million in fiscal 1995 compared to
$20.5 million in the prior year.
In fiscal 1994, the Company formed a joint venture with Intrawest
Corporation of Canada, a leading mountain resort operator and developer, to
develop the Company's real estate holdings at the Keystone Resort. The Company
contributed land to the joint venture at book value and will realize the market
value of these
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<PAGE> 45
holdings over time as land is sold or projects are completed and sold, in
addition to sharing in any development profits with Intrawest.
Operating results for this segment are highly seasonal. Historically, the
resorts have earned more than the entire fiscal year's operating profit during
the second quarter, which contains the peak of the ski season.
Consolidated
Consolidated net sales increased 2.7% in fiscal 1995 to $1,013.4 million
due to higher Consumer Foods sales partially offset by lower Resort revenues.
The cost of products sold as a percentage of sales declined to 52.3% in fiscal
1995 compared to 53.1% in 1994 due to significantly improved efficiency at
Bremner during 1995 compared to the move-affected prior year and due to improved
margins in Baby Foods. Selling, general and administrative expenses increased to
16.3% of sales in 1995 compared to 15.0% of sales in 1994 due primarily to
higher information systems costs in fiscal 1995 and the increased costs
associated with becoming a stand-alone company. Advertising and promotion
expense as a percentage of sales declined slightly to 21.0% in the current year
due to higher sales of private label products requiring lower levels of
promotional support. Income taxes, which include federal and state taxes, were
39.1% in fiscal 1995 compared to 39.0% in 1994. Tax provisions generally reflect
statutory tax rates.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flow from Operations
The Company's primary source of liquidity is cash flow from operations,
which increased to $91.8 million in 1996 compared to $80.4 million in 1995 due
primarily to reduced working capital needs. The $9.6 million decline in
operating cash flow in 1995 compared to 1994 was due primarily to heavier
investments in inventories and higher 1995 year end receivables associated with
new product introductions. Working capital, excluding cash and current
maturities of long-term debt, was $92.4 million at September 30, 1996 compared
to $104.7 million and $81.8 million at September 30, 1995 and 1994,
respectively. The Company had no cash balances at September 30, 1996 and 1995.
The Company's businesses have historically focused on generating positive
cash flows through operations. For the three years ended September 30, 1996, the
Company was able to generate $262.2 million of cash from operations. Management
believes that the Company will continue to generate operating cash flow through
its mix of businesses and expects that future liquidity requirements will be met
through a combination of operating cash flow and strategic use of borrowings
available under existing bank credit agreements. Upon completion of either or
both of the proposed sale transactions, management anticipates that the
remaining businesses would continue to generate positive, but significantly
lower, operating cash flows. If the proposed sale of Resort Operations is
consummated prior to the consummation of the Merger, the Company will fund its
borrowing needs through its existing credit arrangements. However, if the sale
of Resort Operations is not completed prior to the Merger, then upon the
consummation of the Merger, New Ralcorp expects to enter into a twelve to
thirty-six month $200 million bridge credit facility with several lenders. It is
likely the terms of such a facility will be more restrictive upon New Ralcorp's
business operations and will be at significantly higher interest rates than the
Company's existing credit arrangements. For more information on New Ralcorp's
credit arrangements see, "DESCRIPTION OF NEW RALCORP'S INDEBTEDNESS."
Investing Activities
Capital expenditures were $66.7 million, $66.1 million and $38.2 million in
fiscal years 1996, 1995 and 1994, respectively. Capital expenditures for fiscal
1997 are expected to be approximately $35-$40 million. These fiscal 1997
projected expenditures include the Company's branded cereal and snack business
and Resort Operations for only a portion of fiscal 1997, due to the anticipated
completion of their respective sale transactions. If either or both transactions
are not completed, capital expenditures for fiscal 1997 may be higher. During
fiscal 1994, the Company disposed of two closed production facilities, the
proceeds of which were $19.2 million.
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<PAGE> 46
Investing activities in 1994 also include the November 1993 purchase, for
$39.2 million, of the oats processing and packaging and cereal-making operations
of the National Oats Company division of Curtice Burns Foods, Inc., along with
related manufacturing assets.
Financing Activities
In connection with the 1994 Spinoff, the Company assumed from Ralston
Purina $370 million of debt in a long-term bank credit agreement comprised of
$120 million outstanding under a $200 million revolving credit arrangement and a
$250 million term loan facility. During fiscal 1994, the Company issued $150
million in 8 3/4% notes due 2004, the proceeds of which were used to reduce
borrowings under the credit agreement. During fiscal 1995, the Company amended
the credit agreement, eliminating the term loan and placing the reduced $300
million total amount available under the credit agreement in the revolving
credit facility. The amendment also resulted in a lower borrowing rate and
reduced restrictions on stock repurchases and dividend payments, provided the
Company maintains certain financial ratios and a minimum level of shareholders'
equity. Through an additional amendment, in March 1996, the amount available
under the revolving credit facility was further reduced to $275 million,
comprised of a $100 million 364-day revolving facility and a $175 million five
year revolving facility, and the related maturity date was moved to March 12,
2001. The March 1996 amendment retained many of the provisions negotiated
through the 1995 amendment, again, provided the Company maintains certain
financial ratios and a minimum level of shareholders' equity. In June 1996,
Company management, realizing the potential negative impact of increased
competitive pressures, sought and received less stringent debt and interest
coverage ratios from the credit facility lenders for the third and fourth
quarters of fiscal 1996. The Company met the amended ratios for each of these
quarters. In September 1996, in contemplation of the sale of Resort Operations,
the existing $275 million credit facility agreement was split into two separate
agreements comprised, first, of a $140 million credit facility that was borrowed
directly by the Company's Resort Operations, and fully guaranteed by the
Company, and, second, a continuing revolving credit facility with $135 million
in available borrowings. Interest under both agreements is based on LIBOR and
will vary based on the achievement of certain financial ratios.
As mentioned earlier, due to the unfavorable earnings expectations the
Company secured less stringent levels for the interest and debt coverage ratios
associated with its bank credit agreements. The ratios were scheduled to return
to the original levels for the quarter ended December 31, 1996. On or about
December 18, 1996, lenders under the Company's bank credit agreements reduced
the interest and debt coverage ratios until March 31, 1997. Management believes
that prior to any violation of such ratios, the Company will be able to
renegotiate its bank credit agreements, obtain further waiver of the pertinent
ratios, or obtain alternative financing at rates that may be higher than those
existing through the current bank credit agreements.
In November 1995, in order to hedge its exposure to interest rate
fluctuations on $100 million of existing floating-rate borrowings under the
credit agreement, the Company entered into two interest rate swap transactions
under which the Company will pay interest based on a fixed rate while receiving
a LIBOR-based floating rate. Notional amounts under both transactions are $50
million and have terms that expire in November of calendar years 1997 and 1998.
During fiscal 1996, the Company repurchased $8.6 million of its Common
Stock compared to $13.5 million in the prior year. As a result of activity
during fiscal 1996 total debt declined $18.8 million to $376.6 million compared
to $395.4 million at September 30, 1995. Despite the decline in outstanding
long-term debt, total debt as a percentage of total capitalization rose to 77.9%
at September 30, 1996 compared to 70.9% at September 30, 1995. This increase is
attributable to the sharp decline in the retained earnings of the Company, a
result of the substantial net loss, including significant one-time charges,
recorded in fiscal 1996.
Prior to the 1994 Spinoff, Ralston Purina sold certain of its trade
accounts receivable, including amounts attributable to the Company's cereal
business, to third party purchasers, subject to defined limited recourse
provisions. During fiscal 1994, this program was discontinued, which had the
effect of reducing cash flow from financing activities by $16.6 million.
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On May 25, 1995, the Company's Board of Directors authorized management to
repurchase up to one million shares of the Company's Common Stock from time to
time as management determines. As of December 3, 1996, the Company had
repurchased approximately 371,000 shares for $9.1 million pursuant to such
authorization. A previous Board-approved authorization to repurchase $15.0
million worth of Company Common Stock was completed during fiscal 1995.
OUTLOOK
The difficult pricing environment in the ready-to-eat cereal category will
continue to put pressure on the Company's private label cereal business. The
Company has worked to regain a portion of the private label price gap lost to
branded competitors, but near term private label cereal volume growth, if any,
is expected to be modest, and most likely will come at the expense of any
meaningful profit margin. In the near term, the combination of an unfavorable
outlook for private label cereal profit and the continued declining performance
by several of the Company's minor branded cereal products, while still a part of
the Company's operations, creates an adverse financial outlook for the Company's
cereal business. In baby foods, despite a declining birth rate in the United
States, Beech-Nut has been able to record volume increases by continuing to
focus on the production of high quality baby food products. The production of
quality products, maintaining its presence in key regional areas and continued
emphasis on controlling and cutting costs, create a positive outlook for
Beech-Nut. The baby food business does, however, face significant competitive
pressures, principally from the baby food market leader, Gerber Products
Company. The outlook for the Bremner cracker and cookie business is also
positive, as Bremner has been able to add volume through new products and new
customers. In addition, a major capital project at the Bremner manufacturing
plant was completed during the fourth quarter of fiscal 1996 which should allow
the production and shipping of private label shredded wheat cereals and crackers
to begin in early fiscal 1997.
Cost of products sold in the Consumer Foods segment depends to a
significant extent on commodity prices which may fluctuate widely due to weather
conditions, government regulations, economic climate or other unforeseen
circumstances. The Company attempts to minimize its exposure to unexpected cost
increases related to these factors primarily through advance commitments and,
from time to time, by taking positions in futures markets.
If the sale of Resort Operations is not completed, then the operating
results of the New Ralcorp Businesses will be highly dependent on the results of
operations of the Resort Operations. The Resort Operations have been profitable
during the past three fiscal years. However, the Resort Operations' results are
highly seasonal and dependent on weather conditions and consumers' discretionary
spending trends, both of which are out of the control of New Ralcorp.
ENVIRONMENTAL MATTERS
The operations of the Company, like those of similar businesses, are
subject to various federal, state and local laws and regulations with respect to
environmental matters, including air and water quality, underground fuel storage
tanks, waste handling and disposal and other regulations intended to protect
public health and the environment. The Company has received notices from the
U.S. Environmental Protection Agency, state agencies, and/or private parties
seeking contribution, that it has been identified as a "potential responsible
party" ("PRP") at one cleanup site, under the Comprehensive Environmental
Response, Compensation and Liability Act, as amended ("CERCLA"), and the Company
may be required to share in the cost of cleanup with respect to the one cleanup
site. Under applicable law, the Company's liability, if any, for the cleanup of
the disposal site may be joint and several with all PRPs at this site.
Management reviews a number of items to determine if the remediation associated
with environmental matters is expected to be material to the Company including,
but not limited to, the stage of each proceeding; whether other parties have
been designated as possibly responsible (including other PRPs) and the financial
strength of such other parties; the nature and volume of hazardous material
alleged to be located at a site; the Company's alleged volumetric contribution
to a site; the contemplated remedy for a site; any defenses or third party
claims the Company may have; indemnification arrangements with third parties;
the number of years over which remediation costs will be distributed; reports of
experts (internal or external); and appropriate governmental opinions on the
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<PAGE> 48
remediation of a site. While it is difficult to quantify with certainty the
potential financial impact of actions regarding expenditures for environmental
matters, particularly remediation, shared cleanup costs at CERCLA sites, and
future capital expenditures for environmental control equipment, in the opinion
of management, based upon the information currently available, the ultimate
liability arising from such environmental matters should not have a material
effect on the Company's financial position and results of operations.
ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board (the "FASB") issued
FAS 121 which established accounting standards for recognizing the impairment of
long-lived assets, identifiable intangibles and goodwill, whether to be disposed
of or to be held and used. In general, FAS 121 requires recognition of an
impairment loss when the sum of undiscounted expected future cash flows is less
than the carrying amount of such assets. The Company applied the provisions of
FAS 121 in recognition of the components of the previously discussed $109.5
million and $21.9 million pre-tax nonrecurring charges recorded in fiscal years
1996 and 1995, respectively. The Company will continue to evaluate the
recoverability of the carrying value of all long-lived assets, as events or
circumstances warrant.
In October 1995, the FASB issued Statement of Financial Accounting
Standards No. 123 "Accounting for Stock-Based Compensation" ("FAS 123"). This
statement established financial accounting and reporting standards for
stock-based employee compensation plans. The accounting and disclosure
requirements of FAS 123 are effective during the Company's fiscal year ended
September 30, 1997. The Company will adopt the disclosure provisions of FAS 123,
but will continue to account for compensation costs based on the provisions of
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees". Therefore, there will be no impact on the Company's financial
condition or results of operations as a result of adopting FAS 123.
INFLATION
Management recognizes that inflationary pressures may have an adverse
effect on the Company through higher asset replacement costs, related
depreciation and higher material costs. The Company tries to minimize these
effects through cost reductions and productivity improvements as well as price
increases to maintain reasonable profit margins. It is management's view,
however, that inflation has not had a significant impact on operations in the
three years ended September 30, 1996.
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
Forward-looking statements, within the meaning of Section 21E of the
Exchange Act are made throughout this Information Statement and include
information under the sections titled "DISCUSSION OF UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS," "THE DISTRIBUTION -- Background
and Reasons for the Distribution," and "BUSINESS AND PROPERTIES" and are
preceded by, followed by or include the words "believes," "expects,"
"anticipates" or similar expressions elsewhere in this Information Statement.
The Company's results of operations and liquidity status may differ materially
from those in the forward-looking statements. Such statements are based on
management's current views and assumptions, and involve risks and uncertainties
that could affect expected results. For example, any of the following factors
cumulatively or individually may impact expected results:
(i) Key ingredients were at historically high prices during fiscal
1996 and while prices have moderated, similar cost increases in future
periods would negatively impact earnings;
(ii) During fiscal 1996 the Company faced significant price discount
promotions and price cutting by the largest branded cereal manufacturers
and the same or similar promotions or continued price cutting in the future
may negatively impact earnings;
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<PAGE> 49
(iii) If Ralcorp violates its interest or debt coverage ratios
discussed in the Outlook section above and Ralcorp is unable to secure
waivers of the ratios or amendments to its bank credit agreements, or
obtain alternate sources of debt financing, then Ralcorp could be in
default of its bank credit agreements (and its 8 3/4% $150 million Notes
due September 15, 2004 by virtue of cross-default provisions therein). In
such event, the lenders under the bank agreements (and the holders of the
Notes) could accelerate repayment of the full amount of the debt and
interest outstanding thereunder;
(iv) If the Company renegotiates its bank credit agreements or obtains
alternate sources of financing, (a) the Company could face additional or
more restrictive covenants preventing the Company from engaging in certain
actions such as, but not limited to, payment of dividends, repurchases of
stock, making acquisitions and incurring additional indebtedness; and (b)
the interest rates under such alternative financing may be significantly
higher than under existing bank credit agreements;
(v) The Company's businesses compete in mature segments and profit
growth depends largely on the ability to successfully introduce new
products and manage costs across all parts of the Company; and
(vi) The New Ralcorp Businesses may be negatively impacted by numerous
events and situations outlined elsewhere in this Information Statement. See
"RISK FACTORS" and "BUSINESS AND PROPERTIES."
(The remainder of this page intentionally left blank.)
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NEW RALCORP HOLDINGS, INC.
BUSINESS SEGMENT INFORMATION
Summarized financial information by business segment for the three years
ended September 30, 1996 is set forth below. During these years the segments
consisted of the following:
Consumer Foods
Cereals and Snacks
Baby Food
Crackers and Cookies
Resort Operations
The Consumer Foods segment consists of cereals, baby food products and
other specialty grocery products, primarily crackers, cookies, and snacks, and
the coupon redemption business through January 31, 1996, the effective sale date
of this business. The Resort Operations segment consists of the Keystone,
Arapahoe Basin and Breckenridge resorts.
Sales between business segments were immaterial. No single customer
accounted for 10% or more of sales.
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Sales by Product Lines and Segments
Consumer Foods
Cereals and Snacks........................................ $ 661.4 $ 670.1 $646.4
Baby Foods................................................ 152.8 147.2 142.9
Crackers and Cookies...................................... 77.8 68.7 65.1
-------- ------ ------
Subtotal................................................ $ 892.0 $ 886.0 $854.4
Resort Operations............................................ 135.4 127.4 132.6
-------- ------ ------
Total................................................... $1,027.4 $1,013.4 $987.0
======== ====== ======
Operating Profit
Consumer Foods(a)............................................ $ (58.7) $ 73.6 $ 82.9
Resort Operations............................................ 23.0 17.1 20.5
-------- ------ ------
Total................................................... $ (35.7) $ 90.7 $103.4
Unallocated Corporate and Miscellaneous Expense(b)........... (10.6) (7.7) (3.2)
Interest Expense............................................. (26.8) (28.2) (12.3)
-------- ------ ------
(Loss) Earnings before Income Taxes..................... $ (73.1) $ 54.8 $ 87.9
======== ====== ======
Assets at Year End
Consumer Foods(c)............................................ $ 342.5 $ 472.9 $445.5
Resort Operations............................................ 236.2 226.4 230.9
Corporate.................................................... 48.4 16.9 23.7
-------- ------ ------
Total................................................... $ 627.1 $ 716.2 $700.1
======== ====== ======
Depreciation Expense
Consumer Foods............................................... $ 29.8 $ 31.3 $ 29.5
Resort Operations............................................ 13.7 12.8 12.2
Property Additions
Consumer Foods............................................... $ 42.3 $ 49.7 $ 27.8
Resort Operations............................................ 17.9 9.6 10.4
</TABLE>
- -------------------------
(a) Includes the pre-tax impairment charge of $109.5 and the pre-tax
restructuring charge $20.7 less the $4.2 reversal of that charge in 1996.
Includes the pre-tax nonrecurring charges of $21.9 in 1995.
(b) Includes the $4.0 transactions fees related to the proposed sale of the
Company's Resort Operations in 1996. Reflects the corporate expense incurred
for periods subsequent to the 1994 spinoff from Ralston Purina.
(c) Includes the asset impairment charge of $109.5 and the asset writedown of
$7.3 relating to the restructuring charge in 1996. Includes the asset
writedown portion of the nonrecurring charges related to National Oats of
$20.5 in 1995. Includes acquisition of National Oats in 1994.
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<PAGE> 51
BUSINESS AND PROPERTIES
OVERVIEW
New Ralcorp is a newly formed Missouri corporation that incorporated on
October 23, 1996 for the purpose of owning the Private Label Cereal Business,
Baby Food Business, and Cracker and Cookie Business as well as the Resort
Operations, and assuming the sale thereof to Vail is completed, the Vail Stock.
The Company is the leading manufacturer of private label ready-to-eat and hot
cereal for sale in the United States. The Company believes the Cracker and
Cookie Business is the largest manufacturer of private label crackers and is a
leading manufacturer of private label cookies. Based on net sales for the fiscal
year 1996, the Company believes it is the second largest producer of baby food
with approximately 15% of the category. The Baby Food Business produces baby
food, baby juice and baby cereal under the Beech-Nut trademark. The New Ralcorp
Businesses are categorized into two segments for financial reporting purposes.
The Resort Operations make Ralcorp the largest operator of ski resorts in
North America. As previously mentioned, Ralcorp or the Company, as the case may
be, anticipates selling the Resort Operations to Vail before or soon after the
Distribution and Merger.
In light of the similarities in customers, ingredients, production and
sales and the sharing of administrative functions, the New Ralcorp Businesses
comprising consumer food products are operated as separate product lines rather
than separate businesses. Each such New Ralcorp Business produces consumer food
items for sale to the grocery trade and each sells its products through
independent brokers. The Private Label Cereal Business and the Cracker and
Cookie Business produce grain based products utilizing similar packaging and
extrusion systems. The Baby Food Business also produces cereal products using
some of the same grains (rice and oats) as the other businesses. Since each of
such New Ralcorp Businesses sells to the grocery trade, each is faced with the
same grocery industry trends such as Efficient Consumer Response (for example,
streamlining category management, electronic ordering and paying and
just-in-time inventory and delivery). Further, such New Ralcorp Businesses share
key administrative functions, including order revenue management; information
systems; consumer affairs and market research.
WHEN YOU READ THIS SECTION YOU SHOULD CAREFULLY CONSIDER THE INFORMATION IN
THE FOLLOWING PORTIONS OF THIS INFORMATION STATEMENT: "RISK FACTORS" AND
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS."
STRATEGY
The Company's Baby Food Business, Cracker and Cookie Business and Resort
Operations are currently profitable. Management intends to maintain and improve
profitability in these businesses through managing production and operating
costs and product mix, developing new products, and, with respect to the Baby
Food Business and Resort Operations, through creative advertising and promotion
programs. However, the Company's current strategy with respect to Resort
Operations is to sell the business to Vail as described above. For the Private
Label Cereal Business, the Company's objective is to restore profitability by
delivering quality products at competitive prices to its customers. The Company
plans to achieve this objective through the following key strategies:
- Consolidate Cereal Production. The Company is reviewing the ability to
transfer more ready-to-eat cereal production to its Lancaster, Ohio and
Sparks, Nevada plants. The lower cost structure combined with the
enhanced efficiencies by increasing capacity utilization, would be
expected to lower the Company's ready-to-eat cereal production costs.
- Maximize Operating Efficiencies. As part of restructuring the Company to
reflect its smaller size after the Merger, the Company has embarked on a
number of cost-saving and productivity programs as part of its strategy
to maximize operating efficiencies. The Company has begun a significant
restructuring of its cereal distribution system. Beginning late in fiscal
year 1997, two of the Company's ready-to-eat cereal plants will start
warehousing their products and coordinating the delivery thereof to
customers. These changes should eliminate some expenses associated with
using independent distribution centers.
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<PAGE> 52
In the last six months the Company has dramatically reduced management and
administration headcount, principally at its headquarters. Management estimates
that once the organizational restructuring is completed in light of the sale of
the Branded Business, overall staffing at its headquarters will be reduced
to approximately 284, a 42% reduction.
- Introduce New Products Successfully. The Company will continue to
strategically invest in the development of new products. In October 1996,
the Company began producing private label shredded wheat cereals. The
Company plans to start producing a private label Chex type cereal between
eighteen months to two years after the Merger.
Additionally, the Company will also pursue synergistic acquisitions to
expand or complement its current product lines.
PRIVATE LABEL CEREAL BUSINESS
For each of the last three fiscal years, the Private Label Cereal Business
has accounted for approximately 50% of the sales of the New Ralcorp Businesses.
However, in fiscal year 1996, the business incurred a significant operating loss
and it is expected that the business will also sustain a significant operating
loss in fiscal year 1997. Management anticipates restoring the Private Label
Cereal Business to profitability in fiscal 1998. Private label ready-to-eat
cereals are currently produced at three operating facilities. Beginning in
October, the Company's Cracker and Cookie Business began producing a shredded
wheat cereal. The Company's ready-to-eat cereals are made up of twenty-four
different types of private label cereals, manufactured for approximately 275
customers. Private label and branded hot cereals are produced at one facility.
The hot cereal products include old fashioned oatmeal, quick oats, plain instant
oatmeal, flavored instant oatmeal, farina and instant Ralston, a branded hot
wheat cereal. The Private Label Cereal Business also sells hot cereal under the
brand Three Minute Oats.
The Company currently estimates that it possesses 55-60% of the private
label ready-to-eat cereals category (on a volume basis).
The Company's ready-to-eat and hot cereals are warehoused in and
distributed through seven independent distribution facilities and shipped to
customers principally via independent truck lines. The ready-to-eat and hot
cereal products are sold to grocery wholesalers, retail chains, mass
merchandisers, warehouse club outlets and other customers through in-house
district sales managers and independent food brokers.
BABY FOOD BUSINESS
The Baby Food Business produces baby food, juice and cereal under the
Beech-Nut brand. The Baby Food Business is profitable at the operating level and
is significantly more profitable than the Cracker and Cookie Business. The brand
is positioned as a high quality product that does not contain additives such as
sugar and starch in most of its food items. The Baby Food Business sales are
regional, with eleven major geographic areas located in the east and west coast
regions of the United States, accounting for approximately 75% of total volume.
The Baby Food Business produces baby food and juices at one plant and baby
cereal at another plant, both located in the state of New York, where the Baby
Food Business sells a significant portion of its products. Beech-Nut products
are marketed to retailers by a direct sales force in the metropolitan New York
and northern New Jersey areas while an outside broker network is used in the
remaining markets. Products are shipped directly to customer accounts from a
plant, an on-site warehouse and one independent distribution center in
California.
CRACKER AND COOKIE BUSINESS
The Company currently believes its Cracker and Cookie Business produces
55-60% of private label crackers and a much smaller but significant portion of
the private label cookies for sale in the United States (based on volume). The
Cracker and Cookie Business is profitable at the operating level. The Cracker
and Cookie Business also produces Ry-Krisp branded crackers. Management
positions the Cracker and Cookie
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<PAGE> 53
Business as the premier quality and low cost producer of a wide variety of
private label crackers and specialty cookies. Management expects to realize the
full benefit of its extension into the reduced fat cracker segment in fiscal
year 1997. In October, the business began producing a private label shredded
wheat cracker. Early trade interest in the product has been good.
The Cracker and Cookie Business operates two plants: one produces solely
Ry-Krisp crackers and one produces all of the Company's private label crackers
and cookies, as well as, beginning in November, shredded wheat cereal for the
Private Label Cereal Business. The Cracker and Cookie Business' products are
largely produced to order and shipped directly to customers. Private label
crackers and cookies are sold through a broker network. Branded Ry-Krisp
crackers are sold through a direct store distributor network.
RESORT OPERATIONS
For each of the last three fiscal years, sales generated by the Resort
Operations have accounted for approximately 10% of the sales of the Company. The
Resort Operations consist of the Keystone, Arapahoe Basin and Breckenridge ski
resorts located in Summit County, Colorado. Sales of the Resort Operations
segment are highly seasonal, with sales primarily occurring during the winter
ski season, with inconsequential off-season sales. In recent years, however,
management has increased its efforts to increase the number of off-season
visitors through special promotional activities during the off-season and the
construction of a multi-use convention facility to attract conventions
throughout the year. Performance of the Resort Operations segment is highly
subject to weather conditions, but management, through expansion of snow-making
capabilities and night skiing opportunities, has been able to increase the
number of skier days at the Keystone Resort in recent years. Ralcorp has formed
a joint venture with Intrawest Corporation to develop the undeveloped real
estate at the Keystone Resort.
COMPETITION
The New Ralcorp Businesses face intense competition from large branded
cereal, cracker and cookie manufacturers, highly competitive private label
cereal, cracker and cookie manufacturers, and large branded baby food
manufacturers. Top branded ready-to-eat cereal competitors include Kellogg,
General Mills, Kraft General Foods and Quaker. In the first half of calendar
year 1996, major branded producers significantly reduced wholesale prices of
many branded ready-to-eat cereal products and began advertising and promotion
spending to publicize such decreases. The result has been a dramatic drop in
earnings of the Private Label Cereal Business. The Baby Food Business is
believed to currently rank second in sales for baby food products and its top
competitor, Gerber Products Company, produces about 68% of branded baby foods
sold in the United States. Recently, Gerber announced it intends to alter some
of its product formulations to eliminate or reduce added starch and sugar. The
Baby Food Business advertising has emphasized, for a number of years, the
absence of added sugar and starch in many of its Beech-Nut baby food products.
The Cracker and Cookie Business faces intense competition from large branded
manufacturers such as Nabisco and Keebler/Sunshine who possess approximately 36%
and 21%, respectively, of the branded cracker category and similar shares in the
cookie category (on a volume basis). In addition, private label cracker and
cookie manufacturers such as BakeLine, Wortz and Midwest Baking provide
significant competition in the store brand segment.
The industries in which the New Ralcorp Businesses compete are highly
sensitive to both pricing and promotion. Competition is based upon product
quality, price, effective promotional activities, and the ability to identify
and satisfy emerging consumer preferences. These industries are expected to
remain highly competitive in the foreseeable future. Future growth opportunities
for the New Ralcorp Businesses are expected to depend on New Ralcorp's ability
to implement strategies for competing effectively in all of its businesses,
primarily the Private Label Cereal Business, including strategies relating to
enhancing the performance of its employees, maintaining effective cost control
programs, developing and implementing methods for more efficient manufacturing
and distribution operations, and developing successful new products, while at
the same time maintaining aggressive pricing and promotion of its products.
The ski industry is highly competitive. The Resort Operations compete with
mountain resort areas in the United States, Canada and Europe for destination
guests and with numerous ski areas in Colorado for the day
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<PAGE> 54
skier. The Company also competes with other worldwide recreation resorts,
including warm weather resorts, for the vacation guest. The Resort Operations'
major U.S. competitors include the Utah ski areas, the Lake Tahoe ski areas in
California and Nevada, the New England ski areas and the other major Colorado
ski areas, including Copper Mountain, Vail, Telluride, Steamboat Springs, Winter
Park, Loveland and the Aspen resorts. Total skier days generated by all United
States ski areas have increased by a total of only 2% since the 1985-86 ski
season which also has increased competition for the vacation guest. The
competitive position of the Resort Operations is dependent upon many diverse
factors such as proximity to population centers, availability and cost of
transportation to the areas, including direct flight availability by major
airlines, pricing, snowmaking facilities, type and quality of skiing offered,
duration of the ski season, prevailing weather conditions, the number, quality
and price of related services and lodging facilities, and the reputation of the
areas. In addition to competition with other mountain and warm weather resorts
for the vacation guest, the Resort Operations also face competition for day
skiers from nearby population centers from varied alternative leisure
activities, such as attendance at movies, sporting events and participation in
alternative indoor and outdoor recreational activities.
EMPLOYEES
After the Distribution, and assuming the Resort Operations are sold as
presently contemplated, New Ralcorp Businesses will employ approximately 2,242
people in the United States. Approximately 626 of the New Ralcorp personnel are
covered by six union contracts and, from time to time New Ralcorp businesses
have experienced union organizing activities at its non-union plants. The
Company believes its relations with its employees, including union employees,
are good. Resort Operations employ 1,500 people in Colorado on a permanent basis
and 2,300 on a seasonal basis.
POTENTIAL ADVERSE EFFECTS OF ECONOMIC SLOWDOWN
Because the Resort Operations derive a significant portion of its revenues
from the worldwide leisure market, an economic recession or other significant
economic slowdown could adversely affect the Company's business. Although,
historically, economic downturns have not had an adverse impact on the Company's
operating results, there can be no assurance that a decrease in the amount of
discretionary spending by the public in the future would not have an adverse
effect on the Company's business.
RAW MATERIALS
The principal raw materials used in the New Ralcorp Businesses are grain
and grain products, flour, sugar, fruits and vegetables. The New Ralcorp
Businesses purchase such raw materials from local, regional, national and
international suppliers. The cost of raw materials used in the Company's
products may fluctuate widely due to weather conditions, government regulations,
economic climate, or other unforeseen circumstances. During the past fiscal year
certain key raw materials were at historically high prices. Agricultural
products represent 30% to 48% of the Company's cost of goods sold in fiscal
1996. The cost of packaging supplies, predominately paper based, have increased
dramatically over the past two years. Packaging prices represent 23% to 42% of
the Company's cost of goods sold in fiscal 1996. From time to time the Company
will enter into supply contracts for periods up to twelve months to secure
favorable pricing for ingredient and packaging supplies.
GOVERNMENTAL REGULATION; ENVIRONMENTAL MATTERS
The operations of the New Ralcorp Businesses are subject to regulation by
various federal, state and local governmental entities and agencies. As a
producer of goods for human consumption, such operations are subject to
stringent production and labeling standards. In the early 1990's, new labeling
regulations were promulgated and implemented which have required the New Ralcorp
Businesses to modify the information disclosed on their packaging. Management
expects that similar changes in laws in the future could be implemented without
a materially adverse impact on the New Ralcorp Businesses if existing packaging
stock may be used during a transition period while packaging information is
modified.
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The operations of the New Ralcorp Businesses, like those of similar
businesses, are subject to various federal, state, and local laws and
regulations with respect to environmental matters, including air and water
quality, underground fuel storage tanks, waste handling and disposal and other
regulations intended to protect public health and the environment. While it is
difficult to quantify with certainty the potential financial impact of actions
regarding expenditures for environmental matters, particularly remediation, and
future capital expenditures for environmental control equipment, in the opinion
of management, based upon the information currently available, the ultimate
liability arising from such environmental matters, taking into account
established accruals for estimated liabilities, should not have a material
effect on New Ralcorp's capital expenditures, earnings and competitive position.
PROPERTIES
New Ralcorp's principal properties are its manufacturing locations. Shown
below are the locations of the principal properties which will be owned by New
Ralcorp following the Distribution. New Ralcorp leases its principal executive
offices and research and development facilities in St. Louis, Missouri. The
management of New Ralcorp believes its facilities are suitable and adequate for
the purposes for which they are used and are adequately maintained.
<TABLE>
<CAPTION>
CEREAL PLANTS CRACKER AND COOKIE PLANTS BABY FOOD PLANTS SKI RESORTS
- ----------------- ------------------------- ---------------- ---------------------------------
<S> <C> <C> <C>
Battle Creek, MI Minneapolis, MN Fort Plains, NY Keystone, Summit County, CO
Cedar Rapids, IA Princeton, KY Canajoharie, NY Breckenridge, Summit County, CO
Lancaster, OH Arapahoe Basin, Summit County, CO
Sparks, NV
</TABLE>
With respect to the Resort Operations, Ralston Resorts has been granted the
right to use approximately 3,156 acres, 5,571 acres and 825 acres of federal
land under the terms of permits with the Forest Service for Breckenridge,
Keystone and Arapahoe Basin, respectively. Both the Breckenridge permit and the
Arapahoe Basin permit expire on December 31, 2029, while the Keystone permit
expires on December 31, 2032. Each of the permits is terminable by the Forest
Service if required for the public interest. While the Company believes that its
relationship with the Forest Service is good, and to the Company's knowledge no
recreational Special Use Permit or Term Special Use Permit for any major ski
resort has ever been terminated by the Forest Service, a termination of any of
the Resort Operations' permits would have a material adverse effect on the
business and operations of the Company.
LITIGATION
Ralcorp is currently a party to a number of legal proceedings in various
state and federal jurisdictions arising out of the operations of the New Ralcorp
Businesses. These proceedings are in varying stages and some involve highly
complex questions of law and fact. Liability for these proceedings will be
assumed by New Ralcorp except to the extent provided otherwise in the
Reorganization Agreement.
On January 4, 1993, Ralston Purina, Ralcorp's former parent, was served
with the first of nine substantively identical actions currently pending in the
United States District Court for the District of New Jersey. The suits have been
consolidated and styled In Re Baby Food Antitrust Litigation, No. 92-5495 (NHP).
The consolidated proceeding is a certified class action by and on behalf of all
direct purchasers of baby foods (other than the defendants and governmental
entities), alleging that the Beech-Nut baby food business (and its predecessor,
Nestle Holdings, Inc.) together with Gerber Products Company and H. J. Heinz
Company, conspired to fix, maintain and stabilize the prices of baby foods
during the period January 1, 1975 to August 31, 1992, and seeking treble
damages. On January 19 and 21, 1993, Ralston Purina was served with two class
actions on behalf of indirect purchasers (consumers) of baby food in California,
which contain substantively identical charges. These actions have been
consolidated in the Superior Court for the County of San Francisco and styled
Bruce, et al. v. Gerber Products Company, et al., No. 94-8857. On January 19,
1993, Ralston Purina was served with a similar action filed in Alabama state
court on behalf of indirect purchasers of baby food in Alabama, styled Johnson,
et al. v. Gerber Products Company et al., No. 93-L-0333-NE. Both state actions
allege violations of state antitrust laws and are substantively identical
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<PAGE> 56
to each other. Similar state actions may be filed in states having laws
permitting suits by indirect purchasers. Ralston Purina and Ralcorp have agreed
in the reorganization agreement entered into in connection with the 1994
Spin-off (the "Prior Reorganization Agreement") that all expenses related to the
above antitrust matters will be shared equally, but that Ralcorp's liability for
any settlement or judgment will not exceed $5 million.
Except as noted, many of the foregoing matters are in preliminary stages,
involve complex issues of law and fact and may proceed for protracted periods of
time. Based upon a review of the petitions in the above antitrust matters, it
appears that those actions contain questionable allegations and that there are
numerous meritorious defenses. The amount of alleged liability, if any, from
these proceedings cannot be determined with certainty; however, in the opinion
of New Ralcorp management, based upon the information presently known, as well
as upon the limitation of its liabilities set forth in the Prior Reorganization
Agreement, the ultimate liability of New Ralcorp, if any, arising from the
pending legal proceedings, as well as from asserted legal claims and known
potential legal claims which are probable of assertion, taking into account
established accruals for estimated liabilities, should not be material.
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
See the information under the section titled: "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Cautionary
Statement on Forward-Looking Statements".
DESCRIPTION OF CERTAIN NEW RALCORP INDEBTEDNESS
New Ralcorp intends to replace its existing credit facilities upon the
completion of the Distribution and Merger.
If the sale of the Resort Operations is completed prior to the completion
of the Distribution and Merger, New Ralcorp expects to maintain a three year,
$50 million revolving credit facility. The proceeds of the facility may be used
to fund New Ralcorp's working capital needs, capital expenditures, and other
general corporate purposes, including the issuance of letters of credit.
Borrowings under the $50 million facility are expected to bear interest annually
at the rate of (i) LIBOR (which rate is based on a formula relating to the
London interbank offered rate for a given interest period) plus a margin
(ranging from .75% to 1.50%) or (ii) the Base Rate (defined as, generally, the
higher of the Federal Funds Rate, as published by the Federal Reserve Bank of
New York, plus .50%. In addition, the Company is expected to pay a fee on the
face amount of each letter of credit outstanding at a rate ranging from .75% to
1.50%. The Company also expects to pay a quarterly unused commitment fee ranging
from .20% to .50%. The interest margins and fees described in this paragraph
will fluctuate based upon the ratio of debt to the Company's earnings before
deductions for taxes, depreciation and amortization.
If the Resort Operations are not sold prior to the completion of the
Distribution and Merger, New Ralcorp expects to maintain a $200 million credit
facility with a maturity of one to three years after inception. The Company
would initially borrow approximately $135 to $140 million, which amount relates
to Resort Operations' indebtedness. The remaining unborrowed amount will be
available for New Ralcorp's working capital needs, capital expenditures and
other general corporate purposes, including the issuance of letters of credit.
Borrowings under the $200 million credit facility are expected to bear
interest annually at rates significantly higher than those described above for
the $50 million credit facility.
Both facilities described above are anticipated to contain various
covenants that limit, among other things, and subject to certain exceptions,
indebtedness, liens, transactions with affiliates, restricted payments and
investments, mergers, consolidations and dissolutions, sales of assets,
dividends and distributions and certain other business activities. The credit
facilities will also contain certain financial covenants, such as maximum
borrowings to cash flow ratios and minimum interest coverage ratios.
Additionally, all or part of the borrowings under the $200 million credit
facility may be required to be secured.
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The Resort Operations also have borrowings under the following instruments:
(i) $23.4 million of Industrial Revenue Bonds ("Ralston IRBs"), (ii) a $3.0
million term loan payable to National Australia Bank Limited ("National
Australia"), and (iii) a loan from the Colorado Water Conservation Board to
Clinton Ditch and Reservoir Company ("Clinton Ditch"), of which Ralston Resorts
is the largest owner, with a remaining principal balance of approximately $1.9
million. The Ralston IRBs consist of two series of refunding bonds which were
originally issued to finance the cost of sports facilities at Keystone Mountain.
The first issue, the Series 1990 Sports Facilities Refunding Revenue Bonds in
the aggregate principal amount of $20.4 million, bears interest at rates ranging
from 7.2% to 7.875% and mature in installments in 1998, 2006, and 2008. The
second issue, the Series 1991 Sports Facilities Refunding Revenue Bonds in the
aggregate principal amount of $3.0 million, bears interest at 7.125% for bonds
maturing in 2002 and 7.375% for bonds maturing in 2010.
(The remainder of this page intentionally left blank.)
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MANAGEMENT
DIRECTORS OF NEW RALCORP
Pursuant to the New Ralcorp Articles of Incorporation and Bylaws, the Board
of Directors of New Ralcorp (the "New Ralcorp Board") will consist of from five
to twelve individuals, divided into three approximately equal classes with each
class serving a three-year term. The exact number of directors will be set from
time to time by resolution of the New Ralcorp Board. Initially, following the
Distribution, the New Ralcorp Board will consist of six individuals, only one of
whom will be an employee of New Ralcorp. The following table sets forth
information as to the persons who will serve as directors of New Ralcorp
following the Distribution, their class membership and their original terms (the
directors' ages are as of December 31, 1996). New Ralcorp's Bylaws provide that
no person may stand for election or re-election as a director after having
attained the age of 70. It is presently intended that Mr. Stiritz will serve as
the initial Chairman of the New Ralcorp Board.
<TABLE>
<CAPTION>
INITIAL
TERM
NAME AGE EXPIRES INFORMATION
- ------------------------------ --- ------- -----------------------------------------------
<S> <C> <C> <C>
William H. Danforth........... 70 1999 Dr. Danforth has been a director of Ralcorp
since March, 1994. He is Chairman of the Board
of Trustees of Washington University and has
served in that capacity since July, 1995. He
retired as Chancellor of Washington University
in June, 1995, a position he held since 1971.
He is also a director of McDonnell Douglas
Corporation and Ralston Purina Company.
William D. George, Jr. ....... 64 1998 Mr. George has been a director of Ralcorp since
March, 1994. He is President and Chief
Executive Officer and a member of the Board of
Directors of S. C. Johnson & Son, Inc. and has
served in that capacity since 1993. He served
as S. C. Johnson's President and Chief
Operating Officer, Worldwide Consumer Products
from 1990 to 1993. He is also a director of
Arvin Industries, Inc. and Moorman
Manufacturing Company.
Jack W. Goodall............... 58 2000 Mr. Goodall has been a director of Ralcorp
since March, 1994. He is Chairman of the Board
of Foodmaker, Inc. and has served in that
capacity since April, 1996. He served as
Chairman, President and Chief Executive Officer
of Foodmaker, Inc. from 1985 to 1996. He is
also a director of Thrifty PayLess, Inc. and
Van Camp Seafood Co., Inc.
David W. Kemper............... 46 1999 Mr. Kemper has been a director of Ralcorp since
October, 1994. He is Chairman, President and
Chief Executive Officer of Commerce Bancshares,
Inc. and has served in that capacity since
1991. He served as Commerce Bancshares' Chief
Executive Officer and President from 1986 to
1991. He is also a director of Seafield Capital
Corporation, Tower Properties Company and Wave
Technologies International, Inc.
</TABLE>
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<TABLE>
<CAPTION>
INITIAL
TERM
NAME AGE EXPIRES INFORMATION
- ------------------------------ --- ------- -----------------------------------------------
<S> <C> <C> <C>
Joe R. Micheletto............. 60 2000 Mr. Micheletto has been a director of Ralcorp
since January, 1994. He is Chief Executive
Officer and President of Ralcorp and has served
in that capacity since September, 1996. He
served as Co-Chief Executive Officer and Chief
Financial Officer of Ralcorp since 1994. He
served as Vice President and Controller of
Ralston Purina Company from 1985 to 1994, and
as Chief Executive Officer of Ralston Purina's
Keystone Resorts from 1991 to 1994.
William P. Stiritz............ 62 1998 Mr. Stiritz has been a director and the
Chairman of the Board of Ralcorp since January,
1994. He is Chairman of the Board, Chief
Executive Officer and President of Ralston
Purina Company and has served in that capacity
since 1982. He is also a director of Angelica
Corporation, Ball Corporation, Boatmen's
Bancshares, Inc., Interstate Bakeries
Corporation, Reinsurance Group of America,
Incorporated and The May Department Stores
Company.
</TABLE>
DIRECTORS' MEETINGS, FEES AND COMMITTEES
The New Ralcorp Board expects to have four regularly scheduled meetings per
year, and will hold such special meetings as it deems advisable, to review
significant matters affecting New Ralcorp and to act upon matters requiring
Board approval. Non-management directors will receive an annual retainer of
$20,000, and will also be paid $1,000 for attending each regular or special
Board meeting and $1,000 for attending each standing committee meeting and for
each telephonic meeting and consent to action without a meeting. New Ralcorp
will also pay the premiums on Directors' and Officers' Liability, and Travel
Accident insurance policies insuring directors.
New Ralcorp will adopt a Deferred Compensation Plan for Non-Management
Directors (the "DCP"). Under this plan, any non-management director may elect to
defer, with certain limitations, all retainers and fees. Deferrals may be made
in New Ralcorp Common Stock equivalents in an Equity Option (stock equivalents)
or may be made in cash under a Variable Interest Option (interest at prime
rate). Deferrals in the Equity Option receive a 33 1/3% Company matching
contribution which will also be in New Ralcorp Common Stock equivalents. All
Stock equivalents credited to a recipient will also be credited with dividend
equivalents at any time that cash dividends are declared and paid on New Ralcorp
Common Stock; when sufficient in amount, such equivalents will be converted into
additional New Ralcorp Common Stock equivalents. Deferrals and related earnings
will be paid out in a lump sum in cash to the Director at the Director's
termination of service, or total disability or to the Director's estate or
beneficiary upon the Director's death.
The New Ralcorp Incentive Stock Plan (the "ISP") also provides that certain
non-management directors may be granted non-qualified stock options to acquire
shares of New Ralcorp Common Stock and other awards of New Ralcorp Common Stock.
For a more complete description of the ISP and the tax consequences to
participants of awards under that plan, see "EXECUTIVE COMPENSATION -- Incentive
Stock Plan." The Company contemplates that each non-management director will
receive a stock option for 20,000 shares with a market value exercise price.
Other terms of the options such as a vesting schedule have not been determined.
Prior to the Distribution, the New Ralcorp Board is expected to establish
and designate specific functions and areas of oversight to a Nominating and
Compensation Committee and an Audit Committee. A director
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who is also an employee or officer of New Ralcorp will not be permitted to serve
on either committee. A description of these standing committees and the identity
of their expected members follows:
Audit Committee -- D. W. Kemper (Chairman); W. H. Danforth; W. D. George,
Jr.; J. W. Goodall; W. P. Stiritz
The Audit Committee will consist entirely of non-management Directors. It
will be responsible for matters relating to accounting policies and practices,
financial reporting, and internal controls. It will recommend to the New Ralcorp
Board the appointment of a firm of independent accountants to examine the
financial statements of New Ralcorp, and will review with representatives of the
independent accountants the scope of the examination of New Ralcorp financial
statements, results of audits, audit costs, and recommendations with respect to
internal controls and financial matters. It will also review nonaudit services
rendered by New Ralcorp's independent accountants and will periodically meet
with or receive reports from principal corporate officers.
Nominating and Compensation Committee -- J. W. Goodall (Chairman); W. H.
Danforth; W. D. George, Jr.; D. W. Kemper; W. P. Stiritz
The Nominating and Compensation Committee will consist entirely of
non-management Directors free from interlocking or other relationships that
might be considered a conflict of interest. It will recommend to the New Ralcorp
Board nominees for election as Directors and Executive Officers of the Company.
Additionally, it will make recommendations to the New Ralcorp Board regarding
election of Directors to positions on committees of the New Ralcorp Board and
compensation and benefits for Directors. The Nominating and Compensation
Committee will also consider suggestions from shareholders regarding possible
Director candidates. This Committee will also set the compensation of all
Executive Officers and administer New Ralcorp's Deferred Compensation Plan for
Key Employees and Incentive Stock Plan, including the granting of awards under
the latter plan, other than to Directors on this Committee. It will also review
the competitiveness of management compensation and benefit programs, and
principal employee relations policies and procedures.
EXECUTIVE OFFICERS OF NEW RALCORP
New Ralcorp's senior management team (the "Executive Officers") will
consist primarily of individuals currently responsible for the management of the
New Ralcorp Businesses as conducted by Ralcorp. Ages shown are as of December
31, 1996.
Joe R. Micheletto: For biography see "MANAGEMENT -- Directors of New
Ralcorp."
Kevin J. Hunt will be Corporate Vice President and President, Bremner, Inc.
Currently, he holds the same position with Ralcorp and has since 1995. Mr. Hunt
joined Ralston in 1985. In 1988, he was named Director of Marketing for
Continental Baking Company, and in 1992 he was named Director of Planning for
Ralston Purina and President of Bremner, Inc. Age: 45.
Robert W. Lockwood will be Corporate Vice President, General Counsel and
Secretary of New Ralcorp. Currently, he holds the same position with Ralcorp and
has since 1994. Mr. Lockwood joined Ralston Purina in 1976. In 1981, he was
named Associate Counsel and Assistant Secretary; and in 1989, he was named Vice
President, Senior Counsel and Assistant Secretary. Age: 53.
James A. Nichols will be Corporate Vice President and President, Ralston
Foods. Currently he holds the same position with Ralcorp and has since 1995. Mr.
Nichols joined Ralston Purina in 1975. In 1985, he was named Vice President and
Director of Marketing-Cereal. In 1989, he was named President, Beech-Nut
Nutrition Corporation. In 1994, he was named Corporate Vice President and
President of Beech-Nut Nutrition Corporation of Ralcorp. Age: 48.
David P. Skarie will be Corporate Vice President and Director of Customer
Development of Ralston Foods. Currently, he holds the same position with Ralcorp
and has since 1994. Mr. Skarie joined Ralston Purina in 1986. In 1988, he was
named National Sales Director, General Merchandise; in 1990 he was named
54
<PAGE> 61
Vice President, Eastern Division Sales; in 1991 he was named Vice President,
Field Sales; and in 1993, he was named Vice President-Director, Customer
Development, Human Foods. Age: 50.
Susan P. Widham will be Corporate Vice President and President, Beech-Nut
Nutrition Corporation. Currently, she holds the same position with Ralcorp and
has since 1996. Ms. Widham joined Ralston Purina in 1985. In 1991, she was named
Group Director, Marketing for Beech-Nut Nutrition Corporation; and in 1992, was
named Director of Marketing for Beech-Nut. In 1994, she was named Vice
President, Director of Marketing for Beech-Nut; and in 1995, was named Executive
Vice President, Director of Marketing for Beech-Nut. In December, 1995, she was
named Executive Vice President and Director of Branded Foods Marketing for
Ralston Foods. Age: 39.
Ronald D. Wilkinson will be Corporate Vice President and Director, Product
Supply of Ralston Foods. Currently, he holds the same position with Ralcorp and
has since 1996. Mr. Wilkinson joined Ralcorp in November, 1995. In 1991, he was
named Director, Engineering U.S. Cereals for the Quaker Oats Company; and in
1992, was named Vice President, Supply Chain U.S. Cereals for The Quaker Oats
Company. In November, 1995, Mr. Wilkinson joined Ralcorp as Executive Vice
President and Director, Manufacturing for Ralston Foods; and in June, 1996, was
named Executive Vice President and Director, Product Supply for Ralston Foods.
Age: 46.
All of such individuals will resign from their positions with Ralcorp
effective as of the Distribution Date. See "MANAGEMENT -- Executive Officers of
New Ralcorp."
EXECUTIVE COMPENSATION
INTRODUCTION AND SUMMARY
All direct and indirect remuneration of all Executive Officers and certain
other executives will be approved by the Nominating and Compensation Committee
of the New Ralcorp Board (the "Committee"). The Committee will consist entirely
of non-management directors free from interlocking or other relationships that
might be considered a conflict of interest. It is anticipated that compensation
for the Executive Officers and for other executives will consist principally of
base salary, annual cash bonus and long-term stock-based incentive awards.
The following tables and narrative text discuss the compensation paid by
Ralcorp in fiscal year 1996 to the Named Executive Officers, i.e., New Ralcorp's
Chief Executive Officer and President and to New Ralcorp's four other most
highly compensated executive officers (collectively, the "Named Executive
Officers").
With respect to Messrs. Micheletto, Lockwood and Nichols, whose
compensation had been previously reported in Ralcorp's proxy statements, the
Summary Compensation Table set forth below also summarizes compensation received
for the fiscal year 1995, and separately for the period from the date of the
1994 Spin-off through the end of fiscal year 1994, that is, for six months of
fiscal year 1994 rather than for the full fiscal year.
The full amount of bonuses paid by Ralcorp at the end of fiscal year 1994
are reflected in the "Bonus" column. No attempt has been made to pro rate
bonuses based on the relationship between the period before the 1994 Spin-off
and the period after the 1994 Spin-off.
55
<PAGE> 62
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
(AWARDS)
ANNUAL COMPENSATION ----------------------------
------------------------------------ SECURITIES
OTHER ANNUAL RESTRICTED UNDERLYING ALL OTHER
NAME & PRINCIPAL SALARY COMPENSATION STOCK AWARD(S) OPTIONS COMPENSATION
POSITION YEAR ($)(1) BONUS ($) ($)(2) (#) ($)(3)
- ---------------------- ---- -------- -------- ------------ -------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
J. R. Micheletto...... 1996 $210,000 $100,000 $ 19,481 0 0 $ 46,733
Chief Executive
Officer 1995 210,000 100,000 13,169 0 20,000 41,497
and President 1994 105,000 100,000 6,361 $638,750 156,746 26,940
K. J. Hunt............ 1996 $130,000 $ 40,000 $ 43 0 0 $ 10,193
Vice President; and
President, Bremner,
Inc.
R. W. Lockwood........ 1996 $182,000 $ 43,000 $ 0 0 0 $ 21,863
Vice President,
General 1995 165,000 43,000 12,815 0 12,000 20,900
Counsel and Secretary 1994 80,000 38,000 6,239 $182,500 32,256 9,800
J. A. Nichols......... 1996 $157,000 $ 60,000 $ 596 0 0 $ 42,080
Vice President; and 1995 140,000 60,000 12,286 0 15,000 38,904
President, Ralston
Foods 1994 67,500 46,000 6,000 $146,000 112,781 26,227
D. P. Skarie.......... 1996 $152,000 $ 55,000 $ 0 0 0 $ 18,931
Vice President and
Director of Customer
Development
</TABLE>
- ---------------
1. In fiscal year 1996, car allowances for Messrs. Lockwood and Nichols were
rolled into their salaries. Prior to that time, car allowances were included
in the column "Other Annual Compensation."
2. The aggregate restricted stock holdings and value at September 30, 1996 for
the Named Executive Officers were as follows: Micheletto -- 21,000 shares
($435,750); Hunt -- 4,637 shares ($96,218); Lockwood -- 6,000 shares
($124,500); Nichols -- 4,800 shares ($99,600); and Skarie -- 6,000 shares
($124,500).
Under the terms of the grant, restricted shares reflected in this column
vested or will vest as follows: 20% of the total award on September 23 of
each of the years 1995, 1996, 1997, and 1998 and on March 30, 1999.
However, the Ralcorp Board has determined that immediately prior to the
Distribution, restricted stock awards held by employees who will be New
Ralcorp employees following the Distribution (including the Named Executive
Officers) will vest so that recipients of such awards will own Ralcorp Common
Stock underlying the awards free of any restrictions.
3. The amounts shown in this column consist of the following: (i) Ralcorp
matching contributions or accruals to Ralcorp's Savings Investment Plan and
Executive Savings Investment Plan. Such amounts are $19,600, $10,193,
$11,113, $9,513, and $12,056, respectively, for Messrs. Micheletto, Hunt,
Lockwood, Nichols, and Skarie; (ii) Amounts attributable to the portion of
split-dollar life insurance premiums paid by Ralcorp. These amounts will be
repaid on a specified future date. Amounts included are equal to the premiums
outstanding during fiscal year 1996 multiplied by Ralcorp's approximate
borrowing rate for money borrowed for comparable periods. Such amounts are
$27,133 and $17,567, respectively, for Messrs. Micheletto and Nichols; and
(iii) Ralcorp 25% matching contributions on deferrals under the Equity Option
of the Deferred Compensation Plan for Key Employees. Such amounts are
$10,750, $15,000, and $6,875, respectively, for Messrs. Lockwood, Nichols and
Skarie.
STOCK OPTIONS
The following table sets forth fiscal year end option values. No options
were exercised by any of the Named Executive Officers during fiscal year 1996.
Ralcorp has never granted Stock Appreciation Rights.
56
<PAGE> 63
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FY-END(#) OPTIONS AT FY-END($)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
J. R. Micheletto............................... 15,194 161,552 $ 56,031 $ 646,288
K. J. Hunt..................................... 5,472 21,645 34,320 33,145
R. W. Lockwood................................. 13,679 30,577 96,404 69,139
J. A. Nichols.................................. 64,424 63,357 462,318 244,557
D. P. Skarie................................... 3,648 39,047 18,160 100,941
</TABLE>
The Ralcorp Board has determined that immediately prior to the
Distribution, stock options in Ralcorp Common Stock held by employees who will
be New Ralcorp employees following the Distribution (including the Named
Executive Officers) will become fully vested and the value thereof will be paid
to the recipient in cash. Stock options that have an exercise price higher than
the current price of Ralcorp Common Stock will be valued at $0.50 per share.
COMPENSATION PURSUANT TO PLANS
During fiscal year 1996, Ralcorp maintained certain plans that provided
benefits to executive officers and other employees of the Company. Descriptions
of some of these plans follow. The descriptions provided are in summary form and
are contained in this Information Statement solely in order to meet SEC
requirements regarding disclosure of the compensation of the Named Executive
Officers and should not be used for any other purpose.
EMPLOYMENT/SEVERANCE AGREEMENTS
Messrs. Micheletto, Hunt, Lockwood, Nichols, and Skarie and all other
Executive Officers of New Ralcorp are expected to enter into employment
agreements in respect of their employment with New Ralcorp. The following
discussion is a summary of the material provisions of these employment
agreements, forms of which are filed as exhibits to the Company Form 10 of which
this Information Statement forms a part.
Mr. Micheletto's employment agreement with New Ralcorp (the "Micheletto
Employment Agreement") provides that he will be Chief Executive Officer and
President of the Company on the Distribution Date. The Micheletto Employment
Agreement extends until three years from the Distribution Date (the "Term").
Pursuant to the Micheletto Employment Agreement, Mr. Micheletto will receive a
base salary of not less than $300,000 and will be eligible to receive an annual
incentive bonus of not less than $150,000 during the term of the Micheletto
Employment Agreement determined by the New Ralcorp Board subject to the Company
attaining certain performance goals. The Micheletto Employment Agreement
provides that Mr. Micheletto will receive an executive level benefit program as
determined by the New Ralcorp Board.
The Micheletto Employment Agreement provides that Mr. Micheletto may be
terminated at any time without "cause" (as defined in the Micheletto Employment
Agreement), but if such termination occurs prior to the end of the Term, Mr.
Micheletto will be entitled to receive his base salary, minimum bonuses and
employee benefits through the end of the Term. Notwithstanding these provisions,
New Ralcorp will be entitled to terminate the Micheletto Employment Agreement
immediately and without notice if Mr. Micheletto engages in certain specified
conduct, including the refusal without cause, to perform his assigned duties,
the open criticism in the media of the Company and the participation in any
conduct that the New Ralcorp Board determines to be inimical to or contrary to
the best interest of the Company ("Termination for Cause"). Upon Termination for
Cause, New Ralcorp will be obligated to pay Mr. Micheletto his base salary
prorated to the date of the termination event.
Messrs. Hunt, Lockwood, Nichols and Skarie as well as all of the other
Executive Officers of New Ralcorp are expected to enter employment agreements
with New Ralcorp (the "Employment Agreement"). Under the Employment Agreement,
Messrs. Hunt, Lockwood, Nichols and Skarie will accept the positions of,
respectively, Corporate Vice President and President, Bremner, Inc.; Corporate
Vice President, General
57
<PAGE> 64
Counsel and Secretary; Corporate Vice President and President, Ralston Foods;
and Corporate Vice President and Director of Customer Development, Ralston
Foods. Mr. Hunt's base salary will be $140,000; Mr. Lockwood's base salary will
be $182,000; Mr. Nichols' base salary will be $180,000; and Mr. Skarie's base
salary will be $152,000. In addition, Messrs. Hunt, Lockwood, Nichols and Skarie
will be eligible to receive an annual incentive bonus of not less than $70,000,
$43,000, $90,000 and $55,000 during the term of the pertinent Employment
Agreement, subject to the Company attaining certain performance goals. The term
of each Employment Agreement shall be the same as the Term of the Micheletto
Employment Agreement. The other terms and conditions contained in the Employment
Agreement will be substantially similar to those contained in the Micheletto
Employment Agreement.
Each of the Named Executive Officers may, from time to time, receive
miscellaneous benefits and perquisites as approved by the New Ralcorp Board.
New Ralcorp intends to enter into management continuity agreements with the
Executive Officers. The purpose of these agreements is to provide severance
compensation in the event of their voluntary or involuntary termination after a
change in control of New Ralcorp, which is generally defined as the acquisition
of 50% or more of the outstanding shares of New Ralcorp Common Stock, or the
failure of the initial Directors or their recommended or appointed successors to
constitute a majority of the New Ralcorp Board. The compensation provided would
be in the form of (i) a lump sum payment equal to the present value of
continuing their respective salaries and bonuses throughout an applicable period
following termination of employment, plus the difference between the Executive's
actual benefit under the New Ralcorp Retirement Plan and the benefit such
Executive would have received if he or she had remained employed throughout the
period, and (ii) the continuation of other executive benefits for the same
period. The initial applicable period will be two years, in the event of an
involuntary termination of employment (including a constructive termination),
and one year, in the event of a voluntary termination of employment, which
periods will be subject to reduction for each complete year the relevant
individual remains employed following a change in control. No payments would be
made in the event termination is due to death, disability or normal retirement,
or is for cause, nor would any payments continue beyond attainment of normal
retirement age. Any amounts payable under the Employment Agreements or the
Micheletto Employment Agreement for the same period of time for which payments
are to be made under the Management Continuity Agreements shall be used to
offset such payments under the Management Continuity Agreements.
RETIREMENT PLAN
The New Ralcorp Retirement Plan (the "Retirement Plan") is expected to
provide pension benefits in the future to the Named Executive Officers.
Substantially all regular U.S. sales, administrative, clerical and production
employees having one year of service with Ralcorp or certain of its
majority-owned subsidiaries will be eligible to participate in the Retirement
Plan. Employees become vested after five years of service. Normal retirement
will be at age 65; however, employees who work beyond age 65 may continue to
accrue benefits.
Annual benefits will be computed by multiplying the participant's Final
Average Earnings (average of participant's five highest consecutive annual
earnings during the ten years of service 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).
The following table shows the estimated annual retirement benefits that
would be payable from the Retirement Plan to salaried employees, including Named
Executive Officers, assuming age 65 retirement on the basis of a straight-life
annuity. To the extent an employee's compensation or benefits exceed certain
limits imposed by the Code, the table also includes benefits payable from an
unfunded supplemental retirement plan which has been adopted by New Ralcorp. The
table reflects benefits prior to the subtraction of social security benefits as
described above.
58
<PAGE> 65
PENSION PLAN TABLE
<TABLE>
<CAPTION>
REMUNERATION
(FINAL AVERAGE
EARNINGS) 10 15 20 25 30 35 40
- ----------------------- ------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$100,000............. $15,000 $ 22,500 $ 30,000 $ 37,500 $ 45,000 $ 52,500 $ 60,000
200,000............. 30,000 45,000 60,000 75,000 90,000 105,000 120,000
300,000............. 45,000 67,500 90,000 112,500 135,000 157,500 180,000
400,000............. 60,000 90,000 120,000 150,000 180,000 210,000 240,000
500,000............. 75,000 112,500 150,000 187,500 225,000 262,500 300,000
600,000............. 90,000 135,000 180,000 225,000 270,000 315,000 360,000
</TABLE>
For the purpose of calculating retirement benefits, the Named Executive
Officers had, as of September 30, 1996, the following years of credited service,
calculated to the nearest year: Messrs. Micheletto -- 34 years; Hunt -- 11
years; Lockwood -- 20 years; Nichols -- 21 years; and Skarie -- 11 years.
Credited service includes service with Ralston Purina, former parent of Ralcorp
and Ralcorp, the Company's former parent. Earnings used in calculating benefits
under the Retirement Plan and any unfunded supplemental retirement plan
previously described are approximately equal to amounts included in the Salary
and Bonus columns in the Summary Compensation Table on page 56.
INCENTIVE STOCK PLAN
Ralcorp, as the sole shareholder of New Ralcorp, has approved the ISP which
is administered by the Committee. The Committee has sole discretion, subject to
terms of the ISP, to determine those eligible to receive awards and the amount
and type of awards. The ISP provides for the granting of stock options,
restricted stock awards and other awards payable in New Ralcorp Common Stock to
New Ralcorp Employees, including Named Executive Officers and certain New
Ralcorp directors. The purpose of the ISP is to enhance the profitability and
value of New Ralcorp for the benefit of its shareholders by providing stock
awards to attract, retain and motivate officers, other key employees and in
certain circumstances, non-management directors, who make important
contributions to the success of New Ralcorp. Terms and conditions of awards will
be set forth in written agreements, the terms of which are consistent with the
terms of the ISP.
Any employee of New Ralcorp or any of its subsidiaries is eligible for any
award under the ISP if selected by the Committee. Subject to the provisions of
the ISP, the Committee would have full authority and discretion to determine the
individuals to whom awards will be granted and the amount and form of such
awards. It is estimated that there are approximately 290 persons employed by New
Ralcorp and its subsidiaries who would be eligible for selection for
participation by the Committee.
The ISP will continue until the shares reserved for award have been granted
in awards or such earlier time as determined by the Committee. Under the ISP,
the maximum number of shares of New Ralcorp Common Stock granted or subject to
awards will be 2.9 million (approximately 8.8% of the issued and outstanding
shares of New Ralcorp Common Stock as of the Distribution Date). Since there is
no current market for shares of the New Ralcorp Common Stock, the market value
of such securities cannot be determined. Upon the cancellation or expiration of
an award, the unissued shares of New Ralcorp Common Stock subject to such awards
will again be available for awards under the ISP.
Under the ISP, the Committee is authorized (i) to grant stock options that
qualify as "Incentive Stock Options" under Section 422 of the Code, and (ii) to
grant stock options that do not so qualify. The Committee is entitled to set the
option price on stock options at any price it determines in excess of par value.
Stock options entitle the recipient to purchase a specific number of shares of
New Ralcorp Common Stock after a specified period of time at an option price set
by the Committee (or at the fair market value of New Ralcorp Common Stock at the
time of grant for Incentive Stock Options). No stock option can be exercised
more than ten years after the date such option is granted. In the case of
Incentive Stock Options, the aggregate fair market value of the stock with
respect to which options are exercisable for the first time by any recipient
during any calendar year cannot, under present tax rules, exceed $100,000.
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<PAGE> 66
The grant of stock equivalents pursuant to the New Ralcorp Deferred
Compensation Plan for Key Employees will be subject to the provisions of that
plan. See "EXECUTIVE COMPENSATION -- Deferred Compensation Plan for Key
Employees." Pursuant to that plan, the Committee may in its discretion permit an
eligible employee to defer payment of a cash bonus or other cash compensation in
the Equity Option provided thereunder. Upon such deferral, an account in the
employee's name will be credited with an appropriate number of stock
equivalents. Such account will be credited from time to time with dividend
equivalents if dividends are paid by New Ralcorp. At the discretion of the
Committee, deferrals under the Equity Option may entitle the participant to a
Company matching contribution of up to 25% of the deferral. Upon retirement or
other termination of employment, the employee receives shares of stock equal to
the number of equivalents in such employee's account or, at the Committee's
discretion, may receive the value of such shares in cash.
The ISP provides that it may be amended by the Board of Directors, except
that no such amendment can increase the number of shares of stock reserved for
awards, withdraw the authority of the Committee to administer the ISP, change
the class of individuals who may be eligible for awards, other than if necessary
to comply with Section 16(b) of the Securities Exchange Act of 1934, as amended,
or change the term of awards granted prior to the amendment without the consent
of the recipient, other than if necessary to comply with Section 16(b) of the
Securities Exchange Act of 1934, as amended.
Stock options to be issued under the ISP as Incentive Stock Options ("ISO")
will satisfy the requirements of Section 422 of the Code. Under the provisions
of that Section, the optionee will not be deemed to receive any income at the
time an ISO is granted or exercised. If the optionee disposes of the shares more
than two years after the grant and one year after the exercise of the ISO, the
gain, if any (i.e., the excess of the amount realized for the shares over the
option price) will be long-term capital gain. If the optionee disposes of the
shares acquired on exercise of an ISO within two years after the date of grant
or within one year after the exercise of the ISO, the disposition will
constitute a "disqualifying disposition," and the optionee will have ordinary
income in the year of the disqualifying disposition equal to the fair market
value of the stock on the date of exercise minus the option price. The excess of
the amount received for the shares over the fair market value at the time of
exercise will be capital gain. If the optionee disposes of the shares in a
disqualifying disposition, and such disposition is a sale or exchange which
would result in a loss to the optionee, then the amount treated as ordinary
income is the excess (if any) of the amount realized in such sale or exchange
over the adjusted basis of such shares.
New Ralcorp is not entitled to a deduction as a result of the grant or
exercise of an ISO. If an optionee has ordinary income as a result of a
disqualifying disposition, New Ralcorp will have a corresponding deductible
expense in an equivalent amount in the taxable year of New Ralcorp in which the
disqualifying disposition occurs.
The difference between the fair market value of the option at the time of
exercise and the option price is a tax preference item for alternative minimum
tax purposes. The basis in an ISO for alternative minimum tax purpose is
increased by the amount of the preference.
Stock options issued under the ISP which do not satisfy the requirements of
Section 422 of the Code will have the following tax consequences:
(i) the optionee will have ordinary income at the time the option is
exercised in an amount equal to the excess of the fair market value at the
date of exercise over the option price;
(ii) New Ralcorp will have a deductible expense in an amount equal to
the ordinary income of the optionee;
(iii) no amount other than the price paid under the option shall be
considered as received by New Ralcorp for shares so transferred; and
(iv) any gain from the subsequent sale of the shares by the optionee
for an amount in excess of fair market value on the date the option is
exercised will be capital gain and any loss will be capital loss.
60
<PAGE> 67
In general, a recipient of other stock awards, including stock equivalents
pursuant to the Deferred Compensation Plan for Key Employees, but excluding
restricted stock awards (see below), will have ordinary income equal to the cash
or fair market value of the stock on the date received in the year in which the
award is actually paid. New Ralcorp will have a corresponding deductible expense
in the same year in an amount equal to that reported by the recipient as
ordinary income. The recipient's basis in the stock received will be equal to
the fair market value of the stock when received and his holding period will
begin on that date.
With respect to restricted stock awards, such awards do not constitute
taxable income under existing Federal tax law until such time as restrictions
lapse with respect to any installment. When any installment of shares are
released from restriction, the market value of such shares on the date the
restrictions lapse constitutes income to the recipient in that year and is
taxable at ordinary income rates, and New Ralcorp will have a corresponding
deductible expense in an amount equal to that reported by the recipient as
ordinary income and in the same year. Since the lapse of restrictions on
restricted stock awards is accelerated in the event of a change of control of
New Ralcorp, such an acceleration may result in an excess parachute payment, as
defined in Section 280G of the Code. In such event, New Ralcorp's deduction with
respect to such payment is denied and the recipient is subject to a
nondeductible 20% excise tax on such excess parachute payment.
The Committee has the sole discretion to determine that awards under the
ISP contain provisions regarding the treatment of awards in the event of a
change in ownership or of a change in control of New Ralcorp. Upon a change in
ownership or change in control, all terms, conditions, restrictions and
limitations in effect with respect to any unexercised award will immediately
lapse and no other terms and conditions will be applied. Any unexercised,
unvested, unearned or unpaid award will automatically become 100% vested. Awards
with performance periods will be treated as if the performance objectives have
been obtained at a level of 100%.
Unless determined otherwise by the Committee, awards to a participant under
the ISP are forfeited upon any of the following: by the participant's discharge
for cause; voluntary termination other than retirement; engaging in competition
with New Ralcorp; or engaging in activity or conduct contrary to the best
interest of New Ralcorp. Awards (other than unrestricted stock awards) will be
nonassignable (except by will or the laws of descent and distribution) and will
have such term and will terminate upon such conditions as contained in
individual awards.
After the Distribution, the Committee is expected to meet and grant stock
options and possibly restricted stock awards to the Named Executive Officers and
other members of key management.
A copy of the ISP has been filed as an Exhibit to the Company Form 10, of
which this Information Statement forms a part. The foregoing description of the
ISP is intended only as a summary and is qualified in its entirety by reference
to the ISP.
SAVINGS INVESTMENT PLAN
New Ralcorp has adopted the New Ralcorp SIP, a defined contribution plan
which is intended to be a 401(k) Plan and an employee stock ownership plan
designed to invest primarily in employer securities. Pursuant to that plan, any
regular non-union sales, administrative, clerical or production employees (and
union employees, to the extent permitted by their collective bargaining
agreements) of New Ralcorp or certain of its majority-owned domestic
subsidiaries who have completed one year of service may elect to have their
employer contribute to the New Ralcorp SIP on their behalf Basic Contributions
of 2% to 12% of their compensation in 1% increments rather than receive such
amounts in cash. New Ralcorp will contribute a Company Matching Contribution
equal to 50% of each participant's Basic Contribution, but only to the extent
that the participant's Basic Contributions do not exceed 6% of compensation.
Neither the Basic Contributions nor the Company Matching Contributions will be
subject to Federal income tax in the year contributed. A participant may also
elect to make Supplemental Contributions of 1% to 10% of his or her
compensation; however, the total Basic and Supplemental Contributions will be
subject to limitation as required by Section 415 of the Code. Supplemental
Contributions will be subject to Federal and state income tax in the year
contributed.
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Amounts contributed to the New Ralcorp SIP will be invested by the Trustee
in one or more funds as directed by the participant. It is contemplated that
initially there will be approximately 10 such funds offering a variety of
investment media. The Company Matching Contributions thereon will be required to
be invested in the New Ralcorp Common Stock Fund.
A participant's election deferrals will be vested from the time made.
Company Matching Contributions will vest at the rate of 25% for each of a
participant's first four years' of service and will be fully vested after four
years of employment or upon attainment of age 65, upon retirement, disability or
death, or in the case of termination of the New Ralcorp SIP or discontinuance of
Company Matching Contributions. Upon termination of employment, retirement,
disability or death, that portion of the trust fund credited to a participant
which is vested will be made available to the participant.
The Code imposes limits on deferrals permitted in tax-qualified plans such
as the New Ralcorp SIP. New Ralcorp will also establish a nonqualified
supplemental SIP pursuant to which compensation of certain Executive Officers,
and certain other key management employees, will be deferred to the extent such
deferrals exceed the qualified plan limits in the New Ralcorp SIP or are
otherwise ineligible to be deferred into the New Ralcorp SIP. Such deferrals
will be credited with Company Matching Contributions in the same manner as in
the New Ralcorp SIP.
DEFERRED COMPENSATION PLAN FOR KEY EMPLOYEES
New Ralcorp has adopted a Deferred Compensation Plan for Key Employees
which will be administered by the Nominating and Compensation Committee. Under
this plan, all or any part of an eligible employee's salary and bonus may be
deferred by the participant until retirement, termination of employment, total
disability or death. Participation in the plan will be offered to certain key
employees (including the Executive Officers) of New Ralcorp and certain of its
subsidiaries. The purpose of the plan is to afford the participant the
opportunity to create additional post-retirement benefits. The plan initially
will provide that all or any part of the participant's compensation may be
deferred in New Ralcorp Common Stock equivalents under an Equity Option, or in
cash under a Variable Interest Option. At the discretion of the Nominating and
Compensation Committee exercised prior to any deferrals, deferrals under the
Equity Option may entitle the participant to a Company Match of up to 25% of the
deferral. New Ralcorp Common Stock equivalents will earn dividend equivalents.
If the participant's compensation is deferred in cash under the Variable
Interest Option, the amount of the deferral will be credited to a "Deferred Cash
Account" in the participant's name. Thereafter, interest equivalents at a rate
based on a published prime rate will be credited annually to the account.
Deferrals under the Equity Option or under the Variable Interest Option
will normally be distributed to the participant in a lump sum following
retirement, termination of employment or total disability. In the event of the
participant's death, deferrals in the Equity Option and deferrals in the
Variable Interest Option will be paid to the participant's beneficiary or legal
representative.
The New Ralcorp Board has determined that account balances in Ralcorp
Common Stock will be converted to New Ralcorp Common Stock. The conversion will
be based on the relative value of Ralcorp Common Stock prior to the Distribution
to the value of New Ralcorp Common Stock after the Distribution.
OTHER BENEFIT PLANS
New Ralcorp has adopted a New Ralcorp Executive Life Plan, under which,
following retirement, beneficiaries of eligible Executive Officers or other
eligible employees will be provided a death benefit in an amount equal to 50% of
the earnings recognized under New Ralcorp's benefit plans for the Executive
Officer or other eligible employee during the last full year of employment.
The New Ralcorp Executive Health Plan is a hospital and medical
reimbursement plan covering active key management employees, including certain
Executive Officers, and their dependents. Employees eligible for this plan must
participate in New Ralcorp's Comprehensive Health Plan, which will be available
to certain New Ralcorp employees at their own expense, to be eligible for the
Executive Health Plan. The Executive
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Health Plan will provide coverage, at no cost to the participant, for 100% of
medical expenses incurred, up to $35,000 per year, provided such expenses would
constitute deductible medical expenses for federal income tax purposes and
provided that the expenses are not payable by the Comprehensive Health Plan.
New Ralcorp has also adopted an Executive Long-Term Disability Plan which
will provide benefits to its corporate officers, including certain Executive
Officers, in the event they become disabled. The Long-Term Disability Plan,
which will be available to certain regular New Ralcorp employees and in which
officers must participate at their own expense in order to be eligible for the
Executive disability plan, will impose a limit of $5,000 per month (60% of a
maximum annual salary of $100,000) on the amount paid to a disabled employee.
The Executive disability plan will provide a supplemental benefit equal to 60%
of the difference between the Executive Officer's previous year's earnings
recognized under New Ralcorp's benefit plans and $100,000, with appropriate
taxes withheld.
CERTAIN TRANSACTIONS
The New Ralcorp Businesses have in the past engaged in numerous
transactions with Ralcorp. (See "Notes to Combined Financial Statements --
Related Party Activity".) Such transactions have included, among other things,
the extension of intercompany loans, purchases of raw materials or additives,
the provision of various other types of financial support by or to Ralcorp, and
the sharing of services and administration and the costs thereof.
Mr. Stiritz is the Chairman of the New Ralcorp Board and is on the
Company's Nominating and Compensation Committee and is Chairman of the Board,
Chief Executive Officer and President of Ralston Purina. Since its spin-off from
Ralston Purina in 1994, Ralcorp has engaged in several transactions with Ralston
Purina. During fiscal 1996, Ralston Purina paid Ralcorp approximately $1.35
million for coupon and promotional processing services; such services have been
discontinued. Also, during fiscal 1996, Ralston Purina purchased approximately
$10.55 million of Ralcorp products for distribution outside of the United
States. Both arrangements were conducted in the ordinary course of business at
competitive prices and terms. New Ralcorp expects to continue selling Ralston
Purina products for distribution outside of the United States. During fiscal
1996, Ralcorp paid Ralston Purina approximately $1.67 million for various
services including, advertising creative assistance, the leasing of research and
development space, insurance administration, and other administrative services.
New Ralcorp expects the majority of these services will continue to be used by
New Ralcorp.
Except as provided in the Supply Agreement, administrative services
provided by New Ralcorp to Ralcorp and General Mills will be discontinued. All
other administrative services currently provided by Ralcorp on the one hand and
New Ralcorp on the other hand will be either assumed by the other party or
obtained by it from unaffiliated third parties.
See also "AGREEMENTS AMONG RALCORP, GENERAL MILLS AND NEW RALCORP."
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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS OF NEW RALCORP COMMON STOCK
All of New Ralcorp's outstanding common stock is currently held by Ralcorp.
To the best knowledge of New Ralcorp, the following table sets forth projected
New Ralcorp Common Stock ownership information with respect to each of the New
Ralcorp Directors, Named Executive Officers and all New Ralcorp Directors and
Executive Officers as a group and with respect to each person who is projected
to own more than 5% of the New Ralcorp Common Stock immediately after the
Distribution. Such projections are based on the anticipated distribution of one
share of New Ralcorp Common Stock for every one share of Ralcorp Common Stock
beneficially owned by such parties as of the Distribution Record Date (including
shares of New Ralcorp Common Stock held in the New Ralcorp Savings Investment
Plan for the accounts of Executive Officers. Ownership information for 5%
holders is as of October 31, 1996. Ownership information for New Ralcorp
Directors, Named Executive Officers and all New Ralcorp Directors and Executive
Officers as a group is as of November 30, 1996. Except as noted, all such
parties will possess sole voting and investment powers with respect to the
shares noted. An asterisk in the column listing the percentages of shares to be
beneficially owned indicates the person will own less than 1% of New Ralcorp
Common Stock. See "THE DISTRIBUTION -- Manner of Effecting the Distribution";
"EXECUTIVE COMPENSATION."
<TABLE>
<CAPTION>
NUMBER OF SHARES
TO BE % OF SHARES EXPLANATORY
NAME AND ADDRESS BENEFICIALLY OWNED OUTSTANDING(A) NOTES
- -------------------------------------------------- ------------------ -------------- -----------
<S> <C> <C> <C>
Boatmen's Bancshares, Inc......................... 1,785,459 5.4% (B)
One Boatmen's Plaza
St. Louis, MO 63101
FMR Corp.......................................... 2,825,317 8.6% (C)
82 Devonshire Street
Boston, MA 02109
William H. Danforth............................... 307,417 * (D)(E)(F)
William D. George, Jr............................. 1,000 *
Jack W. Goodall................................... 35,100 *
David W. Kemper................................... 1,000 * (E)
Joe R. Micheletto................................. 40,696 * (G)
William P. Stiritz................................ 281,959 * (E)(H)
Kevin J. Hunt..................................... 11,630 * (I)
Robert W. Lockwood................................ 16,627 * (J)
James A. Nichols.................................. 31,758 * (K)
David P. Skarie................................... 12,782 * (L)
All Directors and Executive Officers as a group
(12 persons).................................... 746,401 2.3% (M)
</TABLE>
- ---------------
(A) For purposes of calculating the percentage of Shares Outstanding to be
beneficially owned, Shares Outstanding were deemed to be shares actually
outstanding on November 30, 1996.
(B) This amount will consist of shares of New Ralcorp Common Stock owned by the
following subsidiaries of Boatmen's Bancshares, Inc: Boatmen's Trust
Company -- 1,783,259 shares and Boatmen's Bancshares, Inc. subsidiaries --
2,200 shares. Of such shares, Boatmen's will have voting and investment
powers as follows: sole voting -- 390,459 shares; shared voting --
1,393,920 shares; sole investment -- 87,934 shares; and shared investment
-- 1,637,280 shares. Of such shares, voting and investment powers for
254,922 shares will be shared with Dr. Danforth who is a director of the
Company.
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(C) Would include 1,979,132 shares beneficially owned by Fidelity Management &
Research Company, as a result of its serving as investment adviser to
various investment companies registered under Section 8 of the Investment
Company Act of 1940 and its serving as investment adviser to certain other
funds which are generally offered to limited groups of investors; 838,685
shares beneficially owned by Fidelity Management Trust Company, as a result
of its serving as trustee or managing agent for various private investment
accounts, primarily employee benefit plans and its serving as investment
adviser to certain other funds which are generally offered to limited groups
of investors; and 7,500 shares beneficially owned by Fidelity International
Limited, as a result of its serving as investment adviser to various non-
U.S. investment companies. FMR Corp. would have sole voting power with
respect to 651,293 shares and sole investment power with respect to
2,817,817 shares. Fidelity International Limited would have sole voting and
investment powers with respect to all the shares it would beneficially own.
(D) Would exclude 1,100,000 shares, or 3.3% of the outstanding New Ralcorp
Common Stock, which would be held by The Danforth Foundation, St. Louis,
Missouri. Dr. Danforth is one of the ten trustees of the Foundation. Dr.
Danforth would disclaim beneficial ownership of such shares.
(E) Would exclude 841,870 shares, or 2.6% of the outstanding New Ralcorp Common
Stock which would be held by Washington University, St. Louis, Missouri.
Dr. Danforth is Chairman of the Board of Trustees of the University and
Messrs. Stiritz and Kemper serve on the University's Board of Trustees,
which consists of 49 members.
(F) Dr. Danforth would have sole voting and investment powers respecting 22,648
shares. He would share voting and investment powers respecting 284,769
shares, and would disclaim beneficial ownership of 29,847 of such shares.
(G) Would include 9,381 shares of New Ralcorp Common Stock held under the
Company's Savings Investment Plan. Shares in the Plan are as of September
30, 1996. Mr. Micheletto would only have voting power with respect to 1,279
of these shares.
(H) Would include 3,333 shares owned by Mr. Stiritz's wife.
(I) Would include 1,925 shares of New Ralcorp Common Stock held under the
Company's Savings Investment Plan. Shares in the Plan are as of September
30, 1996. Mr. Hunt would only have voting power with respect to 1,925 of
these shares.
(J) Would include 216 shares as to which he would share voting and investment
powers and 2,085 shares of New Ralcorp Common Stock held under the
Company's Savings Investment Plan. Shares in the Plan are as of September
30, 1996. Mr. Lockwood would only have voting power with respect to 2,081
of these shares.
(K) Would include 3,866 shares of New Ralcorp Common Stock held under the
Company's Savings Investment Plan. Shares in the Plan are as of September
30, 1996. Mr. Nichols would only have voting power with respect to 1,778 of
these shares.
(L) Would include 2,288 shares of New Ralcorp Common Stock held under the
Company's Savings Investment Plan. Shares in the Plan are as of September
30, 1996. Mr. Skarie would only have voting power with respect to 1,357 of
these shares.
(M) With respect to all Executive Officers except those named in the above
Table: would include 4,056 shares of New Ralcorp Common Stock held under the
Company's Savings Investment Plan (the Executive Officers would only have
voting power with respect to 1,487 of these shares). Shares in the Plan are
as of September 30, 1996.
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DESCRIPTION OF NEW RALCORP CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
Under New Ralcorp's Articles of Incorporation (the "New Ralcorp Articles"),
the total number of shares of all classes of stock that New Ralcorp will have
authority to issue under the New Ralcorp Articles will be 310 million, of which
10 million will be shares of $.01 par value preferred stock, and 300 million
will be shares of New Ralcorp Common Stock. No shares of New Ralcorp preferred
stock will be issued in connection with the Distribution. Based on the number of
shares of Ralcorp Common Stock outstanding at November 30, 1996, approximately
33 million shares of New Ralcorp Common Stock will be issued to shareholders of
Ralcorp in the Distribution (including shares to be issued to key employees of
New Ralcorp in exchange for their shares of Ralcorp Common Stock -- see "THE
DISTRIBUTION -- Manner of Effecting the Distribution". All of the shares of New
Ralcorp Common Stock issued in the Distribution, whether distributed or
exchanged, will be validly issued, fully paid and nonassessable.
NEW RALCORP COMMON STOCK
The holders of New Ralcorp Common Stock will be entitled to one vote for
each share held of record on the applicable record date on all matters voted on
by shareholders, including elections of directors, and, except as otherwise
required by law or provided in any resolution adopted by the New Ralcorp Board
with respect to any shares of New Ralcorp preferred stock, the holders of such
shares will exclusively possess all voting power. The New Ralcorp Articles do
not provide for cumulative voting in the election of directors or any preemptive
rights to purchase or subscribe for any stock or other securities and there are
no conversion rights or redemption or sinking fund provisions with respect to
such stock. Subject to any preferential rights of any outstanding series of New
Ralcorp preferred stock created by the New Ralcorp Board from time to time, the
holders of New Ralcorp Common Stock on the applicable record date will be
entitled to such dividends as may be declared from time to time by the New
Ralcorp Board from funds available therefor, and upon liquidation will be
entitled to receive pro rata all assets of New Ralcorp available for
distribution to such holders. See "RISK FACTORS -- Ralcorp Dividend Policy", and
"-- Manner of Effecting the Distribution."
The New Ralcorp Articles, Bylaws and Shareholder Protection Rights Plan
contain certain provisions which may have the effect of discouraging certain
types of transactions that involve an actual or threatened change of control of
New Ralcorp. See "-- Common Stock Purchase Rights" and "ANTI-TAKEOVER EFFECTS OF
CERTAIN PROVISIONS."
NEW RALCORP PREFERRED STOCK
The New Ralcorp Board has the authority to issue shares of New Ralcorp
preferred stock in one or more series and to fix, by resolution, the voting
powers, which may be full or limited or no voting powers, designations,
preferences and relative, participating, optional or other special rights and
the qualifications, limitations or restrictions thereof, including liquidation
preferences, dividend rates, conversion rights and redemption provisions of the
shares constituting any series, without any further vote or action by the
shareholders. Any shares of New Ralcorp preferred stock so authorized and issued
could have priority over the New Ralcorp Common Stock with respect to dividend
and/or liquidation rights.
COMMON STOCK PURCHASE RIGHTS
The New Ralcorp Board has declared a dividend distribution of one Right for
each outstanding share of New Ralcorp Common Stock to be distributed to Ralcorp
shareholders pursuant to the Distribution. Except as set forth below, each Right
will entitle the registered holder to purchase from the Company one share of New
Ralcorp Common Stock at a price of $30 per share, subject to adjustment (the
"Purchase Price"). The description and terms of the Rights will be set forth in
a Shareholder Protection Rights Plan (the "Rights Agreement") between the
Company and a rights agent (the "Rights Agent").
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The Rights will not be exercisable or transferable separately from the
shares of New Ralcorp Common Stock to which they are attached until the earlier
of (i) the close of business on the tenth business day following the public
announcement or the date that a person or group of affiliated or associated
persons (other than the Company, any subsidiary of the Company or any employee
benefit plan of the Company) (an "Acquiring Person") has acquired, or obtained
the right to acquire, 20% or more of the outstanding shares of New Ralcorp
Common Stock without the prior express written consent of the Company executed
on behalf of the Company by a duly authorized officer of the Company following
express approval by action of at least a majority of the members of the New
Ralcorp Board then in office (the "Stock Acquisition Date"), or (ii) the close
of business on the tenth business day (or such later date as determined by the
New Ralcorp Board but not later than the Stock Acquisition Date) following the
commencement of a tender offer or exchange offer, without the prior written
consent of the Company, by a person (other than the Company, any subsidiary of
the Company or any employee benefit plan of the Company) which, upon
consummation, would result in such party's control of more than 20% or more of
the Company's voting stock (the earlier of the dates in clause (i) or (ii) above
being called the "Rights Distribution Date"). As soon as practicable following
the Rights Distribution Date, separate certificates evidencing the Rights
("Right Certificates") will be mailed to holders of record of the New Ralcorp
Common Stock as of the close of business on the Rights Distribution Date and
such separate certificates alone will then evidence the Rights.
The Rights are not exercisable until the Rights Distribution Date. The
Rights will expire on the later to occur of the date that is the ten year
anniversary of the Distribution, or, January 31, 2007, unless earlier redeemed
or exchanged by the Company, as described below.
The Purchase Price payable, and the number of shares of New Ralcorp Common
Stock or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of the
New Ralcorp Common Stock, (ii) upon the issuance of New Ralcorp Common Stock or
rights to subscribe for shares of New Ralcorp Common Stock or securities
convertible into New Ralcorp Common Stock at less than the then current market
price of the New Ralcorp Common Stock, or (iii) upon the distribution to holders
of New Ralcorp Common Stock of securities (other than those described in (ii)
above), evidences of indebtedness or assets (excluding regular periodic cash
dividends out of earnings or retained earnings).
If any person or group (other than the Company, any subsidiary of the
Company or any employee benefit plan of the Company) acquires 20% or more of the
Company's outstanding voting stock without the prior written consent of the New
Ralcorp Board, each Right, except those held by such persons, would entitle each
holder of a Right to acquire such number of shares of New Ralcorp Common Stock
as shall equal the result obtained by multiplying the then current Purchase
Price by the number of shares of New Ralcorp Common Stock for which a Right is
then exercisable and dividing that product by 50% of the then current per-share
market price of New Ralcorp Common Stock.
If any person or group (other than the Company, any subsidiary of the
Company or any employee benefit plan of the Company) acquires more than 20% but
less than 50% of the outstanding New Ralcorp Common Stock without prior written
consent of the New Ralcorp Board, each Right, except those held by such persons,
may be exchanged by the New Ralcorp Board for one share of New Ralcorp Common
Stock.
If the Company were acquired in a merger or other business combination
transaction where the Company is not the surviving corporation or where New
Ralcorp Common Stock is exchanged or changed or 50% or more of the Company's
assets or earnings power is sold in one or several transactions without the
prior written consent of the New Ralcorp Board, each Right would entitle the
holders thereof (except for the Acquiring Person) to receive such number of
shares of the acquiring company's common stock as shall be equal to the result
obtained by multiplying the then current Purchase Price by the number of shares
of New Ralcorp Common Stock for which a Right is then exercisable and dividing
that product by 50% of the then current market price per share of the common
stock of the acquiring company on the date of such merger or other business
combination transaction.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional shares will be issued.
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In lieu of fractional shares, an adjustment in cash will be made based on the
market price of the New Ralcorp Common Stock on the last trading date prior to
the date of exercise.
The Rights will be redeemable by the New Ralcorp Board for $.01 per Right
at any time prior to the tenth business day following the Stock Acquisition Date
(as defined above). Upon the action of the New Ralcorp Board electing to redeem
the Rights, the Company will make an announcement thereof, and the right to
exercise the Rights will terminate and the only right of the holders of Rights
will be to receive the redemption price.
The terms of the Rights may be amended by the New Ralcorp Board without the
consent of the holders of the Rights, including, but not limited to, an
amendment to lower certain thresholds described above to not less than the
greater of: (i) any percentage greater than the largest percentage of the Voting
Power (as defined in the Rights Agreement) of the Company then known by the
Company to be beneficially owned by any person or group of affiliated or
associated persons (other than an excepted person); and (ii) 10%. However, from
and after such time as any person or group of affiliated or associated persons
becomes an Acquiring Person the New Ralcorp Board may not amend the Rights
Agreement in any manner that may adversely affect the interests of the holders
of the Rights.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends.
ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS
The New Ralcorp Articles, Bylaws, Rights and the GBCL contain certain
provisions that could have the effect of delaying, deferring or preventing a
change in control of New Ralcorp by various means such as a tender offer or
merger not approved by the New Ralcorp Board. These provisions are designed to
enable the New Ralcorp Board, particularly in the initial years of New Ralcorp's
existence as an independent, publicly owned company, to develop New Ralcorp's
business in a manner that will foster its long-term growth without the potential
disruption that might be entailed by the threat of a takeover not deemed by the
New Ralcorp Board to be in the best interests of New Ralcorp and its
shareholders.
The description set forth below is intended as a summary of these
provisions only and is qualified in its entirety by reference to such
provisions. Copies of the New Ralcorp Articles and Bylaws are filed as exhibits
to the Company Form 10, of which this Information Statement is a part.
LIMITATIONS ON CHANGES IN BOARD COMPOSITION AND OTHER ACTIONS BY SHAREHOLDERS
The New Ralcorp Bylaws provide that the number of directors will be fixed
from time to time exclusively by the New Ralcorp Board, but shall consist of no
less than five and no more than twelve directors (initially the New Ralcorp
Board will be comprised of six directors). The New Ralcorp Articles provide for
the New Ralcorp Board to be divided into three classes, as nearly equal in size
as possible, serving staggered terms so that the terms of two of the initial
directors of New Ralcorp will expire at each of the 1998, 1999 and 2000 annual
meetings of New Ralcorp's shareholders. Starting with the 1998 annual meeting of
New Ralcorp's shareholders, one class of directors will be elected each year for
a three year term. As a result, at least two annual meetings of shareholders may
be required for shareholders to change a majority of the directors, whether or
not a majority of New Ralcorp's shareholders believes that such a change would
be desirable. See "MANAGEMENT -- Directors of New Ralcorp."
The GBCL provides that, unless a corporation's articles of incorporation or
bylaws provide otherwise, the holders of a majority of the corporation's voting
stock may remove any director from office. The New Ralcorp Articles provide that
a director may be removed by shareholders only "for cause" and only by the
affirmative vote of (i) two-thirds of all members of the New Ralcorp Board and
(ii) the holders of at least two-thirds of New Ralcorp's voting stock. The GBCL
also provides that, unless a corporation's articles of incorporation or bylaws
provide otherwise, all vacancies on a corporation's board of directors,
including any vacancies resulting from an increase in the number of directors,
may be filled by a majority of the directors then in office, although less than
a quorum, until the next election of directors by the shareholders of the
corporation. The New
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Ralcorp Articles provide that, subject to any rights of holders of New Ralcorp
Preferred Stock, vacancies may be filled only by a majority of the remaining
directors.
Under the New Ralcorp Bylaws only persons who are nominated by or at the
direction of the New Ralcorp Board, or by a shareholder who has given notice in
accordance therewith, which generally requires notice not less than sixty nor
more than ninety days prior to a meeting at which directors are to be elected,
will be eligible for election as directors at that meeting. The New Ralcorp
Bylaws also establish such advance notice procedure with regard to other matters
which any shareholder may desire to be brought before any meeting of
shareholders. See "SHAREHOLDER PROPOSALS."
The GBCL provides that special meetings of shareholders may be called by
the board of directors or by such other person or persons as may be authorized
by a corporation's Articles of Incorporation or Bylaws. The New Ralcorp Bylaws
provide that special meetings of New Ralcorp's shareholders may be called only
by the Chairman of the Board or President of New Ralcorp or by a majority of the
entire New Ralcorp Board. The New Ralcorp Bylaws also provide that only such
business shall be conducted at a special meeting of New Ralcorp's shareholders
as shall be specified in the notice of meeting.
The GBCL provides that any action by written consent of shareholders in
lieu of a meeting must be unanimous.
The provisions of the New Ralcorp Articles and Bylaws with respect to the
classification of directors, the advance notice requirements for director
nominations or other proposals of shareholders and the limitations on the
ability of shareholders to increase the size of the board, remove directors and
fill vacancies, will have the effect of making it more difficult for
shareholders to change the composition of the New Ralcorp Board or otherwise to
bring a matter before shareholders without the New Ralcorp Board's consent, and
thus will reduce the vulnerability of New Ralcorp to an unsolicited takeover
proposal.
PREFERRED AND COMMON STOCK
The New Ralcorp Articles authorize the New Ralcorp Board to establish
series of preferred stock and to determine, with respect to any series of
preferred stock, the voting powers, full or limited, or no voting powers, and
such designations, preferences and relative, participating, optional or other
special rights and such qualifications, limitations or restrictions thereof as
are stated in the resolutions of the New Ralcorp Board providing for such
series. In addition, the New Ralcorp Articles authorize the New Ralcorp Board to
issue up to approximately 234 million additional shares of New Ralcorp Common
Stock after the Distribution (in addition to shares reserved for the Rights and
outstanding options). The number of authorized but unissued shares will provide
New Ralcorp with the ability to meet future capital needs and to provide shares
for possible acquisitions and stock dividends or stock splits.
New Ralcorp believes that the preferred stock will provide New Ralcorp with
increased flexibility in structuring possible future financings and
acquisitions, and in meeting other corporate needs that might arise. Having such
authorized shares available for issuance will allow New Ralcorp to issue shares
of preferred stock without the expense and delay of a special shareholders'
meeting. The authorized and unissued shares of preferred stock, as well as the
authorized and unissued shares of New Ralcorp Common Stock, will be available
for issuance without further action by shareholders, unless such action is
otherwise required by applicable law. Although the New Ralcorp Board has no
intention at the present time of doing so, it could issue a series of preferred
stock that could, subject to certain limitations imposed by the law, depending
on the terms of such series, impede the completion of a merger, tender offer or
other takeover attempt. The New Ralcorp Board will make any determination to
issue such shares based on its judgment as to the best interests of New Ralcorp
and its then-existing shareholders at the time of the issuance. The New Ralcorp
Board, in so acting, could issue preferred stock having terms which could
discourage an acquisition attempt or other transaction that some, or a majority,
of the shareholders might believe to be in their best interests or in which
shareholders might receive a premium for their stock over the then market price
of such stock.
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FAIR PRICE PROVISIONS
In order to ensure New Ralcorp shareholders receive a fair price for their
shares of New Ralcorp Common Stock upon significant change in the ownership of
New Ralcorp, the New Ralcorp Articles contain a fair price provision requiring
the affirmative vote of not less than 85% of all of the outstanding shares of
capital stock of New Ralcorp then entitled to vote, and a majority of the voting
power of all such shares of which an interested shareholder (as defined) is not
the beneficial owner, to approve certain business combinations. Business
combinations covered by the provision include a merger or consolidation, sale or
other disposition of a substantial amount of New Ralcorp assets, a plan of
liquidation or dissolution of New Ralcorp, or other transactions involving the
transfer, issuance, reclassification or recapitalization of New Ralcorp
securities, in each case benefiting an individual or entity that, together with
its affiliates and associates, is the beneficial owner of more than 10% of the
outstanding shares entitled to vote in the election of directors. In certain
circumstances, the New Ralcorp Board may approve any of the foregoing in lieu of
the super-majority shareholder approval provision.
AMENDMENT OF CERTAIN PROVISIONS OF THE NEW RALCORP ARTICLES AND BYLAWS
The New Ralcorp Articles provide that the Bylaws may only be amended or
repealed by two-thirds of the New Ralcorp Board of Directors. Any amendment of
the New Ralcorp Articles requires a vote of a majority of the outstanding shares
of New Ralcorp capital stock entitled to vote. Amendment of the provisions of
the New Ralcorp Articles relating to the Directors of the corporation requires
the vote of two-thirds of the outstanding shares of New Ralcorp capital stock
entitled to vote. Amendment of the provisions of the New Ralcorp Articles
relating to the "Fair Price" and "Indemnification" provisions require the vote
of 85% of the outstanding shares of New Ralcorp capital stock entitled to vote.
RIGHTS
The Rights Agreement which has been adopted by the New Ralcorp Board, as
described above, will permit disinterested shareholders to acquire shares of New
Ralcorp Common Stock or common stock of an acquiring company at a substantial
discount in the event of certain described changes in control. See "DESCRIPTION
OF NEW RALCORP CAPITAL STOCK -- Common Stock Purchase Rights."
MANAGEMENT CONTINUITY AGREEMENTS; OTHER SEVERANCE ARRANGEMENTS
New Ralcorp has entered into Management Continuity Agreements with its
executive officers and other key management employees providing severance
compensation and continuation of benefits in the event of termination following
a change in control of New Ralcorp, with the amount of payments to be received
being dependent upon the voluntary or involuntary nature of such termination.
See "EXECUTIVE COMPENSATION -- Employee/Severance Agreements." New Ralcorp has
adopted a Change in Control Severance Compensation Plan which will provide
severance compensation and continuation of benefits to other eligible employees
of New Ralcorp upon their involuntary termination following a change in control
not approved by the New Ralcorp Board.
STATUTORY PROVISIONS
New Ralcorp is subject to the control share acquisition and the business
combinations sections of the GBCL, which sections, together with the provisions
of the GBCL permitting the New Ralcorp Board to consider the interests of
non-shareholder constituencies in connection with acquisition proposals, may
make it more difficult for there to be a change in control of New Ralcorp or for
New Ralcorp to enter into certain business combinations than if New Ralcorp were
not subject to such sections.
INDEMNIFICATION OF OFFICERS AND DIRECTORS OF NEW RALCORP
Under Section 351.355 of the GBCL and the New Ralcorp Articles, New Ralcorp
must indemnify any person (other than a party plaintiff suing on his or her
behalf or in the right of New Ralcorp) who is or was a
70
<PAGE> 77
director or officer of New Ralcorp, or is or was serving at the request of New
Ralcorp as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, trade or industry association or other
enterprise, to the maximum extent permitted by law, against any and all expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement,
actually and reasonably incurred by such person in connection with any civil,
criminal, administrative or investigative action, proceeding or claim (including
an action by or in the right of New Ralcorp), by reason of the fact that such
person is or was serving in such capacity, provided that such person's conduct
is not finally adjudged to have been knowingly fraudulent, deliberately
dishonest or willful misconduct. New Ralcorp's Directors and Executive Officers
also have indemnification contracts with New Ralcorp which will become effective
as of the Distribution Date. Pursuant to those agreements, the Company agrees to
indemnify the Directors and Executive Officers to the full extent authorized or
permitted by the GBCL. The agreements also provide for indemnification to the
extent not covered by the GBCL or insurance policies purchased and maintained by
the Company (e.g. if the GBCL is amended to change the scope of
indemnification). Such indemnification would be co-extensive with the
indemnification currently permitted by the GBCL, as described above, but no
indemnity would be paid (i) in respect to remuneration paid to the Executive
Officer if it shall be finally judicially adjudged that such remuneration was in
violation of law; (ii) on account of any suit for an accounting of profits made
from the purchase or sale by the Executive Officer of securities of the Company
pursuant to the provisions of Section 16(b) of the Securities Exchange Act of
1934, as amended, or similar provisions of any state or local statutory law;
(iii) on account of the Executive Officer's conduct which is finally judicially
adjudged to have been knowingly fraudulent, deliberately dishonest or willful
misconduct; or (iv) if a final decision by a Court having jurisdiction in the
matter (all appeals having been denied or none having been taken) shall
determine that such indemnification is not lawful.
The agreements also provide for the advancement of expenses of defending
any civil or criminal action, claim, suit or proceeding against the Executive
Officer and for repayment of such expenses by the Executive Officer to the
Company if it is ultimately judicially determined that the Executive Officer is
not entitled to such indemnification.
New Ralcorp will have, following the Distribution, directors' and officers'
insurance which protects each director and officer from liability for actions
taken in their capacity as directors or officers. This insurance may provide
broader coverage for such individuals than may be required by the provisions of
the New Ralcorp Articles.
The foregoing represents a summary of the general effect of the
indemnification provisions Missouri law and the New Ralcorp Articles and such
agreements and insurance. Additional information regarding indemnification of
directors and officers can be found in Section 351.355 of the GBCL, New
Ralcorp's Articles and its pertinent agreements.
SHAREHOLDER PROPOSALS
Article I, Section 4 of the New Ralcorp Bylaws hereto sets forth advance
notice requirements applicable to shareholders desiring to nominate candidates
for directors or to present a proposal or bring other business before a New
Ralcorp shareholders meeting. In each case the notice must be given to the
Secretary of New Ralcorp, whose address is 800 Market Street, Suite 2900, St.
Louis, Missouri 63101. The 1998 Annual Meeting of New Ralcorp Shareholders is
expected to be held on January 29, 1998. To be considered, notice of any such
nomination or proposal must be received between October 30, 1997 and November
29, 1997. To be included in New Ralcorp's proxy statement and form of proxy for
that meeting, any such proposal must also comply in all respects with the rules
and regulations of the Commission.
INDEPENDENT ACCOUNTANTS
The New Ralcorp Board has appointed Price Waterhouse as New Ralcorp's
independent accountants to audit New Ralcorp's financial statements for the
fiscal year ending September 30, 1997. Price Waterhouse has audited the
financial statements of Ralcorp since 1994.
71
<PAGE> 78
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
TERM PAGE
- -------------------------------------- ------
<S> <C>
1994 Spinoff.......................... 15
Acquiring Person...................... 67
Ancillary Agreements.................. 14
ARS................................... 15
Assigned Technical Information and
Know How............................ 28
Baby Food Business.................... 14
Branded Assets........................ 24
Branded Business...................... 14
Branded Contribution.................. 13
Branded Employee...................... 25
Branded Liabilities................... 24
Branded Subsidiary.................... 13
Branded Technical Information and Know
How................................. 29
Branded Trademarks.................... 31
CERCLA................................ 41
Clinton Ditch......................... 51
Code.................................. 16
Cookie Crisp.......................... 32
Commission............................ 12
Committee............................. 55
Company............................... 13, 35
Company Form 10....................... 12
Consent Agreement..................... 23
Consumer Foods........................ 35
Control Brand......................... 32
Cracker and Cookie Business........... 14
DCP................................... 53
Deferred Cash Account................. 62
Designated Products................... 29
Distribution.......................... 13
Distribution Date..................... 15
Distribution Record Date.............. 13
Distribution Time..................... 25
DOJ................................... 23
Effective Time........................ 19
Employment Agreement.................. 57
Exchange Act.......................... 12
Executive Officers.................... 54
FASB.................................. 42
FTC................................... 23
GBCL.................................. 16
General Mills......................... 13
General Mills Common Stock............ 19
General Mills Missouri................ 14
HSR Act............................... 23
Incentive Stock Options............... 59
Indemnifiable Losses.................. 26
<CAPTION>
TERM PAGE
- -------------------------------------- ------
<S> <C>
Information Statement................. 13
Internal Merger....................... 13
Internal Spinoff...................... 13
ISO................................... 60
ISP................................... 53
IRS................................... 14
Known Branded Liabilities............. 25
LIBOR................................. 50
Materials............................. 33
Merger................................ 13
Merger Agreement...................... 14
Micheletto Employment Agreement....... 57
Named Executive Officers.............. 55
National Australia.................... 51
New Ralcorp........................... 13
New Ralcorp Articles.................. 66
New Ralcorp Assets.................... 25
New Ralcorp Board..................... 52
New Ralcorp Businesses................ 14
New Ralcorp Common Stock.............. 13
New Ralcorp Liabilities............... 25
New Ralcorp SIP....................... 23
Nonconforming Products................ 33
NuWorld............................... 15
NYSE.................................. 13
Other Trademarks...................... 31
Post-Closing Branded Liabilities...... 26
Prior Reorganization Agreement........ 50
Prior Technology Agreement............ 29
Private Label Trademarks.............. 32
Private Letter Ruling................. 14
Private Label Cereal Business......... 14
Products.............................. 32
Proposed FTC Order.................... 23
Proxy Statement-Prospectus............ 13
PRP................................... 41
Purchase Price........................ 66
Ralcorp............................... 13
Ralcorp Board......................... 14
Ralcorp Common Stock.................. 13
Ralcorp Holdings, Inc................. 13
Ralston Foods......................... 13
Ralston IRBs.......................... 51
Ralston Purina........................ 15
Ralston Trademarks.................... 31
Reorganization........................ 13
Reorganization Agreement.............. 13
Resorts............................... 15
Resort Operations..................... 14
</TABLE>
72
<PAGE> 79
<TABLE>
<CAPTION>
TERM PAGE
- -------------------------------------- ------
<S> <C>
Retirement Plan....................... 58
Rice Chex............................. 32
Right................................. 13
Rights Agent.......................... 66
Rights Agreement...................... 66
Rights Certificates................... 67
Rights Distribution Date.............. 67
Scheduled Branded Litigation.......... 25
SEC................................... 12
Securities Act........................ 18
Shared Technical Information and
Know How............................ 28
Specifications........................ 33
Stock Acquisition Date................ 67
TERM PAGE
- -------------------------------------- ------
Supply Agreement...................... 14
Surviving Corporation................. 23
Tax Opinions.......................... 14
Tax Sharing Agreement................. 13
Technical Information and Know How.... 28
Technology Agreement.................. 13
Term.................................. 57
Termination for Cause................. 57
Trademark Agreement................... 13
Trademarks............................ 31
Transactions.......................... 13
Unknown Branded Liabilities........... 26
Vail.................................. 15
</TABLE>
73
<PAGE> 80
EXHIBIT 2.6
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
RALCORP HOLDINGS, INC.,
GENERAL MILLS, INC.
AND
GENERAL MILLS MISSOURI, INC.
AUGUST 13, 1996
<PAGE> 81
EXHIBIT 2.1
REORGANIZATION AGREEMENT
This Reorganization Agreement (the "Agreement"), dated as of January ,
1997, by and among Ralcorp Holdings, Inc., a Missouri corporation ("Ralcorp"),
New Ralcorp Holdings, Inc., a Missouri corporation ("New Ralcorp"), Ralston
Foods, Inc., a Nevada corporation ("Foods"), Chex Inc., a Delaware corporation
wholly owned by New Ralcorp (the "Branded Subsidiary"), and General Mills, Inc.,
a Delaware corporation ("Acquiror").
WITNESSETH:
WHEREAS, Ralcorp holds all of the issued and outstanding capital stock of
Foods and all of the issued and outstanding capital stock of New Ralcorp; and
WHEREAS, New Ralcorp holds all of the issued and outstanding capital stock
of the Branded Subsidiary; and
WHEREAS, Ralcorp's Board of Directors has approved, and on August 13, 1996
Ralcorp entered into, an Agreement and Plan of Merger (as amended on October 25,
1996, the "Merger Agreement") among Ralcorp, Acquiror and General Mills
Missouri, Inc., a Missouri corporation ("Merger Sub"), pursuant to which this
Agreement and certain other related agreements will be executed to accomplish
the following transactions:
(i) Ralcorp will cause Foods to be merged with and into New Ralcorp, with
New Ralcorp as the surviving corporation of the merger (the "Internal
Merger").
(ii) Ralcorp will cause New Ralcorp to contribute, as a capital
contribution, the assets and liabilities specified or described
herein to the Branded Subsidiary.
(iii) Ralcorp will contribute, as a capital contribution, the assets and
liabilities specified or described herein to New Ralcorp.
(iv) New Ralcorp will distribute all of the issued and outstanding shares
of the capital stock of the Branded Subsidiary to Ralcorp (the
"Internal Spinoff").
(v) Ralcorp will distribute (the "Distribution") all of the issued and
outstanding shares of capital stock of New Ralcorp (the "Common
Stock") to the holders of Ralcorp's $.01 par value common stock (the
"Ralcorp Stock").
(vi) Acquiror will acquire Ralcorp (and the Branded Subsidiary) by virtue
of a merger of Merger Sub with and into Ralcorp pursuant to the
Merger Agreement.
WHEREAS, the transfer of assets and liabilities of the Branded Business to
the Branded Subsidiary, the Internal Merger and the Internal Spinoff, are
intended to qualify for non-recognition treatment under Sections 368(a)(1)(D)
and 355(a) of the Code;
WHEREAS, in order to effect the Distribution, the Ralcorp Board (as
hereinafter defined) has determined that it is necessary and desirable to
distribute the outstanding shares of Common Stock on a pro rata basis to the
holders of Ralcorp Stock;
WHEREAS, the Distribution is intended to qualify for non-recognition
treatment under Section 355 of the Code (as hereinafter defined);
WHEREAS, in preparation for the Distribution, Ralcorp and New Ralcorp have
prepared and filed with the SEC (as hereinafter defined), and the SEC has
declared effective, a Registration Statement on Form 10 ("Form 10") pursuant to
Section 12(b) of the Exchange Act with respect to the Common Stock and
associated Rights; and
B-1
<PAGE> 82
INDEX TO FINANCIAL INFORMATION*
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Consolidated Financial Statements:
Report of Independent Accountants................................................... F-1
Consolidated Statement of Earnings.................................................. F-2
Consolidated Balance Sheet.......................................................... F-3
Consolidated Statement of Cash Flows................................................ F-4
Consolidated Statement of Shareholders' Equity...................................... F-5
Notes to Consolidated Financial Statements.......................................... F-6
Quarterly Financial Information (Unaudited)......................................... F-21
</TABLE>
* For financial reporting purposes under the federal securities laws, New
Ralcorp is a "successor registrant" to Ralcorp. As a result, the historical
financial information of New Ralcorp is the historical financial information of
Ralcorp.
F-i
<PAGE> 83
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and
Board of Directors of
Ralcorp Holdings, Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of earnings, of shareholders' equity and of cash
flows present fairly, in all material respects, the financial position of
Ralcorp Holdings, Inc. and its subsidiaries at September 30, 1996 and 1995, and
the results of their operations and their cash flows for each of the three years
in the period ended September 30, 1996, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
St. Louis, Missouri
October 30, 1996
F-1
<PAGE> 84
RALCORP HOLDINGS, INC.
CONSOLIDATED STATEMENT OF EARNINGS
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30
1996 1995 1994
-------- -------- ------
<S> <C> <C> <C>
Net Sales......................................................... $1,027.4 $1,013.4 $987.0
Costs and Expenses
Cost of products sold........................................... 536.8 530.4 524.2
Selling, general and administrative............................. 177.6 164.9 148.3
Advertising and promotion....................................... 233.3 213.2 214.2
Interest........................................................ 26.8 28.2 12.3
Nonrecurring charges............................................ 109.5 21.9
Restructuring charge............................................ 16.5
Other (income)/expense, net..................................... -- -- 0.1
-------- ------ ------
1,100.5 958.6 899.1
-------- ------ ------
(Loss) Earnings before Income Taxes............................... (73.1) 54.8 87.9
Income Taxes...................................................... (26.3) 21.4 34.3
-------- ------ ------
Net (Loss) Earnings............................................... $ (46.8) $ 33.4 $ 53.6
======== ====== ======
(Loss) Earnings per Common Share--
(based on pro forma average shares for all periods prior to
April 1, 1994).................................................. $ (1.42) $ 1.00 $ 1.59
======== ====== ======
</TABLE>
The above financial statement should be read in conjunction
with the Notes to Consolidated Financial Statements.
F-2
<PAGE> 85
RALCORP HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------
1996 1995
------ ------
(IN MILLIONS
EXCEPT SHARE
DATA)
<S> <C> <C>
ASSETS
Current Assets
Cash......................................................................
Receivables, less allowance for doubtful accounts......................... $ 75.5 $ 86.3
Inventories............................................................... 103.3 110.1
Prepaid expenses.......................................................... 14.2 11.1
------ ------
Total Current Assets................................................... 193.0 207.5
Investments and Other Assets................................................ 88.1 91.6
Deferred Income Taxes....................................................... 23.4
Property at Cost
Land...................................................................... 27.9 22.9
Buildings................................................................. 112.6 134.1
Machinery and equipment................................................... 370.4 469.9
Construction in progress.................................................. 26.1 42.4
------ ------
537.0 669.3
Accumulated depreciation.................................................... 214.4 252.2
------ ------
322.6 417.1
------ ------
Total................................................................ $627.1 $716.2
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt...................................... $ 1.8 $ 1.8
Accounts payable and accrued liabilities.................................. 100.6 102.8
------ ------
Total Current Liabilities.............................................. 102.4 104.6
Long-Term Debt.............................................................. 376.6 395.4
Deferred Income Taxes....................................................... 20.2
Other Liabilities........................................................... 40.7 33.6
Commitments and Contingencies
Shareholders' Equity
Common stock -- $.01 par value, issued shares: 1996 and 1995 --
33,924,848............................................................. .3 .3
Capital in excess of par value............................................ 130.9 131.0
Retained (deficit) earnings............................................... (.2) 46.6
Common stock in treasury, at cost, 1,007,932 shares in 1996 and 658,522
shares in 1995......................................................... (22.7) (13.8)
Unearned portion of restricted stock...................................... (.9) (1.7)
------ ------
Total Shareholders' Equity............................................. 107.4 162.4
------ ------
Total................................................................ $627.1 $716.2
====== ======
</TABLE>
The above financial statement should be read in conjunction
with the Notes to Consolidated Financial Statements.
F-3
<PAGE> 86
RALCORP HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
SEPTEMBER 30,
--------------------------
1996 1995 1994
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Cash Flow from Operations
Net (loss) earnings............................................... $(46.8) $ 33.4 $ 53.6
Adjustments to reconcile earnings to net cash flow provided by
operations:
Depreciation and amortization.................................. 46.4 46.7 44.2
Nonrecurring charges........................................... 109.5 21.9
Restructuring charge, $16.5 less cash payments of $5.5......... 11.0
Deferred income taxes.......................................... (45.8) (8.4) (2.0)
Changes in assets and liabilities used in operations:
Decrease (increase) in accounts receivable................... 10.8 (8.6) (15.0)
Decrease (increase) in inventories........................... 6.9 (16.0) (4.1)
(Increase) decrease in other current assets.................. (.9) (1.0) 1.2
Decrease (increase) in long-term receivables................. 5.7 (4.2)
(Decrease) increase in accounts payable and accrued
liabilities................................................. (5.9) (.4) 19.5
(Decrease) increase in other current liabilities............. (.7)
Other, net................................................... 6.6 7.1 (2.5)
------ ------ ------
Net cash flow from operations.................................. 91.8 80.4 90.0
------ ------ ------
Cash Flow from Investing Activities
Acquisition....................................................... (39.2)
Additions to property and intangible assets....................... (66.7) (66.1) (38.2)
Proceeds from the sale of property................................ 6.0 4.3 19.2
Other, net........................................................ (3.7) (2.7) (.4)
------ ------ ------
Net cash used by investing activities.......................... (64.4) (64.5) (58.6)
------ ------ ------
Cash Flow from Financing Activities
Discontinued sale of trade receivables............................ (16.6)
Net repayments under credit agreement............................. (17.0) (2.2) (150.7)
Proceeds from long-term debt...................................... 150.0
Repayments of long-term debt, including current maturities........ (1.8) (.2) (.2)
Repurchase of common stock........................................ (8.6) (13.5) (2.0)
Net transactions with Ralston..................................... (12.7)
Other, net........................................................ .6
------ ------ ------
Net cash (used) provided by financing activities............... (27.4) (15.9) (31.6)
------ ------ ------
Net Decrease in Cash and Cash Equivalents........................... -- -- (.2)
Cash and Cash Equivalents, Beginning of Year........................ .2
------ ------ ------
Cash and Cash Equivalents, End of Year.............................. $ -- $ -- $ --
====== ====== ======
</TABLE>
The above financial statement should be read in conjunction
with the Notes to Consolidated Financial Statements.
F-4
<PAGE> 87
RALCORP HOLDINGS, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
FOR THE THREE YEARS ENDED SEPTEMBER 30, 1996
-------------------------------------------------------------------------------
COMMON STOCK
CAPITAL IN TREASURY, UNEARNED
RALSTON COMMON STOCK IN AT COST PORTION OF
EQUITY -------------- EXCESS OF --------------- RETAINED RESTRICTED
INVESTMENT SHARES AMOUNT PAR VALUE SHARES AMOUNT EARNINGS STOCK
---------- ------ ------ --------- ------ ------ -------- -----------
(DOLLARS IN MILLIONS, SHARES IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1993...... $ 474.4
Net earnings................... 40.4
Net transfer of
assets/liabilities from
Ralston..................... (372.1)
Net transactions with
Ralston..................... (12.7)
Stock distribution to holders
of RPG Stock................ (130.0) 33,878 $ .3 $ 129.8 $ (.1)
------- ------ --- ------ ---- ----- ----- ----
Balance, March 31, 1994.......... -- 33,878 .3 129.8 (.1)
Net earnings................... $ 13.2
Treasury stock purchased....... (126) $ (2.0)
Activity under stock plans..... 44 1.1 126 2.0 (3.1)
------- ------ --- ------ ---- ----- ----- ----
Balance, September 30, 1994...... -- 33,922 .3 130.9 -- -- 13.2 (3.2)
Net earnings................... 33.4
Treasury stock purchased....... (633) (13.5)
Activity under stock plans..... 3 .1 (26) (.3)
Amortization of restricted
stock....................... 1.5
------- ------ --- ------ ---- ----- ----- ----
Balance, September 30, 1995...... -- 33,925 .3 131.0 (659) (13.8) 46.6 (1.7)
------- ------ --- ------ ---- ----- ----- ----
Net earnings................... (46.8)
Treasury stock purchased....... (349) (8.6)
Activity under stock plans..... (.1) (.3)
Amortization of restricted
stock....................... .8
------- ------ --- ------ ---- ----- ----- ----
Balance, September 30, 1996...... $ -- 33,925 $ .3 $ 130.9 (1,008) $(22.7) $ (.2) $ (.9)
======= ====== === ====== ==== ===== ===== ====
</TABLE>
The above financial statement should be read in conjunction
with the Notes to Consolidated Financial Statements.
F-5
<PAGE> 88
RALCORP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
NOTE 1: GENERAL INFORMATION
Effective at the close of business on March 31, 1994 (the Distribution
Date) Ralcorp Holdings, Inc. (the Company) became an independent, publicly owned
company as a result of the distribution by Ralston Purina Company (Ralston) of
the Company's $.01 par value Common Stock (Ralcorp Stock) to holders of Ralston-
Ralston Purina Group $.10 par value Common Stock (RPG Stock), at a distribution
ratio of one for three (the Distribution). Prior to the Distribution, the
Company was formed as a wholly owned subsidiary of Ralston for the purpose of
effecting the Distribution. Included in this transaction was the transfer of
substantially all of the assets and liabilities related to the branded and
private label cereal business (excluding cereal products manufactured in Korea
and France), baby food business, branded and private label crackers and cookies
business, coupon redemption business and the ski operations business
(collectively, the Ralcorp Businesses), all of which were previously owned by
Ralston. Ralston did not retain any ownership interest in the Company.
For the purpose of governing certain of the relationships between Ralston
and the Company, as well as providing an orderly transition to the status of two
separate companies, Ralston and the Company entered into various agreements,
including the Agreement and Plan of Reorganization (the Reorganization
Agreement), Tax Sharing Agreement, Bridging Agreement, Trademark Agreement and
other agreements.
These agreements deal with many operational issues, including (a) the
separation of the Company from Ralston; (b) transitional services provided by
Ralston to the Company, which included certain administrative, data processing
and technical services and office facilities for use as the Company's
headquarters; (c) certain research and other services provided by the Company to
Ralston; (d) use of certain trademarks by the Company; and (e) the allocation of
certain tax and other liabilities among the Company and Ralston.
Charges for any services rendered between the Company and Ralston were
determined on an arms' length basis. As of September 30, 1995 most of these
arrangements had ended.
NOTE 2: BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION -- The financial statements as of, and for the years
ended September 30, 1996 and 1995 are presented on a consolidated basis. The
Statement of Earnings for the year ended September 30, 1994 includes the
combined results of operations of the Ralcorp Businesses under Ralston for the
six months prior to the Distribution Date and the consolidated results of
operations of the Company for the six month period ended September 30, 1994. All
significant intercompany transactions have been eliminated. The combined
financial statements include assets, liabilities, revenues and expenses that are
directly related to the Ralcorp Businesses.
These financial statements include the accounts of Ralcorp and its
majority-owned subsidiaries. All significant intercompany transactions are
eliminated. Investments in affiliated companies, 20% through 50%-owned, are
carried at equity.
CASH EQUIVALENTS for purposes of the Statement of Cash Flows are considered
to be all highly liquid investments with an original maturity of three months or
less.
FINANCIAL INSTRUMENTS -- The Company has a policy which allows the use of
various derivative financial instruments to manage the Company's financial risk
that exists as part of conducting business. Under the policy, the Company is not
permitted to engage in speculative or leveraged transactions that have the
potential for a disproportionate ratio between the change in value of the
liability being hedged and the expected change in value of the related
derivative instrument. The Company will not hold or issue financial instruments
for trading purposes. As of September 30, 1996, the Company had two interest
rate swap agreements outstanding, each with a notional principal amount of $50.
The differential to be paid or received, with regard to these swap agreements,
is accrued as interest rates change and is recognized over the life of the
agreements.
F-6
<PAGE> 89
RALCORP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
INVENTORIES are valued generally at the lower of average cost or market. In
connection with purchasing key raw ingredient materials, the Company follows a
policy of from time to time using commodities futures contracts to minimize the
risk associated with market price fluctuations. Such contracts are accounted for
as hedges, with related gains and losses ultimately included as part of the cost
of products sold. The effect of any realized or deferred gains or losses is
immaterial to the financial condition and results of operations of the Company.
PROPERTY AT COST -- Expenditures for new facilities and those which
substantially increase the useful lives of the property, including interest
during construction, are capitalized. Maintenance, repairs and minor renewals
are expensed as incurred. When properties are retired or otherwise disposed of,
the related cost and accumulated depreciation are removed from the accounts and
gains or losses on the disposition are reflected in earnings.
DEPRECIATION is generally provided on the straight-line basis by charges to
costs or expenses at rates based on the estimated useful lives of the
properties. Estimated useful lives range from 3 to 25 years for machinery and
equipment and 10 to 50 years for buildings.
INTANGIBLE ASSETS include the excess of cost over the net tangible assets
of acquired businesses and are amortized over estimated periods of related
benefit ranging from 4 to 40 years. The Company also defers systems development
costs when they reach technological feasibility. Amounts deferred are amortized
over estimated periods of related benefit not to exceed 5 years. Intangible
assets are included in Investments and Other Assets.
IMPAIRMENT -- The Company continually evaluates whether events or
circumstances have occurred which might impair the recoverability of the
carrying value of its long-lived assets, identifiable intangibles and goodwill.
PROPERTY HELD FOR DEVELOPMENT is recorded at cost and is included in
Investments and Other Assets.
INCOME TAXES -- In accordance with the Tax Sharing Agreement, the Company
is liable for federal, state and local tax liabilities for taxable periods
beginning after the Distribution Date. Accordingly, the Ralcorp Businesses were
included in the consolidated federal, state and local income tax returns filed
by Ralston for periods ending on or before the Distribution Date.
Income taxes have been provided in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (FAS 109). FAS 109
requires the liability method of income tax accounting, accordingly, a deferred
tax liability or asset is recognized for the effect of temporary differences
between financial and tax reporting.
EARNINGS PER SHARE -- The computation of earnings per common share for the
years ended September 30, 1996 and 1995 are based on the weighted average number
of shares of Ralcorp Stock outstanding for the years then ended. Earnings per
common share for the year ended September 30, 1994 is computed using a
combination of the average number of RPG Stock shares outstanding for the six
months ended March 31, 1994, adjusted for the 1 for 3 distribution ratio, and
the weighted average number of Ralcorp shares outstanding for the six months
ended September 30, 1994.
ADVERTISING COSTS are expensed in the year in which the costs are incurred.
ESTIMATES -- The preparation of financial statements in conformity with
Generally Accepted Accounting Principles requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses and the disclosure of contingent assets and liabilities.
Actual results could differ from those estimates.
F-7
<PAGE> 90
RALCORP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
RECLASSIFICATIONS -- Certain reclassifications of the prior year's amounts
have been made to conform with the current year presentation.
NOTE 3: BUSINESS SEGMENT INFORMATION
The Business Segment Information section is an integral part of these
financial statements. The related discussion of the Business Segments financial
condition and results of operations is incorporated from "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
NOTE 4: NONRECURRING CHARGES
In September 1996, the Company recorded a $109.5 pre-tax impairment charge
related to its private label ready-to-eat cereal and consumer hot cereal
operations. Recent and dramatic changes in the pricing and promotion environment
of the ready-to-eat cereal category and the effect these changes have had and
will continue to have on the Company's private label cereal business, caused the
Company to record this charge. The charge was determined under the provisions of
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
(FAS 121) which was issued by the Financial Accounting Standards Board in March
1995. FAS 121 established accounting standards for recognizing the impairment of
long-lived assets, identifiable intangibles and goodwill, whether to be disposed
of or to be held and used. In general, FAS 121 requires recognition of an
impairment loss when the sum of undiscounted expected future cash flows is less
than the carrying amount of such assets. Ultimately, it was determined that the
projection of future cash flows generated by the private label cereal operations
would not be sufficient to recover the carrying value of assets associated with
such operations. The amount of the September 1996 impairment loss was recognized
by the Company as a write-down of fixed assets to fair value.
In September 1995, the Company decided to exit the industrial oats business
and close oats milling operations at its Cedar Rapids, Iowa facility. This
decision did not affect the Company's branded and private label consumer hot
cereal business which will continue to operate at the Cedar Rapids location. The
consumer and industrial oats businesses were acquired in November 1993 as part
of the acquisition of the National Oats Company from Curtice Burns Foods, Inc.
The decision to exit the industrial business and close milling operations
was reached due to excess industry capacity which depressed selling prices
despite significantly higher raw ingredient costs. In addition, the location of
the milling operations placed the Company at a competitive disadvantage due to
higher freight costs. As a result, the Company recorded, in fiscal 1995, a
nonrecurring pre-tax charge of $10.1 to cover the costs of exit, consisting
primarily of the write-down of the carrying value of related fixed assets, or
$9.8, to fair value less related disposition costs. The fiscal 1995 operating
loss, for the operations affected by the exit decision, was approximately $3.7.
In addition to the exit-related charge, the Company also recorded a
non-recurring pre-tax charge of $11.8 in fiscal 1995 representing the impairment
of the remaining fixed and intangible assets related to the consumer hot cereal
business. (A portion of the fiscal 1996 impairment charge also pertained to
these assets). The entry of a significant new competitor into the private label
hot cereal category adversely affected the price structure of the category and
precipitated the impairment charge. Like the fiscal 1996 charge, this charge and
the previously mentioned exit charge, were determined under the provisions FAS
121. The amount of the September 1995 impairment loss was recognized by the
Company as a write-down of goodwill and fixed assets to fair value.
F-8
<PAGE> 91
RALCORP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
With regard to all the above referenced charges, fair value was determined
as the present value of estimated expected future cash flows using a discount
rate commensurate with the risks involved.
NOTE 5: RESTRUCTURING CHARGE
For the year ended September 30, 1996, the Company recorded a pre-tax
charge of $16.5 ($10.4 after taxes or $.31 per common share) to recognize the
costs related to the restructuring of its ready-to-eat cereal subsidiary,
Ralston Foods. As a result of this restructuring plan, approximately 100
positions have been eliminated from the Ralston Foods subsidiary and corporate
support groups, primarily at the Company's headquarters in St. Louis. In
addition, the restructuring plan includes the partial closing of the Ralston
Foods production facility in Battle Creek, MI, thereby reducing excess
production capacity in the Ralston Foods system and eliminating approximately
190 jobs from the production and administrative staffs at that facility.
The components of the restructuring charge and utilization to date were as
follows:
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30, 1996
-------------------
AMOUNTS AMOUNT
CHARGED UTILIZED BALANCE
------- -------- -------
<S> <C> <C> <C>
Salaries, severance and benefits.................................... $ 8.0 $ 5.0 $ 3.0
Fixed asset writedowns.............................................. 7.3 7.3 --
Other............................................................... 1.2 .5 .7
----- ----- ----
Total.......................................................... $16.5 $ 12.8 $ 3.7
===== ===== ====
</TABLE>
NOTE 6: TRANSACTIONS WITH RALSTON
The Company and Ralston entered into a Bridging Agreement under which
Ralston will continue to provide certain administrative, data processing and
technical services and office facilities for the Company's headquarters. As of
September 30, 1995 most of these arrangements had ended. Prior to the
Distribution Date the expenses related to these services were allocated to the
Company based on utilization or other methods deemed reasonable by management.
These allocations were $18.1 and $37.8 for the six months ended March 31, 1994,
and year ended September 30, 1993, respectively. Actual expenses paid by the
Company to Ralston for such services had declined to $1.7 for the year ended
September 30, 1996 from $19.2 for the year ended September 30, 1995 and $10.3
for the six months ended September 30, 1994.
In addition, the Company sells certain goods for resale outside the United
States to Ralston. These transactions were at negotiated prices. Included in the
Statement of Earnings are sales to Ralston of $17.7 for the year ended September
30, 1994.
The Company also provides certain coupon and promotional materials
processing services to Ralston. Terms and conditions for such services are
similar to those negotiated by unrelated parties at arm's length, and the
Company's charges to Ralston for these services were $7.7 for the year ended
September 30, 1994.
NOTE 7: ACQUISITIONS
In November 1993, the Company purchased the oats processing and packaging
and cereal making operations of the National Oats Company division of Curtice
Burns Foods, Inc., along with certain related manufacturing assets for $39.2.
This acquisition was accounted for using the purchase method of accounting,
and accordingly, the results of operations are included in the Consolidated
Statement of Earnings from the date of acquisition.
F-9
<PAGE> 92
RALCORP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
NOTE 8: INCOME TAXES
The provisions for income taxes consisted of the following:
<TABLE>
<CAPTION>
1996 1995 1994
------ ----- -----
<S> <C> <C> <C>
Current:
United States....................................................... $ 17.9 $26.2 $27.0
State............................................................... 1.6 3.6 4.1
------ ----- -----
Total current.................................................. 19.5 29.8 31.1
------ ----- -----
Deferred:
United States....................................................... (42.1) (7.9) 3.1
State............................................................... (3.7) (.5) .1
------ ----- -----
Total deferred................................................. (45.8) (8.4) 3.2
------ ----- -----
Income taxes before cumulative effect of accounting changes........... $(26.3) $21.4 $34.3
====== ===== =====
</TABLE>
Income taxes were 36.0%, 39.1% and 39.0% of pre-tax earnings in 1996, 1995
and 1994, respectively. A reconciliation of income taxes with the amounts
computed at the statutory federal rate follows:
<TABLE>
<CAPTION>
1996 1995 1994
------ ----- -----
<S> <C> <C> <C>
Computed tax at federal statutory rate (35.0% for all years).......... $(25.6) $19.2 $30.8
State income taxes, net of federal tax benefit........................ (2.3) 2.0 2.7
Other, net............................................................ 1.6 .2 .8
------ ----- -----
$(26.3) $21.4 $34.3
====== ===== =====
</TABLE>
The deferred tax assets and deferred tax liabilities as set forth on the
consolidated balance sheet at September 30, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
DEFERRED TAX DEFERRED TAX
ASSETS LIABILITIES
-------------- --------------
1996 1995 1996 1995
----- ----- ----- -----
<S> <C> <C> <C> <C>
Current:
Accrued liabilities........................................... $ 5.4 $ 4.4
Inventories................................................... 3.0 1.9
Other items................................................... .4 .3
----- -----
Total current............................................ 8.8 6.6
----- -----
Noncurrent:
Property basis differences.................................... 4.0 $35.4
Postretirement benefits....................................... 5.9 5.5
Intangible assets............................................. 7.0 3.9
Workers' compensation......................................... 3.0 2.1
Deferred compensation......................................... 1.7 2.4
Other items................................................... 1.8 2.3
----- ----- ----- -----
Total noncurrent......................................... 23.4 15.2 35.4
----- ----- ----- -----
Total deferred taxes............................................ $32.2 $21.8 -- $35.4
===== ===== ===== =====
</TABLE>
The significant change in property basis differences and intangible assets
from September 30, 1995 to September 30, 1996 is directly attributable to the
asset writedowns taken in conjunction with the impairment
F-10
<PAGE> 93
RALCORP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
of certain operating assets. See the "Nonrecurring Charges" footnote, found
elsewhere in these Notes to Consolidated Financial Statements, for further
information and details.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The Company believes it
is probable that the net deferred tax assets, reflected above, will be realized
on future tax returns, primarily from the generation of future taxable income.
Total income tax payments made by the Company were $25.9 and $29.7 for the
years ended September 30, 1996 and 1995, respectively. Tax payments due on
income earned prior to the Distribution Date are the responsibility of Ralston.
NOTE 9: PENSION PLAN
The Company sponsors a noncontributory defined benefit pension plan which
covers substantially all regular employees in the United States. The plan
provides retirement benefits based on years of service and final-average or
career-average earnings. It is the Company's practice to fund pension
liabilities in accordance with the minimum and maximum limits imposed by the
Employee Retirement Income Security Act of 1974 (ERISA) and federal income tax
laws. Plan assets consist primarily of investments in commingled employee
benefit trusts consisting of marketable equity securities, corporate and
government debt securities and real estate.
Prior to the spin-off, the Company participated in Ralston's defined
benefit pension plans and certain jointly-administered multi-employer defined
benefit plans and recorded pension costs as allocated by Ralston. The amount of
such costs were $2.1 for the six months ended March 31, 1994, which includes the
Company's expenses related to the multi-employer plans. The components of net
pension costs for the periods subsequent to the spin-off include the following:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED SIX MONTHS ENDED
SEPT. 30, 1996 SEPT. 30, 1995 SEPT. 30, 1994
-------------- -------------- ----------------
<S> <C> <C> <C>
DEFINED BENEFIT PLAN
Service cost (benefits earned during the period).... $ 4.3 $ 4.0 $ 1.9
Interest cost on projected benefit obligation....... 5.6 4.8 2.4
Return on plan assets............................... (10.7) (8.3) (2.9)
Net amortization and deferral....................... 4.8 3.1 .4
------ ----- -----
Total.......................................... $ 4.0 $ 3.6 $ 1.8
====== ===== =====
</TABLE>
F-11
<PAGE> 94
RALCORP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
The following table presents the funded status of the Company's defined
benefit plan and amounts recognized in the balance sheet at September 30, 1996
and 1995:
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Actuarial present value of:
Vested benefits........................................................... $(54.6) $(48.1)
Nonvested benefits........................................................ (7.5) (6.4)
------ ------
Accumulated benefit obligation............................................ (62.1) (54.5)
Effect of projected future salary increases............................... (17.3) (18.1)
------ ------
Projected benefit obligation.............................................. (79.4) (72.6)
Plan assets at fair value................................................... 86.3 77.5
------ ------
Plan assets in excess of projected benefit obligation....................... 6.9 4.9
Unrecognized net gain....................................................... (16.7) (12.7)
Unrecognized prior service cost............................................. 3.9 5.0
Unrecognized net asset at transition........................................ (.6) (.6)
------ ------
Accrued pension costs included in Consolidated Balance Sheet................ $ (6.5) $ (3.4)
====== ======
</TABLE>
As a result of the elimination of a significant number of jobs through the
restructuring initiatives taken in the third quarter of fiscal 1996, see the
"Restructuring Charge" footnote, the Company recognized a curtailment gain of
$.7 to the pension plan.
The key actuarial assumptions used in determining net pension costs and the
projected benefit obligation were as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C> <C> <C>
Discount rate.................................................................. 7 5/8% 7 5/8%
Rate of future compensation increases.......................................... 5 1/4% 5 1/4%
Long-term rate of return on plan assets........................................ 9 1/2% 9 1/2%
</TABLE>
In addition, the Company sponsors a defined contribution plan covering a
substantial majority of its employees under which the Company makes matching
contributions of up to 100% of employee contributions depending on years of
service. The Company matching contribution is capped at a certain percentage of
employee earnings. Prior to the spin-off, most employees of the Company
participated in Ralston's defined contribution plan which provided benefits on
the same basis. The cost of the Company's defined contribution plan for the
years ended September 30, 1996 and 1995 and six months ended September 30, 1994
were $5.2, $5.7 and $3.0, respectively. The costs allocated to the Company
related to its participation in Ralston's defined contribution plan prior to the
spin-off totaled $3.1 for the six months ended March 31, 1994.
NOTE 10: POSTRETIREMENT BENEFITS OTHER THAN PENSIONS AND POSTEMPLOYMENT BENEFITS
The Company provides health care and life insurance benefits for certain
groups of retired employees who meet specified age and years of service
requirements. The Company is, however, phasing out its subsidy of medical
benefits for a substantial majority of its future retirees. Retiree
contributions are adjusted periodically in order to share increases in the costs
of providing medical benefits.
Prior to the spin-off, Ralston allocated the cost of these benefits to the
Company. The costs of retiree health and life insurance benefits allocated to
the Company by Ralston prior to the spin-off were $.7 for the six months ended
March 31, 1994.
F-12
<PAGE> 95
RALCORP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
The net periodic cost of postretirement benefits for the period subsequent
to the spin-off includes the following components:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED SIX MONTHS ENDED
SEPT. 30, 1996 SEPT. 30, 1995 SEPT. 30, 1994
-------------- -------------- ----------------
<S> <C> <C> <C>
Service cost........................................ $ .3 $ .3 $ .2
Interest cost....................................... 1.0 .9 .5
Amortization of unrecognized prior service cost..... .1 (.1)
---- ------ ------
Net periodic postretirement benefit costs........... $1.4 $ 1.1 $ .7
==== ====== ======
</TABLE>
The following table sets forth the status of the Company's postretirement
benefit plans at September 30, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
-------------- ----------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees...................................................... $ 3.4 $ 2.1
Fully eligible active plan participants....................... 6.5 6.8
Other active plan participants................................ 4.4 4.6
------ ------
Total accumulated postretirement benefit obligation............. 14.3 13.5
Unrecognized net gain........................................... 1.8 1.8
Unrecognized prior service cost................................. (.7) (.8)
------ ------
Accrued postretirement benefit costs included in Consolidated
Balance Sheet................................................. $ 15.4 $ 14.5
====== ======
</TABLE>
As a result of the elimination of a significant number of jobs through the
restructuring initiatives taken in the third quarter of fiscal 1996, see the
"Restructuring Charge" footnote, the Company recognized a curtailment gain of
$.2 to the postretirement medical and life insurance plan.
Actuarial assumptions used to determine the accumulated postretirement
benefit obligation include a discount rate of 7 5/8% in 1996 and 1995. In 1996
and 1995, the annual increase in per capita costs of covered health care
benefits is assumed to be 6% for all years. If the health care trend rates were
increased one percentage point, the current year postretirement benefit costs
would have increased $.2 and the accumulated postretirement benefit obligation
as of September 30, 1996 would have increased $2.1.
In 1995, the Company adopted Statement of Financial Accounting Standards
No. 112 (FAS 112), "Employers' Accounting for Postemployment Benefits." FAS 112
requires recognition of benefits provided by an employer to former or inactive
employees after employment but prior to such employees' retirement. The effect
of the adoption of this standard did not have a material impact on the Company's
financial position or results of operations.
NOTE 11: LONG TERM DEBT
The Company has available certain borrowings under credit agreements with a
number of banks (Bank Credit Agreements). Provisions of the Bank Credit
Agreements require that the Company maintain certain financial ratios and a
minimum level of shareholders' equity. There was $300.0 available under the Bank
Credit Agreements at September 30, 1995 and through an amendment, in March 1996,
the funds available under the Bank Credit Agreements were reduced to $275.0. The
March 1996 amendment also revised the Bank Credit Agreements maturity date to
March 12, 2001.
F-13
<PAGE> 96
RALCORP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
At September 30, 1996 and 1995, long-term debt associated with the
Company's businesses consisted of the following:
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
8.75% Notes due 2004......................................... $150.0 $150.0
Bank Credit Agreements....................................... 200.1 217.1
10.85% and 11.15% Notes due 9/30/97 and 9/30/98.............. 3.0 4.5
Refunding Revenue Bonds Series 90
7.20%-7.875% due 9/2/98, 9/1/06 and 9/1/08................. 20.4 20.4
Refunding Revenue Bonds Series 91
7.125% and 7.375% due 9/1/02 and 9/1/10.................... 3.0 3.0
Other........................................................ 1.9 2.2
------ ------
378.4 397.2
Less Current Portion......................................... (1.8) (1.8)
------ ------
$376.6 $395.4
====== ======
</TABLE>
Included in the Bank Credit Agreements line item, at September 30, 1996, is
$140.0 of bank debt that has been borrowed directly by the Company's Resort
Operations and is fully guaranteed by the Company. Also included in the Bank
Credit Agreements line item are short term notes which have maturities ranging
from one day to one month and have been classified as long term debt based on
the Company's intent and ability to renew the obligations on a long-term basis.
Scheduled aggregate maturities on all long-term debt outstanding as of
September 30, 1996 are $3.2, $.3, $.3 and $200.5 for the years ending September
30, 1998 through 2001. These aggregate maturities include outstanding
commitments at September 30, 1996 under the Bank Credit Agreements, which expire
on March 12, 2001. The Company is subject to the payment of commitment fees
based on a fraction of a percentage on the unused portion of the revolving
credit facility included in the Bank Credit Agreements.
NOTE 12: FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Fair Values
The Company's financial instruments primarily include certain short-term
instruments and short and long-term debt. As of September 30, 1996 and 1995, the
fair value of long-term debt, including current maturities, was $391.6 and
$414.2, respectively, compared to the carrying value of $378.4 and $397.2,
respectively. The fair value of the Company's long-term debt has been estimated
using primarily quoted market prices obtained through independent pricing
sources for the same or similar types of borrowing arrangements, taking into
consideration the underlying terms of the debt, such as the coupon rate, term to
maturity, tax impact to investors and imbedded call options, if any.
Due to their nature, the carrying amounts of short-term financial
instruments, such as receivables and accounts payable, reported on the
Consolidated Balance Sheet approximate fair value.
Interest Rate Swap Agreements
In November 1995, in order to hedge its exposure to interest rate
fluctuations on $100 of existing floating rate borrowings under the bank credit
agreements, the Company entered into two interest rate swap transactions.
Notional amounts under both transactions are $50 and have terms that expire in
November 1997 and November 1998. Through these interest rate swaps, the Company
pays interest based on fixed rates of 5.575 percent, for the swap expiring in
November 1997, and 5.682 percent, for the swap expiring November
F-14
<PAGE> 97
RALCORP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
1998, while receiving a LIBOR-based floating rate. The Company is exposed to
credit loss in the event of nonperformance by the other parties to the interest
rate swap agreements. However, management does not anticipate such
nonperformance. The impact of these interest rate swaps on fiscal 1996 interest
expense was immaterial to the Company's results of operations.
At September 30, 1996, the fair value of the outstanding interest rate
swaps was approximately $.7 of income. This fair value is the estimated amount
the Company would receive to unwind the interest rate swap agreements, taking
into account current interest rates and the credit risk of the counterparties.
Concentration of Credit Risk
The Company's primary concentration of credit risk is related to certain
trade accounts receivable due from several highly leveraged or "at risk"
customers. At September 30, 1996 and 1995 the amount of such receivables was
$3.1 and $4.0, respectively. Consideration was given to the financial position
of these customers when determining the appropriate allowance for doubtful
accounts.
NOTE 13: SHAREHOLDERS' EQUITY
The Company's Restated Articles of Incorporation authorize the issuance of
up to 300,000,000 shares of Common Stock, par value $.01, and 10,000,000 shares
of Preferred Stock, par value $.01. As of September 30, 1995, the Company had
approximately 33,266,000 shares of Common Stock issued and outstanding. The
Company has not issued any shares of Preferred Stock. The terms of any series of
Preferred Stock (including but not limited to the dividend rate, voting rights,
convertibility into other Company securities and redemption) may be set by the
Company's Board of Directors.
On March 24, 1994 the Ralston Board of Directors declared a dividend
distribution of one share purchase right (Right) for each outstanding share of
the Company's Common Stock. Each Right entitles a shareholder to purchase from
the Company one common share at an exercise price of $75 per share subject to
antidilution adjustments. The Rights, however, become exercisable only at the
time a person or group acquires or commences a public tender offer for 20% or
more of the Company's Common Stock. If an acquiring person or group acquires 20%
or more of the Company's Common Stock, the price will be further adjusted so
that holders of Rights (other than the acquiring person or group) may purchase
Common Stock at one-third of its then market price. In the event that the
Company merges with, or transfers 50% or more of its assets or earning power to,
any person or group after the Rights become exercisable, holders of the Rights
may purchase, at the exercise price, Common Stock of the acquiring entity having
a value equal to twice the exercise price. The Rights can be redeemed by the
Board of Directors at $.05 per Right only up to the date a person or group
acquires 20% or more of the Company's Common Stock. Also, following the
acquisition by a person or group of beneficial ownership of at least 20% but
less than 50% of the Company's Common Stock, the Board may exchange the Rights
for Common Stock at a ratio of one share of Common Stock per Right. The Rights
expire on March 31, 2004.
On May 25, 1995, the Company's Board of Directors authorized the repurchase
of up to one million shares of the Company's Common Stock. This authorization
allows the Company's management to make purchases from time to time at
prevailing market prices. The previous year's Board-approved repurchase
authorization of $15.0 worth of the Company's Common Stock was completed during
the current fiscal year. For the year ended September 30, 1996, the Company
repurchased approximately 349,000 shares for $8.6, for the year ended September
30, 1995, the Company repurchased approximately 633,000 shares for $13.5 and for
the six month period ended September 30, 1994 the Company repurchased
approximately 126,000 shares for $2.0, pursuant to such authorizations.
F-15
<PAGE> 98
RALCORP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
On September 23, 1994, the Company's Board of Directors approved the grant
of 170,000 shares of Common Stock for restricted stock awards. All of the
previously repurchased treasury shares during the six months ended September 30,
1994, along with approximately 44,000 new shares, were issued under the
restricted stock award.
At September 30, 1996, there were 2,665,304 shares of Company Common Stock
reserved under various employee incentive compensation and benefit plans.
NOTE 14: INCENTIVE COMPENSATION
The Company's Incentive Stock Plan (Plan), adopted in March 1994, reserves
shares which will be used for various stock based compensation awards. The Plan
provides that eligible employees may receive stock option awards and other stock
awards payable in whole or part by the issuance of stock. During 1995, the
Company issued performance-based stock option awards at an option price equal to
the fair market value of the shares at grant date. These awards would vest and
become exercisable only upon achievement of certain share price growth targets.
Compensation expense was recognized throughout the first six months of fiscal
1996 for these awards based on the difference between the share price at grant
date and the share price when the required growth targets are achieved. The
recognition of compensation expense was discontinued, however, upon the
determination that the share price growth targets would not be met. At spin-off,
stock option awards relating to shares of RPG Stock held by employees of the
Company were replaced with awards based on the Company's Common Stock according
to a formula which maintained the then current relationship between the option
price and the market value of the shares. During 1994, subsequent to the spin-
off, additional stock option awards were issued at an option price equal to the
fair market value of the shares at grant date and, accordingly, no charge
against earnings was made. Proceeds from the exercise of stock options are
credited to the appropriate capital accounts.
Changes in incentive and nonqualified stock options outstanding are
summarized as follows:
<TABLE>
<CAPTION>
SHARES UNDER OPTION
-------------------
<S> <C>
Outstanding at September 30, 1994 ($13.23 to $26.14 per share)............. 994,842
Granted ($23.63 per share)................................................. 318,800
Exercised ($13.23 per share)............................................... (3,576)
Canceled................................................................... (7,439)
---------
Outstanding at September 30, 1995 ($13.23 to $26.14 per share)............. 1,302,627
---------
Granted.................................................................... --
Exercised ($13.23 to $24.08 per share)..................................... (13,555)
Canceled................................................................... (63,191)
---------
Outstanding at September 30, 1996 ($13.23 to $26.14 per share)............. 1,225,881
=========
Shares exercisable at:
September 30, 1995....................................................... 175,815
---------
September 30, 1996....................................................... 245,019
---------
</TABLE>
At September 30, 1996 and 1995 there were 1,386,803 and 1,381,081 shares,
respectively, available for future awards. In addition, at September 30, 1996
and 1995, 98,122 and 140,482 shares, respectively, of restricted stock awards
were outstanding. Restrictions on shares of restricted stock issued to eligible
employees lapse over periods ranging up to 36 months provided continued
employment and, in certain cases, minimum stock price requirements are met.
Compensation cost is recognized over this vesting period.
F-16
<PAGE> 99
RALCORP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
The Ralcorp Board has determined that immediately prior to the
Distribution, the value of stock options in Ralcorp Common Stock held by
employees will be paid to the recipient in cash. Stock options that have an
exercise price higher than the current price of Ralcorp Common Stock will be
valued at $0.50 per share. The Company estimates that total payments related to
the cash settlement of stock options will be $4.7, which will be recognized as
additional compensation expense in fiscal 1997.
NOTE 15: COMMITMENTS AND CONTINGENCIES
The Company is a party to a number of legal proceedings in various state
and federal jurisdictions. These proceedings are in varying stages and many may
proceed for protracted periods of time. Some proceedings involve highly complex
questions of fact and law.
On January 4, 1993, Ralston was served with the first of nine substantively
identical actions currently pending in the United States District Court for the
District of New Jersey. The suits have been consolidated and styled In Re Baby
Food Antitrust Litigation, No. 92-5495 (NHP). The consolidated proceeding is a
certified class action by and on behalf of all direct purchasers of baby foods
(other than the defendants and governmental entities), alleging that the
Beech-Nut baby food business (and its predecessor Nestle Holdings, Inc.)
together with Gerber Products Company and H. J. Heinz Company, conspired to fix,
maintain and stabilize the prices of baby foods during the period January 1,
1975 to August 31, 1992, and seeking treble damages.
On January 19 and 21, 1993, Ralston was served with two class actions on
behalf of indirect purchasers (consumers) of baby food in California, which
contain substantially identical charges. These actions have been consolidated in
the Superior Court for the County of San Francisco and styled Bruce, et al. v.
Gerber Products Company, et al., No. 94-8857. On January 19, 1993, Ralston was
served with a similar action filed in Alabama state court on behalf of indirect
purchasers of baby food in Alabama, styled Johnson, et al. v. Gerber Products
Company, et al., No. 93-L-0333-NE. Both state actions allege violations of state
antitrust laws and are substantively identical to each other. Similar state
actions may be filed in states having laws permitting suits by indirect
purchasers. Ralston and the Company have agreed in the Reorganization Agreement
that all expenses related to the above antitrust matters will be shared equally,
but that Ralcorp's liability for any settlement or judgment will not exceed $5
million. Expenses and liability with respect to certain other lawsuits which are
not believed by the Company to be material, either individually or in the
aggregate, will also be shared pursuant to the Reorganization Agreement.
The operations of the Company, like those of similar businesses, are
subject to various federal, state, and local laws and regulations intended to
protect public health and the environment, including air and water quality and
waste handling and disposal. Certain Company businesses have received notices
from the U.S. Environmental Protection Agency, state agencies, and /or private
parties seeking contribution, that they have been identified as a "potentially
responsible party" (PRP) under the Comprehensive Environmental Response,
Compensation and Liability Act, and the Company may be required to share in the
cost of cleanup with respect to three waste disposal sites. The Company's
ultimate liability in connection with environmental matters may depend on many
factors including, but not limited to, the volume of material contributed to a
site, the existence of other parties responsible for remediation and their
financial viability, reports of experts (internal or external), and the
remediation methods and technology to be used.
Except as noted, many of the foregoing matters are in preliminary stages,
involve complex issues of law and fact and may proceed for protracted periods of
time. The amount of alleged liability, if any, from these proceedings cannot be
determined with certainty; however, in the opinion of Company management, based
upon the information presently known as well as upon the limitation of its
liabilities set forth in the Reorganization Agreement, the ultimate liability of
the Company, if any, arising from the pending legal proceedings, as well as from
asserted legal claims and known potential legal clams which are probable of
F-17
<PAGE> 100
RALCORP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
assertion, taking into account established accruals for estimated liabilities,
should not be material to the Company's consolidated financial position or
results of operations. In addition, while it is difficult to quantify with
certainty the potential financial impact of actions regarding expenditures for
environmental matters, in the opinion of management, based upon the information
currently available, the ultimate liability arising from such environmental
matters should not be material to the Company's consolidated financial position
or results of operations.
LEASE COMMITMENTS
Future minimum rental commitments under noncancelable operating leases in
effect as of September 30, 1996 were: 1997 - $3.8, 1998 - $3.5, 1999 - $3.1,
2000 - $2.3, 2001 - $1.0, thereafter - $0.8.
Total rental expense for all operating leases was $5.3 in 1996, $4.1 in
1995 and $4.2 in 1994.
NOTE 16: SUPPLEMENTAL EARNINGS STATEMENT INFORMATION
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Maintenance and repairs................................................ $32.5 $29.7 $29.3
Research and development............................................... 6.5 7.4 6.7
</TABLE>
NOTE 17: SUPPLEMENTAL CASH FLOW STATEMENT INFORMATION
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Interest paid.......................................................... $27.6 $27.9 $11.3
Income taxes paid...................................................... 25.9 29.7 38.5
</TABLE>
Interest paid by the Company during the six month period ended September
30, 1994 was $10.2. Interest payments for the six month period ended March 31,
1994 and prior years were the responsibility of Ralston. Total income tax
payments made by the Company after the Distribution Date were $14.5. Tax
payments due on income earned prior to the Distribution Date are the
responsibility of Ralston.
F-18
<PAGE> 101
RALCORP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
NOTE 18: SUPPLEMENTAL BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Receivables (current) --
Trade..................................................................... $ 63.3 $ 77.9
Income taxes.............................................................. 6.6 4.4
Other..................................................................... 6.6 4.8
Allowance for doubtful accounts........................................... (1.0) (.8)
------ ------
$ 75.5 $ 86.3
====== ======
Inventories --
Raw materials and supplies................................................ $ 26.5 $ 33.4
Finished products......................................................... 76.8 76.7
------ ------
$103.3 $110.1
====== ======
Prepaid Expenses --
Deferred income tax benefits.............................................. $ 8.8 $ 6.6
Prepaid expenses.......................................................... 5.4 4.5
------ ------
$ 14.2 $ 11.1
====== ======
Investments and Other Assets --
Intangible assets (net of accumulated amortization:
1996 -- $10.4 and 1995 -- $7.5(a))..................................... $ 43.2 $ 45.3
Property held for development............................................. 12.4 17.3
Investments in affiliated companies....................................... 29.1 25.3
Deferred charges and other assets......................................... 3.4 3.7
------ ------
$ 88.1 $ 91.6
====== ======
Accounts Payable and Accrued Liabilities --
Trade accounts payable.................................................... $ 54.7 $ 66.1
Incentive compensation, salaries and vacations............................ 7.0 6.6
Property taxes............................................................ 5.3 4.6
Shutdown reserves......................................................... 7.6 5.8
Advertising............................................................... 9.6 6.4
Other items............................................................... 16.4 13.3
------ ------
$100.6 $102.8
====== ======
</TABLE>
- -------------------------
(a) Excludes $.8 of amortization related to National Oats goodwill, all of which
was eliminated through the September 1995 nonrecurring charges.
NOTE 19: ANALYSIS OF BALANCE SHEET CHANGES
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Allowance for Doubtful Accounts --
Balance, beginning of year.................................... $ .8 $ .7 $ .9
Provision charged to expense.................................. .8 .4 .3
Writeoffs, less recoveries.................................... (.6) (.3) (.5)*
---- ---- ----
Balance, end of year............................................ $1.0 $ .8 $ .7
==== ==== ====
</TABLE>
- -------------------------
* Includes $.4 adjustment to beginning allocated balance, actual writeoffs were
$.1.
F-19
<PAGE> 102
RALCORP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Property at Cost --
Balance, beginning of year....................... $669.3 $634.9 $590.5
Additions........................................ 60.2 59.3 62.0(d,e)
Acquisitions(f).................................. 22.4
Disposals........................................ (192.5)(a) (24.9)(c) (40.0)(g)
------ ------ ------
Balance, end of year............................... $537.0 $669.3 $634.9
====== ====== ======
Accumulated Depreciation --
Balance, beginning of year....................... $252.2 $218.7 $177.9
Depreciation provision........................... 43.5 44.1 60.6(d,e)
Disposals........................................ (81.3)(b) (10.6)(c) (19.8)(g)
------ ------ ------
Balance, end of year............................... $214.4 $252.2 $218.7
====== ====== ======
</TABLE>
- -------------------------
(a) Includes the impairment of assets related to the private label ready-to-eat
cereal and consumer hot cereal operations (decrease of $178.6).
(b) Includes the impairment of assets related to the private label ready-to-eat
cereal and consumer hot cereal operations (decrease of $78.0). Also,
includes asset writedown related to the third quarter fiscal 1996
restructuring charge, which increased accumulated depreciation $5.8.
(c) Includes write-down of fixed assets related to exit of industrial oats and
oats milling operations and impairment of the consumer hot cereal business
(decreases of $13.1 in property and $3.1 in accumulated depreciation).
(d) Includes valuation adjustment related to Keystone Resort ($13.9 addition to
property and accumulated depreciation).
(e) Includes asset transfers from Ralston at spin-off of $9.9, and related
accumulated depreciation of $5.0.
(f) Includes acquisition of National Oats in 1994.
(g) Represents net book value of property disposals. Actual proceeds from the
sale of the related property were $19.2.
F-20
<PAGE> 103
RALCORP HOLDINGS, INC.
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
The results of any single quarter are not necessarily indicative of the
Company's results for the full year. Net earnings of the Company are highly
seasonal, primarily due to resort operations which earn more than the entire
year's operating profit during the second fiscal quarter. Cereal operations are
also affected by seasonal CHEX party mix promotions which increase sales volume
during the first fiscal quarter of the year.
<TABLE>
<CAPTION>
FISCAL 1996 FIRST SECOND THIRD FOURTH
- ---------------------------------------------- ------ ------ -------- -------
<S> <C> <C> <C> <C>
Net sales..................................... $295.3 $277.4 $ 230.1 $ 224.6
Gross profit.................................. 153.0 138.0 103.5 96.1
Net earnings (loss)........................... 14.7 21.2 (16.3)(a) (66.4)(b)(c)
Net earnings per common share(e)(f)........... .44 .64 (.50)(a) (2.02)(b)(c)
</TABLE>
<TABLE>
<CAPTION>
FISCAL 1995 FIRST SECOND THIRD FOURTH
- ---------------------------------------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
Net sales..................................... $278.4 $258.3 $231.5 $245.2
Gross profit.................................. 146.0 123.4 105.4 108.2
Net earnings.................................. 17.1 21.9 5.1 (10.7)(d)
Net earnings per common share(e)(f)........... .51 .65 .15 (.32)(d)
</TABLE>
- -------------------------
(a) Net earnings (loss) and earnings (loss) per share were negatively affected
by the inclusion of pre-tax restructuring charge of $20.7 ($12.7 after
taxes, or $.39 per share).
(b) Net earnings (loss) and earnings (loss) per share were negatively affected
by the inclusion of pre-tax nonrecurring charges of $109.5 ($68.8 after
taxes, or $2.09 per share) and the recording of certain transaction costs
related to the Company's proposed resorts sale totaling $4.0, pre-tax ($2.5
after taxes, or $.08 per share). Partially offsetting these negative factors
was a pre-tax adjustment to the third quarter restructuring charge of $4.2
($2.6 after taxes, of $.08 per share).
(c) Net earnings were favorably impacted by adjustments to advertising and
promotion accruals recorded earlier in the year. Advertising and promotion
expense for the fiscal 1996 fourth quarter was $44.1 compared to fiscal 1995
fourth quarter expense of $52.1, despite full fiscal 1996 advertising and
promotion expense being $20.1 higher than fiscal 1995. This adjustment
became necessary when it was determined that redemption levels for in-ad
coupon programs and cereal sales volumes were below the expectations used to
record advertising and promotion expense in the previous fiscal 1996
quarters.
(d) Net earnings (loss) and earnings (loss) per share for the fourth quarter of
1995 were negatively affected by the inclusion of pre-tax nonrecurring
charges of $21.9 ($13.6 after taxes, or $.41 per share) and by the write-off
of small dollar accounts receivable of $2.4, pre-tax ($1.5, after taxes, or
$.045 per share).
(e) Based on actual weighted average outstanding shares of Ralcorp Stock for all
periods presented.
(f) Earnings (loss) per common share is computed independently for each of the
periods presented, therefore, the sum of the earnings per common share
amounts for the quarters may not equal the total for the year.
F-21
<PAGE> 104
RFG0354
<PAGE> 105
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
----------- ----------------------------------------------------------------------- ----
<C> <S> <C>
2.1 Form of Reorganization Agreement
2.2 Form of Tax Sharing Agreement
2.3 Form of Transition Services--Supply Agreement
2.4 Form of Technology Agreement
2.5 Form of Trademark Agreement
2.6 Form of Agreement and Plan of Merger
3.1 Form of Articles of Incorporation of New Ralcorp Holdings, Inc.
3.2 Form of Bylaws of New Ralcorp Holdings, Inc.
4.1 Form of Shareholder Protection Rights Agreement between New Ralcorp
Holdings, Inc. and Boatmen's Trust Company, as Rights Agent
10.01 Form of New Ralcorp Incentive Stock Plan
10.02 Forest Services Permits (P)
10.03 Form of Management Continuity Agreement
10.04 Form of Employment Agreement For Mr. Joe R. Micheletto
10.05(a) Form of Employment Agreement for Mr. James A. Nichols
10.05(b) Form of Employment Agreement for Mr. Kevin J. Hunt
10.05(c) Form of Employment Agreement for Mr. Robert W. Lockwood
10.05(d) Form of Employment Agreement for Mr. David P. Skarie
10.06 Change in Control Severance Plan
10.07 Split Dollar Second to Die Life Insurance Arrangement
10.08 Deferred Compensation Plan For Non-Management Directors
10.09 Deferred Compensation Plan For Key Employees
10.10 Executive Life Insurance Plan
10.11 Executive Health Plan
10.12 Executive Long Term Disability Plan
10.13 Form of Indemnification Agreement
10.14 Supplemental Retirement Plan
10.15 Executive Savings Investment Plan
10.16 Stock Purchase Agreement By and Among Vail Resorts, Inc., Ralston
Foods, Inc. and Ralston Resorts, Inc. dated July 22, 1996.
21 List of New Ralcorp Subsidiaries
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 2.1
REORGANIZATION AGREEMENT
This Reorganization Agreement (the "Agreement"), dated as of January ,
1997, by and among Ralcorp Holdings, Inc., a Missouri corporation ("Ralcorp"),
New Ralcorp Holdings, Inc., a Missouri corporation ("New Ralcorp"), Ralston
Foods, Inc., a Nevada corporation ("Foods"), Chex Inc., a Delaware corporation
wholly owned by New Ralcorp (the "Branded Subsidiary"), and General Mills, Inc.,
a Delaware corporation ("Acquiror").
WITNESSETH:
WHEREAS, Ralcorp holds all of the issued and outstanding capital stock of
Foods and all of the issued and outstanding capital stock of New Ralcorp; and
WHEREAS, New Ralcorp holds all of the issued and outstanding capital stock
of the Branded Subsidiary; and
WHEREAS, Ralcorp's Board of Directors has approved, and on August 13, 1996
Ralcorp entered into, an Agreement and Plan of Merger (as amended on October 25,
1996, the "Merger Agreement") among Ralcorp, Acquiror and General Mills
Missouri, Inc., a Missouri corporation ("Merger Sub"), pursuant to which this
Agreement and certain other related agreements will be executed to accomplish
the following transactions:
(i) Ralcorp will cause Foods to be merged with and into New Ralcorp, with
New Ralcorp as the surviving corporation of the merger (the "Internal
Merger").
(ii) Ralcorp will cause New Ralcorp to contribute, as a capital
contribution, the assets and liabilities specified or described
herein to the Branded Subsidiary.
(iii) Ralcorp will contribute, as a capital contribution, the assets and
liabilities specified or described herein to New Ralcorp.
(iv) New Ralcorp will distribute all of the issued and outstanding shares
of the capital stock of the Branded Subsidiary to Ralcorp (the
"Internal Spinoff").
(v) Ralcorp will distribute (the "Distribution") all of the issued and
outstanding shares of capital stock of New Ralcorp (the "Common
Stock") to the holders of Ralcorp's $.01 par value common stock (the
"Ralcorp Stock").
(vi) Acquiror will acquire Ralcorp (and the Branded Subsidiary) by virtue
of a merger of Merger Sub with and into Ralcorp pursuant to the
Merger Agreement.
WHEREAS, the transfer of assets and liabilities of the Branded Business to
the Branded Subsidiary, the Internal Merger and the Internal Spinoff, are
intended to qualify for non-recognition treatment under Sections 368(a)(1)(D)
and 355(a) of the Code;
WHEREAS, in order to effect the Distribution, the Ralcorp Board (as
hereinafter defined) has determined that it is necessary and desirable to
distribute the outstanding shares of Common Stock on a pro rata basis to the
holders of Ralcorp Stock;
WHEREAS, the Distribution is intended to qualify for non-recognition
treatment under Section 355 of the Code (as hereinafter defined);
WHEREAS, in preparation for the Distribution, Ralcorp and New Ralcorp have
prepared and filed with the SEC (as hereinafter defined), and the SEC has
declared effective, a Registration Statement on Form 10 ("Form 10") pursuant to
Section 12(b) of the Exchange Act with respect to the Common Stock and
associated Rights; and
B-1
<PAGE> 2
WHEREAS, the parties hereto have determined that it is necessary and
desirable to set forth the principal corporate transactions required to effect
the Distribution and the other transactions contemplated hereby and to set forth
other agreements that will govern certain other matters relating to the
Distribution and such other transactions and the relationship of the parties
following the Distribution.
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained and intending to be legally bound thereby, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
1.1 GENERAL. As used in this Agreement, the following terms shall have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):
ACQUIROR: as defined in the recitals to this Agreement.
ACTION: any action, claim, suit, arbitration, inquiry, proceeding or
investigation by or before any court, governmental or other regulatory or
administrative agency or commission or any arbitration or other tribunal.
AFFILIATE: with respect to any specified Person, an "affiliate" as defined
in Rule 405 promulgated pursuant to the Securities Act (as hereinafter defined);
provided, however, that for purposes of this Agreement (i) Affiliates of Foods
or New Ralcorp shall not be deemed to include Ralcorp or the Branded Subsidiary,
and (ii) Affiliates of Ralcorp shall not be deemed to include Foods, New Ralcorp
or any of their direct or indirect subsidiaries (except the Branded Subsidiary).
ANCILLARY AGREEMENTS: all of the agreements, instruments, understandings,
assignments and other arrangements (excluding the Merger Agreement) entered into
in connection with the transactions contemplated hereby, including, without
limitation, this Agreement, the Supply Agreement, the Tax Sharing Agreement, the
Technology Agreement and the Trademark Agreement.
ASSET: any and all assets and properties, tangible or intangible, including
the following: (i) certificates of deposit, bankers' acceptances, stock,
debentures, evidences of indebtedness, certificates of interest or participation
in profit-sharing agreements, collateral-trust certificates, preorganization
certificates, investment contracts, voting-trust certificates; (ii) except as
otherwise provided in the following sentence, trade secrets, confidential
information, registered and unregistered trademarks, service marks, service
names, trade styles and trade names and associated goodwill; statutory, common
law and registered copyrights; applications for any of the foregoing, rights to
use any of the foregoing and other rights in, to and under any of the foregoing;
(iii) rights under Contracts and permits; (iv) real estate and buildings and
other improvements thereon and timber and mineral rights of every kind; (v)
leasehold improvements, fixtures, trade fixtures, machinery, equipment
(including transportation and office equipment), tools, dies and furniture; (vi)
office supplies, production supplies, spare parts, other miscellaneous supplies
and other tangible property of any kind; (vii) raw materials, work-in-process,
finished goods, consigned goods and other inventories; (viii) prepayments or
prepaid expenses; (ix) claims, causes of action, choses in action, rights of
recovery and rights of set-off of any kind; (x) the right to receive mail and
other communications; (xi) lists of advertisers, records pertaining to
advertisers and accounts, lists and records pertaining to suppliers and agents,
and books, ledgers, files and business records of every kind; (xii) advertising
materials and other recorded, printed or written materials; (xiii) except as
otherwise provided in the following sentence, goodwill as a going concern and
other intangible properties; (xiv) personnel records and employee contracts,
including any rights thereunder to restrict an employee from competing in
certain respects; and (xv) licenses and authorizations issued by any
governmental authority. Notwithstanding the foregoing definition, "Assets" shall
not include (i) any of the intellectual and proprietary property, rights and
obligations that are the subjects of the Technology Agreement and the Trademark
Agreement (which shall be governed by the Technology Agreement and the Trademark
Agreement, respectively), or (ii) any cash, notes and trade and customer
accounts receivable (whether current or non-current and including all rights
with respect thereto).
ASSIGNMENT AND ASSUMPTION AGREEMENT: as defined in Section 6.2 of this
Agreement.
B-2
<PAGE> 3
BRANDED ASSETS: all of the Assets listed on Schedule 1.1(a).
BRANDED BALANCE SHEET: as defined in the Merger Agreement.
BRANDED BUSINESS: the business of manufacturing, distributing and selling
branded ready-to-eat cereal (excluding Non-Branded Cereals) and branded
cereal-based snacks and snack mixes, as conducted by any member of either Group
immediately prior to the Distribution Date.
BRANDED EMPLOYEE: any individual who on the Distribution Date is an officer
or employee of any member of either Group and (a) who is actively employed at
the Branded Plant, or (b) who is set forth on Schedule 1.1(b) (which Schedule
will be updated by mutual agreement of New Ralcorp and Acquiror prior to the
Effective Time), or (c) who is on leave or layoff (with recall rights) from
active employment but who, immediately prior to commencement of such leave or
layoff, was employed at the Branded Plant, except that a Branded Employee shall
not include any individual who, as of the Distribution Date, (i) has been
determined to be disabled under the Ralcorp Holdings Long Term Disability Plan
("LTD Plan"), the Ralcorp Holdings Group Life Insurance Plan or the Ralcorp
Holdings Retirement Plan for Sales, Administrative, Clerical and Production
Employees, or (ii) is on leave during a waiting period prior to a determination
of disability under the LTD Plan.
BRANDED INDIVIDUAL: any individual who is a Branded Employee or a
beneficiary of a Branded Employee.
BRANDED LIABILITIES: (i) all of the Liabilities arising out of, relating to
or resulting from the ownership, use or possession of the Branded Assets or the
operation of the Branded Business other than those portions of the Branded
Business that are not conveyed to or retained by Ralcorp and the Branded
Subsidiary hereunder as of immediately after the Distribution Time, whether
arising prior to or after the Closing Date, (ii) the Scheduled Branded
Litigation, and (iii) the Known Branded Liabilities. For purposes of
clarification, the Liabilities referred to in clause (i) shall include product
liability claims relating to Branded Business products produced prior to the
Distribution Time regardless of whether such products were produced at the
Branded Plant, but shall not include employee, environmental, occupational
safety, health and similar liabilities related to any facility other than the
Branded Plant.
BRANDED PLANT: the manufacturing facility located at 11301 Mosteller Road,
Sharonville, Ohio.
BRANDED SUBSIDIARY: as defined in the recitals to this Agreement.
BUSINESS DAY: any day other than a Saturday, a Sunday or a day on which
banking institutions located in the State of Missouri are obligated by law or
executive order to close.
CLOSING: as defined in the Merger Agreement.
CLOSING DATE: as defined in the Merger Agreement.
CLOSING DATE BALANCE SHEET: as defined in Schedule 2.3 to the Merger
Agreement.
CODE: the Internal Revenue Code of 1986, as amended, or any successor
legislation.
COLLECTIVE BARGAINING AGREEMENT: any collective bargaining or other labor
agreement to which any member of either Group is a party, including those listed
on Schedule 8.9.
COMMON STOCK: as defined in the recitals to this Agreement.
CONTRACT: any written or oral contract, agreement, lease, indenture or
evidence of indebtedness.
CONTROL BRAND: as defined in the Trademark Agreement.
CURRENT PLAN YEAR: the plan year or fiscal year, to the extent applicable
with respect to any Plan, during which the Distribution Date occurs.
DELAYED ASSET: as defined in Section 3.5 of this Agreement.
DELAYED LIABILITY: as defined in Section 3.5 of this Agreement.
DISTRIBUTION: as defined in the recitals to this Agreement.
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DISTRIBUTION DATE: the date, to be determined by the Ralcorp Board
consistent with the Merger Agreement, as of which the Distribution shall be
effected.
DISTRIBUTION TIME: 11:59 p.m. on the Distribution Date.
DISTRIBUTORSHIP AGREEMENT: as defined in Section 10.4 of this Agreement.
EFFECTIVE TIME: as defined in the Merger Agreement.
ERISA: the Employee Retirement Income Security Act of 1974, as amended, or
any successor legislation.
EXCHANGE ACT: the Securities Exchange Act of 1934, as amended, together
with the rules and regulations promulgated thereunder.
FOODS: as defined in the recitals to this Agreement.
FORM 10: as defined in the recitals to this Agreement.
GROUP: the New Ralcorp Group or the Ralcorp Group.
INDEMNIFIABLE LOSS: with respect to any claim by an Indemnitee for
indemnification hereunder, any and all losses, liabilities, claims, damages,
obligations, payments, costs and expenses (including, without limitation, the
costs and expenses of any and all Actions, demands, claims and assessments, and
any and all judgments, settlements and compromises related thereto and
reasonable attorney's fees and expenses in connection therewith) incurred or
suffered by such Indemnitee with respect to such claim.
INDEMNITEE: as defined in Section 9.3 of this Agreement.
INDEMNITOR: as defined in Section 9.3 of this Agreement.
INFORMATION: as defined in Section 7.2 of this Agreement.
INTERNAL MERGER: as defined in the recitals to this Agreement.
INTERNAL SPINOFF: as defined in the recitals to this Agreement.
IRS: the Internal Revenue Service.
ISP: the Ralcorp Holdings Incentive Stock Plan.
KNOWN BRANDED LIABILITIES: the Branded Liabilities included in the Closing
Date Balance Sheet (but not the notes thereto), regardless of the sufficiency of
the amount of any accrual thereon, and the Branded Liabilities set forth on
Schedule 1.1(c).
LIABILITIES: all claims, debts, liabilities, royalties, license fees,
losses, costs, expenses, deficiencies, litigation proceedings, taxes, levies,
imposts, duties, deficiencies, assessments, attorneys' fees, charges,
allegations, demands, damages, judgments or obligations, whether absolute or
contingent, matured or unmatured, liquidated or unliquidated, accrued or
unaccrued, known or unknown and whether or not the same would properly be
reflected on a balance sheet, including all costs and expenses relating thereto.
MERGER: as defined in the Merger Agreement.
MERGER AGREEMENT: as defined in the recitals to this Agreement.
MERGER SUB: as defined in the recitals to this Agreement.
NEW RALCORP: as defined in the recitals to this Agreement.
NEW RALCORP ASSETS: all of the Assets used or held by any member of either
Group immediately prior to the Closing Date, except for the Branded Assets.
NEW RALCORP BILL OF SALE: as defined in Section 6.2 of this Agreement.
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NEW RALCORP BUSINESS: any business conducted by any member of either Group,
except for the Branded Business.
NEW RALCORP DEFERRED COMPENSATION PLANS: as defined in Section 8.5 of this
Agreement.
NEW RALCORP DOCUMENTS: as defined in Section 5.1(b) of this Agreement.
NEW RALCORP EMPLOYEE: any individual who at any time is or was an officer
or employee of any member of either Group, other than a Branded Employee.
NEW RALCORP GROUP: New Ralcorp and all other direct and indirect
subsidiaries of Ralcorp other than the Branded Subsidiary.
NEW RALCORP INDIVIDUAL: any individual who is a New Ralcorp Employee or a
beneficiary of a New Ralcorp Employee.
NEW RALCORP LIABILITIES: all of the Liabilities of any member of either
Group, except for the Branded Liabilities.
NEW RALCORP OBLIGATIONS: as defined in Article XI of this Agreement.
NEW RALCORP OFFICERS: the individuals listed on Schedule 4.2 to this
Agreement.
NEW RALCORP RETIREMENT PLAN: as defined in Section 8.1 of this Agreement.
NEW RALCORP SHARE PURCHASE RIGHTS AGREEMENT: as defined in Section 2.2 of
this Agreement.
NON-BRANDED CEREALS: Cereals sold exclusively under Control Brands or
Private Label Trademarks.
NOTICE OF CLAIM: as defined in Section 9.3 of this Agreement.
NYSE: the New York Stock Exchange.
PERSON: an individual, a partnership, a joint venture, a corporation, a
trust or other entity, an unincorporated organization or a government or any
department or agency thereof.
PLAN: any plan, policy, arrangement, contract or agreement providing
benefits (including salary, bonuses, deferred compensation, incentive
compensation, savings, stock purchases, pensions, profit sharing, welfare
benefits or retirement or other retiree benefits, including retiree medical
benefits) for any group of employees or former employees or individual employee
or former employee, or the beneficiary or beneficiaries of any such employee or
former employee, whether formal or informal or written or unwritten and whether
or not legally binding, and including any means, whether or not legally
required, pursuant to which any benefit is provided by an employer to any
employee or former employee or the beneficiary or beneficiaries of any such
employee or former employee.
POST-CLOSING BRANDED LIABILITIES: all Branded Liabilities relating to or
arising from the ownership, use or possession of the Branded Assets or the
operation of the Branded Business after the Effective Time.
PRIVATE LABEL TRADEMARK: as defined in the Trademark Agreement.
QUALIFIED PLAN: a Plan which is an employee pension benefit plan (within
the meaning of Section 3(2) of ERISA) and which constitutes or is intended in
good faith to constitute a qualified plan under Section 401(a) of the Code.
RALCORP: as defined in the recitals to this Agreement.
RALCORP BILL OF SALE: as defined in Section 6.2 of this Agreement.
RALCORP BOARD: the Board of Directors of Ralcorp and their duly elected or
appointed successors.
RALCORP DEFERRED COMPENSATION PLANS: as defined in Section 8.5 of this
Agreement.
RALCORP DOCUMENTS: as defined in Section 5.2(b) of this Agreement.
RALCORP GROUP: Ralcorp and the Branded Subsidiary.
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RALCORP OPTIONS: as defined in Section 8.4 of this Agreement.
RALCORP RETIREMENT PLAN: as defined in Section 8.1 of this Agreement.
RALCORP STOCK: as defined in the recitals to this Agreement.
RECORD DATE: the date to be determined by the Ralcorp Board, as the record
date for determining shareholders of Ralcorp Stock entitled to receive the
Distribution.
RIGHTS: the rights to be issued by New Ralcorp pursuant to the New Ralcorp
Share Purchase Rights Agreement.
RIGHTS PAYMENT: as defined in the Merger Agreement.
RIP: as defined in Section 8.1 of this Agreement.
SEC: the Securities and Exchange Commission.
SCHEDULED BRANDED LITIGATION: the Liabilities listed on Schedule 1.1(d).
SECURITIES ACT: the Securities Act of 1933, as amended, together with the
rules and regulations promulgated thereunder.
SUBSIDIARY: with respect to any specified Person, any corporation or other
legal entity of which such Person or any of its Subsidiaries controls or owns,
directly or indirectly, more than 50% of the stock or other equity interest
entitled to vote on the election of members to the board of directors or similar
governing body of such corporation or other legal entity.
SUPPLY AGREEMENT: as defined in Section 6.2 of this Agreement.
TAX SHARING AGREEMENT: as defined in Section 6.2 of this Agreement.
TECHNOLOGY AGREEMENT: as defined in Section 6.2 of this Agreement.
THIRD PARTY CLAIM: any Action or claim by a third party against or
otherwise involving an Indemnitee for which indemnification may be sought
pursuant to Article IX hereof.
TRADEMARK AGREEMENT: as defined in Section 6.2 of this Agreement.
UNKNOWN BRANDED LIABILITIES: all Branded Liabilities other than (i) the
Known Branded Liabilities, (ii) the Scheduled Branded Litigation and (iii) the
Post-Closing Branded Liabilities.
WELFARE PLAN: any Plan, including but not limited to the Plans listed on
Schedule 8.3, which is not a Qualified Plan and which provides medical, health,
disability, accident, life insurance, death, dental or other welfare benefits,
including any post-employment benefits or retiree medical benefits.
1.2 REFERENCES TO TIME. All references to times of the day in this
Agreement shall refer to St. Louis, Missouri time.
ARTICLE II
CERTAIN TRANSACTIONS PRIOR TO THE DISTRIBUTION
2.1 INTERNAL MERGER; SPINOFF TO RALCORP. Prior to the transactions
contemplated by Article III, Ralcorp shall merge Foods into New Ralcorp with New
Ralcorp surviving the Internal Merger. After the Internal Merger and the
transactions contemplated by Article III but prior to the Distribution Date, New
Ralcorp shall distribute all of the issued and outstanding shares of capital
stock of the Branded Subsidiary to Ralcorp.
2.2 ISSUANCE OF STOCK. Prior to the Distribution Date, Ralcorp shall take
all steps necessary so that immediately prior to the Distribution Date the
number of shares of Common Stock outstanding and held by Ralcorp shall equal the
number of shares necessary to effect the Distribution. The Distribution shall be
effected as described in Article IV.
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2.3 NEW RALCORP SHARE PURCHASE RIGHTS AGREEMENT; ARTICLES OF INCORPORATION;
BYLAWS. Prior to the Distribution Date, Ralcorp shall cause New Ralcorp to adopt
a New Ralcorp Share Purchase Rights Agreement in substantially the form filed
with the SEC as an exhibit to the Form 10, and Ralcorp shall cause the Board of
Directors of New Ralcorp to authorize a distribution of one Right to every share
of outstanding Common Stock, such distribution to occur prior to the
Distribution. Ralcorp shall take all action necessary so that, at the
Distribution Date, the Articles of Incorporation and Bylaws of New Ralcorp shall
be substantially in the forms filed with the SEC as exhibits to the Form 10.
ARTICLE III
CONTRIBUTION AND ASSUMPTION OF ASSETS AND LIABILITIES
3.1 CONTRIBUTION OF THE BRANDED ASSETS. Upon the terms and subject to the
conditions of this Agreement, New Ralcorp shall assign, transfer, convey and
contribute to the Branded Subsidiary, effective immediately prior to the
Distribution Time, all of New Ralcorp's right, title and interest in, to and
under the Branded Assets.
3.2 ASSUMPTION OF THE BRANDED LIABILITIES. Upon the terms and subject to
the conditions of this Agreement, effective immediately prior to the
Distribution Time, the Branded Subsidiary shall assume and agree to pay, perform
and discharge when due the Branded Liabilities, subject to the indemnification
obligations of New Ralcorp set forth in Section 9.1(b) hereof.
3.3 CONTRIBUTION OF THE NEW RALCORP ASSETS. Upon the terms and subject to
the conditions of this Agreement, Ralcorp shall assign, transfer, convey and
contribute to New Ralcorp, effective immediately prior to the Distribution Time,
all of Ralcorp's right, title and interest in, to and under the New Ralcorp
Assets.
3.4 ASSUMPTION OF THE NEW RALCORP LIABILITIES. Upon the terms and subject
to the conditions of this Agreement, effective immediately prior to the
Distribution Time, New Ralcorp shall assume and agree to pay, perform and
discharge when due the New Ralcorp Liabilities.
3.5 DELAYED ASSETS AND LIABILITIES.
(a) To the extent that any required consent or waiver with respect to
a Contract or other instrument included in the Branded Assets or the New
Ralcorp Assets has not been obtained on or prior to the Closing Date, such
Contract or instrument (a "Delayed Asset") shall not be transferred
hereunder, and any related liability that constitutes a Branded Liability
or New Ralcorp Liability, as the case may be (a "Delayed Liability"), shall
not be assumed hereunder by the Branded Subsidiary or New Ralcorp, as the
case may be, unless and until such required consent or waiver has been
obtained. Notwithstanding the foregoing, if such a required consent or
waiver is not obtained, the party required to transfer such Delayed Asset
will reasonably cooperate with the party entitled to receive such Delayed
Asset to attempt to provide such party with the benefits under or of any
such Delayed Asset as long as the party entitled to receive such Delayed
Asset shall assume, pay and perform any corresponding Delayed Liabilities.
Ralcorp, the Branded Subsidiary and New Ralcorp each agrees that, in any
such event, they shall work in good faith to cause such arrangement to
reflect as nearly as possible the respective benefits and obligations that
would have been in effect had such consent or waiver been obtained.
(b) At such time and on each occasion after the Closing Date that a
required consent or waiver shall be obtained with respect to a Delayed
Asset, such Delayed Asset shall forthwith be transferred and assigned to
the party entitled to receive it hereunder, and all related Delayed
Liabilities shall be simultaneously assumed by such party hereunder,
whereupon (i) such Delayed Asset shall constitute for all purposes an Asset
acquired hereunder and (ii) such Delayed Liabilities shall constitute for
all purposes Liabilities assumed hereunder.
3.6 ACCOUNTS RECEIVABLE. The customer accounts receivable (including for
any products of the Branded Business shipped but not invoiced, which products
shall be relieved from inventory) outstanding at the close of business on the
Distribution Date shall remain assets of New Ralcorp. New Ralcorp shall be
entitled to collection and receipt of all such receivables, provided that (a) to
the extent that a customer takes a justifiable
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deduction against an invoice related to products of the Branded Business
invoiced prior to the close of business on the Distribution Date, which
deduction is related to products of the Branded Business shipped after the close
of business on the Distribution Date, the Branded Subsidiary will promptly
reimburse New Ralcorp for any such deduction and (b) to the extent that a
customer takes a justifiable deduction against an invoice relating to products
of the Branded Business shipped and invoiced by the Branded Subsidiary after the
close of business on the Distribution Date, which deduction is related to
products of the Branded Business shipped prior to the close of business on the
Distribution Date, New Ralcorp will promptly reimburse the Branded Subsidiary
for any such deduction, except to the extent the deduction constitutes a Known
Branded Liability. New Ralcorp and the Branded Subsidiary shall cooperate in
good faith in order to ensure that New Ralcorp receives payment of the customer
accounts receivable outstanding immediately prior to the close of business on
the Distribution Date, that the Branded Subsidiary receives payment of accounts
receivable of the Branded Business issued from and after the close of business
on the Distribution Date, and in order to determine whether any deductions from
invoices are justifiable. To the extent that either receives payment of
receivables owned by the other party, the Branded Subsidiary and New Ralcorp
agree to promptly (within ten Business Days) remit the proceeds to the
designated bank account of New Ralcorp or the Branded Subsidiary, as applicable.
New Ralcorp shall direct all trade debtors to make payment on such customer
account receivables outstanding as of the close of business on the Distribution
Date to New Ralcorp's specified address and/or account.
ARTICLE IV
THE DISTRIBUTION
4.1 DISTRIBUTION DATE. Subject to the satisfaction of the conditions set
forth in Article XIV, the Distribution shall be effective as of the Distribution
Time.
4.2 MECHANICS OF THE DISTRIBUTION. Effective at the Distribution Time,
Ralcorp shall distribute all outstanding shares of Common Stock to holders of
record of Ralcorp Stock on the Record Date on the basis of one share of Common
Stock for each share of Ralcorp Stock outstanding on the Record Date, subject to
the treatment of fractional shares as set forth in Section 4.3. All shares of
Common Stock issued in the Distribution shall be duly authorized, validly
issued, fully paid and nonassessable. To the extent feasible, the Rights Payment
shall be included in the mailing of Common Stock to such record holders. The
parties acknowledge that Ralcorp is responsible for the issuance of checks and
the payment of the Rights Payment and New Ralcorp is responsible for the costs
of the distribution of such payment.
4.3 PAYMENT IN LIEU OF FRACTIONAL SHARES. No fractional shares of Common
Stock shall be issued in the Distribution. In lieu thereof, New Ralcorp shall
remit to each holder of Ralcorp Stock who would otherwise be entitled to receive
such fractional shares, an amount of cash equal to the average of the high and
low sales prices of the Common Stock during the first three days of trading
following the Distribution Date multiplied by such holders fractional interest
in such shares (after making appropriate deductions of the amount required for
Federal tax withholding purposes).
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 REPRESENTATIONS AND WARRANTIES OF NEW RALCORP AND FOODS. Each of New
Ralcorp and Foods hereby represents and warrants, as to itself, to Ralcorp and
the Branded Subsidiary as follows:
(a) Organization, Standing and Power. Each of New Ralcorp and Foods is
a corporation duly organized, validly existing and in good standing under
the laws of its state of incorporation. Each of New Ralcorp and Foods has
all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted.
(b) Authority. Each of New Ralcorp and Foods has all requisite power
and authority to execute this Agreement and the Ancillary Agreements to
which it is or will be party (collectively, the "New
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Ralcorp Documents") and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and the other New
Ralcorp Documents and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all necessary action on the
part of New Ralcorp and Foods and, to the extent required, by the
stockholder of New Ralcorp and Foods. This Agreement has been duly executed
and delivered by each of New Ralcorp and Foods and constitutes, and each of
the other New Ralcorp Documents will be duly executed and delivered by New
Ralcorp on or prior to the Closing Date, and when so executed and delivered
will constitute, a legal, valid and binding obligation of New Ralcorp
and/or Foods, as the case may be, enforceable against it in accordance with
its terms.
(c) No Conflict. (i) The execution, delivery and performance by each
of New Ralcorp and Foods of this Agreement and by New Ralcorp of the other
New Ralcorp Documents will not contravene, violate, result in a breach of
or constitute a default under (x) any provision of applicable law or of the
articles of incorporation or by-laws of New Ralcorp or Foods or any other
member of the New Ralcorp Group or (y) any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to New Ralcorp or
Foods or any other member of the New Ralcorp Group or any of their
properties or assets.
(d) Approvals. No consent, approval, order, authorization of, or
registration, declaration or filing with, any governmental entity is
required in connection with the making or performance by New Ralcorp or
Foods of this Agreement or the other New Ralcorp Documents.
ARTICLE VI
CERTAIN ADDITIONAL COVENANTS
6.1 NEW RALCORP BOARD. Prior to the Distribution Date, Ralcorp shall take
such actions as are necessary such that New Ralcorp's Board of Directors is
comprised of those individuals named as directors in the Form 10.
6.2 CONTRACTUAL ARRANGEMENTS.
(a) At the Closing, effective as of the Distribution Time, Ralcorp and
New Ralcorp shall enter into the Tax Sharing Agreement, substantially in
the form attached to this Agreement as Exhibit 6.2(a) ("Tax Sharing
Agreement");
(b) At the Closing, effective as of the Distribution Time, Ralcorp,
New Ralcorp and the Branded Subsidiary shall enter into the Trademark
Agreement, substantially in the form attached to this Agreement as Exhibit
6.2(b) ("Trademark Agreement");
(c) At the Closing, effective as of the Distribution Time, Ralcorp,
New Ralcorp and the Branded Subsidiary shall enter into the Technology
Agreement, substantially in the form attached to this Agreement as Exhibit
6.2(c) ("Technology Agreement");
(d) At the Closing, effective as of the Distribution Time, Ralcorp and
New Ralcorp shall enter into the Transition Services -- Supply Agreement,
substantially in the form attached to this Agreement as Exhibit 6.2(d)
("Supply Agreement");
(e) At the Closing, effective immediately prior to the Effective Time,
New Ralcorp and the Branded Subsidiary shall enter into the Assignment and
Assumption Agreement, in a form mutually reasonably agreed to between New
Ralcorp and Acquiror ("Assignment and Assumption Agreement");
(f) At the Closing, effective immediately prior to the Effective Time,
New Ralcorp shall execute and deliver to the Branded Subsidiary a Bill of
Sale, in a form mutually reasonably agreed to between New Ralcorp and
Acquiror (the "New Ralcorp Bill of Sale"); and
(g) At the Closing, effective as of the Effective Time, Ralcorp shall
execute and deliver to New Ralcorp a Bill of Sale, in a form mutually
reasonably agreed to between New Ralcorp and Acquiror (the "Ralcorp Bill of
Sale").
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(h) Notwithstanding the foregoing, the parties have agreed that the
Trademark Agreement, the Technology Agreement and the Supply Agreement are
each to be conditionally amended as set forth in Exhibits 6.2(b)(i),
6.2(c)(i) and 6.2(d)(i), respectively. These amendments shall become final
upon final acceptance by the Federal Trade Commission of the Consent
Agreement between Acquiror and the Federal Trade Commission dated December
24, 1996; provided, however, if this should not occur, then all of these
amendments shall be revoked, canceled and of no force or effect ten (10)
business days after the Federal Trade Commission withdraws its provisional
acceptance of this Consent Agreement regardless of whether the Trademark
Agreement, the Technology Agreement and the Supply Agreement have been
executed by the parties and the Closing has occurred. In such event, the
Trademark Agreement, the Technology Agreement and the Supply Agreement
shall each be executed or re-executed, as the case may be, by the parties
in their original form, without giving effect to the amendments reflected
in Exhibits 6.2(b)(i), 6.2(c)(i) and 6.2(d)(i).
6.3 INTERCOMPANY ACCOUNTS. All intercompany services provided by the New
Ralcorp Group to the Ralcorp Group or by the Ralcorp Group to the New Ralcorp
Group shall terminate as of the Distribution Time unless otherwise provided in
any Ancillary Agreement. Effective as of the close of business on the
Distribution Date, all intercompany receivables or payables and loans then
existing between any member of one Group and any member of the other Group shall
be written off by means of cancellation, capital contribution or dividend, as
the case may be.
ARTICLE VII
ACCESS TO INFORMATION
7.1 PROVISION OF CORPORATE RECORDS.
(a) Prior to or as promptly as practicable after the Distribution
Date, Ralcorp shall deliver to New Ralcorp all corporate books and records
of the New Ralcorp Group as well as copies or, to the extent not
detrimental in the reasonable opinion of Ralcorp to the interests of
Ralcorp, originals, of all books, records and data relating exclusively to
the New Ralcorp Assets, the New Ralcorp Business, or the New Ralcorp
Liabilities, including, but not limited to, all books, records and data
relating to the purchase of materials, supplies and services, financial
results, sale of products, records of the New Ralcorp Employees, commercial
data, research done by or for New Ralcorp or Foods, catalogues, brochures,
training and other manuals, sales literature, advertising and other sales
and promotional materials, maintenance records and drawings, all active
agreements, active litigation files and government filings. All such
documents located at locations other than the Branded Plant shall be deemed
delivered to New Ralcorp as of the Distribution Date. To the extent that
originals of such books, records and data are provided to New Ralcorp, New
Ralcorp shall provide Ralcorp copies thereof as reasonably requested in
writing by Ralcorp. Notwithstanding the above, Ralcorp shall provide copies
of customer information, invoices and credit information only to the extent
reasonably requested in writing by New Ralcorp, and Ralcorp shall provide
such copies of all books, records and data only to the extent that such
action is not prohibited by the terms of any agreements pertaining to such
information or is not prohibited by law. From and after the Distribution
Date, all books, records and copies so delivered shall be the property of
New Ralcorp. Notwithstanding the above, Ralcorp shall not be required to
make copies, other than pursuant to Section 7.2 of this Agreement, of any
portion of any books, records or data to the extent such portion relates
exclusively to the Branded Assets, the Branded Business or to Liabilities
assumed or retained by the Branded Subsidiary or Ralcorp.
(b) Prior to or as promptly as practicable after the Distribution
Date, New Ralcorp shall deliver to Ralcorp all corporate books and records
of the Ralcorp Group as well as copies or, to the extent not detrimental in
the reasonable opinion of New Ralcorp to the interests of New Ralcorp,
originals, of all books, records and data relating exclusively to the
Branded Assets, the Branded Business, or the Branded Liabilities,
including, but not limited to, all books, records and data relating to the
purchase of materials, supplies and services, financial results, sale of
products, records of the Branded Employees, commercial data, research done
by or for Ralcorp, catalogues, brochures, training and other manuals, sales
literature,
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advertising and other sales and promotional materials, maintenance records
and drawings, all active agreements, active litigation files and government
filings. All such documents located at the Branded Plant shall be deemed
delivered to Ralcorp as of the Distribution Date. To the extent that
originals of such books, records and data are provided to Ralcorp, Ralcorp
shall provide New Ralcorp copies thereof as reasonably requested in writing
by New Ralcorp. Notwithstanding the above, New Ralcorp shall provide copies
of customer information, invoices and credit information only to the extent
reasonably requested in writing by Ralcorp, and New Ralcorp shall provide
such copies of all books, records and data only to the extent that such
action is not prohibited by the terms of any agreements pertaining to such
information or is not prohibited by law. From and after the Distribution
Date, all books, records and copies so delivered shall be the property of
Ralcorp. Notwithstanding the above, New Ralcorp shall not be required to
make copies, other than pursuant to Section 7.2 of this Agreement, of any
portion of any books, records or data to the extent such portion relates
exclusively to the New Ralcorp Assets, the New Ralcorp Business or to
Liabilities assumed or retained by New Ralcorp.
7.2 ACCESS TO INFORMATION. From and after the Distribution Date, each of
Ralcorp and New Ralcorp shall afford to the other and to the other's agents,
employees, accountants, counsel and other designated representatives, reasonable
access and duplicating rights during normal business hours to all records,
books, contracts, instruments, computer data and other data and information
("Information") within such party's possession relating to such other party's
businesses, assets or liabilities, insofar as such access is reasonably required
by such other party. Without limiting the foregoing, such Information may be
requested under this Section for audit, accounting, claims, litigation and tax
purposes, as well as for purposes of fulfilling disclosure and reporting
obligations.
7.3 RETENTION OF RECORDS. Except as otherwise required by law or agreed in
writing, or as otherwise provided in the Tax Sharing Agreement, each of Ralcorp
and New Ralcorp shall retain, for a period of at least seven years following the
Distribution Date, all significant Information in such party's possession or
under its control relating to the business, assets or liabilities of the other
party and, after the expiration of such seven-year period, prior to destroying
or disposing of any of such Information, (a) the party proposing to dispose of
or destroy any such Information shall provide no less than 30 days prior written
notice to the other party, specifying the Information proposed to be destroyed
or disposed of, and (b) if, prior to the scheduled date for such destruction or
disposal, the other party requests in writing that any of the Information
proposed to be destroyed or disposed of be delivered to such other party, the
party proposing to dispose of or destroy such Information promptly shall arrange
for the delivery of the requested Information to a location specified by, and at
the expense of, the requesting party.
7.4 CONFIDENTIALITY. From and after the Distribution Date, each Group shall
hold, in strict confidence, all Information obtained from the other Group prior
to the Distribution Date or furnished to it pursuant to this Agreement or any
other agreement referred to herein which relates to or concerns the business
conducted by such other Group, and such Information shall not be used by it to
the detriment of the other Group, or disclosed by it or its agents, officers,
employees or directors without the prior written consent of such other Group
unless and to the extent that (a) disclosure is compelled by judicial or
administrative process or, in the opinion of such Group's counsel, by other
requirements of law, or (b) such Group can show that such Information was (i)
available to such Group on a nonconfidential basis prior to its disclosure by
the other Group, (ii) in the public domain through no fault of such Group, (iii)
lawfully acquired by such Group from other sources after the time that it was
furnished to such Group pursuant to this Agreement or any other agreement
referred to herein, or (iv) independently developed by such Group.
Notwithstanding the foregoing, each Group shall be deemed to have satisfied its
obligations of confidentiality under this Section with respect to any
Information concerning or supplied by the other Group if it exercises
substantially the same care with regard to such Information as it takes to
preserve confidentiality for its own similar Information.
7.5 REIMBURSEMENT. Each member of any Group providing Information pursuant
to Sections 7.2 or 7.3 to any member of the other Group shall be entitled to
receive from the recipient, upon presentation of an invoice therefor, payment of
all out-of-pocket costs and expenses as may reasonably be incurred in providing
such Information.
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ARTICLE VIII
EMPLOYEE BENEFITS; LABOR MATTERS
8.1 RALCORP RETIREMENT PLAN.
(a) Ralcorp shall take, or cause to be taken, all action necessary and
appropriate to amend the Ralcorp Holdings, Inc. Retirement Plan for Sales,
Administrative, Clerical, and Production Employees (the "Ralcorp Retirement
Plan") to remove Ralcorp as sponsor and a named fiduciary and shall name
New Ralcorp as successor sponsor and named fiduciary of the plan after the
consummation of the Internal Merger and prior to the Distribution Date.
Acquiror shall take, or cause to be taken, all action necessary and
appropriate to establish, effective as of the day after the Distribution
Date, and administer, a defined benefit pension plan which is a qualified
plan ("New Retirement Plan") and to provide benefits thereunder for all
Branded Employees other than administrative employees who are not covered
by a collective bargaining agreement and who, on the Distribution Date,
were participants in the Ralcorp Retirement Plan. With respect to all
Branded Employees participating thereunder, the New Retirement Plan shall
be the same as the Ralcorp Retirement Plan in all material respects and
shall preserve all protected benefits within the meaning of Code Section
411(d)(6). Acquiror shall take, or cause to be taken, all action necessary
and appropriate to amend, effective as of the day after the Distribution
Date, the Retirement Income Plan of General Mills, Inc. (the "RIP") to
provide benefits thereunder for all Branded Employees who, on the
Distribution Date, were administrative employees of the Branded Business,
were not covered by a collective bargaining agreement and were participants
in the Ralcorp Retirement Plan. New Ralcorp agrees to provide Acquiror, as
soon as practicable after the Distribution Date, with a list of the Branded
Employees who were, to the best knowledge of New Ralcorp, participants in
or otherwise entitled to benefits under the Ralcorp Retirement Plan as of
the Distribution Date, together with a listing of each such Branded
Employee's term of service for eligibility, accrual and vesting purposes
under the Ralcorp Retirement Plan on such Distribution Date and a listing
of each such Branded Employee's accrued benefit thereunder on such
Distribution Date, along with all other records necessary to effectively
administer such benefits. Ralcorp shall, as soon as practicable after the
Distribution Date, provide New Ralcorp with such additional information (to
the extent in the possession of Ralcorp and not already in the possession
of the New Ralcorp Group) as may be reasonably requested by New Ralcorp and
necessary for New Ralcorp to effectively administer the Ralcorp Retirement
Plan.
(b) New Ralcorp agrees, as soon as practicable following the
Distribution Date, to direct the trustees of the Ralcorp Retirement Trust
to transfer to the trustee of the RIP, in cash, securities and other
property, or a combination thereof, as reasonably determined by New Ralcorp
and as agreed to by Acquiror, an amount determined according to the
following formula, with respect to administrative Branded Employees not
covered by a collective bargaining agreement on the Distribution Date: (X)
less (Y), as adjusted by (Z) where (X) equals the projected benefit
obligations (within the meaning of Statement No. 87 of the Financial
Accounting Standards Board) determined as described in (c) below of such
administrative Branded Employees as of the Distribution Date pursuant to
the benefit provisions of the Ralcorp Retirement Plan in effect as of the
Distribution Date, where (Y) equals aggregate payments made from the
Ralcorp Retirement Trust relating to the Ralcorp Retirement Plan in respect
of the accrued benefits of such administrative Branded Employees from the
Distribution Date through the date of complete transfer; and where (Z)
equals the amount of the net earnings or losses, as the case may be, from
the Distribution Date through the date of complete transfer, on the average
of the daily balances of (X) and (Y) and based upon the Frank Russell Trust
Co. short term interest fund rate during such period.
New Ralcorp agrees, as soon as practicable following the Distribution
Date, to direct the trustees of the Ralcorp Retirement Trust to transfer to
the trustee of the New Retirement Plan, in cash, securities and other
property, or a combination thereof, as reasonably determined by New Ralcorp
and as agreed to by Acquiror, an amount determined according to the
following formula, with respect to Branded Employees other than
administrative employees not covered by a collective bargaining agreement,
on the Distribution Date: (X) less (Y), as adjusted by (Z) where (X) equals
the projected benefit obligations
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(within the meaning of Statement No. 87 of the Financial Accounting
Standards Board) determined as described in (c) below of such Branded
Employees, as of the Distribution Date pursuant to the benefit provisions
of the Ralcorp Retirement Plan in effect as of Distribution Date, where (Y)
equals aggregate payments made from the Ralcorp Retirement Trust relating
to the Ralcorp Retirement Plan in respect of the accrued benefits of such
Branded Employees, from the Distribution Date through the date of complete
transfer; and where (Z) equals the amount of the net earnings or losses, as
the case may be, from the Distribution Date through the date of transfer,
on the average of the daily balances of (X) and (Y) and based upon the
Frank Russell Trust Co. short term interest rate Ralcorp Retirement Plan
during such period.
(c) New Ralcorp shall cause the calculation of the projected benefit
obligation and the amounts to be transferred pursuant to this Section to be
completed by Kwasha Lipton, based on the actuarial assumptions used for the
Ralcorp Retirement Plan for financial disclosure purposes for the fiscal
year in which the Distribution Date occurs; provided however, that (i) the
discount rate shall be equal to (A) the average of the 30-year U.S.
Treasury rate as of thirty days prior to the Distribution Date, on the
Distribution Date and thirty days after the Distribution Date, plus (B) 75
basis points and (ii) the salary scale shall be 5.25%. Acquiror shall cause
the calculation of such amounts to be reviewed by William M. Mercer. New
Ralcorp and Acquiror shall use their best efforts to resolve any dispute
arising in connection with the calculation of the amounts to be transferred
and to effect the actual transfer of such funds. Notwithstanding the
foregoing provisions of this Section, such transfers shall be adjusted, if
and to the extent necessary, to comply with applicable law and regulations,
including Section 414(l) of the Code and the regulations promulgated
thereunder and Pension Benefit Guaranty Corporation Regulations Section
2619.41 through 2619.65 (including Appendices A through D).
(d) In connection with the transfers described in this Section,
Ralcorp and New Ralcorp shall cooperate in making any and all appropriate
filings required under the Code or ERISA, and the regulations thereunder,
and any applicable securities laws and take all such action as may be
necessary and appropriate to cause such transfers to take place as soon as
practicable after the Distribution Date; provided, however, that no
transfer shall take place until as soon as practicable after the later of
(i) the expiration of a 30-day period following the date of filing any
required Forms 5310-A (or any successor form thereto) with the IRS and (ii)
with respect to each of the New Retirement Plan transfer and the RIP
transfer, the receipt of a favorable IRS determination letter with respect
to the qualification of the transferee plan (i.e., the New Retirement Plan
and the RIP respectively) as amended through the date of transfer, under
Code Sections 401(a) and 501(a) or the receipt by New Ralcorp of an opinion
of counsel retained by Ralcorp and reasonably satisfactory in form and
substance to New Ralcorp to the effect that such counsel believes the
transferee plan as amended through the date of transfer, to be qualified
under Code Section 401(a) and that the trust established thereunder is
exempt from federal tax under Code Section 501(a). Ralcorp and New Ralcorp
agree to provide to such counsel such information in the possession of the
Ralcorp Group and the New Ralcorp Group, respectively, as may be reasonably
requested by such counsel in connection with the issuance of such opinion.
New Ralcorp agrees, during the period ending with the date of complete
transfer of assets and liabilities to the RIP and the New Retirement Plan,
to administer the Ralcorp Retirement Plan in the ordinary course, in
accordance with its plan provisions, the Code and ERISA, except as
otherwise set forth in this Agreement. In connection with this transaction,
Ralcorp and New Ralcorp shall cooperate in making any and all appropriate
filings required by the Pension Benefit Guaranty Corporation and the
regulations so governing.
(e) Except as specifically set forth in this Section, from and after
the Distribution Date, Ralcorp shall cease to have any liability whatsoever
with respect to the Ralcorp Retirement Plan other than liability for the
accrued benefits related to the asset transfer made on behalf of Branded
Employees from the Ralcorp Retirement Plan ("Transfer Obligations"), and
New Ralcorp shall assume and shall be solely responsible for all other
liabilities whatsoever under the Ralcorp Retirement Plan, including
liabilities with respect to Branded Employees other than Transfer
Obligations.
8.2 401(K) PLAN. Ralcorp shall take, or cause to be taken, all action
necessary and appropriate to amend the Ralcorp Holdings, Inc. Savings Investment
Plan (the "SIP") to remove Ralcorp as sponsor and named
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fiduciary and shall name New Ralcorp as sponsor and named fiduciary of the plan
prior to the Distribution Date. Ralcorp shall also take such action as necessary
to fully vest as of the Distribution Date each participant who is a Branded
Employee in his or her account balance under the SIP. Acquiror shall take, or
cause to be taken, such action as necessary to amend the General Mills Savings
Plan (the "Savings Plan") to permit participation by the Branded Employees of
Ralcorp immediately following the Distribution Date. The Savings Plan will
accept direct rollovers of the eligible taxable distributions which could
otherwise be made to the Ralcorp Group employees. The acceptance of direct
rollovers will be subject to the procedures of the Savings Plan. New Ralcorp
agrees to provide such information (to the extent in the possession of the New
Ralcorp Group or of any party providing services to the SIP) as may be
reasonably required by Ralcorp in order for the Acquiror to effectively
administer the Savings Plan, including, without limitation, information
necessary to determine the appropriate Code Section 415 limits of each Branded
Employee and to determine the qualified status of the SIP.
8.3 WELFARE PLANS.
(a) Ralcorp shall take, or cause to be taken, all action necessary and
appropriate to amend each and every welfare plan covering its employees
(Ralcorp Welfare Plans) to remove Ralcorp as sponsor and named fiduciary
and shall name New Ralcorp as sponsor and named fiduciary of each such plan
after the consummation of the Internal Merger and prior to the Distribution
Date. Acquiror shall take, or cause to be taken, all action necessary and
appropriate to cause either (i) its existing welfare plans to be amended,
or (ii) new welfare plans to be adopted which will cover Branded Employees
(and their dependents as appropriate) immediately following the
Distribution Date (the "New Welfare Plans"). Acquiror shall cause the New
Welfare Plans to provide benefits of substantially the same, or greater,
type and value as the benefits which the Branded Employees (other than
administrative employees who are not covered by a collective bargaining
agreement) enjoyed under the Ralcorp Welfare Plans, on the date immediately
preceding the Distribution Date. Acquiror shall also cause the New Welfare
Plans, to the extent applicable, to credit such Branded Employees with the
term of service credited to such employees as of the Distribution Date
under the terms of the applicable Ralcorp Welfare Plan. Acquiror will cause
Branded Employees to receive credit for payments made under the Ralcorp
Comprehensive and Well-Med Plan during the plan year in which the
Distribution Date occurs for purposes of satisfying the applicable
deductibles and maximum out-of-pocket limits of the applicable New Welfare
Plans during the plan year in which the Distribution Date occurs.
(b) Except as otherwise noted in this Section, Ralcorp shall cause one
or more members of the New Ralcorp Group to assume and be solely
responsible for, or cause its insurance carriers or agents to be
responsible for, all liabilities for welfare benefit claims incurred under
the welfare plans on or before the Distribution Date. For purposes of this
Section, disability claims are incurred on the date on which the disability
was incurred or, in the case of a disability which is not incurred on a
single, identifiable date, the date on which the disability was diagnosed;
medical and dental services are incurred when an individual is provided
with medical or dental care; death benefit claims are incurred at the time
of death of the insured notwithstanding any other provision of any welfare
benefit plan to the contrary. At the Distribution Date, Branded Employees
will cease participation in Ralcorp Welfare Plans, except to the extent (i)
that a Branded Employee or a covered dependent of a Branded Employee is
hospitalized on the Distribution Date, in which case such individual shall
continue to be covered under the appropriate Ralcorp Welfare Plan until the
individual is discharged from the hospital or (ii) they elect continued
coverage under such plans pursuant to COBRA or other provisions of the
plans. New Ralcorp shall be responsible for all qualifying events under
COBRA and COBRA claims incurred under the Ralcorp Welfare Plans on or
before the Distribution Date.
(c) New Ralcorp and the New Ralcorp Group shall be responsible for any
retiree medical and life insurance benefits payable under any welfare plan
with respect to any former employee of Ralcorp or one of its Affiliates who
retired from the New Ralcorp Group or the Ralcorp Group on or before the
Distribution Date and who met the eligibility requirements for such
benefits at that time. Branded Employees who retire from Ralcorp or
Acquiror after the Distribution Date shall not be entitled to retiree
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medical and life insurance benefits from the Ralcorp Welfare Plans, but
shall be eligible for coverage as provided by the New Welfare Plans.
8.4 STOCK OPTIONS AND RESTRICTED STOCK.
[(a) On or prior to the Closing Date, Ralcorp shall take such action
as may be necessary in order to obtain any required consents to insure that
at the Effective Time, all rights to acquire Ralcorp Common Stock pursuant
to the ISP (the "Ralcorp Options") held by Branded Employees, which are
outstanding at the Effective Time, whether or not then exercisable, shall
be converted into and become rights with respect to Acquiror Common Stock,
and Acquiror shall assume each such Ralcorp Option, in accordance with the
stock option agreement by which it is evidenced, so that from and after the
Effective Time, (i) each such Ralcorp Option assumed by Acquiror may be
exercised solely for shares of Acquiror Common Stock, (ii) the number of
shares of Acquiror Common Stock subject to each such Ralcorp Option shall
be equal to the number of shares of Ralcorp Common Stock subject to such
Ralcorp Option immediately prior to the Effective Time multiplied by the
Merger Agreement Ratio (as defined below), rounded down to the nearest
share and (iii) the per share exercise price under each such Ralcorp Option
shall be adjusted by dividing the per share exercise price under each such
option by the Merger Adjustment Ratio, rounded down to the nearest cent;
provided, however, each such Ralcorp Option shall otherwise be subject to
the same terms and conditions as in effect immediately prior to the
Effective Time, including restrictions on exercisability.
The "Merger Adjustment Ratio" shall mean the ratio of (i) the average
of the daily average of the high and low sale prices on the NYSE Composite
Index for the Ralcorp Stock, [trading regular way with due bills] for the
Common Stock, for the ten trading day period prior to Distribution Date to
(ii) the Average Value of Acquiror Common Stock (as defined in the Merger
Agreement).
(b) On or prior to the Distribution Date, Ralcorp shall take such
action as may be necessary in order to obtain any required consents to
insure that at the Distribution Date, all rights to acquire Ralcorp Common
Stock pursuant to the Ralcorp Options (other than Ralcorp Options held by
Branded Employees), which are outstanding at the Distribution Date, whether
or not then exercisable, shall be waived by such employees.
(c) Prior to the Distribution, Ralcorp shall accelerate or pay in cash
the value of restricted shares of Ralcorp Stock awarded pursuant to the
Ralcorp ISP and held by New Ralcorp Employees, immediately prior to the
Distribution.
8.5 CHANGE OF PLAN SPONSOR. After the consummation of the Internal Merger
and prior to the Distribution Date, Ralcorp shall take such action as necessary
to remove Ralcorp as sponsor and named fiduciary of the plans listed in Schedule
8.5, and name New Ralcorp as the sponsor and named fiduciary of such plans.
8.6 LIFE INSURANCE PROGRAMS. On the Distribution Date, Ralcorp shall
relinquish all rights under any Split Dollar Second-To-Die Life Insurance
policies currently insuring the lives of any New Ralcorp Employee and his or her
spouse, including but not limited to rights to any portion of the cash value or
death benefits under such policies, created in accordance with the terms of the
Split Dollar Agreement and Collateral Assignment between Ralcorp and such
employee regarding such policies, and will take all reasonable steps necessary
to assign such rights to New Ralcorp. Prior to the Distribution Date, Ralcorp
shall perform any and all obligations required of it under the terms of such
Split Dollar Agreement and Collateral Assignment with respect to such policies.
8.7 VACATION PAY. Ralcorp shall assume all liability for unpaid vacation
pay accrued by Branded Employees, to the extent it has been properly accrued for
on the books of the Branded Business. New Ralcorp will assume all liability for
unpaid vacation pay accrued by New Ralcorp Employees, prior to the Distribution
Date. Except as set forth in the first sentence hereof, after the Distribution
Date, Ralcorp will have no liability for vacation pay.
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8.8 SEVERANCE PAY.
(a) Ralcorp and New Ralcorp agree that, with respect to individuals
who, in connection with the Distribution, cease to be employees of the
Ralcorp Group and become employees of the New Ralcorp Group, such cessation
shall not be deemed a severance of employment from either Group for
purposes of any Plan that provides for the payment of severance, salary
continuation or similar benefits and shall, in connection with the
Distribution, if and to the extent appropriate obtain waivers from
individuals against any such assertion.
(b) The Ralcorp Group shall assume and be solely responsible for all
liabilities and obligations whatsoever in connection with claims made by or
on behalf of Branded Employees. New Ralcorp shall assume and be responsible
for any severance pay with respect to any individuals other than the
Branded Employees, including, without limitation, any individuals who, in
connection with the Distribution, cease to be employees of the Ralcorp
Group, whether or not such individuals accept employment with the New
Ralcorp Group.
8.9 COLLECTIVE BARGAINING AGREEMENTS. As of the Distribution Date, Ralcorp
and the Ralcorp Group shall cease to have any liability or obligation whatsoever
with respect to any employee or former employees under any of the collective
bargaining agreements listed on Schedule 8.9.
8.10 OTHER BALANCE SHEET ADJUSTMENTS. To the extent not otherwise provided
in this Agreement, Ralcorp, New Ralcorp and Foods shall take such action as is
necessary to effect an adjustment to the books of Ralcorp, New Ralcorp and Foods
so that, as of the Distribution Date, the prepaid expense balances and accrued
employee liabilities with respect to any employee liability or obligation
assumed or retained as of the Distribution Date by the Ralcorp Group or the New
Ralcorp Group are appropriately reflected on the consolidated balance sheets as
of the Distribution Date of Ralcorp and New Ralcorp, respectively, and are taken
into account in calculating the Closing Date Net Asset Value (as defined in the
Merger Agreement).
8.11 PRESERVATION OF RIGHTS TO AMEND OR TERMINATE PLANS. Subject to the
provisions of this Article, no provision of this Agreement, including the
agreement of Ralcorp or New Ralcorp that it, or any member of the Ralcorp Group
or the New Ralcorp Group, will make a contribution or payment to or under any
Plan herein referred to for any period, shall be construed as a limitation on
the right of Ralcorp or New Ralcorp or any member of the Ralcorp Group or the
New Ralcorp Group to amend such Plan or terminate its participation therein
which Ralcorp or New Ralcorp or any member of the Ralcorp Group or the New
Ralcorp Group would otherwise have under the terms of such Plan or otherwise,
and no provision of this Agreement shall be construed to create a right in any
employee or former employee or beneficiary of such employee or former employee
under a Plan which such employee or former employee or beneficiary would not
otherwise have under the terms of the Plan itself. Notwithstanding the above,
however, New Ralcorp agrees that it shall not make or cause to be made any
amendments to any Plan, nor shall it terminate any Plan, in a manner which would
violate the covenants set forth in this Agreement, except as may be required to
comply with applicable law, but subject to the provisions of this Article.
8.12 REIMBURSEMENT; INDEMNIFICATION. Each of the parties hereto
acknowledges that the Ralcorp Group, on the one hand, and the New Ralcorp Group,
on the other hand, may incur costs and expenses (including contributions to
Plans and the payment of insurance premiums) arising from or related to any of
the Plans which are, as set forth in this Agreement, the responsibility of the
other party hereto. Notwithstanding anything in this Section to the contrary,
(1) New Ralcorp shall reimburse Ralcorp and, as applicable, the trustees of the
Ralcorp Retirement Plan, for costs and expenses or other liabilities they may
incur after the Distribution Date which arise out of action taken by the Pension
Benefit Guaranty Corporation (PBGC) or an agreement reached between Ralcorp or
the trustees of the Ralcorp Retirement Plan and the PBGC relating to the funded
status of, or payment of benefits by, the New Ralcorp Retirement Plan or any
successor plan or plans; and (2) costs and expenses or other recovery arising
from any challenge by the IRS pursuant to Section 414(l) of the Code, in
connection with the calculation of assets and liabilities to be transferred as
set forth in Section 8.1, shall not be subject to reimbursement or
indemnification under this Agreement. Ralcorp and New Ralcorp agree to reimburse
each other, as soon as practicable but in any event within 30 days of receipt
from the other party of appropriate verification, for all such costs and
expenses. Except as specifically
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assumed or retained by Ralcorp pursuant to this Article, New Ralcorp will
indemnify and hold Ralcorp, the Branded Subsidiary and their respective
Affiliates harmless from and against any and all Liabilities or other
Indemnifiable Losses (including, without limitation, taxes, penalties, interest,
claims for benefits, legal fees and other costs and expenses) arising out of or
related to (w) the Ralcorp Plans (as defined below), (x) the employment of any
Branded Employee on or before the Distribution Date, (y) the employment of any
New Ralcorp Employee whether before, on or after the Distribution Date, or (z)
the breach of any covenant of New Ralcorp in this Article. Ralcorp Plans means
any Plan sponsored or maintained by Ralcorp or an Affiliate, or to which Ralcorp
or an Affiliate contributed or was obligated to contribute.
8.13 FURTHER TRANSFERS. For a period of six months following the
Distribution Date, no member of either Group shall, directly or indirectly,
without the prior written consent of a corporate officer of the other Group,
solicit or attempt to solicit any exempt employee or officer of such other Group
for the purpose of obtaining his or her services for hire, or otherwise causing
such exempt employee to leave employment with such other Group, and no member of
either Group, without the prior written consent of a corporate officer of the
other Group, will, for such period of six months, hire such exempt employee or
officer; provided, however, if the employment of any officer or exempt employee
of one Group is terminated by that Group at any time following the Distribution,
a member of the other Group may employ such person without the consent of the
other Group. Subject to the above sentence, Ralcorp and New Ralcorp recognize
that there may be New Ralcorp Employees who will, after the Distribution, become
employed by Ralcorp and there may be Branded Employees who become employed,
after the Distribution Date, by New Ralcorp.
8.14 OTHER LIABILITIES. As of the Distribution Date, New Ralcorp shall
assume and be solely responsible for all Liabilities whatsoever of the Ralcorp
Group with respect to claims made by individuals other than Branded Individuals
relating to any Liability not otherwise expressly provided for in this
Agreement, including earned salaries, wages, severance payments or other
compensation, regardless of whether such Liability was incurred before or after
the Distribution Date.
8.15 COMPLIANCE. Notwithstanding anything to the contrary in this Article,
to the extent any actions of the parties contemplated in this Article are
determined prior to the Distribution to violate law or result in unintended tax
liability for Branded Individuals or New Ralcorp Individuals, such action may be
modified to avoid such violation of law or unintended tax liability.
ARTICLE IX
INDEMNIFICATION
9.1 INDEMNIFICATION.
(a) From and after the Effective Time, Acquiror, Ralcorp and the
Branded Subsidiary jointly and severally agree to indemnify and hold
harmless New Ralcorp against any and all Indemnifiable Losses for or on
account of or arising from or in connection with or otherwise with respect
to:
(i) any and all Branded Liabilities (except for the Scheduled
Branded Litigation and the Unknown Branded Liabilities, to the extent
that New Ralcorp is obligated to indemnify Ralcorp and the Branded
Subsidiary therefor under Section 9.1(b)(ii)) assumed by the Branded
Subsidiary pursuant to Section 3.2 of this Agreement;
(ii) any breach or violation of any covenant made in the Merger
Agreement, this Agreement or any other Ancillary Agreement by Acquiror,
or, with respect to covenants to be performed after the Effective Time,
by Ralcorp or the Branded Subsidiary (including Ralcorp's obligations
under Section 9.1(c));
(iii) subject to the limitations set forth in Section 9.2, any
breach or violation of any representation or warranty (without regard to
materiality qualifications contained therein) made by Acquiror and/or
Merger Sub in the Merger Agreement; or
(iv) as provided in Section 9.1(c).
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Any indemnification provided for under this Section shall be deemed to also
extend to other members of the New Ralcorp Group, Affiliates of New Ralcorp and
to New Ralcorp Employees, directors, Plan fiduciaries, shareholders, agents,
consultants, representatives, successors, transferees and assigns of New Ralcorp
or members of the New Ralcorp Group.
(b) From and after the Distribution Date, New Ralcorp agrees to indemnify
and hold harmless Ralcorp and the Branded Subsidiary against any and all
Indemnifiable Losses for or on account of or arising from or in connection with
or otherwise with respect to:
(i) any and all New Ralcorp Liabilities assumed by New Ralcorp
pursuant to Section 3.4 of this Agreement;
(ii) subject to the limitations set forth in Section 9.2, any and all
Unknown Branded Liabilities and the Scheduled Branded Litigation;
(iii) any breach or violation of any covenant made in the Merger
Agreement, this Agreement or any other Ancillary Agreement by New Ralcorp
or Foods or, with respect to covenants to be performed before the Effective
Time, by Ralcorp or the Branded Subsidiary (including New Ralcorp's
obligations under Section 9.1(c));
(iv) the ownership, use or possession of the New Ralcorp Assets or the
operation of the New Ralcorp Business, whether relating to or arising out
of occurrences prior to or after the Effective Time, except to the extent
liability therefor is assumed by the Branded Subsidiary pursuant to Section
3.2 of this Agreement;
(v) subject to the limitations set forth in Section 9.2, any breach or
violation of any representation or warranty (without regard to materiality
qualifications contained therein) made by Ralcorp in the Merger Agreement
or made by New Ralcorp or Foods in this Agreement;
(vi) any Third Party Claim to the extent relating to the actions of
the Ralcorp Board in authorizing the Distribution or the Merger;
(vii) any Third Party claim arising out of the disclosures contained
in the Form 10 or the S-1, if required, other than disclosures based on
information provided by or on behalf of Acquiror for inclusion therein; or
(viii) as provided in Section 9.1(c).
Any indemnification provided for under this Section shall also be deemed to
extend to other members of the Ralcorp Group, Affiliates of New Ralcorp, Branded
Employees, directors, Plan fiduciaries, shareholders, agents, consultants,
representatives, successors, transferees and assigns of Ralcorp or members of
the Ralcorp Group.
(c) In the event an appraisal award is paid to any holder of shares of
Ralcorp Stock as a result of such holder's exercise of dissenters' rights with
respect to the Merger and/or the Distribution, the liability for such appraisal
award shall be allocated as follows:
(i) if such appraisal award is based on the value of the Ralcorp Stock
before giving effect to the Distribution and such award does not allocate
the portions thereof attributable to the value of the Branded Business and
the value of the New Ralcorp Business, respectively, Ralcorp shall be
responsible for and shall indemnify New Ralcorp and its Affiliates against
such award in the amount per share equal to the value of the Merger
Consideration (as defined in the Merger Agreement), as calculated based on
the Average Value of Acquiror Common Stock (as defined in the Merger
Agreement), and New Ralcorp shall be responsible for and shall indemnify
Ralcorp and its Affiliates against such award to the extent such award
exceeds the value of the per share Merger Consideration as described above.
(ii) if such appraisal award is based on the value of the Ralcorp
Stock before giving effect to the Distribution and such award allocates the
portions thereof attributable to the value of the Branded Business and the
value of the New Ralcorp Business, respectively, Ralcorp and New Ralcorp
shall each
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be responsible for and shall indemnify the other (and the other's
Affiliates) against the portion of the award allocated to the value of the
Branded Business and the value of the New Ralcorp Business, respectively.
(iii) if such appraisal award is based on the value of the Ralcorp
Stock after giving effect to the Distribution, Ralcorp shall be responsible
for and shall indemnify New Ralcorp and its Affiliates against all of such
award.
(iv) each of Ralcorp and New Ralcorp shall bear their own respective
costs and expenses incurred in connection with any appraisal proceeding
relating to the Merger and/or the Distribution.
(v) Ralcorp and New Ralcorp each agree to cooperate with each other
reasonably in the event of any appraisal proceeding involving the value of
the Ralcorp Stock before giving effect to the Distribution in order to
minimize the appraisal award granted as a whole and, to the extent
reasonably feasible without prejudicing its own interests in such appraisal
proceeding, minimize the portion of the appraisal award that would be
payable by the other party.
9.2 LIMITATIONS ON INDEMNIFICATION.
(a) Notwithstanding the expiration of the representations and
warranties in the Merger Agreement or anything else to the contrary in the
Merger Agreement, the indemnification obligations set forth in Sections
9.1(a)(iii) and (b)(v) above shall survive the Distribution Date for
eighteen months, at which time such indemnification obligations shall
expire automatically, except with respect to written claims for
indemnification made in good faith prior to such expiration (which claims
will survive such expiration).
(b) The indemnification obligations set forth in Section 9.1(b)(ii)
above shall survive the Distribution Date for five years, at which time
such indemnification obligation shall expire automatically, except with
respect to written claims for indemnification made in good faith prior to
such expiration (which claims will survive such expiration).
(c) The indemnification obligation set forth in Section 9.1(a)(iii)
above shall apply only to the extent Indemnifiable Losses under such
Section exceed $6 million in the aggregate.
(d) The indemnification obligations set forth in Sections 9.1(b)(ii)
and (v) above shall apply only to the extent Indemnifiable Losses under
such Sections combined exceed $6 million in the aggregate.
9.3 INSURANCE AND THIRD PARTY OBLIGATIONS. Any indemnification otherwise
payable pursuant to Section 9.1 shall be reduced by the amount of any insurance
or other amounts (net of deductibles and allocated paid loss retropremiums)
received from a third party by the Indemnitee or paid by a third party on the
Indemnitee's behalf. It is expressly agreed that no insurer or any other third
party shall be (i) entitled to a benefit it would not be entitled to receive in
the absence of the foregoing indemnification provisions, (ii) relieved of the
responsibility to pay any claims for which it is obligated, or (iii) entitled to
any subrogation rights with respect to any obligation hereunder.
9.4 ACTIONS AND CLAIMS OTHER THAN THIRD PARTY CLAIMS; NOTICE AND
PAYMENT. Promptly upon obtaining knowledge of any Action, Liabilities or claim,
other than Third Party Claims, which any Person entitled to indemnification (the
"Indemnitee") believes may give rise to any Indemnifiable Loss, the Indemnitee
shall promptly notify the party liable for such indemnification (the
"Indemnitor") in writing of such Action or claim (such written notice being
hereinafter referred to as a "Notice of Claim"); provided, however, that failure
of an Indemnitee timely to give a Notice of Claim to the Indemnitor shall not
release the Indemnitor from its indemnity obligations set forth in this Article
except to the extent that such failure materially increases the amount of
indemnification which the Indemnitor is obligated to pay hereunder, in which
event the amount of indemnification which the Indemnitee shall be entitled to
receive shall be reduced to an amount which the Indemnitee would have been
entitled to receive had such Notice of Claim been timely given. A Notice of
Claim shall specify in reasonable detail the nature and estimated amount of any
such Action, Liabilities or claim giving rise to a right of indemnification. The
Indemnitor shall have thirty Business Days after receipt of a Notice of Claim to
notify the Indemnitee whether or not it disputes its liability to the Indemnitee
with respect to such Action, Liabilities or claim or the amount thereof, and
setting forth the basis
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<PAGE> 20
for such objection. If the Indemnitor fails to respond to the Indemnitee within
such thirty Business Day period, the Indemnitor shall be deemed to have
acknowledged its responsibility for such Indemnifiable Loss. The Indemnitor
shall pay and discharge any such Indemnifiable Loss which is not contested
within forty-five Business Days after the later of its receipt of a Notice of
Claim or the determination of the amount of such Indemnifiable Loss.
9.5 THIRD PARTY CLAIMS; NOTICE, DEFENSE AND PAYMENT. Promptly following the
earlier of (i) receipt of notice of the commencement of a Third Party Claim or
(ii) receipt of information from a third party alleging the existence of a Third
Party Claim, any Indemnitee who believes that it is or may be entitled to
indemnification by any Indemnitor under Section 9.1 with respect to such Third
Party Claim shall deliver a Notice of Claim to the Indemnitor. Failure of an
Indemnitee timely to give a Notice of Claim to the Indemnitor shall not release
the Indemnitor from its indemnity obligations set forth in this Article except
to the extent that such failure adversely affects the ability of the Indemnitor
to defend such Action, Liabilities or claim or materially increases the amount
of indemnification which the Indemnitor is obligated to pay hereunder, in which
event the amount of indemnification which the Indemnitee shall be entitled to
receive shall be reduced to an amount which the Indemnitee would have been
entitled to receive had such Notice of Claim been timely given. Indemnitee shall
not settle or compromise any Third Party Claim in an amount in excess of $25,000
prior to giving a Notice of Claim to Indemnitor. In addition, if an Indemnitee
settles or compromises any Third Party Claims for an amount equal to or less
than $25,000 prior to giving a Notice of Claim to an Indemnitor, the Indemnitor
shall be released from its indemnity obligations to the extent that such
settlement or compromise was not made in good faith and was not commercially
reasonable. Within thirty Business Days after receipt of Notice of Claim, the
Indemnitor may (i) by giving written notice thereof to the Indemnitee,
acknowledge liability for, and at its option elect to assume, the defense of
such Third Party Claim at its sole cost and expense or (ii) object to the claim
of indemnification set forth in the Notice of Claim delivered by the Indemnitee;
provided that if the Indemnitor does not within the same thirty Business Day
period give the Indemnitee written notice either objecting to such claim and
setting forth the grounds therefor or electing to assume the defense, the
Indemnitor shall be deemed to have acknowledged its responsibility to accept the
defense and its ultimate liability, if any, for such Third Party Claim. Any
contest of a Third Party Claim as to which the Indemnitor has elected to assume
the defense shall be conducted by attorneys employed by the Indemnitor and
reasonably satisfactory to the Indemnitee; provided that the Indemnitee shall
have the right to participate in such proceedings and to be represented by
attorneys of its own choosing at the Indemnitee's sole cost and expense. If the
Indemnitor assumes the defense of a Third Party Claim, the Indemnitor may settle
or compromise the Third Party Claim without the prior written consent of
Indemnitee; provided that the Indemnitor may not agree to any such settlement
pursuant to which any such remedy or relief, other than monetary damages for
which the Indemnitor shall be responsible hereunder, shall be applied to or
against the Indemnitee, without the prior written consent of the Indemnitee,
which consent shall not be unreasonably withheld. If the Indemnitor does not
assume the defense of a Third Party Claim for which it has acknowledged
liability for indemnification under Section 9.1, the Indemnitee may require the
Indemnitor to reimburse it on a current basis for its reasonable expenses of
investigation, reasonable attorney's fees and reasonable out-of-pocket expenses
incurred in defending against such Third Party Claim and the Indemnitor shall be
bound by the result obtained with respect thereto by the Indemnitee, provided
that the Indemnitor shall not be liable for any settlement effected without its
consent, which consent shall not be unreasonably withheld. The Indemnitor shall
pay to the Indemnitee in cash the amount for which the Indemnitee is entitled to
be indemnified (if any) within ten Business Days after the final resolution of
such Third Party Claim (whether by settlement, a final nonappealable judgment of
a court of competent jurisdiction or otherwise) or, in the case of any Third
Party Claim as to which the Indemnitor has not acknowledged liability, within
fifteen days after such Indemnitor's objection has been resolved pursuant to the
provisions of Article XII of this Agreement. Pending acknowledgment or
determination of the liability of Indemnitor with respect to any Third Party
Claim, Indemnitee may defend such Third Party Claim and any Liability arising
out of such Third Party Claim (including all costs and expenses of such defense)
shall be allocated in accordance with such acknowledgment or determination.
9.6 REMEDIES CUMULATIVE; SURVIVAL OF INDEMNITIES. The remedies provided in
this Article shall be cumulative and shall not preclude assertion by any
Indemnitee of any other rights or the seeking of any and all
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<PAGE> 21
other remedies against any Indemnitor. The obligations of each of Ralcorp and
the Branded Subsidiary, on the one hand, and New Ralcorp, on the other hand,
under this Article shall survive the sale or other transfer by it of any assets
or businesses or the assignment by it of any Liabilities, with respect to any
claim of the other for any Indemnifiable Losses related to such assets,
businesses or Liabilities.
ARTICLE X
OTHER POST-DISTRIBUTION OBLIGATIONS
10.1 NEW RALCORP'S POST-DISTRIBUTION OBLIGATIONS. New Ralcorp shall, and
shall cause each member of the New Ralcorp Group to, comply with each
representation and statement made, or to be made, to the IRS (or, if applicable,
tax counsel) in connection with any ruling (or tax opinion) obtained, or to be
obtained, by Ralcorp, from the IRS (or tax counsel) with respect to any
transaction contemplated by this Agreement or the Merger Agreement. Neither New
Ralcorp nor any member of the New Ralcorp Group shall for a period of two years
following the Distribution Date engage in any of the following transactions,
unless either (a) an opinion in form and substance reasonably satisfactory to
Ralcorp is obtained from counsel to New Ralcorp, or (b) a supplemental ruling is
obtained from the IRS, in either case to the effect that such transaction(s)
would not adversely affect the tax consequences of the transactions described in
this Agreement or the Merger Agreement to (1) Ralcorp or any member of the
Ralcorp Group, (2) New Ralcorp or any member of the New Ralcorp Group, or (3)
the Ralcorp shareholders as of the Record Date. The transactions subject to this
provision are: (i) making a material disposition (including transfers from one
member of the New Ralcorp Group to another member of the New Ralcorp Group), by
means of a sale or exchange of assets or capital stock, a distribution to
shareholders, or otherwise, of any of its assets (other than the transactions
contemplated by this Agreement) except in the ordinary course of business; (ii)
repurchasing any New Ralcorp capital stock, unless such repurchase satisfies the
requirements of Section 4.05(1)(b) of Revenue Procedure 96-30; (iii) issuing any
New Ralcorp capital stock that in the aggregate exceeds ten percent (10%) of the
issued and outstanding stock of New Ralcorp immediately following the
Distribution; (iv) liquidating or merging with any other corporation (including
a member of the New Ralcorp Group); or (v) causing New Ralcorp to cease
conducting directly the New Ralcorp Business in the ordinary course. New Ralcorp
hereby represents that neither New Ralcorp nor any member of the New Ralcorp
Group has any present intention to undertake any of the transactions set forth
in (i), (ii), (iii), (iv) or (v) above.
10.2 RALCORP'S AND ACQUIROR'S POST-DISTRIBUTION OBLIGATIONS. Acquiror and
Ralcorp shall, and shall cause each member of the Ralcorp Group to, comply with
each representation and statement made, or to be made, to the IRS (or, if
applicable, tax counsel) in connection with any ruling (or tax opinion) obtained
by Ralcorp from the IRS (or tax counsel) with respect to any transaction
contemplated by this Agreement or the Merger Agreement. Acquiror shall not,
during the two-year period following the Merger, (i) reduce its stock ownership
interest in Ralcorp to a level that does not constitute "control" of Ralcorp
within the meaning of Section 368(c) of the Code; (ii) cause Ralcorp to be
liquidated (including via a statutory merger); (iii) cause Ralcorp to reduce its
stock ownership interest in the Branded Subsidiary to a level that does not
constitute "control" of the Branded Subsidiary within the meaning of Section
368(c) of the Code; (iv) engage in or cause to occur any transaction(s) which
will result in the Branded Subsidiary ceasing to conduct directly the Branded
Business in the ordinary course or cause Ralcorp's stock ownership interest in
the Branded Subsidiary to represent less than 90% of the fair market value of
Ralcorp's gross assets; or (v) cause the Branded Subsidiary to dispose of a
material portion of its assets other than in the ordinary course of business,
unless (a) an opinion in form and substance reasonably satisfactory to New
Ralcorp is obtained from counsel to Acquiror; or (b) a supplemental ruling is
obtained from the IRS, in either case to the effect that such transaction(s)
would not adversely affect the tax consequences of the Internal Merger, the
Internal Spinoff or the Distribution. Acquiror represents that it presently has
no plan or intention, and will have no plan or intention at the time of the
Merger, to engage in or cause to occur any of the transactions or events
described in items (i) through (v) of this Section.
10.3 PERFORMANCE BY NEW RALCORP OF CERTAIN MERGER AGREEMENT COVENANTS. New
Ralcorp, as successor to Foods subsequent to the Internal Merger, hereby
covenants and agrees that it will (a) perform in all
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<PAGE> 22
respects the covenants applicable to Foods in Section 2.3 of the Merger
Agreement and (b) pay the fees and expenses of Lehman Brothers, Inc. referred to
in Section 3.2(i) of the Merger Agreement.
10.4 DISTRIBUTORSHIP AGREEMENT. From and after the Effective Time, New
Ralcorp, as successor to Foods subsequent to the Internal Merger, will exercise
its rights under the Exclusive Distribution Agreement for Cereals, dated as of
April 1, 1994 (the "Distributorship Agreement"), between Foods and Ralston
Purina Company ("RPCo.") so as (a) to prevent RPCo. from continuing to use any
trademarks used in the Branded Business in connection with RPCo.'s sale of
Products (as defined in the Distributorship Agreement), and (b) to terminate the
Distributorship Agreement, as to Products that are included in the Branded
Business, at the earliest time permitted under such agreement.
10.5 NET WORTH.
(a) For a period of two years following the Distribution Date, New
Ralcorp and its subsidiaries, on a consolidated basis, will maintain at all
times a net worth (determined in accordance with generally accepted
accounting principles, consistently applied) of not less than $100 million.
(b) Except as provided in paragraph (c) below, for a period of two
years commencing on the second anniversary of the Distribution Date, New
Ralcorp and its subsidiaries, on a consolidated basis, will maintain at all
times a net worth (determined in accordance with generally accepted
accounting principles, consistently applied) of not less than the lesser of
(i) the sum of $25 million plus the aggregate of all claims for
indemnification made in good faith under Section 9.1(b) hereof (subject to
the limitations provided in Section 9.2) unresolved and pending on the
second anniversary of the Distribution Date, and (ii) $100 million.
(c) Notwithstanding the foregoing paragraph (b), in the event an
agreement between Ralcorp and RPCo. as contemplated by Section 4.3(d)(ii)
of the Merger Agreement is not entered into prior to the second anniversary
of the Distribution Date, for a period of three years commencing on the
second anniversary of the Distribution Date, New Ralcorp and its
subsidiaries, on a consolidated basis, will maintain at all times a net
worth (determined in accordance with generally accepted accounting
principles, consistently applied) of not less than the amounts specified
below:
(i) during the first year of such three-year period, the lesser of
(A) the sum of $75 million plus the aggregate of all claims for
indemnification made in good faith under Section 9.1(b) hereof (subject
to the limitations provided in Section 9.2) unresolved and pending on
the second anniversary of the Distribution Date, and (B) $100 million;
(ii) during the second year of such three-year period, the lesser
of (A) the sum of $50 million plus the aggregate of all claims for
indemnification made in good faith under Section 9.1(b) hereof (subject
to the limitations provided in Section 9.2) unresolved and pending on
the third anniversary of the Distribution Date, and (B) the amount
specified in clause (i) of this paragraph (c); and
(iii) during the third year of such three-year period, the lesser
of (A) the sum of $25 million plus the aggregate of all claims for
indemnification made in good faith under Section 9.1(b) hereof (subject
to the limitations provided in Section 9.2) unresolved and pending on
the fourth anniversary of the Distribution Date, and (B) the amount
specified in clause (ii) of this paragraph (c).
In the event an agreement between Ralcorp and RPCo. as contemplated by
Section 4.3(d)(ii) of the Merger Agreement is entered into after the
second anniversary of the Distribution Date, upon execution of such
agreement this paragraph (c) will be of no further force or effect and
the provisions of paragraph (b) will apply instead.
(d) During the foregoing periods, New Ralcorp will provide to Ralcorp,
within 45 days following the end of each of New Ralcorp's fiscal quarters,
a certificate of the Chief Financial Officer of New Ralcorp certifying New
Ralcorp's continuing compliance with the foregoing covenants.
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ARTICLE XI
GUARANTEES AND SURETY BONDS OF THE RALCORP GROUP
New Ralcorp agrees that as soon as practicable following the Distribution
Date it will substitute surety bonds obtained by it for each of the surety bonds
of any member of the Ralcorp Group, if any, relating to any New Ralcorp Asset,
the New Ralcorp Business or any New Ralcorp Liability. New Ralcorp agrees that
it shall enter indemnification agreements in its name with each provider of a
surety bond obtained with respect to the New Ralcorp Assets, the New Ralcorp
Business or any New Ralcorp Liability. New Ralcorp shall use its reasonable best
efforts to obtain the complete release and discharge of any member of the
Ralcorp Group from all obligations (including any obligations upon any renewal
or extension) related to the New Ralcorp Assets, the New Ralcorp Business or any
New Ralcorp Liability on which any member of the Ralcorp Group is directly or
contingently obligated as a guarantor or assignor or otherwise contingently
liable (including, without limitation, any letter of credit, guaranties with
respect to workers' compensation liabilities, and guarantees issued in
connection with Resorts' Conference Center (the "New Ralcorp Obligations")). In
the event that New Ralcorp is unable to obtain any such release, New Ralcorp
agrees that (i) it shall not extend the term or otherwise modify any such New
Ralcorp Obligation in a manner which would expand Ralcorp's financial exposure
under such New Ralcorp Obligation, (ii) it shall use its reasonable best efforts
to substitute itself or another member of the New Ralcorp Group as primary
guarantor of such New Ralcorp Obligations, and (iii) New Ralcorp or any member
of the New Ralcorp Group shall not (other than, in connection with the Resorts
Conference Center, through a sale of all or substantially all of Ralston
Resorts, Inc., a wholly owned subsidiary of Foods) assign any such New Ralcorp
Obligation or transfer, sell or assign any assets securing such New Ralcorp
Obligation or comprising all or any substantial portion of a project, the
financing of which gave rise to such New Ralcorp Obligation, unless Ralcorp or
the appropriate member of the Ralcorp Group, as the case may be, is released and
discharged of all liabilities with respect to such New Ralcorp Obligation.
Without limiting any other obligation of indemnification under this Agreement or
any agreement described herein, New Ralcorp shall defend, indemnify and hold
harmless each member of the Ralcorp Group and their respective Affiliates,
Subsidiaries, directors, officers and employees against any and all Liabilities
whatsoever incurred or suffered by any of them as a result of any New Ralcorp
Obligation. The term "reasonable best efforts" as used in this paragraph shall
not be deemed to require New Ralcorp to (i) prepay any such New Ralcorp
Obligation, (ii) agree to any increase in amount of principal payments or
interest with respect thereto or (iii) extend or accelerate the term of any such
New Ralcorp Obligation.
ARTICLE XII
MEDIATION
12.1 RESOLUTION BY NEGOTIATION; MEDIATION. If any question shall arise in
regard to the interpretation of any provision of this Agreement or any Ancillary
Agreement or as to the rights or obligations of either Group hereunder or
thereunder, each Group shall designate a senior executive within its
organization or other individual with decision-making authority regarding the
dispute who shall, within thirty days after such question arises, meet with each
other to negotiate and attempt to resolve such question in good faith. Such
individuals may, if they so desire, consult outside advisors for assistance in
arriving at such a resolution. In the event that a resolution is not achieved
within such thirty day period, then the parties will submit the dispute to
mediation in accordance with the Model Procedure for Mediation of Business
Disputes of the Center for Public Resources or such other procedures as the
parties may agree and will bear equally the costs of the mediation. The parties
will jointly appoint a mutually acceptable mediator, seeking assistance in such
regard from JAMS/Endispute or the Center for Public Resources if they have been
unable to agree upon such appointment and the procedures within 20 days from the
conclusion of the negotiation period. The parties agree to participate in good
faith in the mediation and negotiations related thereto for a period of 30 days.
If the parties are not successful in resolving the dispute through the
mediation, then the parties may agree to submit the matter to binding
arbitration or a private adjudicator, or either party may seek an adjudicated
resolution through the appropriate court. The foregoing shall not be construed
to prevent any party from
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<PAGE> 24
seeking such preliminary injunctive relief, without compliance with the
foregoing provisions, as may be necessary to preserve the status quo pending
resolution of any such dispute.
12.2 JURISDICTION; WAIVER OF JURY TRIAL. Subject to Section 12.1, each of
the parties hereto (a) consents to submit itself to the personal jurisdiction of
any Federal court located in the State of Missouri or the State of Minnesota in
the event any dispute arises out of this Agreement or any other Ancillary
Agreement or any of the transactions contemplated hereby or thereby, (b) agrees
that it will not attempt to deny or defeat such personal jurisdiction by motion
or other request for leave from any such court, and (c) agrees that it will not
bring any action relating to this Agreement or any other Ancillary Agreement or
any of the transactions contemplated hereby or thereby in any court other than a
Federal court (or if such court does not have subject matter jurisdiction, in a
state court) sitting in the State of Missouri or the State of Minnesota. THE
PARTIES HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY DISPUTE
ARISING UNDER THIS AGREEMENT OR ANY OTHER ANCILLARY AGREEMENT.
ARTICLE XIII
MISCELLANEOUS
13.1 FURTHER ASSURANCES. Each party hereto shall cooperate reasonably with
the other parties, and execute and deliver, or use its reasonable best efforts
to cause to be executed and delivered, all instruments, including instruments of
conveyance, assignment and transfer, and to make all filings with, and to obtain
all consents, approvals or authorizations of, any governmental or regulatory
authority or any other Person under any permit, license, agreement, indenture or
other instrument, and take all such other actions as such party may reasonably
be requested to take by any other party hereto from time to time, consistent
with the terms of this Agreement, in order to effectuate the provisions and
purposes of this Agreement and the transfers of Assets and Liabilities and the
other transactions contemplated hereby or in any of the Ancillary Agreements.
13.2 SURVIVAL OF AGREEMENTS. All covenants and agreements of the parties
hereto contained in this Agreement shall survive the Distribution Date.
13.3 ENTIRE AGREEMENT. This Agreement, the Exhibits and Schedules hereto,
the Merger Agreement and the Ancillary Agreements shall constitute the entire
agreement between the parties hereto with respect to the subject matter hereof,
superseding all previous negotiations, commitments and writings with respect to
such subject matter.
13.4 EXPENSES. Except as provided in Section 7.2(b) of the Merger Agreement
and Section 10.3 of this Agreement, all fees and expenses incurred in connection
with the Merger, the Distribution, this Agreement, the Merger Agreement and the
transactions contemplated by this Agreement, the Merger Agreement and the
Ancillary Agreements shall be paid by the party incurring such fees or expenses,
whether or not the Distribution is consummated, except that expenses incurred in
connection with printing and mailing the Proxy Statement, the Form S-4, the Form
S-1 (if required) and the Form 10, shall be shared equally by Acquiror and
Ralcorp, subject to the provisions of Section 5.6 of the Merger Agreement.
13.5 GOVERNING LAW. This Agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of Missouri, without regard
to its conflicts of law principles, as to all matters, including matters of
validity, construction, effect, performance and remedies.
13.6 NOTICES. All notices, requests, claims, demands and other
communications hereunder (collectively, "Notices") shall be in writing and shall
be given (and shall be deemed to have been duly given upon receipt)
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<PAGE> 25
by delivery in person, by cable, telegram, telex, facsimile or other standard
form of telecommunications, or by registered or certified mail, postage prepaid,
return receipt requested, addressed as follows:
If to a member of the Ralcorp Group or Acquiror:
General Mills, Inc.
Number One General Mills Boulevard
Minneapolis, Minnesota 55426
Attention: Siri S. Marshall
If to a member of the New Ralcorp Group:
R.W. Lockwood
General Counsel
800 Market Street, Suite 2900
St. Louis, Missouri 63101
Facsimile: (314) 877-7748
or to such other address as either Group may have furnished to the other
Group by a notice in writing in accordance with this Section.
13.7 AMENDMENT AND MODIFICATION. This Agreement may be amended, modified or
supplemented, and rights hereunder may be waived, only by a written agreement
signed by Ralcorp, New Ralcorp, Foods and Acquiror. No waiver of any term,
provision or condition of or failure to exercise or delay in exercising any
rights or remedies under this Agreement, in one or more instances, shall be
deemed to be, or construed as, a further or continuing waiver of such term,
provision, condition, right or remedy or as a waiver of any other term,
provision or condition of, or right or remedy under, this Agreement.
13.8 SUCCESSORS AND ASSIGNS; NO THIRD-PARTY BENEFICIARIES. This Agreement
and all of the provisions hereof shall be binding upon and inure to the benefit
of each party hereto and each of their respective successors and permitted
assigns, but neither this Agreement nor any of the rights, interests and
obligations hereunder shall be assigned by (i) the New Ralcorp Group without the
prior written consent of Acquiror or the Ralcorp Group (which consent shall not
be unreasonably withheld) and (ii) the Ralcorp Group or Acquiror, as the case
may be, without the prior written consent of the New Ralcorp Group (which
consent shall not be unreasonably withheld). This Agreement is solely for the
benefit of each Group and is not intended to confer upon any other Person any
rights or remedies hereunder.
13.9 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13.10 INTERPRETATION.
(a) The Article and Section headings contained in this Agreement are
solely for the purpose of reference, are not part of the agreement of the
parties hereto and shall not in any way affect the meaning or
interpretation of this Agreement.
(b) The parties hereto intend that, for federal income tax purposes,
the contributions, transfers, assumptions, Distribution and Merger
contemplated hereby shall each qualify for non-recognition treatment under
the applicable provisions of subchapter C of the Code.
13.11 LEGAL ENFORCEABILITY. Any provision of this Agreement or any of the
Ancillary Agreements which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions hereof. Any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. Each party
acknowledges that money damages would be an inadequate remedy for any breach of
the provisions of this Agreement or any of the Ancillary Agreements and agrees
that the obligations of the parties hereunder and thereunder shall be
specifically enforceable.
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<PAGE> 26
13.12 REFERENCES; CONSTRUCTION. References to any "Article," "Exhibit,"
"Schedule" or "Section," without more, are to Articles, Exhibits, Schedules and
Sections to or of this Agreement. Unless otherwise expressly stated, clauses
beginning with the term "including" set forth examples only and in no way limit
the generality of the matters thus exemplified.
13.13 TERMINATION. In the event the Merger Agreement is terminated,
notwithstanding any provision hereof, this Agreement may be terminated and the
Distribution abandoned at any time prior to the Distribution Date by and in the
sole discretion of the Ralcorp Board without the approval of any other party
hereto or of Ralcorp's shareholders. In the event of such termination, no party
hereto shall have any Liability to any Person by reason of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
RALCORP HOLDINGS, INC.
By:
-----------------------------------
Name:
Title:
NEW RALCORP HOLDINGS, INC.
By:
-----------------------------------
Name:
Title:
RALSTON FOODS, INC.
By:
-----------------------------------
Name:
Title:
CHEX INC.
By:
-----------------------------------
Name:
Title:
GENERAL MILLS, INC.
By:
-----------------------------------
Name:
Title:
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<PAGE> 1
EXHIBIT 2.3
TAX SHARING AGREEMENT
BETWEEN
RALCORP HOLDINGS, INC.
AND
NEW RALCORP
THIS AGREEMENT (the "Agreement") dated as of _______________, 199__, is made by
and between Ralcorp Holdings, Inc. ("Ralcorp"), a Missouri corporation, and New
Ralcorp Holdings, Inc., a Missouri Corporation ("New Ralcorp"), and each of the
parties listed on the signature page.
WHEREAS, Ralcorp is the common parent of an affiliated group of domestic
corporations, including New Ralcorp (the successor to Ralston Foods, Inc.), for
which a consolidated Federal Income Tax Return is filed;
WHEREAS, Ralcorp proposes to distribute to its shareholders all of its stock in
New Ralcorp (the "Distribution") under the Reorganization Agreement among
Ralcorp, New Ralcorp, Branded Subsidiary and Acquiror dated _________________,
199__, subject to receipt of a favorable ruling from the Internal Revenue
Service or an opinion of counsel that the Distribution qualifies for tax-free
treatment under section 355 of the Code;
WHEREAS, following the Distribution, New Ralcorp will become the common parent
of an affiliated group of domestic corporations for which a consolidated
Federal Income Tax Return will be filed;
WHEREAS, New Ralcorp and its Affiliates will exist independent of Ralcorp and
its Affiliates after the Distribution Date; and
WHEREAS, the parties desire to set forth their agreement relating to their
respective obligations, responsibilities, rights and entitlements with respect
to their Federal, state and local Tax liabilities, as well as certain other Tax
matters, attributable to periods before and after the Distribution;
NOW, THEREFORE, in consideration of the premises and of the agreements herein
set forth, Ralcorp (on its own behalf and on behalf of its Affiliates) and New
Ralcorp (on its own behalf and on behalf of its Affiliates) hereby agree as
follows:
<PAGE> 2
ARTICLE I. GENERAL PROVISIONS
SEC. 1 DEFINITIONS
(a) As used in this Agreement:
"Affiliate" shall have the meaning assigned to it in the Reorganization
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated State Tax" means, with respect to each state, any Income Tax
payable to any such state in which New Ralcorp or any of its Affiliates is or
may be liable for such Tax on a consolidated, combined or unitary basis with
Ralcorp or any of its Affiliates.
"Distribution Date" means the date that the shares of New Ralcorp are
distributed to the Ralcorp shareholders.
"Federal Tax" means any United States net income, environmental, excise,
alternative or add-on minimum Tax.
"Income Taxes" means any Federal Tax, state or local income or franchise tax
or other tax measured by income and all other taxes reported on returns which
include federal, state or local income or franchise taxes or other taxes
measured by income, together with any interest, penalties or additions to tax
imposed with respect thereto, but excluding therefrom any taxes imposed by any
foreign government or subdivision thereof.
"Income Tax Return" means any federal, state or local consolidated or
separate Tax Return which reports Income Taxes of Ralcorp, New Ralcorp or any
Affiliate thereof.
"Other Taxes" means Taxes other than Income Taxes.
"Post-Distribution Tax Period" means a taxable year or other taxable period
beginning after the Distribution Date, including the portion of any Straddle
Period occurring subsequent to the Distribution Date.
"Pre-Distribution Tax Period" means any taxable year or other taxable period
beginning before, and ending on or before, the Distribution Date, including the
portion of any Straddle Period occurring prior to the Distribution Date.
"Ralcorp Consolidated Group" means, with respect to any taxable period, the
corporations which are members of the affiliated group of corporations of which
Ralcorp is the common parent (within the meaning of section 1504 of the Code).
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<PAGE> 3
"Straddle Period" means any taxable period that includes (but does not end
on) the Distribution Date.
"Tax" means (A) any net income, alternative or add-on minimum, gross income,
gross receipts, sales, use, ad valorem, franchise, profits, license,
withholding, payroll, employment, excise, transfer, recording, severance,
stamp, occupation, premium, property, environmental, custom duty, or other tax,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest and any penalty, addition to tax or additional
amount imposed by any governmental authority responsible for the imposition of
any such domestic or foreign tax (a "Taxing Authority"); and (B) any liability
of Ralcorp, New Ralcorp or any Affiliate (or, in each case, any successor in
interest thereto by merger or otherwise), as the case may be, for (x) the
payment of any amounts of the type described in clause (A) for any taxable
period resulting from the application of Treasury Regulation section 1.1502-6
or, in the case of any Consolidated State Tax, any similar provision applicable
under State law or (y) for any amount of the type described in (A) under any
Tax sharing, Tax indemnity or other such agreement.
"Tax Return" means all reports, estimates, extensions, information
statements and returns relating to or required by law to be filed by either
Ralcorp and its Affiliates or New Ralcorp and its Affiliates in connection with
any Taxes and in the case of consolidated or combined tax returns, by Ralcorp
on behalf of New Ralcorp and its Affiliates, and all information returns (e.g.,
Form W-2, Form 1099) and reports relating to Taxes and employee benefit plans
of either Ralcorp and its Affiliates or New Ralcorp and its Affiliates.
(b) Any term used in this Agreement which is not defined in this Agreement
shall, to the extent the context requires, have the meaning assigned to it in
the Reorganization Agreement, Code or applicable Treasury Regulations
thereunder, as the case may be.
SEC. 2. RESPONSIBILITIES
Except as otherwise provided herein, New Ralcorp is and will be liable for all
Taxes of (1) New Ralcorp or any New Ralcorp Affiliate for any Pre- or
Post-Distribution Tax Period and (2) Ralcorp or any Ralcorp Affiliate for any
Pre-Distribution Tax Period, including any such liabilities
resulting from an audit or other adjustment to previously filed Tax Returns.
Ralcorp will be liable for all Taxes of Ralcorp or any Ralcorp Affiliate
attributable to any Post-Distribution Tax Period.
In the case of any Straddle Period, Taxes shall be allocated to the
Pre-Distribution Tax Period and the Post-Distribution Tax Period in accordance
with the following principles:
(a) periodic Taxes that are not based on income or receipts (e.g., property
Taxes) for the relevant portion of any Straddle Period shall be computed
based upon
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<PAGE> 4
the ratio of the number of days in the Pre-Distribution Date Tax Period
or Post-Distribution Date Tax Period, as the case may be, and the number
of days in the entire Tax period; and
(b) Taxes for the Pre-Distribution Date Tax Period or Post-Distribution Date
Tax Period, as the case may be (other than Taxes described in clause
(a)) shall be computed as if such taxable period ended as of the close
of business on the Distribution Date, and, in the case of any Taxes
attributable to the ownership of any equity interest in any partnership
or other "flowthrough" entity (other than its Subsidiaries), as if a
taxable period of such partnership or the "flowthrough" entity ended as
of the close of business on the Distribution Date.
SEC. 3. TAX ADJUSTMENTS
New Ralcorp and Ralcorp recognize that since the Distribution Date will occur
on some date during the fiscal year ending _________________, 199_ , and
certain Tax Returns will cover a period which includes the Distribution Date,
there will be certain income and expense items of New Ralcorp and its
Affiliates and Ralcorp and its Affiliates which may require adjustments to be
made for Tax accounting and Tax Return preparation between the portion of the
fiscal year beginning October 1, 199__, and ending with the Distribution Date
and the portion of the fiscal year beginning the day after the Distribution
Date and ending September 30, 199__. These required Tax adjustments may impact
the amount of Taxes due on certain returns and the applicable payment dates to
various government authorities for any type of Tax covered by this Agreement.
Recognizing the extended return preparation periods, and the time needed to
determine such final tax adjustments between New Ralcorp and Ralcorp, the
parties agree that such tax adjustments shall be made and given effect separate
and apart from other adjustments under the Reorganization Agreement as provided
therein. Notice and documentation of such adjustments shall be provided the
other party within 30 days of determination. Any required payment resulting
from such tax adjustments from one party to the other shall be made within
thirty (30) days of the receipt of written request therefor.
SEC. 4. MUTUAL COOPERATION
New Ralcorp and Ralcorp will, and will cause each of their respective
Affiliates to, cooperate with each other in filing any tax return or consent
contemplated by this Agreement and to take such action as the other party may
reasonably request, including but not limited to the following:
(a) provide data for the preparation of Tax Returns, including schedules, and
make elections that may be required by the other party;
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<PAGE> 5
(b) provide required documents and data and cooperate in audits or
investigations of Tax Returns and execute appropriate powers of attorney
in favor of the other party and/or its agents;
(c) file protests or otherwise contest proposed or asserted tax deficiencies,
including filing petitions for redetermination or prosecuting actions for
refund in court and pursuing the appeal of such actions;
(d) take any of the actions of the type described in Treasury Regulation
section 1.1502-77(a) (describing the scope of the agency of the common
parent of a group of affiliated corporations); and
(e) file requests for the extension of time within which to file Tax Returns.
ARTICLE II. FEDERAL INCOME TAXES
SEC. 1. FEDERAL RETURNS
(a) New Ralcorp will join, and will cause each eligible New Ralcorp Affiliate
to join, in the consolidated Federal Tax Income Tax Return to be filed by
Ralcorp for all Pre-Distribution Tax Periods. Ralcorp will not elect to
file separate Federal Tax Income Tax Returns for any such periods;
(b) New Ralcorp hereby designates, and New Ralcorp agrees to cause each of the
New Ralcorp Affiliates to designate, Ralcorp irrevocably as its agent for
the purpose of taking any and all action necessary or incidental to the
filing of consolidated Federal Tax Income Tax Returns, including the
filing of Internal Revenue Service Form 1122 (consent to be included in
the consolidated Federal Tax Return), and New Ralcorp agrees to deliver,
and to cause each of the New Ralcorp Affiliates to deliver, to Ralcorp
executed copies of said Form 1122, if required. New Ralcorp further
agrees to furnish, and to cause each of the New Ralcorp Affiliates to
furnish, Ralcorp with any and all information requested by Ralcorp in
order to carry out the provisions of this Agreement without any charge to
Ralcorp. Ralcorp agrees to furnish to New Ralcorp any and all information
requested by New Ralcorp in order to carry out the provisions of this
Agreement without any charge to New Ralcorp.
(c) New Ralcorp shall prepare, at its expense, and Ralcorp shall review, all
Federal Tax Income Tax Returns of the Ralcorp Consolidated Group in
respect of any Pre-Distribution Period.
(d) Ralcorp, as the common parent of the Ralcorp Consolidated Group, shall be
responsible for filing all Federal Tax Income Tax Returns required to be
filed by or on behalf of Ralcorp or a Ralcorp Affiliate in respect of any
Post-Distribution Tax Period.
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SEC. 2. FEDERAL TAX LIABILITIES
(a) Except as otherwise provided in this Agreement, New Ralcorp and each New
Ralcorp Affiliate shall be liable for, and shall indemnify and hold
Ralcorp and each Ralcorp Affiliate harmless against, any and all
Indemnifiable Losses with respect to Federal Taxes attributable to the
Ralcorp Consolidated Group or any other consolidated group of which New
Ralcorp, Ralcorp or any of their respective Affiliates are or were members
in respect of any Pre-Distribution Tax Period and New Ralcorp shall be
entitled to all refunds of any such Federal Taxes in respect of such
Pre-Distribution Tax Period.
(b) Except as otherwise provided in this Agreement, Ralcorp and each Ralcorp
Affiliate shall be liable for, and shall indemnify and hold New Ralcorp
and each New Ralcorp Affiliate harmless against, any and all Indemnifiable
Losses with respect to Federal Taxes, in respect of any Post-Distribution
Tax Period, attributable to the Ralcorp Consolidated Group or any other
consolidated group of which Ralcorp or any of its Affiliates are or will
be members.
(c) If, as a result of operations in a Post-Distribution Tax Period, New
Ralcorp or any of its Affiliates shall have, for Federal Tax purposes, any
losses or credits which may be carried back to a Pre-Distribution Tax
Period, New Ralcorp shall be entitled to any Tax refunds, as a result of
such carrybacks and any Tax refunds (plus interest) received by Ralcorp or
its Affiliates as a result of such carrybacks shall be remitted to New
Ralcorp. Ralcorp agrees to cooperate with New Ralcorp to obtain such Tax
refunds and New Ralcorp agrees to reimburse Ralcorp for its reasonable
expenses related thereto. In the event any such refund is disallowed to
any extent, such refund (including interest and penalties) shall be
remitted to Ralcorp.
(d) If there are timing differences reflected in the Federal Tax Income Tax
Return of the Ralcorp Consolidated Group as filed for either the taxable
year ended September 30, 199__ or the taxable period ending on the
Distribution Date but that are not included in the deferred income tax
balance on the Closing Date Balance Sheet, and such timing differences
reverse in a Ralcorp or Affiliate Income Tax Returns in a
Post-Distribution Tax Period, then notice and documentation of such
adjustments shall be provided the other party within thirty (30) days of
determination, and
(i) If such timing difference reversal results in an actual increase of
Federal Tax liability of Ralcorp for such subsequent periods, New Ralcorp
shall pay Ralcorp the amount of such liability when due or within thirty
(30) days of the receipt of written request therefore, whichever is later;
or
(ii) If such timing difference reversal results in an actual diminution of
Federal Tax liability of Ralcorp for such subsequent periods, Ralcorp shall
pay New Ralcorp
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the amount of such actual savings within thirty (30) days of written notice
as provided herein.
(e) Anything in this Agreement to the contrary notwithstanding New Ralcorp and
each New Ralcorp Affiliate shall be liable for and shall indemnify and
hold Ralcorp and each Ralcorp Affiliate harmless against any and all
Indemnifiable Losses (as defined in the Reorganization Agreement) with
respect to Taxes directly arising out of or directly resulting from any
transactions set forth in the Reorganization Agreement, the other
Ancillary Agreements or the Merger Agreement unless such Tax liability
arises as a result of a breach of Ralcorp of its obligations under Section
10.2 of the Reorganization Agreement.
SEC. 3. FEDERAL TAX ADJUSTMENTS
(a) New Ralcorp's liability under Section 2 hereto for all Taxes for any
Pre-Distribution Tax Period shall be adjusted consistent with any
adjustments made by the Internal Revenue Service to the taxable income,
loss or tax credits of Ralcorp and its subsidiary. For purposes of this
Agreement, the term "tax credits" shall include, but shall not be limited
to, any business tax credit available under the Code.
(b) If the Internal Revenue Service shall make an adjustment to the
Consolidated Return of the Ralcorp Consolidated Group for any Pre-
Distribution Tax Period, and such adjustment, consistently applied would
require Ralcorp or a Ralcorp Affiliate to make a corresponding adjustment
to their Federal Tax Income Tax Returns for any Post-Distribution Period,
then
(i) if such corresponding adjustment in the Federal Tax Income Tax
Returns of Ralcorp or any of its Affiliates results in an increase of
Federal Tax liability for such Post-Distribution Tax Period, New
Ralcorp shall pay Ralcorp the amount of such liability, when due,
including any applicable interest, penalties or additions to tax.
Any payment by New Ralcorp to Ralcorp of a refund or additional tax
credit shall be made within ninety (90) days after such adjustment; or
(ii) if such corresponding adjustment in the Federal Tax Income Tax
Returns of Ralcorp or any of its Affiliates would result in an actual
diminution of Federal Tax liability for such Post-Distribution Period,
whether or not an actual amended return is filed, Ralcorp shall pay
New Ralcorp the amount of such actual savings plus interest either (a)
when such refund and related interest are received and required to be
remitted within the period provided in this Agreement, or (b) within
ninety (90) days of written notice by New Ralcorp to Ralcorp that
corresponding adjustments should be made, if an amended return is not
filed.
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(c) Any interest payment shall be calculated from the same date and at the
rate used by the Internal Revenue Service in computing the interest
payable by it or to it. Unless otherwise provided, all payments required
to be made under this Agreement from one party to another shall be made
promptly after the event which gives rise to the requirement for payment
occurs.
SEC. 4. CONTEST OF FEDERAL ADJUSTMENTS
Any Federal Tax deficiencies or refund claims which arise with respect to the
consolidated Federal Tax liability of the New Ralcorp Consolidated Group and
which are attributable to any Pre-Distribution Period shall, be defended or
prosecuted by New Ralcorp at its own cost and expense and with counsel and
accountants of its own selection; provided, however, Ralcorp may participate in
any such proceeding at its own cost and expense (in either event such cost or
expense not to include the amount of any payment of any tax claim, interest or
penalties, or of any compromise settlement or other disposition thereof). New
Ralcorp shall have control of any such proceedings, but New Ralcorp shall not
compromise or settle any deficiency of Federal Tax which may reasonably be
expected to affect Ralcorp or any Ralcorp Affiliate without the prior written
consent of Ralcorp, which consent shall not be unreasonably withheld. New
Ralcorp and Ralcorp and their respective Affiliates also agree to execute and
file such Treasury Department waivers, consents, or other forms, Tax Court or
other petitions, refund claims, complaints, powers of attorney and other
documents needed from time to time in order to defend, prosecute or resolve the
Federal Tax deficiencies or refund claims which are the subject of this Article
II, Section 4. Ralcorp shall have a reasonable opportunity to review and
comment upon any documents to be submitted to a court or governmental agency.
ARTICLE III. STATE AND LOCAL INCOME TAXES
SEC. 1. STATE AND LOCAL RETURNS
(a) Ralcorp and the Ralcorp Affiliates have filed separately, or have been
included in combined or consolidated Income Tax Returns, with New Ralcorp
and various New Ralcorp Affiliates in the various states of the United
States and in certain other local jurisdictions in which they carry on
their trade or businesses.
(b) Ralcorp will file, and New Ralcorp and the New Ralcorp Affiliates consent
to the filing of, all combined or consolidated state and local Income Tax
Returns which include the businesses of New Ralcorp and the New Ralcorp
Affiliates for any Pre-Distribution Tax Period. Such combined or
consolidated state and local Income Tax Returns shall be prepared by New
Ralcorp, unless such Income Tax Returns are for a Straddle Period, in
which case Ralcorp shall prepare the Income Tax Returns subject to the
review and approval of New Ralcorp.
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(c) Ralcorp will be responsible for filing combined or consolidated state or
local Income Tax Returns for Ralcorp and the Ralcorp Affiliates in any
state or local jurisdiction in which such a return is required for any
Post-Distribution Tax Period.
(d) New Ralcorp and its Affiliates will be responsible for filing the separate
state or local Income Tax Returns for New Ralcorp and each New Ralcorp
Affiliate in each state or local jurisdiction in which such a return is
required for any Pre- or Post-Distribution Tax Period.
SEC. 2. STATE AND LOCAL TAX LIABILITY
(a) Except as otherwise provided herein, New Ralcorp shall be responsible for
paying any amount of state and local Income Tax attributable to Ralcorp or
its Affiliates for any Pre-Distribution Tax Period and to New Ralcorp or
its Affiliates for any Pre-Distribution Tax Period or Post-Distribution
Tax Period. Ralcorp or the Ralcorp Affiliates shall be responsible for
paying any state or local Income Tax attributable to Ralcorp or a Ralcorp
Affiliate in respect of any Post-Distribution Tax Period.
(b) If there are timing differences reflected in the state and local Income
Tax Returns of the Ralcorp Consolidated Group as filed for a Pre-
Distribution Tax Period but which are not included in the deferred income
tax balance on the Closing Date Balance Sheet, and such timing differences
should reverse in Ralcorp Consolidated Group state and local Income Tax
Returns in a Post-Distribution Tax Period, then notice and documentation
of such adjustments shall be provided the other party within thirty (30)
days of determination, and
(i) If such timing difference reversal results in an actual increase of
state and local Income Tax liability of Ralcorp for such subsequent
periods, New Ralcorp shall pay Ralcorp the amount of such liability
when due or within thirty (30) days of the receipt of written request
therefore, whichever is later; or
(ii) If such timing difference reversal results in an actual diminution of
state and local Income Tax liability of Ralcorp for such subsequent
periods, Ralcorp shall pay New Ralcorp the amount of such actual
savings within thirty (30) days of written notice as provided herein.
SEC. 3. STATE TAX ADJUSTMENTS
If a state or local Taxing Authority makes an adjustment for an item reported
on a state or local Income Tax Return of Ralcorp or a Ralcorp Affiliate
attributable to a Pre-Distribution Tax Period (including adjustments to tax
basis determination or tax accounting methods with respect to its property and
accounts included in and carried forward from the Distribution Date), any
resulting increase or decrease in the Tax liability of Ralcorp and/or a Ralcorp
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Affiliate shall be accounted for between New Ralcorp and Ralcorp in accordance
with the principles and provisions of Article II, Section 3(b) of this
Agreement.
SEC. 4. STATE TAX REFUNDS
(a) If a state or local Income Tax adjustment for an item reported on a state
or local Income Tax Return results in a refund in a Pre- Distribution Tax
Period, that refund will be for the account of New Ralcorp in accordance
with the principles and provisions of this Agreement on payments under
Article III, Sections 2 and 3.
(b) If, as a result of operations during periods commencing after the
Distribution Date, New Ralcorp or a New Ralcorp Affiliate shall have, for
state or local Income Tax purposes, any losses or credits which may be
carried back to a Pre-Distribution Tax Period, New Ralcorp shall be
entitled to any Tax refunds resulting from such carrybacks and any Tax
refunds (plus interest) received by Ralcorp or a Ralcorp Affiliate
resulting from such carrybacks shall be remitted to New Ralcorp. Ralcorp
agrees to cooperate with New Ralcorp to obtain such refunds and New
Ralcorp agrees to reimburse Ralcorp for expenses related thereto. In the
event any such refund is disallowed, to any extent, such refund (including
interest and penalties) shall be remitted to Ralcorp.
ARTICLE IV. OTHER TAXES
SEC. 1. OTHER TAXES
New Ralcorp shall be liable for all Other Taxes and Tax Returns (other than
those relating to federal, state and local Income Taxes, the treatment of which
has been set forth above) and for all foreign taxes attributable to Ralcorp or
a Ralcorp Affiliate or New Ralcorp or a New Ralcorp Affiliate in respect of any
Pre-Distribution Tax Period. Ralcorp shall be liable for all such Other Taxes
attributable to Ralcorp or a Ralcorp Affiliate in respect of any
Post-Distribution Tax Period.
SEC. 2. TRANSFER TAXES
New Ralcorp shall pay any and all sales, use, real property, real property
gains, transfer, mortgage recording or stock transfer or stamp taxes or similar
charges directly resulting from the Distribution, the Internal Spinoff, or the
transactions set forth in the Reorganization Agreement or any other Ancillary
Agreement imposed by any federal, state or local authorities.
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ARTICLE V. STATE AND LOCAL CONTESTS OF ADJUSTMENTS
SEC. 1. CONTESTS OF ADJUSTMENTS
Any state or local Income Tax or Other Tax liabilities which would result in a
payment under Articles III or IV shall be defended (or prosecuted as a refund
action) by Ralcorp or New Ralcorp, depending on which party is responsible for
such Tax liability under this Agreement, at its own cost and expense and with
counsel and accountants of its own selection. Ralcorp and New Ralcorp agree to
cooperate fully in such defense (or prosecution) and provide promptly such
executed documents as the other party may require from time to time in order to
defend (or prosecute) the tax deficiencies or refund claims which are the
subject of Articles III or IV. Neither party shall compromise or settle any
deficiency of tax which would result in a payment under Article III or IV
without the prior written consent of the other, which consent shall not be
unreasonably withheld.
SEC. 2. PAYMENTS
New Ralcorp agrees to pay to Ralcorp and Ralcorp agrees to pay to New Ralcorp
as the case may be, any amounts determined to be for the account of Ralcorp or
New Ralcorp as finally determined under Articles III or IV. Such payment shall
be made within thirty (30) days after the final adjustment giving rise to such
payment. Any interest payment shall be calculated from the same date and at
the same rate used by the applicable state, local or foreign tax authority in
computing the interest payable by it or to it.
ARTICLE VI. DISPUTE RESOLUTION
For the purposes of this Agreement, all computations or recomputations of
federal, state, local or foreign income and franchise tax liability, and all
computations or recomputations of any amount or any payment (including, but not
limited to, computations of the amount of the tax liability, any loss or credit
or deduction, statutory tax rate for a year, interest payments, and
adjustments) and all determinations of payments or repayments, or determination
of any other nature required to be made pursuant to this Agreement, shall be
based on the assumptions and conclusions of the party making the computations.
If either New Ralcorp or Ralcorp objects thereto in writing, addressed to the
other party, the provisions of Article XII in the Reorganization Agreement
between the parties shall be applicable to resolve any issues under this Tax
Sharing Agreement.
ARTICLE VII. MISCELLANEOUS PROVISIONS
SEC. 1. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Missouri and shall be binding on the
successors and assigns of the parties hereto.
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SEC. 2. ENTIRE AGREEMENT. Unless specified otherwise, this Agreement contains
the entire agreement between the parties hereto with respect to the subject
matter hereof and supersedes all prior written agreements, memoranda,
negotiations and oral understandings, if any.
SEC. 3. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but which together
shall constitute one and the same instrument.
SECTION 4. NOTICES. All notices, demands, claims, or other communications
under this Agreement shall be in writing and shall be deemed to have been given
upon the delivery or mailing thereof, as the case may be, if delivered
personally or sent by certified mail, return receipt requested, postage
prepaid, to the parties at the following addresses (or at such other address as
a party may specify by notice to the other):
If to Ralcorp, to:
General Mills
P.O. Box 1113
Number One General Mills Blvd.
Minneapolis, MN 55440
Attention: Ernest M. Harper, Jr.
cc: General Mills
P.O. Box 1113
Number One General Mills Blvd.
Minneapolis, MN 55440
Attention: Ivy S. Bernhardson
If to New Ralcorp, to:
New Ralcorp Holdings, Inc.
800 Market Streeet, Suite 2900
St. Louis, Missouri 63101
Attention:_______________________
SEC. 5. COSTS AND EXPENSES. Except as expressly set forth in this Agreement,
each party shall bear its own costs and expenses incurred pursuant to this
Agreement.
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SEC. 6. TERMINATION AND SURVIVAL. Notwithstanding anything in this Agreement
to the contrary, this Agreement shall remain in effect and its provisions shall
survive for the full period of all applicable statutes of limitation (giving
effect to any extension, waiver or mitigation thereof).
SEC. 7. SECTION HEADINGS. The section headings contained in this Agreement
are for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
SEC. 8. AMENDMENTS; NO WAIVERS.
(a) Any provision of this Agreement may be amended or waived if, and only
if, such amendment or waiver is in writing and signed, in the case of an
amendment, by Ralcorp and New Ralcorp or, in the case of a waiver, by
the party against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the date first above written.
NEW RALCORP HOLDINGS, INC.
BY_________________________________________________
[NAME]
[TITLE]
RALCORP HOLDINGS, INC.
BY_________________________________________________
[NAME]
[TITLE]
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BREMNER FINANCE, INC.
BY_________________________________________________
[NAME]
[TITLE]
BREMNER, INC.
BY_________________________________________________
[NAME]
[TITLE]
BEECH-NUT NUTRITION CORPORATION
BY_________________________________________________
[NAME]
[TITLE]
NATIONAL OATS COMPANY
BY_________________________________________________
[NAME]
[TITLE]
RALSTON RESORTS, INC.
BY_________________________________________________
[NAME]
[TITLE]
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EXHIBIT 2.4
TRANSITION SERVICES - SUPPLY AGREEMENT
BETWEEN
RALCORP HOLDINGS, INC.
AND
NEW RALCORP HOLDINGS, INC.
FOR
"CHEX" AND "COOKIE CRISP" CEREALS
<PAGE> 2
TABLE OF CONTENTS
TRANSITION SERVICES - SUPPLY AGREEMENT
PART I SUPPLY AGREEMENT
- -----------------------
SECTION 1 DEFINITIONS 1
SECTION 2 TERM 3
SECTION 3 PERFORMANCE 3
SECTION 4 PRODUCTION SYSTEM 4
SECTION 5 MATERIALS 4
SECTION 6 SAMPLING AND TESTING 4
SECTION 7 STORAGE 5
SECTION 8 REJECTION 5
SECTION 9 INSPECTION 6
SECTION 10 SUPPLY; QUANTITIES 7
SECTION 11 PAYMENT 8
SECTION 12 WARRANTIES AND COVENANTS 9
SECTION 13 INSURANCE 10
SECTION 14 INDEMNIFICATION 11
SECTION 15 CONFIDENTIAL INFORMATION 13
SECTION 16 INTELLECTUAL PROPERTY 14
SECTION 17 BREACH 14
SECTION 18 TERMINATION 15
SECTION 19 RALCORP PRICING 15
SECTION 20 RIGHTS RESERVED TO RALCORP 15
SECTION 21 ASSIGNMENT 16
SECTION 22 INTERPRETATIONS 16
SECTION 23 DISCRIMINATION 16
SECTION 24 ENTIRE AGREEMENT 16
- i -
<PAGE> 3
TABLE OF CONTENTS (CONT.)
TRANSITION SERVICES - SUPPLY AGREEMENT
SECTION 25 FORCE MAJEURE 16
SECTION 26 GOVERNING LAW 17
SECTION 27 INDEPENDENT CONTRACTOR 17
SECTION 28 NOTICE 17
SECTION 29 REGULATORY NOTICE 18
SECTION 30 SUCCESSORS AND ASSIGNS 18
SECTION 31 WAIVER 18
SECTION 32 AUTHORIZATION; VALIDITY 18
PART II TRANSITION SERVICES 18
SCHEDULE(S)
SCHEDULE - 1 22
SCHEDULE - 2 26
- ii -
<PAGE> 4
TRANSITION SERVICES - SUPPLY AGREEMENT
This Transition Services - Supply Agreement ("Agreement"), dated as of
, 199 , is between RALCORP HOLDINGS, INC., a Missouri corporation
("Ralcorp"), and NEW RALCORP HOLDINGS, INC., a Missouri corporation ("Supplier")
on behalf of itself, its subsidiaries and Affiliates.
WHEREAS, Ralcorp and Supplier possess certain Technical Information for
the manufacture of ready-to-eat (RTE) cereals; and,
WHEREAS, Ralcorp wishes Supplier to produce certain of such products on
behalf of Ralcorp and to provide certain other transition services to Ralcorp;
and
WHEREAS, Supplier is willing to produce those products and provide those
other transition services specified herein.
In consideration of the mutual agreements, promises and covenants herein
contained, the parties hereby agree as follows:
PART I.
SUPPLY AGREEMENT
SECTION 1 DEFINITIONS
A. "FDCA" shall mean the Federal Food, Drug and Cosmetic Act,
including its amendments and regulations.
B. "Laws" shall mean the FDCA and all applicable state and municipal
statutes, rules and regulations substantially similar to the FDCA.
C. "Nonconforming Products" shall mean Products which do not comply
with the FDCA, other Laws or the Specifications referred to below.
D. "Plant" shall mean, for the production of rice-based cereal
packaged using the "CHEX" trademark (i.e. Rice Chex), Supplier's Battle
Creek, Michigan cereal plant, up to its
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capacity as defined in Schedule 1; and for cereal packaged using the
"COOKIE CRISP" trademark, Supplier's Lancaster, Ohio cereal plant, up to
its capacity as defined in Schedule 1; and Supplier's Sparks, Nevada
cereal plant, to the extent Supplier deems reasonably necessary to
utilize such plant for production of Cookie Crisp cereal in lieu of the
Lancaster, Ohio plant.
E. "Product(s)" shall mean Products Of The Type which have been
offered for sale in connection with any form of any CHEX or COOKIE
CRISP trademarks.
F. "Technical Information" shall mean all formulae, information
concerning manufacturing processes and know-how, quality control data,
test data and all other scientific and/or technical data and
information ("data") relating to the development, manufacture,
distribution, sale, or use of the Products and all proprietary rights
embodied therein and related thereto which is licensed by Ralcorp or
its Affiliates to Supplier or its Affiliates, or provided to Supplier
by Ralcorp or which may hereafter be developed by Ralcorp and provided
to Supplier by Ralcorp, whether provided in oral, written or other form
including, but not limited to, any patent or patent application,
formulation, software, product and packaging specifications, trade
secrets and know-how.
G. "Specifications" shall mean the formulas and specifications for the
Products and their production, processing and packaging, which shall
reflect the actual operating conditions and practices of Supplier as of
the date of this Agreement and as such may be amended from time to time
upon reasonable advance written notice by Ralcorp, and other
information relating to quality control, processing, packaging and
administrative procedures as the parties shall mutually agree upon
prior to Closing (the "Other Information"). The parties shall set
forth the terms of the Other Information as an Exhibit hereto (the
"Other Information Exhibit"). The Other Information Exhibit shall be
made a part hereof, and may be amended from time to time by written
agreement of the parties..
H. The term "Products Of The Type" shall mean the identical products
and all products substantially similar in form or in overall appearance
to such products, whether or not they are similar in flavor or are used
in association with other ingredients (e.g. raisins).
I. All other capitalized terms used but not otherwise defined herein
shall have the meanings ascribed thereto in the Reorganization
Agreement dated as of the date hereof, by and
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among Supplier, Ralcorp, Ralston Foods, Inc. ("Foods"), General Mills,
Inc. ("General Mills"), General Mills Missouri, Inc. ("General Mills
Missouri") and the Branded Subsidiary (the "Reorganization
Agreement").
SECTION 2 TERM
This Agreement shall commence immediately after the Closing Date (the
"Closing Date") of the Agreement and Plan of Merger by and among Ralcorp,
General Mills and General Mills Missouri, dated as of August 13, 1996 (as
amended on October ___, 1996, the "Merger Agreement").
This agreement shall expire, with respect to COOKIE CRISP, eighteen months
after the Closing Date; provided that Ralcorp may extend this Agreement,
with respect to COOKIE CRISP, for a second term not to exceed six (6)
months, by notice given not less than sixty (60) days prior to the
expiration of such initial term.
This Agreement shall expire, with respect to RICE CHEX, eighteen months
after the Closing Date.
SECTION 3 PERFORMANCE
A. General Understanding. Supplier agrees to use reasonable efforts
to produce the Products in accordance with the provisions of this
Agreement.
B. Performance. Supplier's performance hereunder, including its
production, packaging and labeling of Products, and handling and
storing ingredients and packaging materials, including stretch wrap,
if any, to be used in connection with Products produced on Ralcorp's
behalf ("Materials"), shall be in accordance with the terms of this
Agreement, including, without limitation, the Specifications. Ralcorp
reserves the right at any time to modify, delete or add to the
Specifications provided that Ralcorp allows Supplier reasonable time
in each instance to implement any changes necessitated by such
revisions in the Specifications so that Product(s) will remain in
compliance with such Specifications. If any such modification(s) as
approved by Supplier result(s) in additional costs to Supplier,
Supplier shall be entitled to a cost increase equal to the reasonable
additional costs resulting therefrom in accordance with Section 11
hereof. Such costs may include the costs of disposing of
Nonconforming Product if Supplier determines, in
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its reasonable discretion, that it will be unable, exercising reasonable
efforts, to consistently meet such revised Specifications, and notifies
Ralcorp accordingly. All Exhibits and Schedules attached hereto or
referred to herein are incorporated by reference herein and form part of
this Agreement.
SECTION 4 PRODUCTION SYSTEM
Supplier's Equipment. Supplier shall provide all equipment and personnel
necessary to produce, package and ship Products in accordance with the terms
hereof without any additional costs to Ralcorp beyond those incorporated
into the respective Product prices and/or rates as described in Section 11A.
SECTION 5 MATERIALS
Securing Materials and loss of yield shall be in accordance with Schedule 1
attached hereto.
SECTION 6 SAMPLING AND TESTING
A. Materials. Supplier shall inspect, sample, analyze and test all
Materials received by Supplier to be used to produce or package
Products in accordance with the Specifications. Any Materials which do
not comply with the requirements of the Specifications shall not be
used by Supplier for any reason in connection with the Products, and
Supplier shall immediately notify Ralcorp of all such nonconforming
Material(s) when such Material(s) were supplied by Ralcorp or purchased
on Supplier's behalf by Ralcorp. The parties shall provide Materials
in accordance with the terms set forth in Schedule 1.
B. Products. Supplier shall sample and test the Products in
accordance with the Specifications. Supplier shall also segregate for
testing by Ralcorp such quantities of packaged Products and Materials
as Ralcorp may from time to time reasonably request and Supplier shall,
at Ralcorp's expense, ship such packages and Materials to such
destinations as specified by Ralcorp.
C. Protection. Supplier shall exercise reasonable care in handling,
storing and protecting the Products and Materials intended for use in
the Products.
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SECTION 7 STORAGE
Supplier shall provide suitable Ralcorp approved storage and warehousing
space ("space") in accordance with Schedule 1.
SECTION 8 REJECTION
A. Supplier shall not knowingly ship any Nonconforming Products to
Ralcorp.
B. Nothing contained in this Agreement shall be deemed to obligate
Ralcorp to inspect any products purchased hereunder.
C. Without limiting any other rights available to Ralcorp with respect
to Nonconforming Products which are in violation of any Laws, unless
otherwise agreed by the parties, in the event that Supplier produces
any Nonconforming Products, Supplier shall promptly replace such
Products at no cost to Ralcorp (including any additional freight costs
incurred), except to the extent such nonconformance was as the result
of Ralcorp's actions, including but not limited to if such
nonconformance was attributable to Materials supplied by Ralcorp or
purchased on Supplier's behalf by Ralcorp. Replacement of
Nonconforming Products by Supplier at no cost to Ralcorp shall be
Ralcorp's sole remedy with respect to Nonconforming Products which are
not in violation of any Laws.
D. Nonconforming Products still within Supplier's possession shall be
destroyed or disposed of pursuant to instructions provided by Ralcorp.
Such disposal shall be at the expense of Supplier, except to the extent
such nonconformance was as the result of Ralcorp's actions, including
but not limited to if such nonconformance was attributable to Materials
supplied by Ralcorp or purchased on Supplier's behalf by Ralcorp. In
no event shall Supplier sell, distribute or ship any Nonconforming
Products in violation of Ralcorp's instructions. Notwithstanding the
above, Supplier may, subject to Ralcorp's consent, donate such Products
provided they are removed from the normal retail packaging prior to
ultimate distribution.
E. Supplier shall code the Products in accordance with the
Specifications.
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SECTION 9 INSPECTION
A. Records. Supplier shall maintain, at the Plant, true, accurate and
complete records in respect of Products production, packaging, storage,
sampling, testing and shipment hereunder ("Records") in accordance with
Supplier's Record Retention Policy, a copy of which will be provided to
Ralcorp. Upon written notice to Supplier from Ralcorp, Supplier shall
permit Ralcorp to (i) inspect the Records at the Plant and at mutually
convenient times and locations, and (ii) take inventory of Materials
and finished Products produced by Supplier for Ralcorp.
B. Inventories. Supplier shall provide Ralcorp access to Supplier's
reports related to Supplier's inventory of Products and Materials in
accordance with the Specifications.
C. Plant. During the period(s) Supplier is performing any of its
services hereunder and upon reasonable advance notice, Ralcorp may
inspect, at Ralcorp's cost, areas of the Plant where Materials or
Products are handled, processed, sampled, tested, packaged or stored
hereunder for the purposes of inspecting the Plant and its facilities,
and the Products, Materials and procedures followed by Supplier;
provided, however, that Supplier shall have the right to accompany
Ralcorp on any such inspections; and provided, further that such
inspection(s) shall not relieve Supplier of any of its obligations
hereunder. Supplier shall, in good faith, explore the possibility and
feasibility of changing its procedure(s) whenever such changes are
determined by Ralcorp as necessary or desirable in order to correct
and/or improve the Products, the conditions of processing and packaging
and the procedures followed hereunder. Supplier has the right to
restrict access to any location, material or equipment that is
proprietary to Supplier's continued production of other products;
provided, however, that such restrictions shall not prevent Ralcorp's
representatives from having access to the areas of the Plant where
Materials or Products are handled, processed, packaged or stored
hereunder, for the purposes of inspecting the Plant and its facilities,
and the Products, Materials and procedures followed by Supplier.
D. Immediate Notice. Supplier shall immediately notify Ralcorp of any
sanitation audits, the results of which indicate the presence of any
food pathogens in the Plant or possible adulteration of the Products.
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SECTION 10 SUPPLY; QUANTITIES
A. To ensure that Ralcorp shall have sufficient Products during the first
18 months of the transition following the above referred to Merger (and
an additional 6 months with respect to COOKIE CRISP in the event that
Ralcorp renews this Agreement in accordance with Section 2), Ralcorp
shall have the sole and exclusive right to Supplier's and its
subsidiaries' and Affiliates' available capacity and rights to make
Products, at all of their plants and facilities, during the term hereof
(i) up to 8,400 cwt. a month of RICE CHEX and 10,000 cwt. a month for
COOKIE CRISP, and (ii) beyond these levels, other than as reasonably
necessary to meet Supplier's requirements for CHEX-type ready to eat
cereal Products to be sold by Supplier under Private Label Trademarks
and Supplier's obligations under its Exclusive Distribution Agreement
with Ralston Purina Company, dated April 1, 1994 (the "RP Agreement"),
with any demands exceeding Supplier's ability to supply allocated
proportionally between Ralcorp and Ralston Purina Company,
based upon total quantities ordered after Supplier first meets
Ralcorp's monthly requirements for RICE CHEX up to 8,400 cwt. a month
and for COOKIE CRISP up to 10,000 cwt. a month and Supplier's
requirements for CHEX type ready to eat cereal Products (after Supplier
has first met Ralcorp's monthly requirements, up to 8,400 cwt. a
month); provided, however, that any production of Products for
Supplier or Ralston Purina Company pursuant to such agreement shall
not include the use of any of the CHEX or COOKIE CRISP trademarks or
any other trademarks or trade dress owned by Ralcorp or its Affiliates
except as otherwise agreed in writing by Ralcorp. Further, it is
understood and acknowledged that the calculation of available capacity
for RICE CHEX production has taken into account Supplier's anticipated
capacity requirements for its store brand hexagon shaped biscuit
product sold under several names, including Crispy Hexagons, among
others, and, in any event, Supplier's obligation to supply Ralcorp
hereunder shall not exceed Supplier's capacity as set forth in
Schedule 1. Ralcorp may order and Supplier shall produce for Ralcorp
Products ordered in accordance with firm orders as set out in Schedule
1. Ralcorp agrees that it will order a minimum of 90,000 cwt. of
Cookie Crisp cereal during the term, and a minimum of 2,000 cwt. in
any given month during the COOKIE CRISP Commitment Period (as defined
in Schedule 1C). Ralcorp agrees that in any month during the term in
which Ralcorp orders Rice Chex cereal, Ralcorp will order a minimum of
6,000 cwt. of Rice Chex cereal in such month.
B. Except for such production of Products (which shall not include the use
of the CHEX or COOKIE CRISP trademarks or other trademarks and trade
dress of Ralcorp or its Affiliates), if any as may be necessary, as set
forth above, for Supplier for CHEX-type ready to eat cereal Products
sold under Private Label Trademarks and for Ralston Purina Company
under the RP Agreement, during the term Supplier shall produce Products
solely and exclusively for Ralcorp.
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SECTION 11 PAYMENT
A. Product Price. Subject to the provisions of Sections 3B and 11B,
Ralcorp shall pay Supplier an amount equal to $37.09 per cwt. of COOKIE
CRISP for the period beginning at the commencement of the term of this
Agreement and ending on September 30, 1997, $38.28 per cwt. of COOKIE
CRISP for the period beginning on October 1, 1997 and ending on
September 30, 1998, and $39.50 per cwt. of COOKIE CRISP thereafter, for
Supplier's manufacturing variable costs, warehouse variable costs,
fixed manufacturing and fixed warehouse costs for COOKIE CRISP produced
and packaged in accordance with this Agreement. Ralcorp shall pay
Supplier an amount equal to actual costs for all Materials provided by
Supplier in connection with COOKIE CRISP produced and packaged in
accordance with this Agreement, subject to yield losses set forth in
Schedule 1E.
Subject to the provisions of Sections 3B and 11B, Ralcorp shall pay
Supplier an amount equal to $38.64 per cwt. of RICE CHEX for the period
beginning at the commencement of the term of this Agreement and ending
on September 30, 1997 and $39.94 per cwt. of RICE CHEX for the remainder
of the term of this Agreement, for Supplier's manufacturing variable
costs, warehouse variable costs, fixed manufacturing and fixed warehouse
costs (excluding depreciation costs with respect to Building 3 of
Supplier's Plant location at Battle Creek, Michigan and the equipment
utilized therein) for RICE CHEX produced and packaged in accordance with
this Agreement. Ralcorp shall pay Supplier an amount equal to actual
costs for all Materials provided by Supplier in connection with RICE
CHEX produced and packaged in accordance with this Agreement, subject to
yield losses set forth in Schedule 1E.
In addition, Ralcorp shall pay Supplier an amount (the "Commitment
Amount") equal to $85,500 for each month in the RICE CHEX Commitment
Period, as such term is defined in Schedule 1C. The Commitment Amount
for any month in the RICE CHEX Commitment Period shall be reduced by an
amount which bears the same ratio to $85,500 as the Supplier Weight (as
defined below) for such month bears to the Aggregate Weight (as defined
below) for such month.
The term "Supplier Weight" means, for any month in the RICE CHEX
Commitment Period, the total weight of all products produced by
Supplier in Building 3 of
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Supplier's Plant location at Battle Creek, Michigan, other than such
Products produced by Supplier for Ralcorp, alone in accordance with
the terms of this Agreement.
The term "Aggregate Weight" means, for any month in the RICE CHEX
Commitment Period, the total weight of all products produced by
Supplier in Building 3 of Supplier's Plant location at Battle Creek,
Michigan.
For each month in the Subsequent Period (as defined below) that Supplier
utilizes Building 3 of Supplier's Plant location at Battle Creek,
Michigan, Supplier shall pay to Ralcorp an amount equal to 50 percent of
the quotient of (x) the sum of the Commitment Amounts for each Non-use
Month (as defined below), divided by (y) the aggregate number of Non-use
Months.
The term "Subsequent Period" means the period of consecutive months
equal in number to the aggregate number of Non-use Months, commencing
upon the termination of the RICE CHEX Commitment Period.
The term "Non-use Month" means any month in the RICE CHEX Commitment
Period during which Building 3 of Supplier's Plant location at Battle
Creek, Michigan is not utilized for the production of RICE CHEX for
Ralcorp in accordance with this Agreement.
Product will be shipped F.O.B. Plant. Supplier will invoice Ralcorp
monthly for all production. Payment terms will be net 11 days.
Yield losses will be addressed as identified in Schedule 1E.
B. Cost Savings. The parties agree to cooperate throughout the term
of this Agreement to identify methods of reducing the cost of the
Products and shall meet periodically to discuss cost savings plans.
SECTION 12 WARRANTIES AND COVENANTS
A. Supplier represents, warrants and covenants that:
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1. Except to the extent arising out of the actions of Ralcorp or
from Materials provided by Ralcorp or purchased on Supplier's behalf
by Ralcorp, Supplier's performance hereunder shall be in accordance
with all the terms of this Agreement, including the Specifications,
and be free of defects in workmanship and materials, except for
defects arising from conformity with the applicable Specifications
to the extent such Specifications were modified per Ralcorp's
request;
2. Supplier shall not cause any of the Products processed,
packaged, stored, labeled and shipped hereunder to be adulterated or
misbranded, within the meaning of Laws, or to be products which may
not, under any of the provisions thereof, be introduced into
interstate commerce, and the Products shall comply with all Laws;
3. Supplier's performance hereunder, including, without
limitation, the maintenance of the Plant, shall at all times be in
compliance with all Laws.
B. Ralcorp's sampling Products and/or approving it for shipment shall
neither relieve Supplier of its warranties hereunder nor be construed
as a waiver of any of Supplier's obligations hereunder.
C. Ralcorp represents and warrants that compliance with the
Specifications of this Agreement, to the extent modified per Ralcorp's
request, shall not cause any of the Products processed, packed and
labeled hereunder to be adulterated or misbranded, within the meaning
of the FDCA, or to be products which may not, under any of the
provisions thereof, be introduced into interstate commerce.
SECTION 13 INSURANCE
On or before execution of this Agreement, Supplier shall obtain:
A. Product liability insurance on an occurrence basis with issuers
acceptable to Ralcorp. The product liability insurance to be
maintained shall provide coverage of Two Million Dollars ($2,000,000)
per occurrence, with a Five Million Dollars ($5,000,000) annual
aggregate;
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B. Public liability insurance, including contractual liability with
limits of not less than Two Million Dollars ($2,000,000);
C. Worker's compensation insurance in accordance with the Laws where
the Plant is located on all employees engaged in any way in the work
pursuant to this Agreement; and
D. Broad form vendor's liability coverage.
Each such policy shall provide that it may not expire or be canceled except
upon thirty (30) days' prior written notice to Ralcorp. Upon the execution
of this Agreement, and upon every insurance renewal during the term of this
Agreement, Supplier shall deliver to Ralcorp (i) a certificate of insurance
evidencing such insurance, (ii) if requested by Ralcorp, a true and complete
copy of the policy as then in effect, and (iii) proof of payment of
premiums. Notwithstanding the foregoing Ralcorp shall not be under a duty to
examine such policy.
Ralcorp does not in any way represent that the insurance coverage specified
herein is sufficient or adequate to protect Supplier's interests or
potential liabilities.
SECTION 14 INDEMNIFICATION
A. Supplier hereby indemnifies Ralcorp and forever holds Ralcorp
(including its parent, subsidiary and Affiliated corporations, and
their respective directors, officers, employees and agents) and its
customers harmless from and against all claims, suits, actions,
proceedings, damages, losses or liabilities, costs or expenses
(including reasonable attorneys' fees, expenses and amounts paid in
settlement) (but excluding consequential damages (which shall include
but not be limited to lost profits))("Claims") incurred by Ralcorp
arising out of, based upon, or in connection with any (i) material
breach of any of Supplier's warranties, representations or agreements
under this Agreement, (ii) injuries or damages to third parties arising
from or in any way related to the use or consumption of any Products
produced by Supplier for Ralcorp pursuant to this Agreement, to the
extent arising out of the condition of such Product(s) as of the date
of shipment to Ralcorp (except to the extent attributable to Materials
supplied by Ralcorp or purchased on Supplier's behalf by Ralcorp),
(iii) actual or alleged injury to person or property or death occurring
to any of Supplier's employees, agents or any individual on Supplier's
premises, (iv) fines and penalties for statutory violations of Laws
attributable to Supplier
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in connection with Supplier's manufacture of Products pursuant to this
Agreement, (v) claim or action by any person alleging that use of any
know-how, machinery, equipment or process employed by Supplier in
connection with the manufacture of the Products produced by Supplier for
Ralcorp pursuant to this Agreement infringes upon any rights of any
third party or violates other rights, and (vi) all reasonable costs of
any recall of Products produced pursuant to the terms hereof as to which
Supplier has consented, such consent not to be unreasonably withheld.
In the event of any Claims made against Ralcorp, Ralcorp shall notify
Supplier of such claim promptly upon a representative of Ralcorp
obtaining knowledge of such Claim, provided that failure to give such
notice shall not relieve Supplier from its indemnity hereunder, except
to the extent Supplier is prejudiced thereby. Thereafter, Supplier, at
its sole cost and expense, may assume the defense of any claim for which
it is required to indemnify Ralcorp pursuant to this Section 14A, using
counsel of its own choice. Notwithstanding anything in this Section 14
to the contrary, Supplier shall not, without Ralcorp's prior written
consent, which consent shall not be unreasonably withheld, settle or
compromise any Claim or consent to entry of any judgment with respect to
any Claim for anything other than money damages paid by Supplier which
would have a material adverse effect on Ralcorp. Supplier may, without
Ralcorp's prior written consent, settle or compromise any Claim or
consent to entry of any judgment with respect to any Claim which
requires solely money damages paid by Supplier and which includes as an
unconditional term thereof the release of Ralcorp and its Affiliates by
the plaintiff from all liability in respect of such Claim. Ralcorp
shall make available to Supplier all records and other materials
reasonably required for use in contesting any Claim and shall cooperate
fully with Supplier in the conduct and defense of any Claim.
B. Ralcorp hereby indemnifies Supplier and forever holds Supplier
(including its parent, subsidiary and Affiliated corporations, and
their respective directors, officers, employees and agents) and its
customers harmless from and against all Claims incurred by Supplier
arising out of, based upon, or in connection with any (i) material
breach of any of Ralcorp's warranties, representations or agreements
under this Agreement, (ii) injuries or damages to third parties arising
from or in any way related to the use of or consumption of any Products
produced by Supplier for Ralcorp to the extent such injuries or damages
are attributable to Materials or premiums supplied by Ralcorp or
purchased on Supplier's behalf by Ralcorp, or from conditions which
arise after Products were made available for shipment to Ralcorp; (iii)
fines, penalties or any other actions or claims arising out of
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alleged violations of any laws or regulations, including Laws, as a
result of any Product claims made by Ralcorp (e.g. health claims) or
other copy, graphics, coupons and promotional offers used in connection
with such Products on packaging or in advertising (except when such
violation arises from Supplier's breach of this Agreement); (iv) claim
or action by any person alleging that use of any know-how, machinery,
equipment or process employed by Supplier at Ralcorp's behest after the
Closing in connection with the manufacture of Products for Ralcorp
infringes upon any rights of any third party.
C. The provisions of this Section 14 shall survive the termination of
this Agreement.
SECTION 15 CONFIDENTIAL INFORMATION
A. Except as expressly provided in the Technology Agreement, Supplier
shall not use the Specifications, Technical Information owned by or
licensed to Ralcorp and all other confidential information of Ralcorp
for any reason other than the production of Products in accordance with
the terms of this Agreement and shall not disclose this information to
any third party and shall keep confidential all such information. The
terms of this provision shall survive the expiration or termination of
this Agreement.
B. Except as expressly provided in the Technology Agreement, Ralcorp
shall not use any confidential information of Supplier that Ralcorp is
not otherwise specifically entitled to use pursuant to the terms of the
Technology Agreement, including but not limited to information
pertaining to the operation of Plants, and production of other products
at such facilities, and Ralcorp shall not disclose this information to
any third party and shall keep confidential all such information. The
terms of this provision shall survive the expiration or termination of
this Agreement.
C. The obligations of nondisclosure, contained in Paragraphs 15A and B
above, shall not apply in the event that any of such information:
(a) was known to the public or generally available to the public
prior to the date it was received from the disclosing party:
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(b) became known to the public or generally available to the
public subsequent to the date it was received from the disclosing
party without any fault of the receiving party; or
(c) is, subsequent to the date of this Agreement, disclosed to
the receiving party from a third party who is under no obligation of
confidentiality regarding the same.
SECTION 16 INTELLECTUAL PROPERTY
Nothing in this Agreement shall be construed to grant to Supplier any right
to or interest in (i) any trademark, trade name, trade dress, copyright and
patent right or (ii) except as may be provided in the Technology Agreement,
any other rights, including any rights to any Technical Information and Know
How which is owned by or licensed to Ralcorp or its Affiliates
("Intellectual Property").
SECTION 17 BREACH
The following actions shall each constitute a breach of this Agreement.
A. The institution by Supplier or Ralcorp of a voluntary case under
any chapter of the Bankruptcy Code (Title 11, United States Code), or
any equivalent or similar action under any other federal or state law
in effect at such time relating to bankruptcy or insolvency, or if a
petition is filed against Supplier or Ralcorp under the Bankruptcy
Code, or if a petition is filed seeking any such equivalent or similar
relief against Supplier or Ralcorp under any other federal or state law
in effect at the time relating to bankruptcy;
B. If Supplier or Ralcorp makes a general assignment for the benefit
of creditors;
C. If Supplier or Ralcorp admits in writing an inability to pay its
debts generally as they become due;
D. If Supplier or Ralcorp has appointed (voluntarily or involuntarily)
a trustee, receiver, custodian or agent under applicable law or under
contract, whose appointment or authority to take charge of property of
Supplier or Ralcorp for the purpose of general administration of such
property for the benefit of Supplier's or Ralcorp's creditors,
respectively; or
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E. If Supplier or Ralcorp commits a material breach of any of the
material terms or provisions of this Agreement and such breach is not
cured within thirty (30) days after written notice to the breaching
party advising of such breach.
SECTION 18 TERMINATION
A. In the event this Agreement expires or is terminated, Supplier
shall promptly provide Ralcorp with all Products and other Materials
owned or provided by Ralcorp which are in Supplier's possession.
B. In the event of the occurrence of any material breach not cured
within thirty (30) days of written notice of such breach, the
non-breaching party may terminate this Agreement effective immediately
upon written notice to the breaching party.
C. Upon termination of this Agreement for any reason Supplier shall
immediately stop the production of any Products then in process which
were to be supplied to Ralcorp and promptly deliver to Ralcorp all
Products manufactured hereunder along with all Specifications,
Technical Information belonging to Ralcorp, artwork, premiums, and
packaging materials purchased by Ralcorp and all other Materials and
supplies provided by Ralcorp. Ralcorp shall purchase from Supplier
reasonable quantities of any packaging materials and any other
Materials purchased by Supplier specifically for use with Products to
be produced for Ralcorp.
D. Upon any change of control of Supplier, Ralcorp may terminate this
Agreement effective immediately upon written notice to Supplier.
SECTION 19 RALCORP PRICING
Ralcorp shall independently determine its prices of the Products to its
customers.
SECTION 20 RIGHTS RESERVED TO RALCORP
Except to the extent otherwise provided herein, Ralcorp reserves to itself
the right to alter the flavors, formulas, ingredients, processing
conditions, labeling or packaging for the Products, provided that Supplier
may reasonably refuse to accept any alteration which adversely affects
Supplier's production of other products in the affected Plant(s).
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SECTION 21 ASSIGNMENT
Other than to a wholly owned subsidiary or to a wholly owned subsidiary of
its parent company, which shall agree to be bound by all the terms and
conditions hereof, neither party shall assign or otherwise transfer in any
manner its rights under this Agreement without the other's prior written
consent. No assignment of this Agreement will act to relieve the Assignor
from any of its duties or obligations hereunder.
SECTION 22 INTERPRETATIONS
The captions contained in this Agreement are for convenience and reference
only and do not define, limit, extend or describe the scope of this
Agreement or the intent of any provision thereof. This Agreement shall be
deemed to have been drafted by each party hereto.
SECTION 23 DISCRIMINATION
Supplier shall not discriminate, in violation of the applicable laws, in its
employment practices and shall comply with all applicable federal, state and
local laws, statutes, ordinances, rules, regulations and orders regarding
employee relations.
SECTION 24 ENTIRE AGREEMENT
This Agreement, including its attached exhibits and schedules specified
herein, together with the Trademark Agreement, the Technology Agreement, the
Reorganization Agreement and the Merger Agreement supersedes all prior or
contemporaneous written or oral agreements and understandings relating to
the subject matter hereof. This Agreement shall not be amended, altered, or
changed unless in writing signed by the parties hereto.
SECTION 25 FORCE MAJEURE
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<PAGE> 20
In the event that a party hereto shall be delayed, hindered in or prevented
from the performance of any act required hereunder by reason of strikes,
lock-outs, labor troubles, inability to procure Materials, failure of power,
riots, insurrection, war or other reasons of a like nature not the fault of,
or under the reasonable control of, the party delayed in performing work or
doing acts required hereunder (a "Casualty"), then performance of such
act(s) shall be excused for the period of the delay and the period for the
performance of any such act shall be extended for a period equal to the
period of such delay, provided such delayed party promptly gives written
notice to the other party of the occurrence giving rise to the delay and
upon cessation of the event causing the delay, promptly resumes performance
of its obligations hereunder.
SECTION 26 GOVERNING LAW
This Agreement shall be governed and construed in accordance with the laws
of the State of Missouri, including all matters of construction, validity,
enforcement and performance.
SECTION 27 INDEPENDENT CONTRACTOR
Supplier agrees that its services are provided as an independent contractor
and that individuals employed by Supplier shall not be deemed employees of
Ralcorp for any reason. Neither party shall have the authority to bind the
other party or to assume or create any obligation or responsibility, express
or implied, on behalf of the other party or in the other party's name.
SECTION 28 NOTICE
All notices, requests and other communications to any party hereunder shall
be in writing (including facsimile or similar writing) and shall be given:
If to Ralcorp, to: Ralcorp Holdings, Inc.
Number One General Mills Boulevard
Minneapolis, MN 55426
Attention: Bruce A. Barquist
Facsimile: (612) 540-4995
Telephone: (612) 540-2374
If to Supplier, to: New Ralcorp Holdings, Inc.
800 Market Street, Suite 2900
St. Louis, Missouri 63101
Attention: Ronald D. Wilkinson
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<PAGE> 21
Facsimile: (314) 877-7694
Telephone: (314) 877-7652
With additional copies as noted in the
Schedule(s).
or such other address or telex or facsimile number as such party may
hereafter specify by written notice to the other party.
SECTION 29 REGULATORY NOTICE
Each party agrees to notify the other immediately by telephone of any action
or inspection by any regulatory agency with respect to the Products covered
by this Agreement, or any of the raw materials or ingredients used to
manufacture Products covered by his Agreement, and shall confirm such notice
promptly in writing. Supplier shall promptly deliver to Ralcorp copies of
all reports pertaining to the Plants (to the extent relevant to Products
produced by Supplier for Ralcorp pursuant to this Agreement) or Products
resulting from an inspection of the Plant made by government organizations.
SECTION 30 SUCCESSORS AND ASSIGNS
Except as limited by the Assignment provisions hereof, this Agreement, its
terms and provisions shall be binding upon and inure to the benefit of the
parties hereto and their respective partners, legal representatives,
successors and assigns.
SECTION 31 WAIVER
Either party's failure to enforce any provision of this Agreement or to
require performance by the other party shall not be construed as a waiver of
such provision nor affect the validity of the Agreement or any part thereof,
or either party's right to enforce any provision thereafter.
SECTION 32 AUTHORIZATION; VALIDITY
The persons executing this Agreement on behalf of the Supplier and Ralcorp
each acknowledge that they are duly authorized to execute this Agreement on
behalf of and bind Supplier or Ralcorp, as the case may be, to the terms
hereof.
PART II.
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<PAGE> 22
OTHER TRANSITION SERVICES
1. Services. Subject to the terms of this part of the Agreement, from and
after the Effective Date of this Agreement, Supplier shall make such Services
available to Ralcorp in accordance with Supplier's normal practice in providing
such services as of the Effective Date or as specifically set forth in Schedule
2 hereto (the "Services"). In consideration for the Services, Ralcorp shall
pay to Supplier an amount equal to the reasonable costs of Supplier (including,
but not limited to labor costs) in providing such Services and each Service
provided will be separately invoiced to Ralcorp. Ralcorp shall give Supplier
written notice of its intent to terminate any one or more of the Services at
least thirty (30) days prior to the termination of the Service. This Agreement
shall continue in full force and effect with respect to any Services not
terminated by any such notices.
2. Knowledge Transfer: Data Separation & Transfer. Supplier and Ralcorp
shall, through their respective information systems departments, work together
to the extent reasonably necessary to facilitate the transfer of knowledge and
data to Ralcorp in accordance with the terms of the Reorganization Agreement
and the Technology Agreement in order to eliminate the need for or to otherwise
discontinue as expeditiously as reasonably possible those Services performed in
accordance with this Agreement. To the extent such Services can reasonably be
eliminated upon the separation and transfer of data, the parties will work
toward executing such transfer immediately following the Closing. Ralcorp
shall pay to Supplier an amount equal to such reasonable costs for all hours
expended by Supplier personnel and actual charges incurred in separating and
converting and/or transferring data and in transferring knowledge associated
therewith.
3. Liability: Indemnification. Supplier shall have no liability to
Ralcorp with respect to its furnishing any of the Services hereunder except for
its willful misconduct or gross negligence. By agreeing to provide the
Services as an accommodation to Ralcorp, Supplier is making no representations
or warranties as to the quality, suitability or adequacy of the Services for
any purpose or use, except that Supplier will use such care in providing
services to Ralcorp as it would use in providing such services for its own use.
In providing the Services, Supplier shall not be obligated to (i) hire any
additional employees; (ii) maintain the employment of any specific employee;
(iii) purchase, lease or license any additional equipment or software; or (iv)
pay any costs related to the transfer or conversion of Ralcorp's data to
Ralcorp or any alternate supplier of administrative services. Except for
Supplier's gross negligence or willful misconduct, the sole remedy of Ralcorp
in the event data owned by it is lost or damaged in any way during processing
by Supplier is the refund to it of any charges paid for the processing of the
damaged data. Supplier agrees to exercise reasonable diligence to correct
errors or deficiencies in the Services. Except for Supplier's gross negligence
or willful misconduct, (i) Supplier shall not be liable to any third party in
any way for any obligation or commitment or for any act or omission in
connection with the provision of Services by Supplier and (ii) Ralcorp shall be
solely liable and responsible for any and all claims, liabilities, obligations,
losses, costs, expenses, litigation, proceedings, taxes, levies, imposts,
duties, deficiencies, assessments, charges, allegations, demands, damages or
judgments of any kind or nature whatsoever ("Liabilities")
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<PAGE> 23
related to, arising from, asserted against or associated with Supplier
furnishing or failing to furnish to Ralcorp any of the Services described
herein. Upon the termination of any of the Services, Ralcorp shall be
obligated to return to Supplier, as soon as reasonably practicable, any
equipment or other property of Supplier relating to the Services which is owned
or leased by it and is or was in Ralcorp's possession or control and which was
or is not part of the assets to be transferred pursuant to the Merger Agreement
or the Reorganization Agreement. Effective as of the date of this Agreement,
Ralcorp shall indemnify and hold Supplier and its affiliates and their
respective directors, shareholders, officers, employees, agents, consultants,
representatives, successors, transferees and assigns harmless from and against
any and all Liabilities (including, without limitation, reasonable fees and
expenses of counsel) of whatever kind and nature related to, arising from,
asserted against or associated with Supplier's furnishing or failing to
furnish the Services provided for in this Agreement, other than Liabilities
arising out of the willful misconduct or gross negligence of Supplier or its
affiliates or their respective directors, shareholders, officers, employees,
agents, consultants, representatives, successors, transferees or assigns.
Nothing herein, however, shall be deemed to affect the right of Ralcorp to seek
damages or other rights of redress against Supplier for breach of the
provisions of this part of the Agreement.
4. Claims. Ralcorp's receipt of any Service performed hereunder shall be
an unqualified acceptance of, and a waiver by it of any and all claims with
respect to such Service unless Ralcorp gives Supplier notice of claim within
thirty (30) days after such receipt; no claim by Ralcorp against Supplier of
any kind, whether as to service performed or for delayed performance or
non-performance, unless such claim is based on gross negligence or willful
misconduct, shall be greater in amount than the fee for the Service in respect
of which such claim is made; and in no event will Supplier be liable to Ralcorp
for any incidental or consequential damages, whether or not caused by or
resulting from gross negligence or willful misconduct or breach of obligations
hereunder.
5. Additional Services. If Ralcorp wants Supplier to provide any service
other than the Services provided for in the Schedule 2, Ralcorp shall notify
Supplier, and within five (5) days following the giving of such notice,
Supplier shall provide such service if such service is reasonably necessary for
the conduct of the Branded Business (as defined in the Reorganization
Agreement) in the ordinary course. Ralcorp shall be invoiced for such services
in accordance with billing practices reasonably determined by Supplier. The
provision by Supplier of any such additional Services shall be subject to all
other provisions of this Agreement, as if those Services had originally been
part of the Schedule 2 to this Agreement.
6. Confidentiality. Any and all information which is not generally known
to the public which is exchanged between the parties in connection with this
Agreement, whether of a technical or business nature, shall be considered to be
confidential. The parties agree that confidential information shall not be
disclosed to any third party or parties without the written consent of the
other party, except to the extent otherwise addressed by the Technology
Agreement, which shall be treated in accordance with the terms of the
Technology Agreement.
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<PAGE> 24
Each party shall take reasonable measures to protect against nondisclosure of
confidential information by its officers and employees. Confidential
information shall not include any information (i) which is or becomes part of
the public domain, (ii) which is obtained from third parties who are not bound
by confidentiality obligations, except to the extent otherwise addressed by the
Technology Agreement or (iii) which is required to be disclosed by law,
regulation, legal process or the rules of any state or federal regulatory
agency or the New York Stock Exchange. The provisions of this section shall
survive the termination of this Agreement.
7. Billing and Payment. Supplier shall bill Ralcorp on a monthly basis
for the amounts due to Supplier for services provided pursuant to the terms of
this Agreement. All such bills shall contain reasonable detail and shall be
due thirty (30) days after receipt. The failure of Ralcorp to pay any bill
within thirty (30) days of receipt shall result in Ralcorp owing Supplier an
additional handling charge equal to 1% per month of the amount due from the
date due to the payment date.
8. Term. It is intended that the Services be provided by Supplier as a
temporary accommodation to Ralcorp. Supplier shall provide the Services for a
period beginning at the commencement of the term of this Agreement. In no
event, however, shall Supplier be obligated to provide any Services identified
pursuant to Part II of this Agreement beyond ninety (90) days from the Closing
Date.
9. Other Provisions. Section 1 and Sections 21 through 32 of Part I of
this Agreement shall be incorporated by reference to this Part II. The
remaining terms of Part I shall in no way govern nor otherwise be applicable to
the services provided pursuant to this Part II.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
RALCORP HOLDINGS, INC. NEW RALCORP HOLDINGS, INC.
By By
----------------------- ----------------------
Title Title
----------------------- ----------------------
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<PAGE> 25
SCHEDULE 1
A. Supplier's Plant location for each Product to be produced (designate by
product): Battle Creek - RICE CHEX, Lancaster, Ohio - COOKIE CRISP,
Sparks, NV - COOKIE CRISP. The parties agree that Supplier's Plant
location at Sparks, NV shall be utilized for the production of COOKIE
CRISP only to the extent that Supplier's Plant location at Lancaster,
Ohio is unable to produce sufficient quantities of COOKIE CRISP in
accordance with the terms of this Agreement. Notwithstanding the
foregoing, Supplier shall have the right to utilize its Plant location at
Sparks, NV for the production of COOKIE CRISP notwithstanding the fact
that Supplier's Plant location at Lancaster, Ohio is able to produce
sufficient quantities of COOKIE CRISP if Supplier pays Ralcorp an amount
equal to the freight cost that would be incurred if such COOKIE CRISP
were shipped from Sparks, NV to Lancaster, Ohio.
The respective Products may not be manufactured or packaged at any other
location without Ralcorp's prior written consent.
B. "Products" - Products produced shall be as follows:
RICE CHEX 14/12 oz.
RICE CHEX 14/17.5 oz.
COOKIE CRISP 12/11 oz.
COOKIE CRISP 4/35 oz.
C. "Capacity Warranty". (a) Supplier hereby covenants that,
throughout the term of this Agreement, Supplier shall have the capacity
to produce 8,400 cwt. of RICE CHEX on a monthly basis (the "RICE CHEX
Production Commitment"). Notwithstanding the foregoing:
(i) Supplier shall have the right to reduce or terminate the RICE
CHEX Production Commitment (a "Supplier Termination") at any time
after the date that is one year after the commencement of the term
of this Agreement. Such termination shall become effective on the
date that is sixty (60) days after the first day of the month
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<PAGE> 26
immediately following the month in which Supplier provides notice to
Ralcorp of such termination, which notice may be provided to Ralcorp
prior to the date that is one year after the commencement of the term
of this Agreement. Ralcorp and Supplier agree that any such
termination shall become effective not earlier than the date that is
one (1) year after the commencement of the term of this Agreement.
(ii) Ralcorp shall have the right to terminate the RICE CHEX
Production Commitment (a "Ralcorp Termination") at any time during
the term of this Agreement. Such termination shall become effective
on the date that is sixty (60) days after the first day of the month
immediately following the month in which Ralcorp provides notice to
Supplier of such termination. (The period commencing on the first
date of the term of this Agreement and ending upon the earlier of
the expiration of the term of this Agreement or any Supplier
Termination or Ralcorp Termination, shall be referred to herein as
the "RICE CHEX Commitment Period.")
(iii) In the event that the repair costs necessary to remedy the
effects of a Casualty upon the operations of Supplier's Plant
location at Battle Creek, Michigan exceed $250,000, Supplier shall
have the right to immediately terminate the RICE CHEX Production
Commitment (in which case the RICE CHEX Commitment Period will
similarly terminate) unless Ralcorp agrees, within 5 business days
after notification by Supplier of the amount of such repair costs,
to pay Supplier an amount equal to the excess of such repair costs
over $250,000.
(b) Supplier hereby covenants (the "COOKIE CRISP Production Commitment")
that, throughout the term of this Agreement, Supplier shall have the
capacity to produce 120,000 cwt. of COOKIE CRISP on an annual basis and
10,000 cwt of COOKIE CRISP on a monthly basis; provided, however, that
Supplier shall not be required to have the capacity to produce more than
15,000 cwt. of COOKIE CRISP in any 30-day period or more than 3,500 cwt.
in any 7-day period. Notwithstanding the foregoing, Ralcorp shall have
the right to terminate the COOKIE CRISP Production Commitment at any time
after the date that is fourteen (14) months after the commencement of the
term of this Agreement. Such termination shall become effective on the
date that is sixty (60) days after the first day of the month immediately
following the month in which Ralcorp provides notice to Supplier of such
termination, which notice may be provided to
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<PAGE> 27
Supplier prior to the date that is fourteen (14) months after the
commencement of the term of this Agreement. Ralcorp and Supplier agree
that any such termination shall become effective not earlier than the
date that is fourteen (14) months after the commencement of the term of
this Agreement. (The period commencing on the first date of the term of
this Agreement and ending upon the earlier of the expiration of the term
of this Agreement or any termination of the COOKIE CRISP Production
Commitment by Ralcorp, shall be referred to herein as the "COOKIE CRISP
Commitment Period.")
D. Securing Materials, Coupons and Premiums. Ralcorp shall provide
all cartons and containers for RICE CHEX production and all COOKIE
CRISP production. A packaging shrink allowance of 4% will be allowed
during production runs at the Supplier with this shrink being
reconciled on an annual basis. Ralcorp will also supply the ingredient
"rice" for Rice Chex production. Supplier will provide all other
ingredients for the production of Rice Chex and all ingredients for
COOKIE CRISP pursuant to the payment terms as described in Section 11A.
Yield loss will be as outlined in Schedule 1E. Notwithstanding the
foregoing, each of Ralcorp and Supplier may provide such Materials for
RICE CHEX production and COOKIE CRISP production as the parties shall
mutually agree. In the event that Supplier exceeds the maximum yield
losses set forth in Schedule 1E with respect to Materials provided by
Ralcorp, Supplier shall pay to Ralcorp an amount equal to the cost of
such excess Materials utilized in connection with Supplier's exceeding
such maximum yield losses. Ralcorp shall provide and deliver to
Supplier all coupons and premiums Ralcorp wishes to include in RICE
CHEX or COOKIE CRISP. Any reasonable costs actually incurred by
Supplier in connection with any coupon or premium drops requested by
Ralcorp shall be paid by Ralcorp in accordance with terms as the
parties shall mutually agree, and the maximum allowed yield losses
relating to any such coupon or premium drops shall be determined in
accordance with terms as the parties shall mutually agree.
E. Loss of Yield. Supplier shall be allowed a maximum yield loss on
COOKIE CRISP of 30% and on RICE CHEX of 28%. Reconciliations of yield
loss costs will be done on an annual basis with the reconciliation
being done on the average yield loss for the 12 month period. Yield
losses will be calculated consistent with Supplier's current methods
from the CPST inventory accounting system.
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<PAGE> 28
F. Storage and Disposal. Supplier shall provide suitable storage and
warehousing space and disposal services for Materials, and the parties
agree that the cost of such storage, warehousing and disposal are
reflected in the rates set forth in Section 11 of this Agreement;
provided, however, that Ralcorp shall pay Supplier an amount equal to
all reasonable costs actually incurred by Supplier in connection with
the storage, warehousing and disposal of Materials by Supplier which
storage, warehousing and disposal require the utilization of
facilities, services or other resources outside the normal course of
business of Supplier. Ralcorp shall promptly provide Supplier with
instructions with respect to the disposition of unusable Materials.
G. Schedule(s). Firm schedules specifying Supplier's requirements for
production, packaging, labeling and shipping of Products hereunder for
each Ralcorp fiscal month this Agreement is in effect shall be
delivered to Supplier by the tenth (10th) workday of the immediately
preceding Ralcorp fiscal month in which Ralcorp desires Supplier to
pack and ship such Products along with a tentative schedule for the
immediately succeeding two (2) fiscal months. The firm schedule(s) may
only be modified as mutually agreed, provided, however, that the
tentative schedule may be modified by Ralcorp for any reason without
Ralcorp incurring any obligation to Supplier therefor.
H. Shipping Instructions. Supplier shall comply with Ralcorp's written
shipping instructions. All Products shall be shipped, with advance approval of
Ralcorp, in vehicles suitable for transportation of food and otherwise in
compliance with all Laws including, without limitation, Department of
Transportation regulations. It is understood that warehouse space for finished
product is not to be supplied by the Supplier; provided, however, that Supplier
shall provide normal loading and on-site holding services during standard
operating time periods with respect to Products to be shipped in accordance
with the terms of this Agreement.
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<PAGE> 29
SCHEDULE 2
Data Processing
- Sales
- Order Processing
- Invoicing
- Accounts Receivable
- Associated General Ledger
- Cincinnati Plant
- Payroll
- Inventory
- Raw Material
- Finished Product
- Maintenance Storeroom
- Disbursements
- Fixed Assets
- Process Control
- Quality Control
- Associated General Ledger
Finished Product Distribution
- Finished Product Storage and Handling
Services Related to Raw Material Supply
- Commodities
- Other Raw Materials
- Packaging Materials
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<PAGE> 1
EXHIBIT 2.5
TECHNOLOGY AGREEMENT
This Technology Agreement (hereinafter "Agreement") dated as of
____________, 199__ by and among Ralcorp Holdings, Inc., a Missouri corporation
("Ralcorp"), NEW RALCORP HOLDINGS, INC., a Missouri corporation and a wholly
owned subsidiary of Ralcorp ("New Ralcorp"), and CHEX, INC., a Delaware
corporation and a wholly owned subsidiary of New Ralcorp ("Branded Subsidiary").
WITNESSETH THAT:
WHEREAS, Ralcorp, General Mills, Inc., a Delaware corporation
("Acquiror"), and General Mills Missouri, Inc., a Missouri corporation and
wholly owned subsidiary of Acquiror ("Merger Sub"), have heretofore entered into
an Agreement and Plan of Merger dated as of August 13, 1996 (as amended on
October ___, 1996, the "Merger Agreement") pursuant to which Merger Sub is being
merged with and into Ralcorp immediately after the consummation of the
transactions contemplated hereby (the "Merger").
WHEREAS, this Agreement is entered into in conjunction with the Merger
Agreement in order to facilitate the license or transfer of certain technical
information and know how to certain of the parties hereto.
WHEREAS, (i) Ralcorp wishes to assign its rights to certain of this
technical information and know how to New Ralcorp and each of Ralcorp and
Branded Subsidiary wish to license other of this technical information and know
how to New Ralcorp, and New Ralcorp wishes to accept such assignments and
licenses and (ii) New Ralcorp wishes to assign its rights to certain of this
technical information and know how to Branded Subsidiary, and Branded Subsidiary
wishes to accept such assignment, with all such assignments and licenses being
on the terms and conditions as hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I - DEFINITIONS
1. The term "Branded Business" shall mean the business of manufacturing,
distributing and selling branded ready-to-eat cereal (excluding Non-Branded
Cereals) and branded cereal-based snacks and snack mixes, as ever conducted
by Ralcorp, New Ralcorp, Ralston Foods, Inc., the predecessor in interest
to New Ralcorp ("Foods"), or their predecessor in interest, Ralston Purina
Company ("RP Co."), prior to the Distribution Date.
<PAGE> 2
2. The term "Foods Business" shall mean any business (including any of
the same businesses as previously conducted by RP Co.) as ever
conducted by Ralcorp, New Ralcorp, Foods, or any of their Affiliates
prior to the Distribution Date, other than the Branded Business.
3. The term "Technical Information and Know How" shall mean any and all
information owned or licensed from third parties by Ralcorp and its
subsidiaries, and which, as of the date of this Agreement, has been
used or reduced to practice for use by the Branded Business or the
Foods Business or by RP Co. in connection with either of such
businesses, including trade secrets, product formulas, processing and
equipment design and information, specifications, know how,
manufacturing, research, software, inventions, patent applications,
patents and industrial property rights and other technical
information.
4. The term "Assigned Technical Information and Know How" shall mean any
and all Technical Information and Know How that is or has in the past
been used exclusively in, or reduced to practice for use exclusively
by, the Foods Business and that same business as it was previously
conducted by RP Co. The term "Assigned Technical Information and Know
How" shall specifically include, without limitation, the Technical
Information and Know How listed on Schedule A attached hereto (such
information designated on Schedule A referred to as the "Special
Assigned Technical Information and Know How") and shall specifically
exclude both the Branded Technical Information and Know How and the
Shared Technical Information and Know How.
5. The term "Shared Technical Information and Know How" shall mean any
and all Technical Information and Know How that is or has in the past
been used or reduced to practice for use by (a) the Branded Business
and that same business as it was previously conducted by RP Co. for
any products which are not Designated Products and (b) both the
Branded Business and the Foods Business and those same businesses as
they were previously conducted by RP Co. The term Shared Technical
Information and Know How" shall specifically exclude the Assigned
Technical Information and Know How and the Branded Technical
Information and Know How.
6. The term "Branded Technical Information and Know How" shall mean any
and all Technical Information and Know How that is or has in the past
been used exclusively, or reduced to practice for use exclusively, by
Ralcorp, its subsidiaries or RP Co. to produce Designated Products,
including all cereal-based snacks and snack mixes that are Designated
Products, and shall include the technical information, know how and
equipment listed on Schedule B attached hereto, which shall not be
considered or form part of the Shared Technical Information and Know
How. The term "Branded Technical Information and Know How" shall
specifically exclude the Assigned Technical Information and Know How.
7. The term "Designated Products" shall have the meaning set forth in the
Trademark Agreement.
2
<PAGE> 3
8. The term "Reorganization Agreement" shall mean the agreement by this
name dated as of the date hereof by and among Ralcorp, New Ralcorp,
Foods, Acquiror, and Branded Subsidiary.
9. The term "Trademark Agreement" shall mean the agreement by this name
dated as of the date hereof by and among Ralcorp, New Ralcorp and
Branded Subsidiary.
10. All other capitalized terms used but not otherwise defined herein
shall have the meanings ascribed thereto in the Reorganization
Agreement.
ARTICLE II - ASSIGNMENTS
1. Ralcorp hereby assigns and transfers to New Ralcorp, its successors
and assigns, all of its right, title, and interest, effective as of
the Distribution Date, in the United States of America and all foreign
countries, in and to the Assigned Technical Information and Know How
and all income, royalties, fees, damages, and payments now or
hereafter due or payable in respect thereto, and in and to any and all
causes of action (either in law or in equity), and the right to
enforce any rights and file any causes of action, including the right
to recover damages, for any past, present, or future infringement or
misappropriation of any of said rights.
2. New Ralcorp hereby assigns and transfers to Branded Subsidiary, its
successors and assigns, all of its right, title and interest,
effective as of the Distribution Date, in the United States of America
and all foreign countries, in and to the Shared Technical Information
and Know How and the Branded Technical Information and Know How in
which New Ralcorp or any of its subsidiaries owns or possesses or
otherwise has rights, together with all income, royalties, fees,
damages and payments now or hereafter due or payable in respect
thereto, and in and to any and all causes of action (either in law or
in equity), and the right to enforce any rights and file any causes of
action, including the right to recover damages, for any past, present,
or future infringement or misappropriation of any of said rights.
3. All assignments made hereunder by Ralcorp and New Ralcorp are on a
quitclaim basis without contravening the representations or warranties
concerning such Technical Information and Know How contained in the
Merger Agreement or Reorganization Agreement.
3
<PAGE> 4
ARTICLE III - LICENSE GRANTS
1. Each of Ralcorp and Branded Subsidiary hereby grants to New Ralcorp,
effective as of the Distribution Date and subject to the terms,
covenants, conditions, and limitations set forth in this Agreement
(including, without limitation, those restrictions set forth in
Article IV hereof), that certain Technology Agreement dated as of
March 31, 1994 by and among RP Co., Ralston Purina International,
Inc., VCS Holding Company Inc. and Ralcorp, which agreement is
attached hereto as Exhibit A (the "Prior Technology Agreement"), the
Merger Agreement, and the Trademark Agreement:
(a) an irrevocable, non-exclusive, royalty-free, license to use,
employ, exercise, apply, or otherwise utilize, the Shared
Technical Information and Know How from and after the date
hereof until March 31, 1999 in the Western Hemisphere, but,
with no rights (except as expressly provided herein) during
the applicable time periods specified in Section 4(a) of
Article IV hereof to produce, have produced, or license to
produce the Designated Products or snack mixes which are not
Designated Products;
(b) an irrevocable, non-exclusive, royalty-free, license to use,
employ, exercise, apply, or otherwise utilize, the Shared
Technical Information and Know How from and after March 31,
1999, worldwide, in perpetuity, but, with no rights (except as
expressly provided herein) during the applicable time periods
specified in Section 4(a) of Article IV hereof to produce,
have produced, or license to produce the Designated Products
or snack mixes which are not Designated Products;
(c) an irrevocable, non-exclusive, royalty free, license to use,
employ, exercise, apply or otherwise utilize the Branded
Technical Information and Know How to produce, but, except as
expressly provided herein, not to disclose or sublicense the
same to third parties (including, without limitation, to
contract manufacturers, other than as is necessary for Foods
Copacking (as defined below)), (i) any products (including,
without limitation, all Designated Products and all
cereal-based snacks and snack mixes) exclusively for Ralcorp
alone or for RP Co. as provided in and in accordance with
Article V, Section 1 hereinbelow, in each case, commencing as
of the Distribution Date; (ii) (A) any products, other than
snack mix products and Designated Products which are COOKIE
CRISP type ready to eat cereals commencing on the Distribution
Date and (B) any Designated Products which are COOKIE CRISP
type ready to eat cereals, commencing eighteen (18) months
after the Distribution Date, in each case (A) and (B) in
the United States, its territories, possessions, military
installations and the Commonwealth of Puerto Rico for any
third parties; (iii) any Products which are Cookie Crisp type
ready to eat cereals, other than snack mix products,
commencing five (5) years after the Distribution Date, in all
other countries for any third parties; (iv) any snack mix
products other than those referred to in Section 4(a)(iii) of
Article IV, commencing two (2) years after the Distribution
Date, worldwide for any third parties; and (v) any snack mix
products referred to in Section 4(a)(iii) of Article IV
hereof, commencing five (5) years after the Distribution Date,
worldwide, for any third parties.
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(d) an irrevocable, non-exclusive, royalty-free, license to use
the invention claimed in U.S. Patent No. 5,188,860 entitled
"Process for the Production for a Fiber Containing Cereal
Product", worldwide, in perpetuity.
For purposes of the foregoing paragraph (c), the term "Foods
Copacking" shall mean the right of New Ralcorp (subject to all of the
restrictions and obligations set forth herein and provided that all use of
Branded Technical Information and Know How and the Shared Technical Information
and Know How by any such contract manufacturer is on the same basis and subject
to the same restrictions as set forth in Section 1 of Article III and Section 4
of Article IV as they apply to New Ralcorp) to have contract manufacturers
pack, or mix with other ingredients and pack, only for New Ralcorp itself,
ready to eat cereals that are Designated Products and cereal based snacks and
snack mix products as described in Section 4(a) of Article IV, but shall not
include any right of any contract manufacturer to produce or make any of such
products for itself or other third parties.
2. New Ralcorp hereby agrees and acknowledges that the Shared Technical
Information and Know How and the Branded Technical Information and
Know How is subject to all limitations, undertakings and liabilities
contained in the Prior Technology Agreement, including, without
limitation, each of the following:
(a) New Ralcorp shall not disclose any of the Shared Technical
Information and Know How and Branded Technical Information and
Know How to any third party during the term of the license
without the written consent of RP Co.; and
(b) New Ralcorp shall obtain a written agreement from each of its
employees, agents, officers and/or directors that the Shared
Technical Information and Know How and the Branded Technical
Information and Know How will be kept confidential at all
times by such parties and that such information will not be
disclosed to any third parties.
ARTICLE IV - OBLIGATIONS OF THE PARTIES
1. New Ralcorp hereby agrees to assume from Ralcorp and fulfill all of
the technical assistance obligations owed to RP Co. by Ralcorp as
described in Article III of the Prior Technology Agreement, and
Ralcorp hereby consents to such assumption by New Ralcorp.
2. Ralcorp, Branded Subsidiary and New Ralcorp each agree to treat as
confidential all Technical Information and Know How, including the
Branded Technical Information and Know How, the Assigned Technical
Information and Know How, the Special Assigned Technical Information
and Know How and the Shared Technical Information and Know How; and
shall not at any time disclose or permit to be disclosed any portion
thereof to any other person, firm, or entity; provided, however, (i)
that New Ralcorp shall have the
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right to license or disclose, in confidence, but only in accordance
with the terms of the Prior Technology Agreement and this Agreement,
the Shared Technical Information and Know How and, as to the Branded
Technical Information and Know How, in accordance with Section 2 of
Article V of this Agreement, and that this provision shall not
otherwise limit or preclude New Ralcorp from doing so and (ii) that
each of Ralcorp and Branded Subsidiary shall have the right to license
or disclose, in confidence, but only in accordance with the terms of
the Prior Technology Agreement, the Shared Technical Information and
Know How and the Branded Technical Information and Know How, and that
this provision shall not otherwise limit or preclude Ralcorp or
Branded Subsidiary from doing so. Notwithstanding the foregoing, New
Ralcorp shall not be under any obligation pursuant to this Agreement
to treat as confidential any of the Assigned Technical Information and
Know How or Special Assigned Technical Information and Know How.
3. The obligation of nondisclosure, contained in Paragraph 2 above, shall
not apply in the event that any of such confidential information:
(a) was known to the public or generally available to the public
prior to the date it was received from the disclosing party;
(b) became known to the public or generally available to the
public subsequent to the date it was received from the
disclosing party without any fault of the receiving party; or
(c) is, subsequent to the date of this Agreement, disclosed to the
receiving party from a third party who is under no obligation
of confidentiality regarding the same.
4. New Ralcorp, on behalf of itself and its successors in interest and
present and future subsidiaries and Affiliates other than Branded
Subsidiary, agrees and shall cause such subsidiaries and Affiliates to
agree, that (except as otherwise provided in the Supply Agreement) New
Ralcorp, its successors and such subsidiaries and Affiliates shall not
directly or indirectly:
(a) make, have made, produce, market, contract pack, sell or
license, or contract with, any third party to produce (except
as provided in and in accordance with Article V, Section 1,
hereinbelow for RP Co. and Article V, Section 3 for Ralcorp):
(i) (A) any ready-to-eat cereals that are COOKIE CRISP-type
Designated Products in the United States, its
territories, possessions, military installations or the
Commonwealth of Puerto Rico for the eighteen (18) month
period commencing upon the Distribution Date and (B) any
ready to eat cereals that are Designated Products
outside of the United States, its territories,
possessions, military installations or the Commonwealth
of Puerto Rico for the five (5) year period commencing
upon the Distribution Date (which shall preclude,
without limitation, any
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sales made to third parties of such Designated Products which
New Ralcorp knows are likely, based on reasonable information
and knowledge, to be sold or resold outside the United
States, its territories, possessions or military
installations, or the Commonwealth of Puerto Rico);
(ii) any snack mix, cereal-based or otherwise, anywhere in the
world for the two (2) year period commencing upon the
Distribution Date; and
(iii) any snack mix containing those products, or a product
substantially similar to, or identical to, products
which have been, prior to the date hereof, offered
for sale in connection with any form of the CHEX
trademark, which shall include products sold under
the Crispy Hexagon designation but which shall not
include those wheat cereals denominated or described
as SHREDDED WHEAT and similar in nature to other
shredded wheat products currently offered by other
cereal manufacturers, for the five (5) year period
commencing upon the Distribution Date; provided,
however, that this Section 4(a)(iii) and Section
4(a)(ii) hereinabove shall not apply to snack mix
products of an enterprise acquired by New Ralcorp in
which the snack mix business generates less than 20%
of the annual gross revenues of such enterprise and
less than seven (7) million dollars in annual sales;
or
(b) use, print, disseminate, display or publish on packaging for
cereals, or in any related advertising, sales or promotional
materials, any snack recipes which are essentially identical
to the snack mix recipes that have been used by Foods or New
Ralcorp in connection with CHEX products in the three (3)
years prior to the Distribution Date.
5. Ralcorp and Branded Subsidiary, and their Affiliates and subsidiaries,
hereby agree that Sections 4(a) and (b) of this Article IV shall not
apply to, and shall not restrict in any manner whatsoever, the
existing business of any third party (including the Affiliates and
subsidiaries of such third party prior to such acquisition) which may
acquire New Ralcorp or any of its Affiliates or subsidiaries, as such
existing business is conducted at the time of such acquisition.
Notwithstanding the foregoing, New Ralcorp, on behalf of itself and
its successors in interest and present and future subsidiaries and
Affiliates, agrees and shall cause such subsidiaries and Affiliates to
agree, that Sections 4(a) and (b) shall prevent any such acquiring
third party from using the Shared Technical Information and Know How
related to snack mixes or the Designated Products and the Branded
Technical Information and Know How in violation of the terms of
Sections 4(a) and (b) of this Article IV.
ARTICLE V - CERTAIN AGREEMENTS
1. Each of Ralcorp and Branded Subsidiary hereby agrees that, except as
set forth in this Section 1, nothing contained in this Agreement shall
interfere with the ability of New
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Ralcorp to meet the obligations of New Ralcorp, if any, to RP Co., as
set forth in the Distributorship Agreement. Each of Ralcorp and
Branded Subsidiary hereby agrees that New Ralcorp shall have the right
to produce ready to eat cereals for RP Co. in accordance with the
terms of the Distributorship Agreement, up to, but not beyond,
September 1, 1999, by which time New Ralcorp agrees that it shall
have terminated the Distributorship Agreement insofar as it may
require the production or sale of any Designated Products. New
Ralcorp also agrees that New Ralcorp shall not use any of the
Branded Trademarks in connection with such production for RP Co.,
unless such usage is specifically authorized in writing by Ralcorp.
2. Each of Ralcorp and Branded Subsidiary hereby agrees that New Ralcorp
shall have the right to license in accordance with the terms of the
Prior Technology Agreement, or, at its option, request that Ralcorp and
Branded Subsidiary each license in accordance with the terms of the
Prior Technology Agreement, if applicable, the Shared Technical
Information and Know How and the Branded Technical Information and Know
How, or any parts thereof, from and after the Distribution Date to any
subsidiaries or Affiliates of New Ralcorp (regardless of when any such
relationship with New Ralcorp may arise), for so long as such entity
continues to be a subsidiary or Affiliate of New Ralcorp, and to any
"Successor Third Party" on the same terms as set forth herein and
specifically subject to the requirement that each such entity shall
assume and be subject to and be bound by all restrictions set forth in
this Agreement and the Trademark Agreement, provided that, upon the
granting of a license of the Shared Technical Information and Know How
and the Branded Technical Information and Know How, or any parts
thereof, by Ralcorp or Branded Subsidiary to a Successor Third Party,
the then existing licenses to New Ralcorp (and its subsidiaries and
Affiliates) relating exclusively to the business transferred or to be
transferred to such Successor Third Party shall be terminated and New
Ralcorp shall only retain, if any, licenses of the Shared Technical
Information and Know How and Branded Technical Information and Know How
relating to that part of the ready to eat cereal, cereal based snack
and cereal based snack mix businesses of which it retains ownership
immediately after such transfer. It is hereby understood that any such
license will (i) provide the licensee with rights no greater than the
rights of New Ralcorp as set forth in this Agreement and (ii) be
subject in all respects to the terms of this Agreement and the Prior
Technology Agreement. Each of Ralcorp and Branded Subsidiary hereby
agrees that it shall, or, if necessary to fulfill its obligations
hereunder, it shall cause its Affiliates and subsidiaries to, promptly
comply with (in no case, more than fourteen (14) days after its receipt
of) any such request by New Ralcorp by providing any such subsidiary or
Affiliate of New Ralcorp with all documentation necessary to provide
such Affiliate or subsidiary with the same rights as transferred to New
Ralcorp by this Agreement. For purposes of this Agreement, "Successor
Third Party" shall mean any entity to whom New Ralcorp transfers (by
way of asset transfer, stock transfer, merger or otherwise) following
the date hereof all or substantially all of (x) its ready to eat
cereal, cereal based snack and cereal based snack mix business as a
whole, (y) substantially all of its assets, title, properties,
interests, rights and privileges, tangible and intangible, to
manufacture and sell cereals that are identical to or substantially
similar in form or overall appearance to cereal products bearing the
CHEX trademark, or (z) after a transfer of the business as described in
(y), the ready to eat cereal, cereal based snack and cereal based snack
mix business then remaining, including any entity that is a subsidiary
or Affiliate of New Ralcorp, and any entity which is a subsequent
transferee of any of the businesses described in (x), (y) or (z) of
this section V.2; it being understood that any license of the Shared
Technical Information and Know How and the Branded Technical
Information and Know How to a subsequent transferee shall be on the
same terms and conditions as set forth in this section V.2.
3. Each of Ralcorp and Branded Subsidiary hereby agrees that nothing
contained in this Agreement shall interfere with the ability of New
Ralcorp to meet its obligations to Ralcorp under the Supply Agreement.
4. After the Distribution Date, none of New Ralcorp, Ralcorp nor Branded
Subsidiary shall have an ongoing obligation to assign, license, share
or provide to the other any Technical Information and Know How created
or developed after the Distribution Date.
5. Ralcorp, Branded Subsidiary and New Ralcorp each hereby acknowledges
that pursuant to the Reorganization Agreement it has agreed to
abide by certain limitations, undertakings and liabilities related to
the Assigned Technical Information and Know How, the Shared Technical
Information and Know How and the Branded Technical Information and
Know How, including those arising out of the Prior Technology
Agreement.
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ARTICLE VI - ASSIGNABILITY
New Ralcorp's rights herein as to the Shared Technical
Information and Know How and the Branded Technical Information and Know How
shall not be assignable except to its successor by operation of law and except
as otherwise expressly provided herein; otherwise, this Agreement and the
rights granted herein shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
ARTICLE VII - MISCELLANEOUS PROVISIONS
1. Should any provision of this Agreement be declared unenforceable for
any reason or found contrary to any law or statute, said provision
shall be adjusted in accordance with such decision or if it cannot be
so adjusted will automatically cease to be a part of this Agreement
without affecting any other provisions or obligation thereof.
2. This Agreement shall be construed and enforced in accordance with the
laws of the State of Missouri.
3. The headings used in this Agreement are for reference only and shall
not be relied upon or used in the interpretation of this Agreement.
4. The dispute resolution provisions contained in Article XII of the
Reorganization Agreement will control in the event of any dispute in
relation to this Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representative effective on the day and year
set forth in this Agreement.
RALCORP HOLDINGS INC.
By:______________________________
Name:____________________________
Title:___________________________
CHEX, INC.
By:______________________________
Name:____________________________
Title:___________________________
NEW RALCORP HOLDINGS, INC.
By:______________________________
Name:____________________________
Title:___________________________
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SCHEDULE A TO THE TECHNOLOGY AGREEMENT
SPECIAL ASSIGNED TECHNICAL INFORMATION AND KNOW HOW
1. Twin screw extrusion technology and equipment currently and
historically associated exclusively with cereals not offered by and
not reduced to practice for use by cereal or snack mixes of the
Branded Business.
2. Cooking, shredding, baking and sugar frosting technology and equipment
at Bremner facility in Princeton, Kentucky currently and historically
associated exclusively with cereals (including cereals not yet in
commercial production) not offered by and not reduced to practice for
use by cereal or snack mixes of the Branded Business.
3. Crispy hexagon forming rolls and related technology currently and
historically associated exclusively with cereals not offered by the
Branded Business.
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SCHEDULE B TO THE TECHNOLOGY AGREEMENT
1. Formulas and processing steps, times and conditions for the Designated
Products
2. To the extent they are exclusively associated with the Designated
Products, the following, as well:
Material specifications
Machine and equipment settings
Equipment and manufacturing specifications and instructions
Plant operating procedures
Testing procedures
Sampling procedures
Safety protocols
Ingredient testing
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EXHIBIT 2.6
TRADEMARK AGREEMENT
THIS TRADEMARK AGREEMENT dated as of the ________ day of ____________
199___, is by and among Ralcorp Holdings, Inc., a Missouri corporation
("Ralcorp"), ____________________, a Missouri corporation wholly owned by
Ralcorp ("New Ralcorp"), and ____________________, a Delaware corporation
("Branded Subsidiary").
W I T N E S S E T H:
WHEREAS, Ralcorp, and General Mills, Inc., a Delaware corporation
("Acquiror"), and General Mills Missouri, Inc., a Missouri corporation and a
wholly owned subsidiary of Acquiror ("Merger Sub"), have entered into an
Agreement and Plan of Merger dated August 13, 1996 (as amended on October ___,
1996, the "Merger Agreement") pursuant to which Merger Sub is being merged with
and into Ralcorp immediately after the consummation of the transactions
contemplated hereby (the "Merger"); and
WHEREAS, in connection with the Merger, the parties hereto desire to
transfer or license certain intellectual property assets to each other on the
terms and conditions set forth in (i) that certain Technology Agreement by and
between Ralcorp, New Ralcorp and Branded Subsidiary dated as of the date hereof
(the "Technology Agreement") and (ii) this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and for other good and valuable consideration, the parties agree as follows:
1. Definitions
a. The term "Trademarks" shall mean and include trademark(s), service
mark(s), trade dress, and copyright(s) and all registrations and
applications for registrations relating thereto; however, the term
"trademark" shall mean only a word, symbol or device registrable as a
trademark under the trademark laws.
b. The term "Designated Products" shall mean cereals, cereal based snacks and
snack mixes, and products which are identical to or substantially similar
in form or in overall appearance to those products, which have been
offered for sale in connection with any form of the CHEX trademark or the
COOKIE CRISP trademark prior to the date hereof, whether or not any of
such products are (i) similar in flavor to those products which have been
offered for sale in connection with such trademarks or (ii) used in
association with ingredients (e.g., raisins) different from the
ingredients used in the products which have been offered for sale
<PAGE> 2
in connection with such trademarks; provided, however, that this term
shall not include the hexagonally shaped products currently sold under the
CRISPY HEXAGON designation or those wheat cereals denominated or described
as SHREDDED WHEAT and similar in nature to other shredded wheat products
currently offered by other cereal manufacturers.
c. The term "Private Label Trademark(s)" shall mean those trademarks and
trade names owned by a grocery retailer, a wholesaler, or broker, which is
not a cereal producer or primarily in the cereal business, which are used
by such persons or entities to identify grocery products sold by such
parties or entities and in which New Ralcorp (as successor by merger to
Ralston Foods, Inc. ("Foods")) and its Affiliates have no rights, except
for the right to produce products utilizing such Trademarks and trade
names for such parties or entities or their licensees, but which shall
not, in any event, include any Trademark or trade name described in
Section 2(d)(i) or Section 2(d)(ii) hereinbelow.
d. The term "Reorganization Agreement" shall mean the Agreement by this name
dated as of the date hereof by and among Ralcorp, New Ralcorp, Foods,
Branded Subsidiary, and Acquiror.
e. The term "Control Brand" shall mean those Trademarks and trade names which
(i) are utilized by New Ralcorp and/or its subsidiaries on a line of
products, the vast majority of which are sold utilizing Private Label
Trademarks, which are typically offered by New Ralcorp to re-sellers of
grocery products who normally do not utilize their own Private Label
Trademarks on such grocery products, in lieu of a Private Label Trademark
on such products and (ii) New Ralcorp and/or its subsidiaries do not
themselves advertise to consumers.
f. All other capitalized terms used but not otherwise defined herein shall
have the meanings ascribed thereto in the Reorganization Agreement.
2. Trademark Assignments and Licenses
a. New Ralcorp on behalf of itself and its subsidiaries, other than Branded
Subsidiary, hereby assigns and agrees to cause any applicable subsidiaries
to assign, effective as of the Distribution Date, to the Branded
Subsidiary all of New Ralcorp's and its subsidiaries' rights, title and
interest, together with all of the goodwill associated therewith, in (i)
the Trademarks and recipe names listed on Schedule 2(a) attached hereto
and registrations and applications for registrations related to the
trademarks listed in Schedule 2(a), and (ii) any other Trademarks, other
than the RALSTON, RALSTON FOODS, and red, stylized R trademarks
(collectively, the "Ralston Trademarks") and the SUN FLAKES and SPIDERMAN
Trademarks, previously used or currently owned by New Ralcorp or licensed
to
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New Ralcorp (as successor by merger to Foods) or its subsidiaries which
are or have been almost always associated with the Branded Business or
intended almost always for use therein (collectively, the Trademarks
described in this Section 2(a) constitute the "Branded Trademarks"). New
Ralcorp hereby grants (without assuming any liability, as to Puerto Rico,
that may arise as a result of or in connection with such grant, including,
without limitation, with respect to the Distributorship Agreement),
effective as of the Distribution Date, to Branded Subsidiary a
non-exclusive royalty free right to use the Ralston Trademarks in the
United States, its territories and possessions and the Commonwealth of
Puerto Rico and military installations on any product packaging,
promotional or advertising materials for a period of one (1) year
following the Distribution Date; provided however, that such term may be
extended (for a period of no more than one (1) additional year) for the
purpose of permitting the Branded Subsidiary to use, sell or otherwise
dispose of product packaging and advertising or promotional materials that
remain on hand on the one year anniversary of the Distribution Date. The
Branded Subsidiary, on behalf of itself and its Affiliates and
subsidiaries, hereby agrees that it will (i) make reasonable efforts to
conclude the use of such product packaging and promotional and advertising
materials by the one year anniversary of the Distribution Date and (ii)
not place any orders for such product packaging and advertising or
promotional materials at any time after the one year anniversary of the
Distribution Date. Nothing herein shall prevent the Branded Subsidiary
from ordering such product packaging and promotional and advertising
materials within the initial one (1) year period following the
Distribution Date.
b. Ralcorp hereby assigns to New Ralcorp all of Ralcorp's rights, title and
interest, together with all the goodwill associated therewith, in and to
(i) the trademarks listed on Schedule 2(b) attached hereto and
registrations and applications for registrations related thereto and (ii)
any other Trademarks owned by Ralcorp, other than the Branded Trademarks
(collectively, the Trademarks described in this Section 2(b) constitute
the "Other Trademarks").
c. Each of Ralcorp and the Branded Subsidiary hereby acknowledge and agree
that New Ralcorp, or its Affiliates and subsidiaries, will retain, and
that neither Ralcorp, nor the Branded Subsidiary will have any rights in
the Other Trademarks, except, as otherwise provided in Section 2(a), with
respect to use of the Ralston Trademarks.
d. New Ralcorp, on behalf of itself and its Affiliates hereby acknowledges
and agrees that neither it nor any of them will retain nor will they have
any rights to the Branded Trademarks. For the respective periods set out
below, New Ralcorp, on behalf of itself and its present and future
Affiliates, further agrees, and shall cause such Affiliates to agree, that
New Ralcorp and such Affiliates shall not directly or indirectly use
(including, without limitation, any use in connection with any Private
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Label Trademark or Control Brand products, any contract packing
arrangement or otherwise in connection with producing product for third
parties), register, seek to register, license or otherwise grant rights in
any of the following Trademarks or statements, as the case may be, in any
state, country or territory anywhere in the world:
(i) the Branded Trademarks and any Trademarks or trade names
confusingly similar to any of such Branded Trademarks, including, with
respect to cereals and snack mixes, without any limitation of the
generality of the foregoing, any one syllable Trademark or trade name
concluding with an "EX" type sound; provided, however, that nothing in
this Agreement shall prevent New Ralcorp or its Affiliates from using
(A) the Branded Trademarks in connection with any legally permissible
comparative advertising or (B) the word "mix" in or in connection with
any Trademark or trade name otherwise permitted to be used hereunder
for any cereal, snack mix or snack mix recipe;
(ii) with respect to the Designated Products, (A) PURINA,
CHECKERBOARD, any checkerboard or checkered logo or symbol, and any
Trademarks or trade names confusingly similar to any of the foregoing
trademarks or (B) any statement which indicates that any CHEX-type
ready to eat cereal Designated Products were produced at any time
prior to the Distribution Date, or that any other Designated Products
were produced at any time prior to the date which is 18 months after
the Distribution Date, in either case, by Ralston Purina Company ("RP
Co.") or New Ralcorp or their Affiliates; and
(iii) with respect to the Designated Products, any trademarks or trade
names, other than Private Label Trademarks.
The obligations set forth in Section 2(d)(i) shall continue and remain in
effect as long as the Branded Subsidiary and its Affiliates, successors in
interest, assigns and licensees shall not have abandoned all use of the
applicable Branded Trademark and all Trademarks confusingly similar
thereto and all registrations for such applicable Branded Trademark and
all Trademarks confusingly similar thereto shall not have expired. The
obligations set forth in Section 2(d)(ii) shall continue and remain in
effect as long as the Branded Subsidiary and its Affiliates, successors in
interest, assigns and licensees shall not have permanently discontinued
(which shall be deemed to have occurred if any such Designated Product
shall not have been offered for sale for a period of two (2) consecutive
years or more unless such discontinuance is a result of a force majeure
event) offering all products which are identical to or substantially
similar to the applicable Designated Product. The obligations set forth
in Section 2(d)(iii) shall continue and remain in effect for a period of
three (3) years from the Distribution Date; provided, however, that (A)
commencing two (2) years after the Distribution Date, New Ralcorp shall
have the
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right to use the Ralston Trademarks as a Control Brand (provided that all
requirements of Section 2(d)(i) and Section 2(d)(ii) are met), and any
other Control Brands which otherwise comply with the requirements of this
Section 2(d), in connection with any Designated Product, and (B)
commencing three (3) years after the Distribution Date, New Ralcorp shall
have the right to use the Ralston Trademarks in connection with the
Designated Products (without limiting its rights to use the Ralston
Trademarks on any other products) only as a house brand in the same manner
as it does for its other cereal products and only on the conditions that
the Ralston Trademarks are less prominently displayed than the primary
trademark or product name in all uses on the principal display panels of
the products and in advertising thereof, and the other requirements of
Section 2(d)(i) and Section 2(d)(ii) are otherwise satisfied and the
Ralston Trademarks shall not be used as part of the product name.
Notwithstanding the foregoing, the restrictions contained in Section
2(d)(iii) hereinabove shall not in and of themselves restrict in any
manner whatsoever, the use of any pre-existing Trademarks or Trademarks
confusingly similar thereto, in the business of any third party which may
acquire New Ralcorp or its Affiliates through a merger, consolidation or
other acquisition transaction. All of the foregoing provisions of this
paragraph (d) are subject to the terms of the Technology Agreement which
shall control in the event of any conflict, difference or ambiguity
existing between this Agreement and the Technology Agreement.
e. All assignments made pursuant to this Trademark Agreement by Ralcorp are
on a quitclaim basis. All grants and assignments made by New Ralcorp are
made on the same basis as set forth in the Merger Agreement and the
Reorganization Agreement with respect to Intellectual Property. The
Branded Subsidiary hereby acknowledges that it has assumed limitations,
undertakings and liabilities related to the Branded Trademarks pursuant
to, and in accordance with, the terms of the Reorganization Agreement,
including, without limitation, such limitations, undertakings and
liabilities arising out of that certain Trademark Agreement dated as of
March 31, 1994 (which has not been amended since such date other than the
amendment dated March 28, 1995) by and between Ralcorp and Ralston Purina
Company (the "Prior Trademark Agreement") which agreement is attached
hereto as Exhibit A. New Ralcorp hereby acknowledges that it has assumed
limitations, undertakings and liabilities related to the Other Trademarks
pursuant to, and in accordance with, the terms of the Reorganization
Agreement, including, without limitation, the limitations, undertakings
and liabilities arising out of the Prior Trademark Agreement.
f. U.S. and Canadian assignments in recordable form, as applicable, relating
to the Branded Trademarks shall be delivered effective as of the
Distribution Date to the Branded Subsidiary at Closing. To the extent
registrations and/or applications relating to the Branded Trademarks exist
in more than one country, a single multi-country assignment shall be
delivered effective as of the Distribution Date to the
5
<PAGE> 6
Branded Subsidiary at Closing. At the Branded Subsidiary's request and
expense, separate country-specific assignments will be delivered to the
Branded Subsidiary or its designee at a reasonable time following each
such request. All taxes, transfer fees and other costs required to record
title to the Branded Trademarks shall be borne by the Branded Subsidiary.
g. U.S. and Canadian assignments in recordable form, as applicable, relating
to the Other Trademarks shall be delivered effective as of the
Distribution Date to New Ralcorp at Closing. To the extent registrations
and/or applications relating to the Other Trademarks exist in more than
one country, a single multi-country assignment shall be delivered
effective as of the Distribution Date to New Ralcorp at Closing. At New
Ralcorp's request and expense, separate country-specific assignments will
be delivered to New Ralcorp at a reasonable time following each such
request. All taxes, transfer fees and other costs required to record
title to the Other Trademarks shall be borne by New Ralcorp.
h. If for any reason a Trademark required to be assigned to the Branded
Subsidiary hereunder cannot be assigned without also assigning rights used
in or associated with businesses not related to the Branded Business, the
parties will work together in good faith to accomplish the goal that such
Trademark will reside in the Branded Subsidiary, or its designee, for
Branded Business purposes and, if for any reason, a Trademark required to
be assigned to New Ralcorp hereunder cannot be assigned without also
assigning rights used in or associated with the Branded Business, the
parties will work together in good faith to accomplish the goal that such
Trademark will reside in the Branded Subsidiary for purposes of the
Branded Business and in New Ralcorp or its designee for other purposes.
3. License Agreements and Contracts.
a. To the extent assignable without third-party consent, and, if not, to the
extent such consents have been obtained heretofore, the license agreements
and contracts listed on Schedule 3(a) attached hereto (which Schedule 3(a)
shall include all license agreements and contracts related to the Branded
Trademarks, including those that may have been entered into from and after
August 13, 1996, in accordance with the terms of the Merger Agreement) and
related to the rights in the Branded Trademarks between New Ralcorp and
unaffiliated third parties are hereby assigned, effective as of the
Distribution Date, to the Branded Subsidiary. Branded Subsidiary hereby
acknowledges that, effective as of the Distribution Date, it has assumed
the obligations under the license agreements and other contracts listed on
Schedule 3(a) pursuant to and in accordance with the terms of the
Reorganization Agreement. To the extent they are non-assignable, New
Ralcorp shall use reasonable efforts to place the Branded Subsidiary in
the same position as the
6
<PAGE> 7
Branded Subsidiary would have been had the rights under such agreements
been assigned.
b. To the extent assignable without third-party consent, and, if not, to the
extent such consents have been obtained heretofore, the license agreements
and contracts related to the rights in the Other Trademarks between
Ralcorp and unaffiliated third parties are hereby assigned, effective as
of the Distribution Date, to New Ralcorp. New Ralcorp hereby acknowledges
that, effective as of the Distribution Date, it has assumed the
obligations under such license agreements and other contracts pursuant to
and in accordance with the terms of the Reorganization Agreement. To the
extent they are non-assignable, Ralcorp shall use reasonable efforts to
place New Ralcorp in the same position as New Ralcorp would have been had
the rights under such agreements been assigned.
4. Scope and Modification.
Except as set forth in the Technology Agreement, the Merger Agreement and the
Reorganization Agreement, each of which shall control in the event of any
conflict, this Trademark Agreement sets forth the entire agreement between
the parties and supersedes all prior agreements and understandings between
the parties relating to the subject matter hereof. None of the terms of this
Trademark Agreement may be waived or modified except as expressly agreed to,
in writing, by each of the parties or their Affiliates.
5. Successors and Assigns.
This Trademark Agreement and all the provisions hereof shall be binding upon
and inure to the benefit of the parties and each of their respective
successors and assigns.
6. Interpretation.
The section headings contained in this Trademark Agreement are solely for the
purpose of reference, are not part of the agreement of the parties hereto,
and shall not in any way affect the meaning or interpretation of this
Trademark Agreement.
7. Counterparts.
This Trademark Agreement may be executed in two or more counterparts, each of
which may be deemed an original, but all of which together shall constitute
one and the same instrument.
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<PAGE> 8
8. Governing Law.
This Trademark Agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of Missouri.
9. Additional Documents.
The parties agree to execute or cause to be executed such additional
documents as may be reasonably required to give effect to their
undertakings in this Trademark Agreement.
10. Dispute Resolution.
The dispute resolution provisions of Article XII of the Reorganization
Agreement will control in the event of any dispute in relation to this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Trademark Agreement
as of the date first above written.
RALCORP HOLDINGS, INC.
By:_________
Name:_______
Title:________
NEW RALCORP HOLDINGS, INC.
By:_________
Name:_______
Title:________
CHEX, INC.
By:_________
Name:_______
Title:________
8
<PAGE> 1
EXHIBIT 2.6
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
RALCORP HOLDINGS, INC.,
GENERAL MILLS, INC.
AND
GENERAL MILLS MISSOURI, INC.
AUGUST 13, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I -- THE MERGER.............................................................. A-2
SECTION 1.1 THE MERGER.......................................................... A-2
SECTION 1.2 CLOSING............................................................. A-2
SECTION 1.3 EFFECTIVE TIME...................................................... A-2
SECTION 1.4 EFFECTS OF THE MERGER............................................... A-2
SECTION 1.5 CERTIFICATE OF INCORPORATION AND BY-LAWS............................ A-2
SECTION 1.6 DIRECTORS........................................................... A-2
SECTION 1.7 OFFICERS............................................................ A-2
ARTICLE II -- EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES................................. A-3
SECTION 2.1 EFFECT ON CAPITAL STOCK............................................. A-3
(a) Cancellation of Treasury Stock and Acquiror-Owned Stock............. A-3
(b) Conversion of Company Common Stock.................................. A-3
(c) Shares of Dissenting Stockholders................................... A-4
SECTION 2.2 EXCHANGE OF CERTIFICATES............................................ A-4
(a) Exchange Agent...................................................... A-4
(b) Exchange Procedures................................................. A-4
(c) Distributions with Respect to Unexchanged Shares.................... A-4
(d) No Further Ownership Rights in Company Common Stock................. A-5
(e) No Fractional Shares................................................ A-5
(f) Termination of Exchange Fund........................................ A-5
(g) No Liability........................................................ A-5
SECTION 2.3 NET ASSETS ADJUSTMENT............................................... A-5
ARTICLE III -- REPRESENTATIONS AND WARRANTIES........................................ A-6
SECTION 3.1 CERTAIN DEFINITIONS................................................. A-6
SECTION 3.2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................... A-6
(a) Organization, Standing, Corporate Power and Subsidiaries............ A-6
(b) Capital Structure................................................... A-6
(c) Authority; Noncontravention......................................... A-7
(d) SEC Documents; Undisclosed Liabilities; Press Releases.............. A-8
(e) Information in Disclosure Documents and Registration Statements..... A-8
(f) Absence of Certain Changes or Events................................ A-9
(g) Litigation.......................................................... A-9
(h) Compliance with Applicable Laws..................................... A-9
(i) Brokers or Finders.................................................. A-9
(j) The Branded Business................................................ A-10
(k) Material Contracts.................................................. A-10
(l) Absence of Changes in Benefit Plans................................. A-10
(m) Benefit Plans, Employment and Labor Relations....................... A-11
(n) Rights Agreement; Antitakeover Statutes............................. A-12
(o) Intellectual Property............................................... A-12
(p) Taxes............................................................... A-13
(q) Branded Financial Statements........................................ A-13
(r) Properties.......................................................... A-13
(s) Capacity of Branded Plant........................................... A-13
(t) Actions Affecting 1994 Spinoff...................................... A-13
(u) Real Property....................................................... A-13
(v) Environmental Matters............................................... A-14
(w) Actions Affecting Internal Spin-off or Distribution................. A-14
</TABLE>
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<TABLE>
<S> <C> <C>
SECTION 3.3 REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGER SUB........... A-14
(a) Organization, Standing and Corporate Power.......................... A-14
(b) Capital Structure................................................... A-14
(c) Authority; Noncontravention......................................... A-15
(d) SEC Documents; Undisclosed Liabilities.............................. A-16
(e) Information in Disclosure Documents and Registration Statements..... A-16
(f) Absence of Certain Changes or Events................................ A-16
(g) Litigation.......................................................... A-17
(h) Compliance with Applicable Laws..................................... A-17
(i) Consummation of Transactions........................................ A-17
(j) Voting Requirements................................................. A-17
(k) Brokers............................................................. A-17
ARTICLE IV -- COVENANTS.............................................................. A-17
SECTION 4.1 COVENANTS OF THE COMPANY............................................ A-17
(a) Ordinary Course..................................................... A-17
(b) Changes in Stock.................................................... A-18
(c) Issuance of Securities.............................................. A-18
(d) Governing Documents................................................. A-19
(e) No Acquisitions..................................................... A-19
(f) No Dispositions..................................................... A-19
(g) Indebtedness........................................................ A-19
(h) Benefit Plans; Collective Bargaining Agreement...................... A-19
(i) Filings............................................................. A-19
(j) Accounting Policies and Procedures.................................. A-19
(k) Liens............................................................... A-20
(l) Actions Affecting Merger, Internal Spin-off or Distribution......... A-20
(m) Delivery of Certain Information..................................... A-20
(n) Exclusivity......................................................... A-20
(o) New Contracts....................................................... A-21
(p) Confidentiality and Standstill Agreements........................... A-21
(q) Broker Transition................................................... A-21
(r) Pending Actions..................................................... A-21
(s) No Agreement to Prohibited Actions.................................. A-21
SECTION 4.2 COVENANTS OF ACQUIROR............................................... A-21
(a) Actions Affecting Merger............................................ A-21
(b) Filings............................................................. A-21
(c) Acquiror Common Stock............................................... A-22
(d) Tax Free Status of Merger and Spin-Offs............................. A-22
SECTION 4.3 MUTUAL COVENANTS.................................................... A-22
ARTICLE V -- ADDITIONAL AGREEMENTS................................................... A-23
SECTION 5.1 PREPARATION OF FORM S-4, FORM S-1, FORM 10 AND THE PROXY STATEMENT;
STOCKHOLDERS MEETING................................................ A-23
SECTION 5.2 ACCESS TO INFORMATION; CONFIDENTIALITY.............................. A-23
SECTION 5.3 LEGAL CONDITIONS TO DISTRIBUTION AND MERGER; LEGAL COMPLIANCE....... A-24
SECTION 5.4 RIGHTS AGREEMENT.................................................... A-24
SECTION 5.5 EMPLOYMENT MATTERS.................................................. A-24
(a) Employment with Branded Business.................................... A-24
(b) Severance and Other Benefits on Termination......................... A-24
(c) Data to be Furnished................................................ A-25
(d) Cooperation......................................................... A-25
</TABLE>
A-ii
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<TABLE>
<S> <C> <C>
SECTION 5.6 FEES AND EXPENSES................................................... A-25
SECTION 5.7 DISTRIBUTION........................................................ A-25
SECTION 5.8 PUBLIC ANNOUNCEMENTS................................................ A-25
SECTION 5.9 PRIVATE LETTER RULING AND TAX OPINIONS.............................. A-25
SECTION 5.10 AFFILIATES.......................................................... A-25
SECTION 5.11 STOCK EXCHANGE LISTING.............................................. A-25
SECTION 5.12 TITLE INSURANCE..................................................... A-25
ARTICLE VI -- CONDITIONS PRECEDENT................................................... A-26
SECTION 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.......... A-26
(a) Stockholder Approval................................................ A-26
(b) Stock Exchange Listing.............................................. A-26
(c) Regulatory Approvals................................................ A-26
(d) Private Letter Ruling............................................... A-26
(e) Joint Tax Opinion or Tax Opinions................................... A-26
(f) No Injunctions or Restraints........................................ A-26
(g) Form S-4............................................................ A-27
(h) Consummation of the Distribution.................................... A-27
(i) Tax Legislation..................................................... A-27
SECTION 6.2 CONDITIONS TO OBLIGATIONS OF ACQUIROR AND MERGER SUB................ A-27
(a) Representations and Warranties...................................... A-27
(b) Performance of Obligations of the Company........................... A-27
(c) Opinion of the Company's Counsel.................................... A-27
(d) No Material Adverse Change.......................................... A-28
(e) Ancillary Agreements................................................ A-28
(f) Amendments to SEC Documents......................................... A-28
(g) Rule 145 Letters.................................................... A-28
(h) Scheduled Agreements................................................ A-28
(i) Certificate of Trustee.............................................. A-28
(j) Dissenters.......................................................... A-29
SECTION 6.3 CONDITIONS TO OBLIGATION OF THE COMPANY............................. A-29
(a) Representations and Warranties...................................... A-29
(b) Performance of Obligations of Acquiror.............................. A-29
(c) Opinion of Acquiror's Counsel....................................... A-29
(d) Amendments to SEC Documents......................................... A-30
(e) Ancillary Agreements................................................ A-30
(f) Dissenters.......................................................... A-30
ARTICLE VII -- TERMINATION, AMENDMENT AND WAIVER..................................... A-30
SECTION 7.1 TERMINATION......................................................... A-30
SECTION 7.2 EFFECT OF TERMINATION............................................... A-31
SECTION 7.3 AMENDMENT........................................................... A-31
SECTION 7.4 EXTENSION; WAIVER................................................... A-31
SECTION 7.5 PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR WAIVER........... A-31
ARTICLE VIII -- GENERAL PROVISIONS................................................... A-32
SECTION 8.1 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES....................... A-32
SECTION 8.2 NOTICES............................................................. A-32
SECTION 8.3 CERTAIN DEFINITIONS................................................. A-32
SECTION 8.4 INTERPRETATION...................................................... A-33
SECTION 8.5 COUNTERPARTS........................................................ A-33
SECTION 8.6 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES...................... A-33
</TABLE>
A-iii
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<TABLE>
<S> <C> <C>
SECTION 8.7 GOVERNING LAW....................................................... A-33
SECTION 8.8 ASSIGNMENT.......................................................... A-33
SECTION 8.9 ENFORCEMENT......................................................... A-33
</TABLE>
A-iv
<PAGE> 6
AGREEMENT AND PLAN OF MERGER
BY AND AMONG RALCORP HOLDINGS, INC.,
GENERAL MILLS, INC. AND GENERAL MILLS MISSOURI, INC.
This Agreement and Plan of Merger is dated as of August 13, 1996 (as
amended, supplemented or otherwise modified from time to time, this
"AGREEMENT"), by and among Ralcorp Holdings, Inc., a Missouri corporation (the
"COMPANY"), General Mills, Inc., a Delaware corporation (the "ACQUIROR"), and
General Mills Missouri, Inc., a Missouri corporation and a wholly owned
subsidiary of Acquiror ("MERGER SUB").
WHEREAS, the Board of Directors of the Company has approved a plan of
distribution and reorganization as described in the Reorganization Agreement
attached hereto as Exhibit A (the "REORGANIZATION AGREEMENT"), which will be
entered into prior to the Effective Time (as defined in Section 1.3), subject to
the issuance of a private letter ruling from the Internal Revenue Service (the
"SERVICE") as described in Section 6.1(d) hereof in response to a ruling request
to be made by the Company (the "RULING REQUEST") or, alternatively, the issuance
of an opinion or opinions of counsel as described in Section 6.1(e) hereof,
pursuant to which (a) certain of the assets and liabilities of the branded
cereals and branded snacks business (the "BRANDED BUSINESS") currently operated
by the Company's wholly-owned subsidiary, Ralston Foods, Inc. ("FOODS"), will be
contributed by Foods to a newly-formed subsidiary (the "BRANDED SUBSIDIARY") as
provided in the Reorganization Agreement, (b) all the stock of the Branded
Subsidiary will be distributed by Foods to the Company pursuant to the
Reorganization Agreement (the "INTERNAL SPINOFF"), and (c) all of the shares of
capital stock of a Missouri corporation to be formed as a wholly-owned
subsidiary of the Company and the parent of Foods ("NEW HOLDINGS") will be
distributed on a pro rata basis to the Company's stockholders as provided in the
Reorganization Agreement (the "DISTRIBUTION");
WHEREAS, the respective Boards of Directors of Acquiror, Merger Sub and the
Company have determined that, following the Distribution, the merger of Merger
Sub with and into the Company (the "MERGER") with the Company as the surviving
corporation (the "SURVIVING CORPORATION") would be advantageous and beneficial
to their respective corporations and stockholders; and
WHEREAS, for Federal income tax purposes, it is intended that (a) the
Distribution and the Internal Spinoff shall each qualify as tax-free
distributions within the meaning of Section 355 of the Internal Revenue Code of
1986, as amended (the "CODE"), and (b) the Merger shall qualify as a
reorganization under Section 368(a)(1)(B) of the Code, and this Agreement is
intended to be and is adopted as a plan of reorganization.
A-1
<PAGE> 7
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties hereto agree
as follows:
ARTICLE I
THE MERGER
SECTION 1.1 THE MERGER. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the General and Business
Corporation Law of Missouri (the "GBCL"), Merger Sub shall be merged with and
into the Company at the Effective Time. Following the Merger, the separate
corporate existence of Merger Sub shall cease and the Company shall continue as
the Surviving Corporation and shall succeed to and assume all the rights and
obligations of Merger Sub in accordance with the GBCL.
SECTION 1.2 CLOSING. Subject to the next sentence, the closing of the
Merger (the "CLOSING") will take place as promptly as practicable after the
satisfaction or waiver of the conditions set forth in Article VI (other than,
but subject to, those conditions to be performed at the Closing), at the offices
of Bryan Cave LLP, 211 No. Broadway, Suite 3600, St. Louis, Missouri, or on such
other date or at such other place is agreed to in writing by the parties hereto.
The parties agree to use reasonable efforts to cause the Closing to occur at the
end of a month. The date of the Closing is referred to herein as the "CLOSING
DATE."
SECTION 1.3 EFFECTIVE TIME. As soon as practicable following the
satisfaction or waiver of the conditions set forth in Article VI, the parties
shall file articles of merger or other appropriate documents (in any such case,
the "CERTIFICATE OF MERGER") executed in accordance with the relevant provisions
of the GBCL, and shall make all other filings or recordings required under the
GBCL. The Merger shall become effective immediately following the Distribution
upon the filing of the Certificate of Merger with the Missouri Secretary of
State or at such other time as the Company and Acquiror shall agree should be
specified in the Certificate of Merger (the time the Merger becomes effective
being the "EFFECTIVE TIME").
SECTION 1.4 EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in Section 351.450 of the GBCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the properties,
rights, privileges, powers and franchises of Merger Sub and the Company shall
vest in the Surviving Corporation, and all debts, liabilities, obligations and
duties of Merger Sub and the Company shall become the debts, liabilities and
duties of the Surviving Corporation.
SECTION 1.5 CERTIFICATE OF INCORPORATION AND BY-LAWS.
(a) The certificate of incorporation of Merger Sub as in effect at the
Effective Time shall be the certificate of incorporation of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law.
(b) The by-laws of Merger Sub as in effect at the Effective Time shall be
the by-laws of the Surviving Corporation until thereafter changed or amended as
provided therein or by applicable law.
SECTION 1.6 DIRECTORS. The directors of Merger Sub at the Effective Time
shall be the directors of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
SECTION 1.7 OFFICERS. The officers of Merger Sub at the Effective Time
shall be the officers of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
A-2
<PAGE> 8
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.1 EFFECT ON CAPITAL STOCK. As of the Effective Time, by virtue of
the Merger and without any action on the part of the holder of any shares of
Common Stock, par value $.01 per share, of the Company ("COMPANY COMMON STOCK"):
(a) Cancellation of Treasury Stock and Acquiror-Owned Stock. Each share of
Company Common Stock that is owned by the Company or by any wholly owned
subsidiary of the Company (but not any Benefit Plan (as defined in Section
3.2(m)) of the Company or any of its subsidiaries) and each share of Company
Common Stock that is owned by Acquiror, Merger Sub or any other wholly owned
subsidiary of Acquiror, excluding, in each case, any such share held by the
Company, Acquiror or any of their wholly owned subsidiaries in a fiduciary,
custodial or similar capacity, shall automatically be canceled and retired and
shall cease to exist, and no common stock, par value $.10 per share, of Acquiror
("ACQUIROR COMMON STOCK") or other consideration shall be delivered in exchange
therefor.
(b) Conversion of Company Common Stock. Subject to Section 2.2(e), each
issued and outstanding share of Company Common Stock, other than (i) shares to
be canceled in accordance with Section 2.1(a) and (ii) as set forth in paragraph
(c) below, shares that have not been voted in favor of the approval of this
Agreement and with respect to which dissenters' rights shall have been perfected
in accordance with Section 351.455 of the GBCL ("DISSENTERS' SHARES"), shall be
converted into the right to receive a fraction of a fully paid and nonassessable
share of Acquiror Common Stock equal to the Conversion Number (the "MERGER
CONSIDERATION"). The term "CONVERSION NUMBER" shall mean a number, expressed to
three decimal places, equal to the fraction of (i) $570,000,000 less (A) the
amount of any Funded Debt of the Company and the Branded Subsidiary as of the
Effective Time and (B) the amount required to be paid by the Company to the
holders of the Rights to redeem the Rights, to the extent such amount remains
unpaid at the Effective Time (the "RIGHTS PAYMENT"), divided by (ii) the product
of (A) the Average Value of Acquiror Common Stock multiplied by (B) the number
of shares of Company Common Stock outstanding immediately before the Effective
Time. The term "FUNDED DEBT OF THE COMPANY" shall mean, without duplication, (i)
the Company's 8 3/4% Notes due September 15, 2004 (the "NOTES") (which shall be
valued at their face value, plus any accrued and unpaid interest thereon as of
the Closing Date), (ii) any amounts outstanding under any bank credit facility
of the Company or the Branded Subsidiary, (iii) all other indebtedness of the
Company or the Branded Subsidiary for borrowed money, and (iv) any other
indebtedness of the Company or the Branded Subsidiary that is evidenced by a
note, bond or similar security. The amount of any Funded Debt of the Company
referred to in the foregoing clauses (ii), (iii) and (iv) shall be the face
value thereof, plus any accrued and unpaid interest thereon as of the Closing
Date, plus an amount, if any, on an after-tax basis, equal to (i) the face value
thereof, multiplied by (ii)(A) the number of days, if any, following the
Effective Time during which such Funded Debt of the Company is not payable or
prepayable without premium or penalty divided by (B) 365, multiplied by (iii)(A)
the applicable annual interest rate of such Funded Debt minus (B) the annual
interest rate applicable to debt of Acquiror having a maturity equal to the
number of days referred to in clause (ii)(A) of this sentence (such rate to be
reasonably agreed upon by Lehman Brothers Inc. and Dillon Read & Co., Inc.). The
term "AVERAGE VALUE OF ACQUIROR COMMON STOCK" shall mean the volume-weighted
average of the prices per share of Acquiror Common Stock for all trades reported
on the New York Stock Exchange Inc. ("NYSE") during the 10 trading days
immediately preceding the last business day before the date of the Effective
Time; provided, however, that if, on any such day, there has been any suspension
of trading, the imposition of any NYSE market circuit breakers or any delay in
the opening of trading, in any such case affecting the trading of the Acquiror
Common Stock on the NYSE, such day shall be excluded and the measurement period
for the determination of the Average Value of Acquiror Common Stock shall be the
10 trading days immediately preceding the last business day before the date of
the Effective Time on which no such event shall have occurred. As of the
Effective Time, all such shares of Company Common Stock shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each holder of a certificate formerly representing any such shares of
Company Common Stock shall cease to have any
A-3
<PAGE> 9
rights with respect thereto, except the right to receive the shares of Acquiror
Common Stock and any cash in lieu of fractional shares of Acquiror Common Stock
to be issued or paid in consideration therefor upon surrender of such
certificate in accordance with Section 2.2, without interest thereon.
(c) Shares of Dissenting Stockholders. Notwithstanding anything in this
Agreement to the contrary, no Dissenters' Shares shall be converted as described
in Section 2.1(b) but shall become the right to receive such consideration from
the Surviving Corporation as may be determined to be due in respect of such
Dissenters' Shares pursuant to the laws of the State of Missouri; provided,
however, that any Dissenters' Shares outstanding immediately prior to the
Effective Time and held by a stockholder who shall, after the Effective Time,
lose or withdraw his or her dissenter's rights pursuant to the GBCL, shall be
deemed to be converted as of the Effective Time into the right to receive the
Merger Consideration.
SECTION 2.2 EXCHANGE OF CERTIFICATES.
(a) Exchange Agent. As of the Effective Time, Acquiror shall deposit with
Norwest Bank Minnesota, N.A. (the "EXCHANGE AGENT"), for the benefit of the
holders of shares of Company Common Stock, for exchange through the Exchange
Agent in accordance with this Article II, certificates representing the shares
of Acquiror Common Stock (such shares of Acquiror Common Stock, together with
any dividends or distributions with respect thereto, being hereinafter referred
to as the "EXCHANGE FUND") issuable pursuant to Section 2.1 in exchange for
certificates formerly representing outstanding shares of Company Common Stock.
Acquiror shall or shall cause the Surviving Corporation to provide to the
Exchange Agent, on a timely basis, funds necessary to pay any cash payable in
lieu of fractional shares of Acquiror Common Stock in accordance with Section
2.2(e).
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Surviving Corporation shall cause the Exchange Agent to mail
to each holder of record of a certificate or certificates which immediately
prior to the Effective Time represented outstanding shares of Company Common
Stock (the "CERTIFICATES") whose shares were converted into the right to receive
shares of Acquiror Common Stock pursuant to Section 2.1, (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as Acquiror may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of Acquiror Common Stock and cash in lieu of any fractional
share. Upon surrender of a Certificate for cancellation to the Exchange Agent or
to such other agent or agents as may be appointed by Acquiror, together with
such letter of transmittal, duly executed, and such other documents as may
reasonably be required by the Exchange Agent, the holder of such Certificate
shall be entitled to receive in exchange therefor a certificate representing
that number of whole shares of Acquiror Common Stock, and cash in lieu of any
fractional share, which such holder has the right to receive pursuant to the
provisions of this Article II, and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of Company Common
Stock which is not registered in the transfer records of the Company, a
certificate representing the proper number of shares of Acquiror Common Stock
and cash in lieu of any fractional share may be issued to a person other than
the person in whose name the Certificate so surrendered is registered, if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such issuance and payment shall pay any
transfer or other taxes required by reason of the issuance of shares of Acquiror
Common Stock and payment of cash in lieu of any fractional share to a person
other than the registered holder of such Certificate or establish to the
satisfaction of Acquiror that such tax has been paid or is not applicable. Until
surrendered as contemplated by this Section 2.2, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the certificate representing shares of Acquiror
Common Stock and cash in lieu of any fractional shares of Acquiror Common Stock
as contemplated by this Section 2.2. No interest will be paid or will accrue on
any shares of Acquiror Common Stock or cash payable in lieu of any fractional
shares of Acquiror Common Stock.
(c) Distributions with Respect to Unexchanged Shares. No dividends or other
distributions with respect to Acquiror Common Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate with
respect to the shares of Acquiror Common Stock represented thereby and no
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cash payment in lieu of fractional shares shall be paid to any such holder
pursuant to Section 2.2(e) until the surrender of such Certificate in accordance
with this Article II. Subject to the effect of applicable laws, following
surrender of any such Certificate, there shall be paid to the holder of the
certificate representing whole shares of Acquiror Common Stock issued in
exchange therefor, without interest, (i) at the time of such surrender, the
amount of any cash payable in lieu of a fractional share of Acquiror Common
Stock to which such holder is entitled pursuant to Section 2.2(e) and the amount
of dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of Acquiror Common Stock and
(ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time but prior to such
surrender and a payment date subsequent to such surrender payable with respect
to such whole shares of Acquiror Common Stock.
(d) No Further Ownership Rights in Company Common Stock. All shares of
Acquiror Common Stock issued upon the surrender for exchange of Certificates in
accordance with the terms of this Article II and any cash paid pursuant to
Section 2.2(c) or 2.2(e) shall be deemed to have been issued and paid in full
satisfaction of all rights pertaining to the shares of Company Common Stock
theretofore represented by such Certificates, and there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Company Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Exchange Agent
for any reason, they shall be canceled and exchanged as provided in this Article
II.
(e) No Fractional Shares.
(i) No certificates or scrip representing fractional shares of
Acquiror Common Stock shall be issued upon the surrender for exchange of
Certificates, and such fractional share interests will not entitle the
owner thereof to vote or to any other rights as a stockholder of Acquiror.
(ii) Notwithstanding any other provision of this Agreement, each
holder of shares of Company Common Stock exchanged pursuant to the Merger
who would otherwise have been entitled to receive a fraction of a share of
Acquiror Common Stock (after taking into account all Certificates
registered to such holder) shall receive, in lieu thereof, cash (without
interest) in an amount equal to such fractional part of a share of Acquiror
Common Stock multiplied by the Average Value of Acquiror Common Stock.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the holders of the Certificates for six months after
the Effective Time shall be delivered to Acquiror, upon demand, and any holders
of the Certificates who have not theretofore complied with this Article II shall
thereafter look only to the Surviving Corporation or Acquiror for payment of
their claim for Acquiror Common Stock, any cash in lieu of fractional shares of
Acquiror Common Stock and any dividends or distributions with respect to
Acquiror Common Stock.
(g) No Liability. None of Acquiror, Merger Sub, the Company, the Surviving
Corporation or the Exchange Agent shall be liable to any person in respect of
any shares of Acquiror Common Stock (or dividends or distributions with respect
thereto) or cash from the Exchange Fund delivered to a public official pursuant
to any applicable abandoned property, escheat or similar law.
SECTION 2.3 NET ASSETS ADJUSTMENT.
(a) If the value of the combined total assets minus the total liabilities
of the Company and the Branded Subsidiary on the Closing Date, as calculated in
the manner set forth on Schedule 2.3 ("CLOSING DATE NET ASSET VALUE"), is less
than $41,900,000, then Foods shall pay to the Surviving Corporation an amount
equal to such shortfall in the manner as provided on Schedule 2.3.
(b) If the Closing Date Net Asset Value is more than $41,900,000, then the
Surviving Corporation shall pay to Foods an amount equal to such excess in the
manner as provided on Schedule 2.3.
(c) Schedule 2.3 sets forth (i) the manner in which the Closing Date Net
Asset Value shall be calculated and (ii) the manner in which any payment
required by Sections 2.3(a) or 2.3(b) shall be made. The payments made under
this Section 2.3 shall not be deemed to be an adjustment of the consideration
paid for the Company Common Stock.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 CERTAIN DEFINITIONS. As used in Section 3.2, unless
specifically provided otherwise, any reference to the Company shall be a
reference to the Company and the Branded Subsidiary, assuming that the
contribution of the Branded Business to the Branded Subsidiary, the Internal
Spinoff and the Distribution had occurred immediately prior to the date hereof
on the terms and conditions set forth in the Reorganization Agreement. As used
in this Agreement, any reference to any event, change or effect having a
material adverse effect on or with respect to an entity (or group of entities
taken as a whole) means such event, change or effect is reasonably expected to
be materially adverse to the business, properties, assets, results of operations
or consolidated financial condition of such entity (or, if with respect thereto,
of such group of entities taken as a whole) or on the ability of such entity or
group of entities to consummate the transactions contemplated hereby, including
the Distribution and the Merger. As used in this Agreement, any reference to the
knowledge of the Company or the best knowledge of the Company means the actual
knowledge after reasonable inquiry of the relevant facts and circumstances of
the individuals listed on Schedule 3.1, and not any other person or entity.
SECTION 3.2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to Acquiror and Merger Sub as follows:
(a) Organization, Standing, Corporate Power and Subsidiaries. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted. The Company is duly qualified or licensed to do
business and in good standing in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification or licensing necessary, except where the failure to be so
duly qualified or licensed and in good standing would not have a material
adverse effect on the Company. True, accurate and complete copies of the
Articles of Incorporation and Bylaws of the Company, as in effect on the date
hereof, including all amendments thereto, have heretofore been delivered to
Acquiror. The Company has made available to legal counsel for Acquiror true,
accurate and complete copies of the minute books of the Company as maintained by
the Company, and such minute books contain minutes of all meetings of the boards
of directors and stockholders of the Company. At the Effective Time, except for
the Branded Subsidiary, the Company will not, directly or indirectly, own or
have the right to acquire any capital stock or other equity interest in any
other corporation, partnership, joint venture or other entity. At the Effective
Time, the Company will own all right, title and interest in and to all capital
stock and all rights with respect to all capital stock of the Branded
Subsidiary. The capitalization and the state, country or other jurisdiction of
incorporation of the Branded Subsidiary is accurately described and identified
on Schedule 3.2(a).
(b) Capital Structure. The authorized capital stock of the Company consists
of 300,000,000 shares of Company Common Stock and 10,000,000 shares of preferred
stock, par value $0.01 per share ("COMPANY PREFERRED STOCK"). At the close of
business on July 31, 1996, (i) 32,924,347 shares of Company Common Stock and no
shares of Company Preferred Stock were issued and outstanding, (ii) 1,000,501
shares of Company Common Stock were held by the Company in its treasury, (iii)
2,610,086 shares of Company Common Stock were reserved for issuance pursuant to
the Benefit Plans and (iv) 35,534,433 shares of Company Common Stock were
reserved for issuance in connection with the rights (the "RIGHTS") issued
pursuant to the Rights Agreement dated as of March 24, 1994 (as amended from
time to time, the "RIGHTS AGREEMENT"), between the Company and Boatmen's Trust
Company, as Rights Agent. Except as set forth above, at the close of business on
July 31, 1996, no shares of capital stock or other voting securities of the
Company were issued, reserved for issuance or outstanding. All outstanding
shares of capital stock of the Company are, and all shares which may be issued
pursuant to the Benefit Plans will be, when issued, duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights. There
are not any bonds, debentures, notes or other indebtedness of the Company having
the right to vote (or convertible into, or exchangeable for, securities having
the right to vote) on any matters on which stockholders of the Company may vote.
Except as set forth above, there are not, and immediately prior to the Effective
Time there will not
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be, any securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which the Company is a party or by
which it is bound obligating the Company to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of capital stock or other voting
securities of the Company or of the Branded Subsidiary or obligating the Company
or the Branded Subsidiary to issue, grant, extend or enter into any such
security, option, warrant, call, right, commitment, agreement, arrangement or
undertaking. There are not any outstanding contractual obligations of the
Company to repurchase, redeem or otherwise acquire any shares of capital stock
of the Company. The Company has delivered to Acquiror a complete and correct
copy of the Rights Agreement as amended and supplemented to the date of this
Agreement.
(c) Authority; Noncontravention. The Company has, and, in the case of any
Ancillary Agreements (as defined in the Reorganization Agreement) executed at a
later time, the Company will have, the requisite corporate power and authority
(subject to the approvals described in the next sentence) to enter into this
Agreement and the Ancillary Agreements and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Ancillary Agreements and the consummation by the Company of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of the Company, other than, with respect
to the Merger, the approval and adoption of this Agreement by the affirmative
vote of the holders of Company Common Stock representing two-thirds of the
shares entitled to vote (such holders of two-thirds of such shares, the
"REQUISITE STOCKHOLDERS"), and formal declaration of the Distribution by the
Company's Board of Directors (which will occur prior to the Closing Date). This
Agreement has been duly executed and delivered by the Company (excluding the
Branded Subsidiary) and, assuming this Agreement constitutes a valid and binding
obligation of Acquiror, constitutes a valid and binding obligation of the
Company (excluding the Branded Subsidiary), enforceable against the Company
(excluding the Branded Subsidiary) in accordance with its terms. Each of the
Ancillary Agreements has been, or prior to the Merger and the other transactions
contemplated thereby will be, duly executed and delivered by each of the Company
and the Branded Subsidiary, as the case may be, and constitutes, or upon such
execution and delivery will constitute, a valid and binding obligation of each
of the Company and the Branded Subsidiary, enforceable against it in accordance
with its terms. Except as set forth on Schedule 3.2(c), none of the execution
and delivery of this Agreement and the Ancillary Agreements or the consummation
of the transactions contemplated hereby or thereby and compliance with the
provisions of this Agreement and the Ancillary Agreements will conflict with, or
result in any violation of, or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or the loss of a benefit under, or result in the
creation of any adverse claim, restriction on voting or transfer, pledge, claim,
lien, charge, encumbrance or security interest of any kind or nature whatsoever
(collectively, "LIENS") upon any of the properties or assets of the Company (i)
under its Articles of Incorporation or Bylaws, (ii) under any Contract (as
defined in the Reorganization Agreement) to which the Company is a party or by
which the Company or any of its assets are bound, or (iii) subject to the
governmental filings and other matters referred to in the following sentence,
under any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Company, or any of its properties or assets, other than, in
the case of clauses (ii) and (iii), any such conflicts, violations, defaults,
rights, losses or Liens that individually or in the aggregate would not (A) have
a material adverse effect on the Company, (B) materially impair the ability of
the Company to perform its obligations under this Agreement or any of the
Ancillary Agreements to which the Company is a party or (C) prevent or
materially delay the consummation of any of the transactions contemplated by
this Agreement or any of the Ancillary Agreements. No consent, approval, order
or authorization of, or registration, declaration or filing with, any Federal,
state or local government or any court, administrative agency or commission or
other governmental authority or agency, or self-regulatory organization,
domestic or foreign (a "GOVERNMENTAL ENTITY"), is required by or with respect to
the Company in connection with the execution and delivery of this Agreement and
any of the Ancillary Agreements to which it is a party or the consummation by
the Company of the transactions contemplated hereby or thereby, except for (i)
the filing with the Securities and Exchange Commission ("SEC") of (x) a proxy
statement relating to the approval by the Company's stockholders of this
Agreement (as amended or supplemented from time to time, the "PROXY STATEMENT"),
(y) potentially, a registration statement on Form S-1 relating to the
Distribution
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and (z) a registration statement on Form 10 (the "FORM 10") under, and such
reports under Section 13(a) of, the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT"), as may be required in connection with this Agreement, the
Ancillary Agreements and the transactions contemplated hereby and thereby, (ii)
the filing of the Certificate of Merger with the Missouri Secretary of State and
appropriate documents with the relevant authorities of other states in which the
Company or the Branded Subsidiary is qualified to do business, (iii) expiration
of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR ACT"), (iv) such consents, approvals, orders,
authorizations, registrations, declarations and filings as are set forth on
Schedule 3.2(c) and (v) such other consents, approvals, orders, authorizations,
registrations, declarations and filings, the absence of which could not
reasonably be expected to have a material adverse effect on the Company.
(d) SEC Documents; Undisclosed Liabilities; Press Releases.
(i) The Company has filed all required reports, schedules, forms,
statements and other documents with the SEC since March 31, 1994 (the
"COMPANY SEC DOCUMENTS"). As of their respective dates (as amended), the
Company SEC Documents complied in all material respects with the
requirements of the Securities Act of 1933, as amended (the "SECURITIES
ACT"), or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such Company
SEC Documents, and none of the Company SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading.
The financial statements of the Company included in the Company SEC
Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with generally
accepted accounting principles (except as permitted by Form 10-Q of the SEC
in the case of unaudited statements) applied on a consistent basis during
the periods involved (except as may be indicated in the notes thereto) and
fairly present the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
(ii) None of the press releases issued by the Company since March 31,
1994 contained at the time of issuance any untrue statement of a material
fact or omitted to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
(e) Information in Disclosure Documents and Registration Statements. None
of the information supplied or to be supplied in writing by the Company or its
representatives for inclusion or incorporation by reference in (i) the
registration statement on Form S-4 to be filed with the SEC by Acquiror in
connection with the issuance of shares of Acquiror Common Stock in the Merger
(the "FORM S-4") or in a registration statement (if any) on Form S-1 or any
other applicable form to be filed with the SEC by New Holdings in connection
with the distribution of shares of Common Stock, par value $0.01 per share, of
New Holdings ("NEW HOLDINGS COMMON STOCK") in the Distribution (the "FORM S-1")
will, at the time such Registration Statements become effective under the
Securities Act and at the Effective Time, in the case of the Form S-4, and at
the time of the meeting of stockholders of the Company to be held in connection
with the Merger and the Distribution and at the time of the Distribution, in the
case of the Form S-1, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading and (ii) the Proxy Statement will, at the date mailed to the
Company's stockholders and at the time of the meeting of stockholders to be held
in connection with the Merger, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The Proxy Statement will comply as to form in
all material respects with the provisions of the Exchange Act and the rules and
regulations thereunder, and the Form S-1 will comply as to form in all material
respects with the provisions of the Securities Act or the Exchange Act, as
applicable, and the rules and regulations thereunder, except that no
representation is made by the Company with respect to statements made therein
based on information supplied by Acquiror or its representatives for inclusion
in the Proxy Statement or the Form S-1,
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respectively, or with respect to information concerning Acquiror or any of its
subsidiaries incorporated by reference in the Proxy Statement.
(f) Absence of Certain Changes or Events. On the date of this Agreement,
except as disclosed in the Company SEC Documents filed and publicly available
prior to the date of this Agreement (the "FILED COMPANY SEC DOCUMENTS") or as
set forth in Schedule 3.2(f), and at the Closing Date, except as disclosed in
the Company SEC Documents filed and publicly available before the Closing Date
or in Schedule 3.2(f) or in the Company Bring Down Certificate (as defined in
Section 6.2(a)), since September 30, 1995, the Company has conducted its
business only in the ordinary course, consistent with past practice, and there
has not been (i) any material adverse change in the Company or any event that
could reasonably be expected to have a material adverse effect on the Company,
(ii) any split, combination or reclassification of any of its capital stock or
any issuance or the authorization of any issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock, (iii)
any damage, destruction or loss, whether or not covered by insurance, that has
had or could reasonably be expected to have a material adverse effect on the
Company and the Branded Subsidiary taken as a whole, (iv) any change in
accounting methods, principles or practices by the Company, or any of its
subsidiaries, except insofar as may have been required (in the opinion of the
Company's independent accountants) by a change in generally accepted accounting
principles (which change is set forth in Schedule 3.2(f) or will be set forth in
the Company Bring Down Certificate), (v) any acquisition or any sale or
disposition of any material assets or properties by the Company, except in the
ordinary course of business, consistent with past practice, or (vi) any entry
into any agreement, arrangement or commitment to take any of the actions set
forth in this Section.
(g) Litigation. Except as set forth in Schedule 3.2(g) or as disclosed in
the Filed Company SEC Documents or, with respect to claims, investigations,
suits, actions or proceedings arising, or to the knowledge of the Company first
expressly threatened, between the date hereof and the Closing Date, as disclosed
in the Company Bring Down Certificate, there is no claim, investigation, suit,
action or proceeding pending or, to the knowledge of the Company, expressly
threatened, against the Company before or by any Governmental Entity or
arbitrator that, individually or in the aggregate, could reasonably be expected
to (i) have a material adverse effect on the Company and the Branded Subsidiary
taken as a whole, (ii) materially impair the ability of the Company or Foods to
perform any obligation under this Agreement or any of the Ancillary Agreements
or (iii) prevent or materially delay or alter the consummation of any or all of
the transactions contemplated hereby or thereby. There are no unpaid judgments,
injunctions, orders, arbitration decisions or awards, or, except as set forth in
Schedule 3.2(g), other judicial or administrative mandates outstanding against
the Company.
(h) Compliance with Applicable Laws. Except as set forth in Schedule
3.2(h), the Company holds all permits, licenses, variances, exemptions, orders
and approvals of, and has made all filings, applications and registrations with,
all Governmental Entities which individually or in the aggregate are material to
the operation of the business of the Company and the Branded Subsidiary taken as
a whole (the "COMPANY PERMITS"). All Company Permits are in full force and
effect in all material respects. The Company is in compliance with the terms of
the Company Permits, except where the failure so to comply would not have a
material adverse effect on the Company and the Branded Subsidiary taken as a
whole. Except as disclosed in the Filed Company SEC Documents, the business of
the Company is not being conducted in violation of any law, ordinance or
regulation of any Governmental Entity, except for violations, if any, that
individually or in the aggregate do not, and could not reasonably be expected
to, have a material adverse effect on the Company and the Branded Subsidiary
taken as a whole.
(i) Brokers or Finders. No broker, investment banker, financial advisor or
other person, other than Lehman Brothers, Inc., the fees and expenses of which
will be paid by Foods, is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated by this Agreement and the Ancillary Agreements based upon
arrangements made by or on behalf of the Company.
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(j) The Branded Business.
(i) At the Effective Time, except as contemplated by the Technology
Agreement, the Trademark Agreement and the Supply Agreement and except as
set forth on Schedule 3.2(j), neither New Holdings, Foods nor any of their
respective subsidiaries will use in the conduct of its business or own or
have rights to use any material assets or property, whether tangible,
intangible or mixed, which have also been heretofore used in the conduct of
the business of the Branded Business. At the Effective Time, neither Foods
nor any of its subsidiaries will be a party to any contract, agreement,
arrangement or understanding with the Company (other than the Ancillary
Agreements and the agreements specifically contemplated thereby) relating
to the business or operations of the Company or pursuant to which the
Company may have any obligation or liability. After the Effective Time, the
Company, the Surviving Corporation, the Branded Subsidiary and Acquiror and
its other subsidiaries will not have any liability whatsoever, direct or
indirect, contingent or otherwise, in any way relating to the business,
operations, indebtedness, assets or liabilities of New Holdings, Foods or
any of their respective subsidiaries, except as contemplated by the
Reorganization Agreement or any of the other Ancillary Agreements.
(ii) Except as set forth on Schedule 3.2(j), the Branded Assets (as
defined in the Reorganization Agreement) and the rights under the
Technology Agreement, the Trademark Agreement and the Supply Agreement are
sufficient to permit Acquiror and the Surviving Corporation to operate the
Branded Business from and after the Effective Time in substantially the
same manner as currently conducted.
(k) Material Contracts. On the date of this Agreement, except as set forth
in Schedule 3.2(k) and, at the Closing Date, except as set forth in Schedule
3.2(k) or as disclosed in the Company Bring Down Certificate, (i) all Material
Contracts (as defined below), together with all modifications and amendments
thereto, are valid and binding obligations of the parties thereto and in full
force and effect, and (ii) the Company is not in breach or default under any
Material Contract, except for such breaches or defaults in the ordinary course
of business that do not, and will not with the passage of time or the giving of
notice, or both, individually or in the aggregate, have a material adverse
effect on the Company and the Branded Subsidiary taken as a whole and, to the
knowledge of the Company, no other party is in material default thereunder.
Except as set forth on Schedule 3.2(k), the Company is not a party to any
Material Contracts. True and complete copies of each Material Contract to which
the Company is a party have been made available to the Acquiror. As used herein,
the term "MATERIAL CONTRACT," shall mean any contract, agreement, arrangement or
understanding to which the Company is a party or by which the Company or any of
its assets is bound, that is or contains any of the following: (A) a contract of
employment that is other than at will or any arrangement binding on the Company
providing any employee with termination benefits other than those available
under the Company's generally applicable severance plan; (B) a contract with any
labor union or association; (C) a contract with any affiliate of the Company
(including, without limitation, Foods and its subsidiaries); (D) a contract
containing a covenant not to compete; (E) a loan or similar agreement relating
to the borrowing of money or any guarantee of indebtedness of any other person
in excess of $100,000; (F) any lease or sublease relating to real property; (G)
any contract not fully performed for the purchase of any commodity, material,
services or equipment, including without limitation fixed assets, for a price in
excess of $100,000 in the aggregate over the life of the contract; (H) any
license agreement (as licensor or licensee) providing for future payments in
excess of $100,000; (I) any other contract which creates future payment
obligations in excess of $100,000; (J) any contract that obligates the Company
to obtain all or a substantial portion of its requirements of any goods or
services from, or supply all or a substantial portion of the requirements for
any goods or services of, any other person; (K) any contract with Ralston Purina
Company or any of its affiliates; (L) any guarantee of any obligation of Foods
or its subsidiaries (other than the Branded Subsidiary); or (M) any contract
that does not permit the Company to terminate the contract upon less than 90
days' notice or expressly requires it to pay liquidated damages of more than
$100,000 upon early termination.
(l) Absence of Changes in Benefit Plans. Except as set forth in Schedule
3.2(l) or as disclosed in the Filed Company SEC Documents, since the date of the
most recent audited financial statements included in the Filed Company SEC
Documents, there has not been any adoption or amendment in any material respect
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by the Company of any collective bargaining agreement or any Benefit Plan other
than any adoption or amendment of a Benefit Plan permitted under Section 4.1(h).
(m) Benefit Plans, Employment and Labor Relations.
(i) Schedule 3.2(m) contains a list of all "employee pension benefit
plans" (as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) (sometimes referred to herein
as "PENSION PLANS"), "employee welfare benefit plans" (as defined in
Section 3(1) of ERISA) and all other plans, agreements, policies or
arrangements relating to stock options, stock purchases, compensation,
deferred compensation, severance, and other employee benefits, in each case
maintained or contributed to as of the date of this Agreement by the
Company for the benefit of any current or former employees, officers or
directors of the Company or for which the Company is or could be liable, as
a result of its status as an ERISA Affiliate (as defined below)
(collectively, the "BENEFIT PLANS"), except that Schedule 3.2(m) does not
list any Benefit Plan of any ERISA Affiliate of the Company that ceased to
be an ERISA Affiliate of the Company on or prior to April 1, 1994. The
Company has made available to Acquiror true, complete and correct copies of
(a) each Benefit Plan (or, in the case of any unwritten Benefit Plans,
descriptions thereof), (b) the most recent annual report on Form 5500 filed
with the Internal Revenue Service with respect to each Benefit Plan (if any
such report was required), (c) the most recent summary plan description for
each Benefit Plan for which such summary plan description is required and
(d) each trust agreement or group annuity contract relating to any Benefit
Plan. The Company shall update Schedule 3.2(m) and the information shall be
made available to the Acquiror through the Distribution Date. "ERISA
AFFILIATE" means, with respect to any entity, trade or business, any other
entity, trade or business that is a member of a group described in Section
414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that
includes the first entity, trade or business, or that is a member of the
same "controlled group" as the first entity, trade or business pursuant to
Section 4001(a)(14) of ERISA, at any time.
(ii) Each Benefit Plan has been administered in all material respects
in accordance with its terms and is in compliance in all material respects
with the applicable provisions of ERISA, the Code and other applicable law.
(iii) Except as set forth on Schedule 3.2(m), the Company does not now
sponsor, maintain, contribute to or have an obligation to contribute to,
and has not at any time since September 2, 1974, sponsored, maintained,
contributed to, or been obligated to contribute to, any single employer,
multiple employer or multiemployer pension plan subject to the provisions
of Section 302 or Title IV of ERISA or Section 412 or 4971 of the Code. No
liability currently exists, and under no circumstances could the Company or
any of its ERISA Affiliates incur a liability pursuant to the provisions of
Title I, II or IV of ERISA or Section 412, 4971 or 4980B of the Code that
could become a liability of the Surviving Corporation or Acquiror after the
consummation of the transactions contemplated by this Agreement. Without
limiting the generality of the foregoing, neither the Company nor any of
its ERISA Affiliates has engaged in any transaction described in Section
4069 or Section 4204 of ERISA for the purpose of evading liability under
subtitle D of Title IV of ERISA. The Company has not incurred a "complete
withdrawal" or a "partial withdrawal" (as such terms are defined in Section
4203 and Section 4205, respectively, of ERISA) with respect to any
"multiemployer plan" (within the meaning of Section 4001(a)(3) of ERISA)
that has led to or could lead to the imposition of a material withdrawal
liability under Section 4201 of ERISA that remains unpaid as of the date
hereof; and the Company does not maintain or contribute to, nor is it
obligated to maintain or contribute to, any such multiemployer plan.
(iv) The Company has not incurred any material liability, nor has any
event occurred that could reasonably result in any material liability,
under Title I or Title IV of ERISA (other than to a Pension Plan for
contributions not yet due or to the Pension Benefit Guaranty Corporation
for payment of premiums not yet due) or under Section 412 or Chapter 43 of
the Code that has not been fully paid as of the date hereof.
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(v) As of the most recent valuation date for any Pension Plan subject
to Section 412 of the Code or Title IV of ERISA, other than any
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA, the
fair market value of the assets of such Pension Plan exceed the present
value (determined on the basis of reasonable assumptions employed by the
independent actuary for such Pension Plan) of the "benefit liabilities"
(within the meaning of Section 4001(a)(16) of ERISA) of such Pension Plan.
(vi) Except as set forth in Schedule 3.2(m), the Company is not a
party to, or bound by, any Contract with any labor union or association,
including, without limitation, any collective bargaining, labor or similar
agreement. Neither the execution and delivery of this Agreement, the
Reorganization Agreement or the other Ancillary Agreements, nor the
consummation of the transactions contemplated hereby or thereby will
constitute a breach or default under any such agreement or give rise to any
right to terminate, amend or modify any such agreement. The Company is in
compliance with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours and is
not engaged in any unfair labor practices, except where the failure to so
comply or the result of such unfair labor practice, as the case may be,
would not have a material adverse effect on the Company.
(vii) As of the date of this Agreement, there are no employees who
have been laid off from the Branded Plant (as defined in the Reorganization
Agreement) and who have recall rights.
(n) Rights Agreement; Antitakeover Statutes.
(i) The Company has taken, or prior to the Effective Time will take,
all necessary action to:
A. redeem the Rights pursuant to Section 23 of the Rights
Agreement; and
B. render inapplicable to the Merger, the Distribution and the
other transactions contemplated by this Agreement and the Ancillary
Agreements any "fair price," "moratorium," "control share acquisition"
or similar anti-takeover statute or regulation enacted under the state
or federal law in the United States.
(ii) The Company has delivered, or will deliver prior to the Closing,
to Acquiror a true and correct copy of the Board resolutions and any other
action taken to accomplish the foregoing.
(o) Intellectual Property.
(i) Schedule 3.2(o) sets forth a complete list of all Intellectual
Property applications and registrations therefor which are unexpired or
uncancelled as of the date hereof. Except for the matters set forth on
Schedule 3.2(o) and except for such matters that individually or in the
aggregate have not had and could not reasonably be expected to have a
material adverse effect on the Company and the Branded Subsidiary taken as
a whole, (A) the Intellectual Property owned by the Company is valid and
enforceable, free and clear of all Liens; (B) the Company has taken all
reasonable actions necessary to maintain and protect the Company's rights
to the Intellectual Property; (C) the owners of the Intellectual Property
licensed to the Company have taken all reasonable actions necessary to
maintain and protect the Intellectual Property subject to such licenses;
(D) there has been no claim made against the Company asserting the
invalidity, misuse, unregistrability or unenforceability of any of the
Intellectual Property or challenging the Company's right to use or
ownership of any of the Intellectual Property; (E) the Company has no
knowledge of any infringement or misappropriation of any of the
Intellectual Property; (F) the conduct of the Branded Business has not
infringed or misappropriated and does not infringe or misappropriate any
intellectual property or proprietary right of any other entity; (G) no loss
of any of the Intellectual Property is pending or to the knowledge of the
Company threatened; (H) the Intellectual Property is sufficient to operate
the Branded Business as it is currently conducted; (I) the consummation of
the transactions contemplated by this Agreement will not alter, impair or
extinguish any of the Intellectual Property; and (J) the Company has not
licensed or in any other way authorized any other party to use the
Intellectual Property.
(ii) For purposes of this Agreement, "INTELLECTUAL PROPERTY" shall
mean all of the following (in whatever form or medium) which are owned by
or licensed to the Company and are used in
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the conduct of the Branded Business as conducted currently: (A) patents,
trademarks, service marks, trade dress and copyrights, (B) applications for
patents and for registration of trademarks, service marks, trade dress and
copyrights, (C) trade secrets and trade names, and (D) know how,
manufacturing, research and other technical information. Intellectual
Property shall not include any widely available off-the-shelf software.
(p) Taxes. The Company has filed all income tax returns and all other
material returns and reports required to be filed by it and has paid all taxes
required to be paid by it except for taxes which in the aggregate are not
material, and the most recent financial statements contained in the Filed
Company SEC Documents reflect an adequate reserve for all taxes payable by the
Company for all taxable periods and portions thereof through the date of such
financial statements. Except as disclosed in Schedule 3.2(p), no deficiencies
for any taxes have been proposed, asserted or assessed against the Company, and
no requests for waivers of the time to assess any such taxes are pending. The
Federal income tax returns of the Company have not been examined by and settled
with the Service. As used in this Agreement, "TAXES" shall include all Federal,
state, local and foreign income, property, sales, excise and other taxes,
tariffs or governmental charges of any nature whatsoever, including interest and
penalties thereon.
(q) Branded Financial Statements. Attached as Schedule 3.2(q)(i) hereto are
the statement of assets and liabilities as of March 31, 1996 (the "BRANDED
BALANCE SHEET") and statement of profit and loss (to a brand contribution level
of detail only) for the period October 1, 1995 through March 31, 1996 for the
Company and the Branded Subsidiary on a combined basis (collectively, the
"BRANDED FINANCIAL STATEMENTS"). The Branded Financial Statements were prepared
in accordance with the accounting principles and procedures set forth on
Schedule 3.2(q)(ii), consistently applied, and fairly present the financial
condition and results of operations (to the brand contribution level) of the
Company and the Branded Subsidiary on a combined basis as of March 31, 1996 and
for the period then ended. Neither this Section 3.2(q) nor any other provision
in this Agreement shall be construed as a representation or warranty as to the
accuracy or completeness of any budgets or projections relating to or reflecting
the Company as the Branded Subsidiary.
(r) Properties. Except (A) as may be reflected in the Branded Balance
Sheet, (B) for any Lien for current taxes not yet delinquent, and (C) for such
other Liens as do not materially affect the value of the property reflected in
the Branded Balance Sheet or acquired since the date of the Branded Balance
Sheet and which do not, individually or in the aggregate, materially interfere
with or impair the present and continued use of such property, the Company has
good title, free and clear of any Liens, to all of the property reflected in the
Branded Balance Sheet, and all property acquired since the date of the Branded
Balance Sheet, except such property as has been disposed of (or, in the case of
receivables, collected or paid) in the ordinary course of business consistent
with past practice. As of the date of the Branded Balance Sheet, all the
material tangible personal property owned or leased by the Company was in good
working condition (normal wear and tear excepted) and was suitable in all
material respects for the purposes for which it was being used.
(s) Capacity of Branded Plant. The production capacity per eight hour shift
of the Branded Plant (by production line, type of product which is run thereon
and package size) is set forth on Schedule 3.2(s).
(t) Actions Affecting 1994 Spinoff. The Company and its subsidiaries have
complied in all material respects with all of the terms and obligations of all
of the agreements between the Company or its subsidiaries and Ralston Purina
Company or its affiliates relating to or arising out of the spin-off of the
Company by Ralston Purina Company effective March 31, 1994 (the "1994 SPINOFF"),
and the Company has not taken, and has not permitted any of its subsidiaries to
take, any action that would disqualify the 1994 Spinoff as a tax-free
transaction within the meaning of Section 355 of the Code.
(u) Real Property.
(i) Owned Real Property. Schedule 3.2(u) attached hereto sets forth a
true and complete legal description of the Real Property (as defined
below). Except as set forth in attached Schedule 3.2(u), the Company has
good and marketable title to the Real Property, free and clear of any
Liens. Except as set forth in attached Schedule 3.2(u), all buildings and
improvements located thereon are in good operating
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condition and repair, ordinary wear and tear excepted, and do not violate
any zoning or building regulations or ordinances where located, except for
violations that do not materially impair the use of the Real Property. The
term "REAL PROPERTY" means the Branded Plant, appurtenant land, and
fixtures and improvement thereon operated by Foods on the date hereof.
(ii) Leased Real Property. Except as set forth on Schedule 3.2(u), the
Company is not a party to any lease of real property that is primarily used
in the Branded Business.
(iii) Real Property Documents. True, correct and complete copies of
title reports, surveys and leases in the Company's possession relating to
such Real Property have been furnished or made available to Acquiror.
(iv) Takings. Since March 31, 1994, neither the whole nor any portion
of any Real Property has been condemned, requisitioned or otherwise taken
by any public authority, and, to the Company's knowledge, no such
condemnation, requisition or taking is threatened.
(v) Environmental Matters. (i) Except as set forth in attached Schedule
3.2(v), (A) the Company, with respect to the Branded Business and the Real
Property, is in material compliance with all applicable laws and regulations for
the protection of the environment, and the Company, with respect to the Branded
Business and the Real Property, has received no notices of unremedied violations
from any Governmental Entity and there are no governmental investigations or
audits, whether pending, threatened or otherwise with respect thereto, other
than notices of matters set forth in attached Schedule 3.2(v), the violation of
which could result in the imposition of a material fine, penalty, liability,
cost or expense; and (B) the Company, with respect to the Branded Business, has
obtained or has made or will, before Closing, make application and pay for all
permits, licenses, orders and approvals of governmental or administrative
authorities required by applicable environmental protection laws or regulations
to permit it to carry on the Branded Business in substantially the same manner
as currently conducted, or which is applicable to the Real Property, and is in
material compliance with the requirements set out in such permits, licenses,
orders and approvals.
(ii) Hazardous Waste Disposal. Set forth in attached Schedule 3.2(v)
hereto is a summary description of current procedures of the Branded
Business with respect to the disposal of hazardous waste materials. Except
as set forth in attached Schedule 3.2(v), such procedures comply in all
material respects with all municipal, state or federal requirements
applicable thereto with respect to which non-compliance could result in the
imposition of a fine, penalty, liability, cost or expense.
(w) Actions Affecting Internal Spin-off or Distribution. The Company has
not taken, and has not permitted any of its subsidiaries to take, any action
that would disqualify the Internal Spinoff or the Distribution as tax-free
transactions within the meaning of Section 355 of the Code.
SECTION 3.3 REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGER
SUB. Acquiror and Merger Sub represent and warrant to the Company as follows:
(a) Organization, Standing and Corporate Power. Each of Acquiror and Merger
Sub is a corporation duly organized, validly existing and in good standing under
the laws of its state of incorporation and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. Each of Acquiror and Merger Sub is duly qualified or
licensed to do business and in good standing in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary, except where the failure
to be so duly qualified or licensed and in good standing would not in the
aggregate have a material adverse effect on Acquiror and its subsidiaries taken
as a whole. True, accurate and complete copies of Acquiror's certificate of
incorporation and by-laws, as in effect on the date hereof, including all
amendments thereto, have heretofore been made available to the Company.
(b) Capital Structure. The authorized capital stock of Acquiror consists of
1,000,000,000 shares of Acquiror Common Stock and 5,000,000 shares of preferred
stock, without par value ("ACQUIROR PREFERRED STOCK"). At the close of business
on August 1, 1996, (i) 157,157,501 shares of Acquiror Common Stock and no shares
of Acquiror Preferred Stock were issued and outstanding, (ii) 46,995,831
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shares of Acquiror Common Stock were held by Acquiror in its treasury, and (iii)
2,000,000 shares of Acquiror Preferred Stock were reserved for issuance in
connection with the Rights Agreement dated as of December 11, 1995, between
Acquiror and Norwest Bank Minnesota, N.A., as Rights Agent. Except as set forth
above and except for shares issuable pursuant to employee stock options and
benefit plans, at the close of business on August 1, 1996, no shares of capital
stock or other voting securities of Acquiror were issued, reserved for issuance
or outstanding. All outstanding shares of capital stock of Acquiror are, and all
shares which may be issued pursuant to this Agreement will be, when issued, duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights. There are not any bonds, debentures, notes or other
indebtedness of Acquiror having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
stockholders of Acquiror may vote. Except as set forth above or in connection
with Acquiror's dividend reinvestment plan, as of the date of this Agreement,
there are not any securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which Acquiror or any of
its subsidiaries is a party or by which any of them is bound obligating Acquiror
or any of its subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other voting securities
of Acquiror or obligating Acquiror or any of its subsidiaries to issue, grant,
extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking.
(c) Authority; Noncontravention. Each of Acquiror and Merger Sub has all
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the Ancillary Agreements to which it is a party and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of each of Acquiror and
Merger Sub. This Agreement has been duly executed and delivered by each of
Acquiror and Merger Sub and, assuming this Agreement constitutes a valid and
binding obligation of the Company, constitutes a valid and binding obligation of
each of Acquiror and Merger Sub, enforceable against it in accordance with its
terms. None of the execution and delivery of this Agreement, the Ancillary
Agreements to which Acquiror or Merger Sub is a party or the consummation of the
transactions contemplated hereby and thereby and compliance with the provisions
of this Agreement or such Ancillary Agreements will conflict with, or result in
any violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or the loss of a benefit under, or result in the creation of any
Lien upon any of the properties or assets of Acquiror or Merger Sub under, (i)
the certificate of incorporation or by-laws of Acquiror or Merger Sub or the
comparable charter or organizational documents of any other subsidiary of
Acquiror, (ii) any loan or credit agreement, note, bond, mortgage, indenture,
lease or other agreement, instrument, permit, concession, franchise or license
to which Acquiror or any of its subsidiaries is a party or by which Acquiror or
any of its subsidiaries or any of their respective assets are bound or (iii)
subject to the governmental filings and other matters referred to in the
following sentence, any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to Acquiror, or any of its subsidiaries or their
respective properties or assets other than, in the case of clauses (ii) and
(iii), any such conflicts, violations, defaults, rights or Liens that
individually or in the aggregate would not (x) have a material adverse effect on
Acquiror and its subsidiaries taken as a whole, (y) materially impair the
ability of Acquiror to perform its obligations under this Agreement or the
Ancillary Agreements to which it is a party or (z) prevent or materially delay
the consummation of any of the transactions contemplated by this Agreement or
such Ancillary Agreements to which it is party. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity is required by or with respect to Acquiror or any subsidiary of Acquiror
in connection with the execution and delivery of this Agreement and any of the
Ancillary Agreements to which it is a party, or the consummation by Acquiror or
any of its subsidiaries of any of the transactions contemplated hereby and
thereby, except for (i) the filing with the SEC of the Form S-4 and such reports
under Sections 13 and 16(a) of the Exchange Act as may be required in connection
with this Agreement and the transactions contemplated by this Agreement, (ii)
the filing of the Certificate of Merger with the Missouri Secretary of State and
appropriate documents with the relevant authorities of other states in which the
Company is qualified to do business, (iii) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
the "takeover" or "blue sky" laws of various states, (iv) expiration of the
waiting period under the HSR
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Act, (v) such consents, approvals, orders, authorizations, registrations,
declarations and filings as are set forth on Schedule 3.3(c), and (vi) such
other consents, approvals, orders, authorizations, registrations, declarations
and filings, the failure of which to obtain or make could not reasonably be
expected to have a material adverse effect on Acquiror and its subsidiaries
taken as a whole.
(d) SEC Documents; Undisclosed Liabilities.
(i) Acquiror has filed all required reports, schedules, forms,
statements and other documents with the SEC since January 1, 1994 (the
"ACQUIROR SEC DOCUMENTS"). As of their respective dates, the Acquiror SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such Acquiror
SEC Documents, and none of the Acquiror SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading.
The financial statements of Acquiror included in the Acquiror SEC Documents
comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles (except as permitted by Form 10-Q of the SEC in the
case of unaudited statements) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and
fairly present the consolidated financial position of Acquiror and its
consolidated subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
(ii) None of the press releases issued by Acquiror since March 31,
1994 contained at the time of issuance any untrue statement of a material
fact or omitted to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
(e) Information in Disclosure Documents and Registration Statements. None
of the information supplied or to be supplied in writing by Acquiror or its
representatives for inclusion or incorporation by reference in (i) the Form S-4
will, at the time the Form S-4 becomes effective under the Securities Act and at
the Effective Time, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading and (ii) the Proxy Statement will, at the date mailed to stockholders
and at the time of the meeting of the Company's stockholders to be held in
connection with the Merger, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. The Form S-4 will comply as to form in all
material respects with the provisions of the Securities Act and the rules and
regulations thereunder, except that no representation is made by Acquiror with
respect to statements made therein based on information supplied by the Company
or its representatives for inclusion in the Form S-4 or with respect to
information concerning the Company or any of its subsidiaries incorporated by
reference in the Form S-4.
(f) Absence of Certain Changes or Events. On the date of this Agreement,
except as disclosed in the Acquiror SEC Documents filed and publicly available
prior to the date of this Agreement (the "FILED ACQUIROR SEC DOCUMENTS") or as
set forth in Schedule 3.3(f), and at the Closing Date, except as disclosed in
the Acquiror SEC Documents filed and publicly available before the Closing Date
or in Schedule 3.3(f) or in the Acquiror Bring Down Certificate (as defined in
Section 6.3(a)), since May 28, 1995, (i) there has not been any material adverse
change in Acquiror and its subsidiaries taken as a whole or any event affecting
Acquiror and its subsidiaries that could reasonably be expected to have such a
material adverse effect, and (ii) there has not been (A) any split, combination
or reclassification of any of Acquiror's capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for shares of its capital stock, (B) any damage, destruction
or loss, whether or not covered by insurance, that has had or could reasonably
be expected to have a material adverse effect on Acquiror and its subsidiaries
taken as a whole, or (C) any change in accounting methods, principles or
practices by Acquiror
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materially affecting its assets, liabilities or business, except insofar as may
have been required (in the opinion of the Acquiror's independent accountants) by
a change in generally accepted accounting principles.
(g) Litigation. Except as disclosed in the Filed Acquiror SEC Documents or,
with respect to claims, investigations, suits, actions or proceedings arising,
or to the knowledge of Acquiror, first expressly threatened, between the date
hereof and the Closing Date, as disclosed in Acquiror SEC Documents filed and
publicly available before the Closing Date or in the Acquiror Bring Down
Certificate, there is no claim, investigation, suit, action or proceeding
pending or, to the knowledge of Acquiror, expressly threatened, against any of
Acquiror or any of its subsidiaries before or by any Governmental Entity or
arbitrator that, individually or in the aggregate, could reasonably be expected
to (i) have a material adverse effect on Acquiror and its subsidiaries taken as
a whole, (ii) materially impair the ability of Acquiror to perform its
obligations under this Agreement or any of the Ancillary Agreements to which it
is a party or (iii) prevent or materially delay or alter the consummation of any
or all of the transactions contemplated hereby or thereby.
(h) Compliance with Applicable Laws. Acquiror and its subsidiaries hold all
permits, licenses, variances, exemptions, orders and approvals of, and have made
all filings, applications and registrations with, all Governmental Entities
which individually or in the aggregate are material to the operation of the
businesses of Acquiror and its subsidiaries taken as a whole (the "ACQUIROR
PERMITS"). All Acquiror Permits are in full force and effect in all material
respects. Acquiror and its subsidiaries are in compliance with the terms of the
Acquiror Permits, except where the failure so to comply would not have a
material adverse effect on Acquiror and its subsidiaries taken as a whole.
Except as disclosed in the Filed Acquiror SEC Documents, the businesses of
Acquiror and its subsidiaries are not being conducted in violation of any law,
ordinance or regulation of any Governmental Entity, except for violations, if
any, which individually or in the aggregate do not, and could not reasonably be
expected to, have a material adverse effect on Acquiror and its subsidiaries
taken as a whole.
(i) Consummation of Transactions. As of the date of this Agreement,
Acquiror has not received written notice from any Federal or state governmental
agency or authority indicating that such agency or authority would oppose or
refuse to grant or issue its consent or approval, if required, with respect to
the transactions contemplated by this Agreement.
(j) Voting Requirements. No action by the stockholders of Acquiror is
required to approve this Agreement and the transactions contemplated by this
Agreement.
(k) Brokers. No broker, investment banker, financial advisor or other
person, other than Dillon, Read & Co. Inc., the fees and expenses of which will
be paid by Acquiror, is entitled to any broker's, finder's, financial advisor's
or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Acquiror.
ARTICLE IV
COVENANTS
SECTION 4.1 COVENANTS OF THE COMPANY. During the period from the date of
this Agreement and continuing until the Effective Time, the Company agrees as to
itself and its subsidiaries that, except for the Distribution and the other
transactions expressly provided for in the Reorganization Agreement, as
expressly contemplated or permitted by this Agreement, or to the extent that
Acquiror shall otherwise consent in writing:
(a) Ordinary Course. The Company and its subsidiaries shall conduct the
Branded Business in the ordinary course, including, without limitation, using
reasonable efforts to preserve beneficial relationships between the Branded
Business and its distributors, brokers, lessors, suppliers, employees and
customers in connection with the Branded Business, it being understood that the
Company and its subsidiaries may comply with their respective contractual
obligations under the contracts to which they are parties (so long as the
execution of such contracts by the Company or the applicable subsidiary does not
constitute a breach of, or
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default under, this Agreement). Without limiting the generality of the
foregoing, the Company and its subsidiaries will, with respect to the Branded
Business:
(i) not commence or commit to any capital projects having an
individual cost of $100,000 or more, or with an aggregate cost for all such
projects of $1,000,000 or more, and will continue the consolidation at the
Branded Plant in substantially the manner contemplated on the date hereof;
(ii) not enter into any contracts or agreements other than in the
ordinary course of the Branded Business relating to or obligating the
Branded Business, that involve amounts in excess of $100,000 individually
or $500,000 in the aggregate unless such contracts or agreements are
cancelable on 30 days or less notice without penalty or premium;
(iii) maintain overall broker sales incentive programs for all of the
Company's and its subsidiaries' products of the Branded Business handled by
brokers that will provide compensation to brokers at a rate that is at
least equal to those maintained by the Company during the comparable period
during the last fiscal year;
(iv) on a fiscal quarterly basis, and cumulatively, maintain direct
and indirect trade, consumer promotions (including coupon expense and
sampling) and advertising expenditures (excluding broker sales incentives)
relating to the Branded Business at such level as the Company may determine
necessary, in its reasonable judgment, to preserve the health of the
Branded Business;
(v) not take any action to intentionally (i) build excessive inventory
levels at the trade or factory level or (ii) permit factory inventory
levels to fall below reasonably expected requirements; and
(vi) not transfer or reassign any of the marketing and/or research and
development employees presently associated primarily with the Branded
Business (all of such persons being identified on Schedule 4.1(a)(vi)), or
any employees to or from the Branded Plant, or recall laid-off employees at
the Branded Plant other than in the ordinary course of business consistent
with past practice, it being understood that, in addition to the employees
at the Branded Plant, Acquiror shall have the opportunity to interview such
identified marketing and/or research and development employees prior to the
Effective Time and to discuss the possibility of employing or causing the
Surviving Corporation to employ those persons from and after the Effective
Time.
(b) Changes in Stock. The Company shall not (i) split, combine or
reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock or (ii) other than in connection with the
exercise of stock options outstanding as of
the date of this Agreement under any Benefit Plan, repurchase, redeem or
otherwise acquire, or permit any subsidiary to repurchase, redeem or otherwise
acquire, any shares of capital stock of the Company or any of its subsidiaries.
(c) Issuance of Securities. The Company shall not, nor shall the Company
permit the Branded Subsidiary to, issue, transfer or sell, or authorize or
propose or agree to the issuance, transfer or sale by the Company or the Branded
Subsidiary of, any shares of its capital stock of any class or other equity
interests or any securities convertible into, or any rights, warrants, calls,
subscriptions, options or other rights or agreements, commitments or
understandings to acquire, any such shares, equity interests or convertible
securities, other than: (i) the issuance of shares of Company Common Stock (w)
upon the exercise of stock options outstanding as of the date of this Agreement
pursuant to any Benefit Plan, (x) to make any payment under any Benefit Plan
that is required as of the date of this Agreement to be made in the form of
shares of Company Common Stock or (y) to make acquisitions of capital stock or
assets of, or in connection with a merger with, another entity provided that
such transaction is permitted pursuant to paragraph (e) of this Section 4.1; or
(z) the grant of stock options pursuant to Benefit Plans consistent with past
practices (provided that any such newly granted options will by their terms be
converted into options to acquire New Holdings Common Stock at or prior to the
Effective Time); and (ii) issuances by the Branded Subsidiary of its capital
stock to its parent.
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(d) Governing Documents. The Company shall not, nor shall it permit the
Branded Subsidiary to, amend or propose to amend its articles of incorporation
(or, if applicable, its certificate of incorporation or other charter document)
or by-laws.
(e) No Acquisitions. The Company shall not, nor shall it permit the Branded
Subsidiary to, (i) acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial equity interest in or substantial portion of the
assets of, or by any other manner, any business or any corporation or other
business organization that would be directly or indirectly acquired by Acquiror
in the Merger or that would create liabilities or obligations that would be
binding upon Acquiror or its subsidiaries, the Branded Subsidiary or the
Surviving Corporation following the Effective Time, or (ii) except for
investments by the Company in its existing wholly owned subsidiaries or any
investments by or in any Benefit Plan, make any other investment in any person
(whether by means of loan, capital contribution, purchase of capital stock,
obligations or other securities, purchase of all or any integral part of the
business of the person or any commitment or option to make an investment or
otherwise) that would be directly or indirectly acquired by Acquiror in the
Merger or that would create liabilities or obligations that would be binding
upon Acquiror or its subsidiaries, the Branded Subsidiary or the Surviving
Corporation following the Effective Time.
(f) No Dispositions. The Company shall not, nor shall it permit any of its
subsidiaries to, sell, lease, license, encumber or otherwise dispose of, or
agree to sell, lease, license, encumber or otherwise dispose of, any of the
assets of the Branded Business (including, without limitation, any real
property, inventory, equipment or Intellectual Property) other than (except with
respect to Intellectual Property) in the ordinary course of business consistent
with past practice and the sale or other disposition of obsolete equipment.
(g) Indebtedness. The Company shall take such action as may be necessary so
that, as of the Effective Time, the Company and the Branded Subsidiary, taken as
a whole, shall not have any indebtedness for borrowed money or any obligation
evidenced by a promissory note or other instrument or guarantee other than: (i)
the Notes, not to exceed $150,000,000 in face value in the aggregate, plus
accrued and unpaid interest thereon, (ii) other indebtedness other than that
described in clause (i) or (iii) below, not to exceed $150,000,000 in principal
amount in the aggregate, plus accrued and unpaid interest thereon (provided that
such indebtedness shall not contain, as of the Effective Time, any terms which
are more restrictive in any material respect on the Company or the Branded
Subsidiary than the terms of the existing indebtedness of the Company on the
date hereof and provided that such indebtedness can be paid without penalty or
premium within thirty (30) days after the Effective Time), and (iii)
indebtedness incurred pursuant to a written agreement that provides that such
indebtedness will be assumed by Foods or a subsidiary of Foods at or prior to
the Effective Time and that, upon such assumption, the Company and its
subsidiaries shall have no obligation or liability in respect of such
indebtedness.
(h) Benefit Plans; Collective Bargaining Agreement. Except as contemplated
by the Reorganization Agreement, the Company shall not, nor shall it permit the
Branded Subsidiary to: (i) adopt any Benefit Plan or amend any Benefit Plan to
the extent such adoption or amendment (x) would create or increase any liability
or obligation on the part of the Company or the Branded Subsidiary that will not
either (A) be fully performed or satisfied prior to the Effective Time or (B) be
assumed by Foods pursuant to the Reorganization Agreement with no remaining
obligation on the part of the Company or the Branded Subsidiary, or (y) would
increase the number of shares of Company Common Stock (if any) to be issued
under such Benefit Plan; (ii) except for normal increases in the ordinary course
of business consistent with past practice, increase the base salary of any
employee of the Branded Business; or (iii) enter into or modify in any material
respect any collective bargaining agreement governing employees of the Branded
Business.
(i) Filings. The Company shall promptly provide counsel for Acquiror copies
of all filings (other than those filings, or portions thereof, which Acquiror
has no reasonable interest in obtaining in connection with the Merger or the
transactions contemplated hereby) made by the Company or any of its subsidiaries
with any Federal, state or foreign Governmental Entity in connection with this
Agreement, the Reorganization Agreement and the transactions contemplated hereby
and thereby.
(j) Accounting Policies and Procedures. The Company will not and will not
permit the Branded Subsidiary to change any of its accounting principles,
policies or procedures, except such changes as may be
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required, in the opinion of the Company's independent accountants, by generally
accepted accounting principles or changes that in the opinion of said
accountants are not material to the Company's consolidated financial statements
(as to which changes and opinion the Company shall promptly notify Acquiror).
(k) Liens. The Company shall not, and shall not permit the Branded
Subsidiary to, create, incur or assume any Lien on the Branded Assets (as
defined in the Reorganization Agreement), except for Liens created, incurred or
assumed in the ordinary course of business consistent with the past practices of
the Company and its subsidiaries, which Liens would not have a material adverse
effect on the Company and the Branded Subsidiary, taken as a whole.
(l) Actions Affecting Merger, Internal Spin-off or Distribution. The
Company shall not, and shall not permit any of its subsidiaries to, take any
action that would or is reasonably likely to result in any of the conditions to
the Merger set forth in Article VI not being satisfied or that would materially
impair the ability of the Company to consummate the Internal Spinoff or the
Distribution in accordance with the terms of the Reorganization Agreement, or
the Merger in accordance with the terms hereof, or would materially delay such
consummation or that would disqualify the Internal Spinoff or the Distribution
as tax-free transactions within the meaning of Section 355 of the Code.
(m) Delivery of Certain Information. The Company shall furnish to Acquiror
as soon as available and in any event within 20 days after the end of each
month, (i) a balance sheet as of the end of each month for the Company and the
Branded Subsidiary on a combined basis substantially in the form of the Branded
Balance Sheet, (ii) statements of profits and loss (at a brand contribution
level) for the Company and the Branded Subsidiary on a combined basis for each
such month, substantially in the form of Schedule 3.2(q)(i), and (iii) monthly
operating reports, including inventory levels, sales volume, marketing spending
by brand and promotional spending plans for forward periods as and when
developed (but excluding any information that the Company is advised by legal
counsel is not appropriate information to be exchanged under applicable law).
(n) Exclusivity. Neither the Company nor any of its directors, officers or
employees shall, and the Company shall use its best efforts to ensure that none
of its representatives shall, directly or indirectly, solicit, initiate or
encourage any inquiries or proposals from or with any person (other than
Acquiror) or such person's directors, officers, employees, representatives and
agents that constitute, or could reasonably be expected to lead to a Third Party
Acquisition. For purposes of this Agreement, a "THIRD PARTY ACQUISITION" shall
mean (i) the acquisition by any person of more than twenty percent of the total
assets of the Branded Business, (ii) the acquisition by any person (other than
an acquisition by a person in connection with a transaction permitted by Section
4.1(e), provided such person agrees to vote the Company Common Stock acquired in
such transaction in favor of the Merger) of twenty percent or more of (A) the
Company Common Stock or (B) the total number of votes that may be cast in the
election of directors of the Company at any meeting of shareholders of the
Company assuming all shares of Company Common Stock and all other securities of
the Company, if any, entitled to vote generally in the election of directors
were present and voted at such meeting, or (iii) any merger, amalgamation or
other combination of the Company with any person. The Company has, upon
execution of this Agreement, immediately ceased or caused to be terminated any
existing discussions or negotiations with any parties other than Acquiror
conducted prior to the date hereof with respect to any Third Party Acquisition.
The Company may furnish or cause to be furnished information (pursuant to
confidentiality arrangements no less favorable to the Company than the
Confidentiality Agreement (as hereinafter defined), unless already in existence
on the date hereof) and may participate in such discussions and negotiations
directly or through its representatives if (i) the failure to provide such
information or participate in such negotiations and discussions would, in the
opinion of its outside counsel, reasonably be deemed to cause the members of the
Company's Board of Directors to breach their fiduciary duties under applicable
law or (ii) another corporation, partnership, person or other entity or group
makes a written offer or written proposal which, based upon the identity of the
person or entity making such offer or proposal and the terms thereof, and the
availability of adequate financing therefor, the Company's Board of Directors
believes, in the good faith exercise of its business judgment and based upon
advice of its outside legal and financial advisors, would reasonably be expected
to be consummated and represents a transaction more favorable to its
shareholders than the transactions contemplated by this Agreement (a "Higher
Offer"). The Company shall notify Acquiror as soon as practicable if any such
inquiries or proposals are received by,
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any such information is requested from, or any such negotiations or discussions
are sought to be initiated or continued with it, which notice shall provide the
identity of the third party or parties and the terms of any such proposal or
proposals. The Company's Board of Directors may fail to recommend or fail to
continue to recommend this Agreement in connection with any vote of its
shareholders, or withdraw, modify, or change any such recommendation, or
recommend any other offer or proposal, if the Company's Board of Directors,
based on the opinion of its outside counsel, determines that making such
recommendation, or the failure to recommend any other offer or proposal, or the
failure to so withdraw, modify, or change its recommendation, or the failure to
recommend any other offer or proposal, would reasonably be deemed to cause the
members of the Company's Board of Directors to breach their fiduciary duties
under applicable law in connection with a Higher Offer. In such event,
notwithstanding anything contained in this Agreement to the contrary, any such
failure to recommend, withdrawal, modification, or change of recommendation or
recommendation of such other offer or proposal, or the entering by the Company
into an agreement with respect to a Higher Offer (provided that the Company
shall have provided Acquiror with at least six business days' notice of its
intention to so enter, the terms of the Higher Offer and the identity of the
other party thereto), shall not constitute a breach of this Agreement by the
Company. Notwithstanding the foregoing, the Company shall not enter into an
agreement with a third party with respect to, or waive, modify or redeem the
Rights or take any action to approve such transaction under any antitakeover
provision of the Company's certificate of incorporation or state law in
connection with, any Third Party Acquisition unless and until this Agreement is
terminated in accordance with the provisions of Article VII.
(o) New Contracts. Other than in the ordinary course of the Branded
Business and consistent with past practice, the Company will not and will not
permit any of its subsidiaries to enter into any new contract, agreement,
arrangement or understanding that would or could reasonably be expected to
impose any new obligations or liabilities on the Company from and after the
Effective Time.
(p) Confidentiality and Standstill Agreements. The Company will not amend,
waive or modify any provision of any confidentiality or standstill agreement
entered into with any other party in connection with such party's interest in
acquiring the Company or the Branded Business or any substantial portion of the
Branded Business.
(q) Broker Transition. The Company will reasonably cooperate, at Acquiror's
expense, with Acquiror to facilitate such post-Closing transition arrangements
between Acquiror or its subsidiaries and brokers distributing products of the
Branded Business as Acquiror may determine necessary or advisable.
(r) Pending Actions. The Company will continue to defend in the ordinary
course, consistent with past practice, the litigation and other proceedings set
forth in Schedule 1.1(c) to the Reorganization Agreement, including resolving
any such litigation and other proceedings as can be resolved prior to the
Effective Time on a commercially reasonable basis and consistent with past
practice.
(s) No Agreement to Prohibited Actions. The Company will not, and will not
permit any of its subsidiaries to, agree or commit to take any action that is
prohibited under this Section 4.1.
SECTION 4.2 COVENANTS OF ACQUIROR. During the period from the date of this
Agreement and continuing until the Effective Time, Acquiror agrees as to itself
and its subsidiaries that:
(a) Actions Affecting Merger. Acquiror shall not, and shall not permit
any of its subsidiaries to, take any action that would or is reasonably
likely to result in any of the conditions to the Merger set forth in
Article VI not being satisfied, or that would materially impair the ability
of Acquiror to consummate the Merger in accordance with the terms hereof or
materially delay such consummation.
(b) Filings. Acquiror shall promptly provide the Company (or its
counsel) copies of all filings (other than those filings, or portions
thereof, which the Company has no reasonable interest in obtaining in
connection with the Merger or the transactions contemplated hereby) made by
Acquiror with any Federal, state or foreign Governmental Entity in
connection with this Agreement and the transactions contemplated hereby.
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(c) Acquiror Common Stock. Except at a time and in a manner which will not
increase the Average Value of Acquiror Common Stock, Acquiror shall not split,
combine or reclassify any of the Acquiror Common Stock or authorize the (i)
making of any in-kind distribution or extraordinary cash dividend with respect
to the Acquiror Common Stock or (ii) issuance of any other securities in respect
of or in exchange for shares of the Acquiror Common Stock.
(d) Tax Free Status of Merger and Spin-Offs. Acquiror shall not, and shall
not permit any of its subsidiaries to, take any action that would disqualify the
Merger as a tax-free reorganization under Section 368(a)(1)(B) of the Code, or
any other action that would disqualify the Internal Spinoff or the Distribution
as tax-free transactions within the meaning of Section 355 of the Code.
SECTION 4.3 MUTUAL COVENANTS.
(a) The Company and Acquiror shall use their reasonable best efforts not
to, and not to permit any of their respective subsidiaries to, take any action
that would, or that could reasonably be expected to, result in (i) any of the
representations and warranties of such party set forth in this Agreement that
are qualified as to materiality becoming untrue, (ii) any of such
representations and warranties that are not so qualified becoming untrue in any
material respect or (iii) the failure to satisfy any of the conditions to the
Merger set forth in Article VI.
(b) The Company and Acquiror shall promptly advise the other party orally
and in writing of any change or event having, or which, insofar as can
reasonably be foreseen, could reasonably be expected to have, a material adverse
effect on such party and its subsidiaries taken as a whole.
(c) (i) Subject to the terms and conditions herein provided, the parties
hereto agree to use their reasonable best efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement and to cooperate with each other in
connection with the foregoing, including, but not limited to, (A) defending all
lawsuits or other legal proceedings challenging this Agreement, or the
transactions contemplated hereby, (B) attempting to lift or rescind any
injunction or restraining order or other order adversely affecting the ability
of the parties to consummate the transactions contemplated hereby, and (C)
effecting all necessary filings and submissions of information requested by
governmental authorities.
(ii) Without limiting the foregoing, the parties hereto shall, as soon
as reasonably practicable, make their filing under the HSR Act, shall
endeavor to obtain early termination of the waiting period thereunder, and
shall promptly make any further filings requested pursuant thereto or which
may be necessary to consummate the transactions contemplated herein. Each
party shall furnish to the other, upon request, such information as shall
reasonably be required in connection with the preparation of the requesting
party's filings under the HSR Act.
(iii) Notwithstanding the foregoing or any other provision of this
Agreement, (A) neither the Company nor any of its subsidiaries will,
without Acquiror's prior written consent, agree or commit to any
divestiture, hold-separate order or other restriction relating to the
Branded Business and (B) neither Acquiror nor any of its subsidiaries will
be required to agree or commit to any divestiture, hold-separate order or
other restriction relating to the Branded Business or to any of its
existing businesses or any other governmental order or obligation that
otherwise imposes any conditions or limitations in connection with
Acquiror's acquisition of the Branded Business.
(d) The Company will use reasonable efforts to reach an agreement prior to
the Effective Time with Ralston Purina Company ("RPCo."), reasonably
satisfactory in form and substance to Acquiror, providing for (i) the
termination or other resolution of Foods' obligations under the Distributorship
Agreement (as defined in the Reorganization Agreement) as of the Effective Time
and (ii) the substitution of Foods for the Company, with a novation of the
Company, effective as of the Effective Time, with respect to any liabilities of
the Company to RPCo. under the agreements entered into between the Company and
RPCo. in connection with the 1994 spinoff of the Company from RPCo., except for
any liabilities assumed or retained by the Company or the Branded Subsidiary
pursuant to this Agreement and the Ancillary Agreements. In connection with and
subject to the execution of an agreement with RPCo. as contemplated by the
preceding sentence, to
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the extent such agreement does not provide for termination of the
Distributorship Agreement, Acquiror will use its reasonable efforts to reach a
mutually satisfactory arrangement under which the Company, effective as of the
Effective Time, would supply Foods with Branded Business products for Foods to
supply to RPCo. for distribution under the Distributorship Agreement (subject to
limitations to be determined by Acquiror and Foods). The foregoing covenants
shall not be construed to require payments by any of Acquiror, the Company or
Foods to RPCo. in exchange for RPCo.'s execution of such agreement.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 PREPARATION OF FORM S-4, FORM S-1, FORM 10 AND THE PROXY
STATEMENT; STOCKHOLDERS MEETING.
(a) As soon as practicable following the date of this Agreement, the
Company and Acquiror shall prepare and file with the SEC the Form S-4, the Form
S-1 (if required), the Form 10 and the Proxy Statement. Each of the Company and
Acquiror shall use its reasonable best efforts to have the Form S-4 and Form S-1
(if required) declared effective under the Securities Act, and the Form 10
declared effective under the Exchange Act, as promptly as practicable after such
filing. The Company will use its reasonable best efforts to cause the Proxy
Statement to be mailed to the Company's stockholders as promptly as practicable
after the Form S-4, Form S-1 (if required) and Form 10 are declared effective
under the Securities Act and the Exchange Act, as the case may be. Acquiror
shall also use its reasonable best efforts to take any action required to be
taken under any applicable state securities laws in connection with the issuance
of Acquiror Common Stock in the Merger and the Company shall furnish all
information concerning the Company and the holders of the Company Common Stock
and rights to acquire Company Common Stock pursuant to the Benefit Plans as may
be reasonably requested in connection with any such action.
(b) The Company shall, as soon as practicable following the date on which
the Form S-4, Form S-1 (if required) and Form 10 are declared effective, duly
call, give notice of, convene and hold a meeting of its stockholders (the
"STOCKHOLDERS MEETING") for the purpose of voting upon the approval and adoption
of this Agreement and, if the Company determines it to be necessary or
appropriate, upon the Distribution. Subject to the provisions of Section 4.1(n),
the Company shall, through its Board of Directors, recommend to its stockholders
approval of this Agreement and the transactions contemplated by this Agreement.
SECTION 5.2 ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) The Company shall, and shall cause its subsidiaries to, afford to
Acquiror and its officers, employees, accountants, counsel, financial advisors
and other representatives of Acquiror, reasonable access during the period prior
to the Effective Time to all its properties, books, contracts, commitments,
personnel and records relating to the Branded Business. During the period prior
to the Effective Time, the Company shall, and shall cause its subsidiaries to,
furnish promptly to Acquiror (i) a copy of each report, schedule, registration
statement and other document filed by it during such period pursuant to the
requirements of Section 13(a) and 15(d) of the Exchange Act, (ii) each press
release issued by it, and (iii) all other information relating to the Branded
Business as Acquiror may reasonably request; provided that the Company shall not
be required to provide information regarding Foods unless such information
relates to liabilities or obligations that could reasonably be expected to be
incurred by or imposed on the Company and that would remain in effect after the
Effective Time. The Company shall not be obligated to provide any aforementioned
access or information to Acquiror if the Company's legal counsel advises the
Company that such action would violate any law, regulation, rule, order or
decree or a confidentiality agreement.
(b) During the period prior to the Effective Time, Acquiror shall furnish
promptly to the Company a copy of each report, schedule, registration statement
and other document filed by it during such period pursuant to the requirements
of Section 13(a) and 15(d) of the Exchange Act (other than Forms 11-K).
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(c) Except as required by law, each of the Company and Acquiror will hold,
and will cause its respective officers, employees, accountants, counsel,
financial advisors and other representatives and affiliates to hold, any
nonpublic information in confidence in accordance with the confidentiality
agreement, dated June 17, 1996 (the "CONFIDENTIALITY AGREEMENT"), between
Acquiror and the Company.
SECTION 5.3 LEGAL CONDITIONS TO DISTRIBUTION AND MERGER; LEGAL COMPLIANCE.
(a) Subject to the terms and conditions hereof, including, without
limitation, Section 4.3(c)(iii), (i) Acquiror shall use reasonable best efforts
to comply promptly with all legal and regulatory requirements which may be
imposed on itself or its subsidiaries with respect to the Merger and (ii)
Acquiror will, and will cause its subsidiaries to, promptly use its reasonable
best efforts to obtain any consent, authorization, order or approval of, or any
exemption by, and to satisfy any condition or requirement imposed by, any
Governmental Entity or other public or private third party, required to be
obtained, made or satisfied by Acquiror or any of its subsidiaries in connection
with the Merger or the taking of any action contemplated thereby or by this
Agreement or the Reorganization Agreement.
(b) Subject to the terms and conditions hereof, including, without
limitation, Section 4.3(c)(iii), (i) the Company will use its reasonable best
efforts to comply promptly with all legal and regulatory requirements which may
be imposed on itself or its subsidiaries with respect to the Distribution and
the Merger and (ii) the Company will, and will cause its subsidiaries to,
promptly use its reasonable best efforts to obtain any consent, authorization,
order or approval of, or any exemption by, and to satisfy any condition or
requirement imposed by, any Governmental Entity or other public or private third
party, required to be obtained, made or satisfied by the Company or any of its
subsidiaries in connection with the Distribution or the Merger or the taking of
any action contemplated thereby or by this Agreement or the Reorganization
Agreement.
(c) Each of the Company and Acquiror will promptly cooperate with and
furnish information to each other in connection with any such requirements
imposed upon any of them or any of their respective subsidiaries in connection
with the Distribution or the Merger.
SECTION 5.4 RIGHTS AGREEMENT. The Board of Directors of the Company shall
take all further action (in addition to that referred to in Section 3.2(n))
requested in writing by Acquiror (including, if necessary, redeeming the Rights
immediately prior to the Effective Time or amending the Rights Agreement) in
order to render the Rights inapplicable to the Merger and the other transactions
contemplated by this Agreement and the Reorganization Agreement.
SECTION 5.5 EMPLOYMENT MATTERS.
(a) Employment with Branded Business. Acquiror agrees to cause the Company
or the Branded Subsidiary to offer to retain all Branded Employees (as defined
in the Reorganization Agreement) as of 12:01 a.m. on the Closing Date. The offer
of continuing employment to be made hereunder shall include provision for the
payment of base salary to each such employee at a rate at least equal to the
rate of base salary in effect for such employee immediately prior to the
Closing. Notwithstanding the foregoing, nothing contained herein shall be
construed as obligating Acquiror, the Surviving Corporation or any of its
affiliates (x) to offer employment after the Closing to any employee whose
employment with the Company terminates for any reason prior to the Closing, (y)
to maintain any term or condition of employment (including base salary) for any
period following the Effective Time, except as provided in Section 5.5(b), or
(z) to recall any employee who does not have recall rights.
(b) Severance and Other Benefits on Termination. With respect to Branded
Employees who are terminated by the Surviving Corporation or the Branded
Subsidiary after the Effective Time, the Surviving Corporation shall be
responsible for severance benefits payable pursuant to severance plans, policies
and practices of the Surviving Corporation applicable to Branded Employees at
the time of their termination. The Surviving Corporation further agrees to
provide any required notice under federal, state and local laws, regulations or
rules for any termination of Branded Employees after the Effective Time.
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(c) Data to be Furnished. Prior to Closing, the Company shall furnish
Acquiror with information as to (i) the rate of base salary in effect for each
Branded Employee immediately before the Closing, (ii) each Branded Employee's
position with the Company immediately before the Closing and (iii) each Branded
Employee's prior service.
(d) Cooperation. Prior to the Closing, the Company will reasonably
cooperate with Acquiror in conducting a review of the Benefit Plans, including
jointly engaging (with Acquiror and Foods) a firm or firms, as promptly as
practicable after the date hereof, selected by Acquiror and at Acquiror's sole
expense, to conduct such review. The Company and Foods will provide such firm or
firms with such documents and other information relating to the Benefit Plans as
such firm or firms may reasonably request. Following such review, the Company
will, as promptly as practicable, take any actions that Acquiror and the Company
may reasonably, mutually determine to be necessary or advisable in light of such
review.
SECTION 5.6 FEES AND EXPENSES. Except as provided in Section 7.2(b)(iii),
all fees and expenses incurred in connection with the Merger, the Distribution,
this Agreement, the Reorganization Agreement and the transactions contemplated
by this Agreement and the Ancillary Agreements shall be paid by the party
incurring such fees or expenses, whether or not the Merger is consummated,
except that expenses incurred in connection with printing and mailing the Proxy
Statement, the Form S-4, the Form S-1 (if required) and the Form 10, shall be
shared equally by Acquiror and the Company. Any such fees or expenses incurred
by the Company or its subsidiaries but not paid prior to the Effective Time
shall be accrued and reflected as liabilities of the Company and taken into
account in calculating the Closing Date Net Assets as set forth in Section 2.3.
SECTION 5.7 DISTRIBUTION. Prior to the Closing, the Company will (a) enter
into the Reorganization Agreement and each of the Ancillary Agreements to which
the Company is to be a party and (b) cause Foods and any other applicable
subsidiaries to enter into the Reorganization Agreement and each of the other
Ancillary Agreements to which it is to be a party. The Company will, and will
cause Foods to, take all action necessary to effect the Distribution immediately
prior to the Effective Time, pursuant to the terms of the Reorganization
Agreement and the Ancillary Agreements. Prior to the Effective Time, the Company
will not agree to or permit any modification, amendment, supplement or waiver of
the Reorganization Agreement or any of the Ancillary Agreements without the
prior written consent of Acquiror.
SECTION 5.8 PUBLIC ANNOUNCEMENTS. Acquiror and the Company will consult
with each other before issuing, and provide each other the opportunity to review
and comment upon, any press release or other public statements (it being
understood that discussions by the parties with financial analysts or other
advisors shall not constitute public statements) with respect to the
transactions contemplated by this Agreement and the Ancillary Agreements,
including the Merger, and shall not issue any such press release or make any
such public statement prior to such consultation, except as may be required by
applicable law, court process or by obligations pursuant to any listing
agreement with any national securities exchange.
SECTION 5.9 PRIVATE LETTER RULING AND TAX OPINIONS. The Company and
Acquiror each hereby agree to cooperate with the other party and to use their
reasonable best efforts to obtain from the Internal Revenue Service (or tax
counsel) the private letter ruling (or tax opinions) contemplated by Section
6.1(d) or (e) of this Agreement.
SECTION 5.10 AFFILIATES. Prior to the Closing Date, the Company shall
deliver to Acquiror a letter identifying all persons who are, at the time this
Agreement is submitted for approval to the stockholders of the Company,
"affiliates" of the Company for purposes of Rule 145 under the Securities Act.
The Company shall use its reasonable best efforts to cause each such person to
deliver to Acquiror on or prior to the Closing Date a written agreement
substantially in the form attached as Exhibit B hereto.
SECTION 5.11 STOCK EXCHANGE LISTING. Acquiror shall use its reasonable best
efforts to cause the shares of Acquiror Common Stock to be issued in the Merger
to be approved for listing on the NYSE, subject to official notice of issuance,
prior to the Closing Date.
SECTION 5.12 TITLE INSURANCE. In the event Acquiror shall elect at Closing
to purchase an A.L.T.A. Owner's Title Insurance Policy with standard extended
coverage for the Real Property, to the extent
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reasonably required by the issuer of such title insurance, the Company will and
will cause Foods to cooperate reasonably in the execution of documents
customarily required by an issuer of title insurance to provide extended title
insurance coverage.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. This Agreement shall have been approved and
adopted by the affirmative vote or consent of the Requisite Stockholders of the
Company.
(b) Stock Exchange Listing. The shares of Acquiror Company Stock issuable
to the Company's stockholders pursuant to this Agreement and under the Benefit
Plans shall have been approved for listing on the NYSE, subject to official
notice of issuance.
(c) Regulatory Approvals. Each of Acquiror and the Company shall have
obtained all requisite approvals of, or satisfied all requisite filing
requirements with, Governmental Entities in connection with the transactions
contemplated hereby and by the Ancillary Agreements, including all requisite
approvals under, and the expiration of all waiting periods in respect of, the
HSR Act.
(d) Private Letter Ruling. Unless otherwise agreed upon by the Company and
the Acquiror as set forth in paragraph (e) below, the Company shall have
received from the Service a private letter ruling (the "PRIVATE LETTER RULING"),
reasonably satisfactory in form and substance to Acquiror, substantially to the
effect that, on the basis of the facts, representations, and applicable law
existing at the Effective Time:
(i) The transfer by Foods to the Branded Subsidiary of its Branded
Business assets and liabilities, and the distribution of the Branded
Subsidiary stock to the Company, as contemplated by the Reorganization
Agreement, will qualify for Federal income tax purposes as a reorganization
within the meaning of Sections 368(a)(1)(D) of the Code and 355(a) of the
Code; and that, among other consequences of such qualification, no taxable
gain, loss or income will be realized by Foods, the Branded Subsidiary or
the Company as a result of such transaction.
(ii) The pro rata distribution of the stock of New Holdings to the
holders of the Company Common Stock will be non-taxable for Federal income
tax purposes, to both the Company's stockholders and the Company, under
Sections 355(a) and (c) of the Code.
(iii) The Merger will be treated for Federal income tax purposes as a
reorganization within the meaning of Section 368(a)(1)(B) of the Code; and
that, among other consequences of such qualification, no taxable gain, loss
or income will be realized by the Company, Acquiror or the Company's
shareholders as a result of the Merger.
(e) Joint Tax Opinion or Tax Opinions. In the event that the Company and
Acquiror agree to complete the transactions contemplated by this Agreement
without obtaining the Private Letter Ruling, Acquiror shall have received a
jointly rendered opinion of Wachtell, Lipton, Rosen & Katz, counsel to Acquiror,
and Bryan Cave LLP, counsel to the Company, or separate opinions of each such
firm, in each case reasonably satisfactory in form and substance to Acquiror, to
the same effect as set forth in clauses (i), (ii) and (iii) of the foregoing
paragraph (d).
(f) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger, the Internal Spinoff or the Distribution shall be in
effect; provided, however, that subject to the terms and conditions of this
Agreement including, without limitation, Section 4.3(c)(iii), each of the
parties shall have used its reasonable efforts to prevent the entry of any such
injunction or other order and to appeal as promptly as possible any such
injunction or other order that may be entered. No action,
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suit or other proceeding shall be pending by any Governmental Entity that, if
successful, would restrict or prohibit the consummation of the Merger, the
Internal Spinoff or the Distribution; provided, however, that the Company will
not unreasonably withhold its waiver of the condition set forth in this sentence
upon Acquiror's request in the event such an action, suit or other proceeding is
pending with respect to the Merger alone.
(g) Form S-4. The Form S-4 shall have become effective under the Securities
Act and shall not be the subject of any stop order or pending proceedings by a
Governmental Entity seeking a stop order.
(h) Consummation of the Distribution. The Distribution shall have become
effective in accordance with the terms of the Reorganization Agreement and each
of the agreements contemplated thereby.
(i) Tax Legislation. There shall be no proposed legislation introduced in
bill form and pending congressional action which, if passed, would have the
effect of amending the Internal Revenue Code so as to alter in any materially
adverse respect any of the tax consequences prescribed by the Private Letter
Ruling or the tax opinions contemplated by paragraphs (d) and (e) above.
SECTION 6.2 CONDITIONS TO OBLIGATIONS OF ACQUIROR AND MERGER SUB. The
obligation of Acquiror and Merger Sub to effect the Merger is further subject to
the following conditions, unless waived in writing by Acquiror:
(a) Representations and Warranties. The representations and warranties of
the Company set forth in this Agreement that are qualified as to materiality
shall be true and correct, and the representations and warranties of the Company
set forth in this Agreement that are not so qualified shall be true and correct
in all material respects, in each case as of the date of this Agreement and as
of the Closing Date as though made on and as of the Closing Date, except as
otherwise contemplated by this Agreement, except to the extent that any
representation or warranty shall be as of a specific date, in which case such
representation and warranty shall be true and correct as of such date, and
Acquiror shall have received a certificate signed on behalf of the Company by
the chief executive officer and the chief financial officer of the Company to
the effect of this sentence. The Company shall have delivered to Acquiror a
certificate (the "COMPANY BRING DOWN CERTIFICATE"), dated as of the Closing Date
and reasonably satisfactory in form to Acquiror, that sets forth each event that
has occurred and each condition that exists that (i) had not occurred or was not
in existence as of the date of this Agreement and (ii) if it had occurred or was
in existence as of the date of this Agreement would be required to be disclosed
pursuant to Section 3.2.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement and the Reorganization Agreement at or prior to the
Closing Date, and Acquiror shall have received a certificate signed on behalf of
the Company by the chief executive officer and the chief financial officer of
the Company to such effect.
(c) Opinion of the Company's Counsel. Acquiror shall have received an
opinion dated the Closing Date of Bryan Cave LLP, counsel to the Company, and/or
R. W. Lockwood, General Counsel of the Company, to the effect that:
(i) the Company, Foods and the Branded Subsidiary (collectively, the
"COMPANY PARTIES") are each corporations validly existing and in good
standing under the laws of the states of their respective incorporation;
(ii) each of the Company Parties has the power and authority to
execute each Document to which it is a party and to consummate the
transactions contemplated hereby and thereby; the execution and delivery of
this Agreement and the Ancillary Agreements and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by
requisite corporate action on the part of each Company Party that is a
party thereto and the stockholders of each such Company Party and each
Document has been duly executed and delivered by the Company Parties that
are party thereto and constitutes a legal, valid and binding obligation of
each such Company Party, enforceable in accordance with its terms, subject
to applicable bankruptcy, insolvency, receivership or other similar laws
affecting the enforcement of creditors' rights generally and subject, as to
enforceability, to general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law; and
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(iii) the execution, delivery and performance of the Ancillary
Agreements by each Company Party thereto will not (x) violate any
applicable Federal law or the laws of the states of their respective
incorporation or (y) conflict with any provision of the articles of
incorporation or by-laws of the applicable Company Party. Such counsel will
express no opinion, however, as to any violation of any law or regulation
which may have become applicable to any Company Party as a result of the
involvement of Acquiror or any of its subsidiaries in the transactions
contemplated by this Agreement because of Acquiror's or any of its
subsidiaries' legal or regulatory status or because of any other facts
specifically pertaining to Acquiror or any of its subsidiaries.
(d) No Material Adverse Change. Whether or not any event or change is
reflected in the Company Bring Down Certificate, since March 31, 1996, there
shall have been no material adverse change, and no event that could reasonably
be expected to result in a material adverse change, to the business, properties,
assets, results of operations, or financial condition of the Company and the
Branded Subsidiary taken as a whole; provided, however, that "material adverse
change" for this purpose shall not include (i) any adverse change resulting from
economic or market conditions generally affecting businesses engaged in the same
or substantially similar activities as the Company and the Branded Subsidiary or
(ii) any adverse change resulting directly from any action taken by Acquiror or
any subsidiary of Acquiror except an action specifically permitted or
contemplated by this Agreement; provided, further, that regardless of cause
(including as a result of any condition or action referred to in the foregoing
proviso), "material adverse change" for this purpose shall include (i) a 10% or
greater decline in the ACV grocery distribution of mainline CHEX, multi-grain
CHEX and COOKIE CRISP cereals in the aggregate for the last reported 12-week
period ending at the end of the last reported week prior to the Closing compared
to the comparable period in the prior year (reported on a consistent basis) or
(ii) a 15% or greater decline in the IRI-reported pound market share of mainline
CHEX, multi-bran CHEX and COOKIE CRISP cereals in the aggregate for the last
reported 12-week period ending at the end of the last reported week prior to the
Closing compared to the comparable period in the prior year (reported on a
consistent basis), except that if such a 15% or greater decline is due to
differences in timing of trade promotions relating to such cereals during such
12-week period compared to the prior year, such decline shall not be considered
a material adverse change unless there has been a 15% or greater decline in the
IRI-reported pound market share of mainline CHEX, multi-bran CHEX and COOKIE
CRISP cereals in the aggregate for the last reported 16-week period ending at
the end of the last reported week prior to the Closing compared to the
comparable period in the prior year (reported on a consistent basis).
(e) Ancillary Agreements. Each of the Ancillary Agreements shall have been
executed substantially in the forms attached as Exhibits hereto or to the
Reorganization Agreement or, if not included as Exhibits, in the form reasonably
agreed to by the Acquiror and the Company and shall have become effective in
accordance with its terms. The Company shall have delivered to Acquiror true,
correct and complete copies of each such agreement to which Acquiror is not a
party.
(f) Amendments to SEC Documents. Since the effective date of the Form S-4
or the Proxy Statement, as applicable, no event with respect to the Company, any
subsidiary of the Company or any security holder of the Company shall have
occurred which should have been set forth in an amendment to the Form S-4 or a
supplement to the Proxy Statement which has not been set forth in such an
amendment or supplement.
(g) Rule 145 Letters. The Company shall have delivered letters regarding
Rule 145 of the Securities Act, substantially in the form of Exhibit B hereto,
executed by each affiliate of the Company who will acquire shares of Acquiror
Common Stock in connection with the Merger.
(h) Scheduled Agreements. Each agreement set forth on a schedule hereto or
on a schedule to the Reorganization Agreement or any of the other Ancillary
Agreements, and required to be assigned or terminated by the Company pursuant to
the provisions hereof or thereof, shall have been so assigned or terminated,
except where the failure to do so could not reasonably be expected to have a
material adverse effect on the Company and the Branded Subsidiary.
(i) Certificate of Trustee. The Company shall have delivered to Acquiror a
certificate from the indenture trustee with respect to the Notes, in form and
substance reasonably satisfactory to Acquiror, to the
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effect that the Trustee has not, as of the Closing Date, received any notice of
and is not aware of any default or event of default with respect to the Notes.
(j) Dissenters. Holders of no more than 5% of the aggregate number of
outstanding shares of Company Common Stock shall have exercised dissenters'
rights with respect to the Merger or, if available, the value of the Company
Common Stock before giving effect to the Distribution.
SECTION 6.3 CONDITIONS TO OBLIGATION OF THE COMPANY. The obligation of the
Company to effect the Merger is further subject to the following conditions,
unless waived in writing by the Company:
(a) Representations and Warranties. The representations and warranties of
Acquiror and Merger Sub set forth in this Agreement that are qualified as to
materiality shall be true and correct, and the representations and warranties of
Acquiror set forth in this Agreement that are not so qualified shall be true and
correct in all material respects, in each case as of the date of this Agreement
and as of the Closing Date as though made on and as of the Closing Date, except
as otherwise contemplated by this Agreement, except to the extent that any
representation or warranty shall be as of a specific date, in which case such
representation and warranty shall be true and correct as of such date, and the
Company shall have received a certificate signed on behalf of Acquiror by the
chief executive officer and the chief financial officer of Acquiror to the
effect of this sentence. Acquiror shall have delivered to the Company a
certificate (the "ACQUIROR BRING DOWN CERTIFICATE"), dated as of the Closing
Date and reasonably satisfactory in form to the Company, that sets forth each
event that has occurred and each condition that exists that (i) had not occurred
or was not in existence as of the date of this Agreement and (ii) if it had
occurred or was in existence as of the date of this Agreement would be required
to be disclosed pursuant to Section 3.3.
(b) Performance of Obligations of Acquiror. Acquiror shall have performed
in all material respects all obligations required to be performed by it under
this Agreement at or prior to the Closing Date, and the Company shall have
received a certificate signed on behalf of Acquiror by the chief executive
officer and the chief financial officer of Acquiror to such effect.
(c) Opinion of Acquiror's Counsel. The Company shall have received an
opinion dated the Closing Date of Wachtell, Lipton, Rosen & Katz, special
counsel to Acquiror, and/or in-house Counsel of Acquiror, to the effect that:
(i) Each of Acquiror and Merger Sub is a corporation validly existing
and in good standing under the laws of its state of incorporation;
(ii) Each of Acquiror and Merger Sub have the requisite power and
authority to execute this Agreement and the Reorganization Agreement and to
consummate the transactions contemplated hereby and thereby; the execution
and delivery of this Agreement and the Reorganization Agreement and the
consummation of the transactions contemplated hereby and thereby has been
duly authorized by all requisite corporate action on the part of Acquiror
and Merger Sub; and this Agreement and the Reorganization Agreement have
been duly executed and delivered by Acquiror and Merger Sub and constitute
valid and binding obligations of Acquiror and Merger Sub enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
receivership or other similar laws affecting the enforcement of creditors'
rights generally and subject, as to enforceability, to general principles
of equity, regardless of whether such enforceability is considered in a
proceeding in equity or at law; and
(iii) the execution, delivery and performance of this Agreement and
the Reorganization Agreement by Acquiror and Merger Sub will not (x)
violate any applicable Federal law or any law of the states of their
respective incorporation or (y) conflict with any provision of the
certificate of incorporation or bylaws of Acquiror or Merger Sub. Such
counsel will express no opinion, however, as to any violation of any law or
regulation which may have become applicable to Acquiror or Merger Sub as a
result of the involvement of any Company Party and any subsidiary of such
party in the transactions contemplated by this Agreement because of such
party's legal or regulatory status or because of any other facts
specifically pertaining to any such party.
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(d) Amendments to SEC Documents. Since the effective date of the Form S-4
or the Proxy Statement, as applicable, no event with respect to Acquiror, any
subsidiary of Acquiror or any security holder of Acquiror shall have occurred
which should have been set forth in an amendment to the Form S-4 or a supplement
to the Proxy Statement which has not been set forth in such an amendment or
supplement.
(e) Ancillary Agreements. Each of the Ancillary Agreements to which
Acquiror is a party shall have been executed substantially in the forms attached
as Exhibits hereto or to the Reorganization Agreement and shall have become
effective in accordance with its terms.
(f) Dissenters. Holders of no more than 5% of the aggregate number of
outstanding shares of Company Common Stock shall have exercised dissenters'
rights, if available, with respect to the value of the Company Common Stock
before giving effect to the Distribution.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 TERMINATION. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after approval of matters presented in
connection with the Merger by the stockholders of the Company:
(a) by mutual written consent of Acquiror and the Company; or
(b) by either Acquiror or the Company:
(i) if, upon a vote at a duly held Stockholders Meeting or any
adjournment thereof, any required approval of the stockholders of the
Company shall not have been obtained;
(ii) if the Merger shall not have been consummated on or before August
31, 1997, unless the failure to consummate the Merger is the result of a
wilful and material breach of this Agreement by the party seeking to
terminate this Agreement; provided, however, that the passage of such
period shall be tolled for any part thereof (but in no event for more than
an additional three months) during which any party shall be subject to a
nonfinal order, decree, ruling or action restraining, enjoining or
otherwise prohibiting the consummation of the Merger or the calling or
holding of the Stockholders Meeting;
(iii) if any Governmental Entity shall have issued an order, decree or
ruling or taken any other action permanently enjoining, restraining or
otherwise prohibiting the Merger and such order, decree, ruling or other
action shall have become final and nonappealable; or
(iv) if prior to the Effective Time, the Internal Revenue Code is
amended so as to alter in any materially adverse respect any of the tax
consequences prescribed by the Private Letter Ruling (or tax opinions)
described in Section 6.1(d) (or (e)); or
(c) by Acquiror if (i) the Board of Directors of the Company shall have
withdrawn, or modified or changed, in a manner adverse to Acquiror, its approval
or recommendation of the Merger or the other transactions contemplated by this
Agreement and the Ancillary Agreements or shall have recommended another offer
or proposal with respect to a Third Party Acquisition, or (ii) a Third Party
Acquisition has occurred or any person shall have entered into a definitive
agreement with the Company with respect to a Third Party Acquisition; or
(d) by the Company if (i) the Company's Board of Directors shall have
failed to recommend to its shareholders the approval of the transactions
contemplated hereby, or shall have withdrawn, modified or changed such
recommendation, in a manner permitted by the penultimate sentence of Section
4.1(n), or (ii) the Company shall have entered into an agreement with respect to
a Higher Offer in a manner permitted by the penultimate sentence of Section
4.1(n).
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SECTION 7.2 EFFECT OF TERMINATION.
(a) In the event of termination of this Agreement by either the Company or
Acquiror as provided in Section 7.1, this Agreement shall forthwith become void
and have no effect, without any liability or obligation on the part of Acquiror
or the Company, other than the provisions of Section 3.2(i), Section 3.3(k),
Section 5.2(c), Section 5.6, this Section and Article VIII and except to the
extent that such termination results from the wilful and material breach by a
party of any of its representations, warranties, covenants or agreements set
forth in this Agreement, the Reorganization Agreement, or any agreement
contemplated hereby or thereby.
(b) If the transactions contemplated by this Agreement are terminated as
provided herein:
(i) Acquiror shall return all documents and other material received
from the Company or its representatives relating to the transactions
contemplated hereby, whether so obtained before or after the execution
hereof, to the Company; and
(ii) all confidential information received by Acquiror with respect to
the businesses of the Company shall be treated in accordance with the
Confidentiality Agreement, which shall remain in full force and effect
notwithstanding the termination of this Agreement.
(c) In the event that: (i) Acquiror terminates this Agreement pursuant to
Section 7.1(c), (ii) the Company terminates this Agreement pursuant to Section
7.1(d) or (iii) this Agreement shall be terminated pursuant to Section 7.1(b)(i)
and, at the time of the meeting called for the approval of the Company's
shareholders referred to in Section 7.1(b)(i), there shall have been made a
proposal relating to a Third Party Acquisition that has become public and,
within six months following such termination, the Company shall enter into a
definitive agreement with respect to the sale of the Branded Business; then the
Company shall promptly pay to Acquiror (by wire transfer to an account
designated by the Acquiror for this purpose) an amount equal to the sum of (i)
$20 million and (ii) notwithstanding the provisions of Section 5.6, the fees and
expenses actually incurred by the Acquiror in connection with the negotiation
and preparation of this Agreement and the Ancillary Agreements to which the
Acquiror is a party, the performance of the Acquiror's covenants herein and
therein, and the transactions contemplated hereby and thereby, including,
without limitation, all fees and disbursements of the Acquiror's financial
advisors, legal counsel, accountants and other advisors, up to a maximum of an
additional $2.5 million.
SECTION 7.3 AMENDMENT. This Agreement may be amended by the parties at any
time before or after any required approval of matters presented in connection
with the Merger by the stockholders of the Company; provided, however, that
after any such approval, there shall be made no amendment that by law requires
further approval by such stockholders without the further approval of such
stockholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties.
SECTION 7.4 EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties may (a) extend the time for the performance of any of the obligations or
other acts of the other party, (b) waive any inaccuracies in the representations
and warranties of the other party contained in this Agreement or in any document
delivered pursuant to this Agreement, or (c) subject to the proviso of Section
7.3, waive compliance by the other party with any of the agreements or
conditions contained in this Agreement. Any agreement on the part of a party to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of such rights.
SECTION 7.5 PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR WAIVER. A
termination of this Agreement pursuant to Section 7.1, an amendment of this
Agreement pursuant to Section 7.3 or an extension or waiver pursuant to Section
7.4 shall, in order to be effective, require in the case of Acquiror or the
Company, action by its Board of Directors or the duly authorized designee of its
Board of Directors.
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ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as and to
the extent provided in the Reorganization Agreement, none of the representations
and warranties in this Agreement or in any instrument delivered pursuant to this
Agreement shall survive the Effective Time. This Section 8.1 shall not limit any
covenant or agreement of the parties which by its terms contemplates performance
after the Effective Time.
SECTION 8.2 NOTICES. Any notice, request, instruction or other document to
be given hereunder by any party to any other party shall be in writing and shall
be deemed to have been duly given (a) on the first business day occurring on or
after the date of transmission if transmitted by facsimile (upon confirmation of
receipt by journal or report generated by the facsimile machine of the party
giving such notice), (b) on the first business day occurring on or after the
date of delivery if delivered personally, or (c) on the first business day
following the date of dispatch if dispatched by Federal Express or other
next-day courier service. All notices hereunder shall be given as set forth
below, or pursuant to such other instructions as may be designated in writing by
the party to receive such notice:
(a) if to Acquiror or Merger Sub, to
General Mills, Inc.
Number One General Mills Boulevard
Minneapolis, Minnesota 55426
Attention: Siri S. Marshall
with a copy (which shall not constitute notice) to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd St.
New York, New York 10019
Attention: Steven A. Rosenblum
(b) if to the Company, to
Ralcorp Holdings, Inc.
800 Market Street, Suite 2900
St. Louis, Missouri 63101
Attention: Robert W. Lockwood
with a copy (which shall not constitute notice) to:
Bryan Cave LLP
One Metropolitan Square
211 North Broadway, Suite 3600
St. Louis, Missouri 63102
Attention: William F. Seabaugh
SECTION 8.3 CERTAIN DEFINITIONS. For purposes of this Agreement:
(a) an "AFFILIATE" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person;
(b) "PERSON" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity; and
(c) a "SUBSIDIARY" of any person means another person, an amount of the
voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which) is owned directly or indirectly by such first
person.
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SECTION 8.4 INTERPRETATION. When a reference is made in this Agreement to a
Section, Exhibit or Schedule, such reference shall be to a Section of, or an
Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
SECTION 8.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
SECTION 8.6 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement,
the Ancillary Agreements and the agreements referred to herein and therein or
required to be delivered in connection with the transactions contemplated by the
Ancillary Agreements constitute the entire agreement, and supersede all prior
agreements (other than the Confidentiality Agreement) and understandings, both
written and oral, among the parties with respect to the subject matter of this
Agreement, and except for the provisions of Article II, this Agreement is not
intended to confer upon any person other than the parties hereto any rights or
remedies.
SECTION 8.7 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Missouri, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 8.8 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and permitted assigns.
SECTION 8.9 ENFORCEMENT. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement, this being in addition to any other
remedy to which they are entitled at law or in equity. In addition, each of the
parties hereto (a) consents to submit itself to the personal jurisdiction of any
Federal court located in the State of Missouri or the State of Minnesota in the
event any dispute arises out of this Agreement or any of the transactions
contemplated by this Agreement, (b) agrees that it will not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from any
such court, and (c) agrees that it will not bring any action relating to this
Agreement or any of the transactions contemplated by this Agreement in any court
other than a Federal court (or if such court does not have subject matter
jurisdiction, in a state court) sitting in the State of Missouri or the State of
Minnesota. THE PARTIES HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO
ANY DISPUTE ARISING HEREUNDER.
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IN WITNESS WHEREOF, Acquiror, Merger Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
GENERAL MILLS, INC.
By: /s/ T.J. BROWN
--------------------------------------
Name: T.J. Brown
Title: Vice President
GENERAL MILLS MISSOURI, INC.
By: /s/ T.J. BROWN
--------------------------------------
Name: T.J. Brown
Title: Vice President
RALCORP HOLDINGS, INC.
By: /s/ RICHARD A. PEARCE
--------------------------------------
Name: Richard A. Pearce
Title: Chief Executive Officer and
President
A-34
<PAGE> 40
AMENDMENT TO
AGREEMENT AND PLAN OF MERGER
BY AND AMONG RALCORP HOLDINGS, INC.,
GENERAL MILLS, INC. AND GENERAL MILLS MISSOURI, INC.
This Amendment to Agreement and Plan of Merger is dated as of October 25,
1996 by and among Ralcorp Holdings, Inc., a Missouri corporation (the
"Company"), General Mills, Inc., a Delaware corporation (the "Acquiror"), and
General Mills Missouri, Inc., a Missouri corporation and a wholly-owned
subsidiary of Acquiror ("Merger Sub").
WHEREAS, the parties hereto are parties to an Agreement and Plan of Merger
dated as of August 13, 1996 (the "Merger Agreement");
WHEREAS, pursuant and subject to the terms and conditions of the Merger
Agreement and the Reorganization Agreement attached thereto as Exhibit A (the
"Reorganization Agreement"), which will be entered into prior to the effective
time of the merger contemplated thereby, the parties hereto have agreed to
consummate the following transactions: (a) certain of the assets and liabilities
of the branded cereals and branded snacks business (the "Branded Business")
currently operated by the Company's wholly-owned subsidiary, Ralston Foods, Inc.
("Foods"), will be contributed by Foods to a newly-formed subsidiary (the
"Branded Subsidiary"); (b) all the stock of the Branded Subsidiary will be
distributed by Foods to the Company; (c) all of the shares of capital stock of a
Missouri corporation to be formed as a wholly-owned subsidiary of the Company
and the parent of Foods ("New Holdings") will be distributed on a pro rata basis
to the Company's stockholders; and (d) Merger Sub will be merged into the
Company, with the Company as the surviving corporation; and
WHEREAS, the parties desire to amend the Merger Agreement and the exhibits
thereto (the "Transaction Documents") to reflect the following revised version
of the transactions recited above: (a) the Company will form a wholly-owned
Missouri subsidiary ("New Ralcorp"), into which Foods will be merged (the
"Internal Merger"), with New Ralcorp as the surviving corporation; (b) the
Branded Business will be contributed by New Ralcorp (as successor to Foods) to
the Branded Subsidiary (the "Branded Contribution"); (c) all the stock of the
Branded Subsidiary will be distributed by New Ralcorp to the Company; (d) all of
the shares of the capital stock of New Ralcorp will be distributed on a pro rata
basis to the Company's stockholders; and (d) Merger Sub will be merged into the
Company, with the Company as the surviving corporation; and
WHEREAS, these revisions are structural only and are not intended to affect
the substantive rights or obligations of the parties to the Merger Agreement and
the related agreements.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in the Merger Agreement and this Amendment,
the parties hereto agree as follows:
1. Section 2.1 of the Reorganization Agreement is hereby amended in its
entirety as follows:
2.1 INTERNAL MERGER; SPINOFF TO RALCORP. Prior to the transactions
contemplated by Article III, Ralcorp shall merge Foods into New Ralcorp
with New Ralcorp surviving the Internal Merger. After the Internal Merger
and the transactions contemplated by Article III but prior to the
Distribution Date, New Ralcorp shall distribute all of the issued and
outstanding shares of capital stock of the Branded Subsidiary to Ralcorp.
2. The parties acknowledge and agree that the Internal Merger will occur
prior to the Branded Contribution. The parties further acknowledge and agree
that New Ralcorp will take the place of New Holdings and, after the Internal
Merger, Foods in the transactions contemplated by the Merger Agreement and the
Ancillary Agreements (as defined in the Reorganization Agreement). Accordingly,
the parties hereby agree that each of the Merger Agreement and the Ancillary
Agreements is hereby amended to (a) substitute New Ralcorp for New Holdings in
each instance, and (b) substitute New Ralcorp for Foods in each instance to the
extent the context refers to Foods after the Internal Merger.
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<PAGE> 41
3. The parties agree that, prior to their execution, the Ancillary
Agreements will be revised to reflect the foregoing amendments and will be
executed and delivered, as so revised, at the Closing.
4. Except as expressly amended hereby, the Merger Agreement shall remain in
full force and effect.
IN WITNESS WHEREOF, Acquiror, Merger Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
GENERAL MILLS, INC.
By: /s/ T. J. BROWN
------------------------------------
Name: T. J. Brown
Title: Vice President
GENERAL MILLS MISSOURI, INC.
By: /s/ T. J. BROWN
------------------------------------
Name: T. J. Brown
Title: Vice President
RALCORP HOLDINGS, INC.
By: /s/ J.R. MICHELETTO
------------------------------------
Name: J.R. Micheletto
Title: Chief Executive Officer and
President
A-36
<PAGE> 1
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF NEW RALCORP HOLDINGS, INC.
* * *
The undersigned natural person of the age of eighteen years or more, for
the purpose of forming a corporation under The General and Business Corporation
Law of Missouri ("GBCL"), adopts the following Articles of Incorporation:
ARTICLE ONE - NAME
The name of the corporation is New Ralcorp Holdings, Inc. (herein referred
to as the "Corporation").
ARTICLE TWO - OFFICE
The initial registered office of the Corporation in the State of Missouri
is located at 906 Olive Street, St. Louis, Missouri 63101, and the name of its
initial registered agent at such address is CT Corporation System.
ARTICLE THREE - AUTHORIZED SHARES
A. CLASSES AND NUMBER OF SHARES
The aggregate number of shares of capital stock which the Corporation is
authorized to issue is 310,000,000 shares, consisting of:
(i) 300,000,000 shares of Common Stock, par value $.01 per share
("Common Stock"); and
(ii) 10,000,000 shares of Preferred Stock, par value $.01 per share
("Preferred Stock").
B. NO PREEMPTIVE RIGHTS
All preemptive rights are hereby denied, so that none of the Common Stock,
the Preferred Stock or any other security or securities of the Corporation
shall carry with it and no holder or owner of any Common Stock, Preferred Stock
or any other security or securities of the Corporation shall have any
preferential or preemptive right to acquire any additional shares of Common
Stock, Preferred Stock or any other security or securities of the Corporation.
C. NO CUMULATIVE VOTING
All cumulative voting rights are hereby denied, so that none of the Common
Stock, the Preferred Stock or any other security or securities of the
Corporation shall carry with it and no
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holder or owner of any Common Stock, Preferred Stock or any other security of
the Corporation shall have any right to vote cumulatively in the election of
directors or for any other purpose.
D. TERMS OF PREFERRED STOCK
The terms of the shares of each series of Preferred Stock shall be as
stated and expressed in these Articles of Incorporation or any amendment
thereto, or in the resolution or resolutions providing for the issuance of such
series of Preferred Stock adopted by the Board of Directors. Subject to the
requirements of the GBCL and the provisions of these Articles of Incorporation,
the Board of Directors is expressly authorized to cause any number of
authorized and undesignated shares of Preferred Stock to be issued from time to
time in one or more series of Preferred Stock with such voting powers, full or
limited, or no voting powers, and such designations, preferences and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, if any, as the Board of Directors may fix
by resolution or resolutions, prior to the issuance of any shares of such
series of Preferred Stock, each of which series may differ from any and all
other series, including, without limiting the generality of the foregoing, the
following:
(i) The number of shares constituting such series of Preferred Stock
and the designation thereof;
(ii) The dividend rate, if any, on the shares of such series of
Preferred Stock, whether and the extent to which any such dividends
shall be cumulative or non-cumulative, the relative rights of priority,
if any, of payments of any dividends, and the time at which, and the
terms and conditions on which, any dividends shall be paid;
(iii) The right, if any, of the holders of such series of Preferred
Stock to vote and the manner of voting, except as may otherwise be
provided by the GBCL and the provisions of these Articles of
Incorporation;
(iv) Whether or not the shares of such series shall be made convertible
into or exchangeable for other securities of the Corporation, including
shares of the Common Stock or shares of any other series of the
Preferred Stock, now or hereafter authorized, the price or prices or
the rate or rates at which conversion or exchange may be made, any
provision for future adjustment in the conversion or exchange rate, and
the terms and conditions upon which the conversion or exchange right
shall be exercised;
(v) The redemption or purchase price or prices of the shares of the
series of Preferred Stock, if any, and the times at which, and the
terms and conditions under which, the shares of such series of
Preferred Stock may be redeemed or purchased;
(vi) The terms of the sinking fund, if any, to be provided for such
series of Preferred Stock, and the terms and amount of any such sinking
fund;
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(vii) The rights of the holders of shares of such series of Preferred
Stock in the event of a voluntary or involuntary liquidation,
dissolution or winding up of the Corporation and the relative rights of
priority, if any, of such holders with respect thereto;
(viii) From time to time to include additional authorized and undesignated
shares of Preferred Stock in such series; and
(ix) Any other relative powers, preferences and rights, and any
qualifications, limitations or restrictions thereof, of such series of
Preferred Stock.
ARTICLE FOUR - INCORPORATOR
The name and place of residence of the incorporator of the Corporation is:
R. W. Lockwood
18 Oleander Drive
St. Louis, MO 63128
ARTICLE FIVE - DIRECTORS
A. Number and Classification
The number of directors to constitute the initial Board of Directors of
the Corporation shall be three. Thereafter, the number of directors shall be
fixed by, or in the manner provided in, the Bylaws of the Corporation, but
shall not be less than three. Any changes in the number of directors shall be
reported to the Secretary of State of Missouri within thirty calendar days of
such change, if required by the GBCL. The directors shall be divided into three
classes, as nearly equal in number as reasonably possible, except that one
class may be one greater or one less in number than the other two classes. At
each annual meeting of shareholders, successors to the class of directors whose
term expires at that annual meeting shall be elected for a three (3) year term
(and until their respective successors shall have been elected and qualified in
each class or until their earlier death, resignation or removal), so that the
term of one class of directors shall expire in each year. Notwithstanding the
foregoing, whenever the holders of any one or more classes or series of stock
of the Corporation, other than shares of Common Stock, shall have the right,
voting separately by class or series, to elect directors, the election, term of
office, filling of vacancies and other features of such directorship shall be
governed by the terms of these Articles of Incorporation or any Certificate of
Designation thereunder applicable thereto; and such directors so elected shall
not be divided into classes pursuant to this Article unless expressly provided
by such terms. As used in these Articles of Incorporation, the term "entire
Board of Directors" means the total number of directors fixed by, or in
accordance with, these Articles of Incorporation and the Bylaws of the
Corporation.
B. Removal of Directors
At a meeting called expressly for that purpose, one or more members of the
Board of Directors may be removed only for cause and only by the affirmative
vote of at least (i) two-
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thirds of all members of the Corporation's Board of Directors, and (ii)
two-thirds of all of the then outstanding shares of capital stock of the
Corporation then entitled to vote generally in the election of directors,
voting together as a single class (such vote being in addition to any required
class or other vote). Whenever the holders of the shares of any class are
entitled to elect one or more directors, the provisions of this Article shall
apply in respect of the removal of a director or directors so elected, to the
vote of the holders of the outstanding shares of that class and not to the vote
of the holders of the outstanding shares as a whole. In addition, any director
may be removed from office by the affirmative vote of a majority of the entire
Board of Directors at any time prior to the expiration of the director's term
of office, as provided by law, in the event that the director fails, at the
time of removal, to meet any qualifications stated in the Bylaws of the
Corporation for election as a director or shall be in breach of any agreement
between the director and the Corporation relating to the director's service as
a director or employee of the Corporation.
C. Vacancies
Subject to the rights, if any, of the holders of any class of capital
stock of the Corporation (other than the Common Stock) then outstanding, any
vacancies in the Board of Directors which occur for any reason prior to the
expiration of the term of office of the class in which the vacancy occurs,
including vacancies which occur by reason of an increase in the number of
directors, may be filled only by the Board of Directors, acting by the
affirmative vote of a majority of the remaining directors then in office
(although less than a quorum), until the next election of directors by the
shareholders of the Corporation.
D. Amendment
This Article may be amended, altered, changed or repealed only upon the
affirmative vote of not less than two-thirds of all of the outstanding shares
of capital stock of the Corporation then entitled to vote generally in the
election of directors voting together as a single class; provided, however,
that whenever the holders of shares of any class are entitled to elect one or
more directors, such amendment, alternation, change or repeal shall also
require the affirmative vote of not less than two-thirds of the outstanding
shares of each such class entitled to vote at such meeting.
ARTICLE SIX - TERM OF EXISTENCE
The Corporation shall have a perpetual existence.
ARTICLE SEVEN - PURPOSES
The purposes of the Corporation are to engage in any lawful act or
activity for which a corporation now or hereafter may be organized under the
GBCL.
ARTICLE EIGHT - BYLAWS
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<PAGE> 5
The Bylaws of the Corporation may be amended, altered, changed or
repealed, and a provision or provisions inconsistent with the provisions of the
Bylaws as they may exist from time to time may be adopted, only by two-thirds
of all of the members of the Board of Directors.
ARTICLE NINE - CERTAIN BUSINESS COMBINATIONS
A. Approval
The approval of any Business Combination shall, in addition to any
affirmative vote otherwise required by the GBCL, require the recommendation of
the Board of Directors and the affirmative vote of the holders of not less than
85% of all of the outstanding shares of capital stock of the Company then
entitled to vote at a meeting of shareholders called for such purpose of which
an Interested Shareholder is not the Beneficial Owner; provided, however, that,
notwithstanding the foregoing, any such Business Combination may be approved on
any affirmative vote required by the GBCL if:
(a) There are one or more Continuing Directors and the Business
Combination shall have been approved by a majority of them; or
(b) (1) The consideration to be received by shareholders of each class
of stock of the Corporation shall be in cash or in the same form as the
Interested Shareholder and its affiliates have previously paid for a
majority of the shares of such class of stock owned by the Interested
Shareholder; and (2) the cash, or Market Value of the property,
securities or other shareholders of each class of stock of the
Corporation in the Business Combination is not less than the higher of:
(i) the highest per share price paid by the Interested
Shareholder for the acquisition of any shares of such class in the
two years immediately preceding the announcement date of the
Business Combination, with appropriate adjustments for stock splits,
stock dividends and like distributions, or
(ii) the Market Value of such shares, on the date the Business
Combination is approved by the Board of Directors.
B. Definitions
(a) For purposes of this Article any terms not otherwise defined herein
shall have the meanings set forth in Section 351.459 of the GBCL as in
effect on October 1, 1996.
(b) The term "Continuing Director" shall mean any member of the Board
of Directors of the Corporation who is not an Affiliate or Associate of
the Interested Shareholder and who was a member of the Board of
Directors prior to the time that the Interested Shareholder became an
Interested Shareholder, and any successor of a Continuing Director if
the successor is not an Affiliate or Associate of the Interested
Shareholder and is recommended or elected to succeed a Continuing
Director by a majority of Continuing Directors.
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C. Amendment
This Article may be amended, altered, changed or repealed only upon the
affirmative vote of not less than 85% of all of the outstanding shares of
capital stock of the Corporation entitled to vote at a meeting called for such
purpose of which an Interested Shareholder is not the Beneficial Owner;
provided, however, that this Article may be amended, altered, changed or
repealed upon any affirmative vote required by the GBCL, if such amendment,
alternation, change or repeal has been approved by a majority of the Board of
Directors, if there is not an Interested Shareholder, or if there is an
Interested Shareholder, by a majority of the Continuing Directors.
ARTICLE TEN - INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS
A. Actions Involving Directors and Officers
The Corporation shall indemnify each person (other than a party plaintiff
suing on his or her behalf or in the right of the Corporation) who at any time
is serving or has served as a director or officer of the Corporation against
any claim, liability or expense incurred as a result of such service, or as a
result of any other service on behalf of the Corporation, or service at the
request of the Corporation as a director, officer, employee, member, or agent
of another corporation, partnership, joint venture, trust, trade or industry
association, or other enterprise (whether incorporated or unincorporated,
for-profit or not-for-profit), to the maximum extent permitted by law. Without
limiting the generality of the foregoing, the Corporation shall indemnify any
such person who was or is a party (other than a party plaintiff suing on his or
her behalf or in the right of the Corporation), or is threatened to be made a
party, to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (including, but not
limited to, an action by or in the right of the Corporation) by reason of such
service, against expenses (including, without limitation, attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or her in connection with such action, suit or proceeding.
B. Actions Involving Employees or Agents
1. Permissive Indemnification. The Corporation may, if it deems
appropriate and as may be permitted by this Article, indemnify any person
(other than a party plaintiff suing on his or her own behalf or in the right of
the Corporation) who at any time is serving or has served as an employee or
agent of the Corporation against any claim, liability or expense incurred as a
result of such service, or as a result of any other service on behalf of the
Corporation, or service at the request of the Corporation as a director,
officer, employee, member, or agent of another corporation, partnership, joint
venture, trust, trade or industry association, or other enterprise (whether
incorporated or unincorporated, for-profit or not-for-profit), to the maximum
extent permitted by law or to such lesser extent as the Corporation, in its
discretion, may deem appropriate. Without limiting the generality of the
foregoing, the Corporation may indemnify any such person who was or is a party
(other than a party plaintiff suing on his or her own behalf or in the right of
the Corporation), or is threatened to be made a party, to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative
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(including, but not limited to, an action by or in the right of the
Corporation) by reason of such service, against expenses (including, without
limitation, attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection with such action,
suit or proceeding.
2. Mandatory Indemnification. To the extent that an employee or agent of
the Corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in Section B.1 of this Article, or
in defense of any claim, issue or matter therein, he or she shall be
indemnified against expenses (including, without limitation, attorneys' fees)
actually and reasonably incurred by him or her in connection with the action,
suit or proceeding.
C. Determination of Right to Indemnification in Certain Circumstances
Any indemnification required under Section A of this Article or authorized
by the Corporation in a specific case pursuant to Section B of this Article
(unless ordered by a court) shall be made by the Corporation unless a
determination is made reasonably and promptly that indemnification of the
director, officer, employee or agent is not proper under the circumstances
because he or she has not met the applicable standard of conduct set forth in
or established pursuant to this Article. Such determination shall be made (1)
by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or (2) if
such a quorum is not obtainable, or even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (3) by majority vote of the shareholders; provided that no such
determination shall preclude an action brought in an appropriate court to
challenge such determination.
D. Standard of Conduct
Except as may otherwise be permitted by law, no person shall be
indemnified pursuant to this Article (including without limitation pursuant to
any agreement entered into pursuant to Section G of this Article) from or on
account of such person's conduct which is finally adjudged to have been
knowingly fraudulent, deliberately dishonest or willful misconduct. The
Corporation may (but need not) adopt a more restrictive standard of conduct
with respect to the indemnification of any employee or agent of the
Corporation.
E. Advance Payment of Expenses
Expenses incurred by a person who is or was a director or officer of the
Corporation in defending a civil or criminal action, suit, proceeding or claim
shall be paid by the Corporation in advance of the final disposition of such
action, suit, proceeding or claim, and expenses incurred by a person who is or
was an employee or agent of the Corporation in defending a civil or criminal
action, suit, proceeding or claim may be paid by the Corporation in advance of
the final disposition of such action, suit, proceeding or claim as authorized
by or at the direction of the Board of Directors, in either case upon receipt
of an undertaking by or on behalf of the director, officer, employee or agent
to repay such amount if it shall ultimately be determined that such
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person is not entitled to be indemnified by the Corporation as authorized in or
pursuant to this Article.
F. Rights Not Exclusive
The indemnification and other rights provided by this Article shall not be
deemed exclusive of any other rights to which those seeking indemnification may
be entitled under any agreement, vote of shareholders or disinterested
directors or otherwise, and the Corporation is hereby specifically authorized
to provide such indemnification and other rights by any agreement, vote of
shareholders or disinterested directors or otherwise.
G. Indemnification Agreements Authorized
Without limiting the other provisions of this Article, the Corporation is
authorized from time to time, without further action by the shareholders of the
Corporation, to enter into agreements with any director, officer, employee or
agent of the Corporation providing such rights of indemnification as the
Corporation may deem appropriate, up to the maximum extent permitted by law.
Any agreement entered into by the Corporation with a director may be authorized
by the other directors, and such authorization shall not be invalid on the
basis that similar agreements may have been or may thereafter be entered into
with other directors.
H. Insurance
The Corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the Corporation,
or who is or was otherwise serving on behalf of the Corporation in any capacity
or at the request of the Corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust, trade or industry
association or other enterprise (whether incorporated or unincorporated,
for-profit or not-for-profit) against any claim, liability or expense asserted
against such person and incurred by such person in any such capacity, or
arising out of such person's status as such, whether or not the Corporation
would have the power to indemnify such person against such liability under the
provisions of this Article.
I. Certain Definitions
For the purpose of this Article:
(i) Any director, officer, employee or agent of the Corporation who
shall serve as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise of
which the Corporation, directly or indirectly, is or was the owner of
20% or more of the outstanding voting stock (or comparable interests),
shall be deemed to be so serving at the request of the Corporation,
unless the Board of Directors of the Corporation shall determine
otherwise. In all other instances when any person shall serve as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust, trade or industry association or
other enterprise of which the Corporation is or was a stockholder or
creditor, or in which it is or was
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otherwise interested, if it is not otherwise established that such
person is or was serving as a director, officer, employee or agent at
the request of the Corporation, the Board of Directors of the
Corporation may determine whether such service is or was at the request
of the Corporation, and it shall not be necessary to show any actual or
prior request for such service.
(ii) References to a corporation include all constituent corporations
absorbed in a consolidation or merger as well as the resulting or
surviving corporation so that any person who is or was a director,
officer, employee or agent of a constituent corporation or is or was
serving at the request of a constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust, trade or industry association or other enterprise shall
stand in the same position under the provisions of this Article with
respect to the resulting or surviving corporation as such person would
if such person had served the resulting or surviving corporation in the
same capacity.
(iii) The term "other enterprise" shall include, without limitation,
employee benefit plans and voting or taking action with respect to
stock or other assets therein; the term "serving at the request of the
Corporation" shall include, without limitation, any service as a
director, officer, employee or agent of a corporation which imposes
duties on, or involves services by, a director, officer, employee or
agent of the Corporation with respect to any employee benefit plan, its
participants, or beneficiaries; and unless a person's conduct in
connection with an employee benefit plan is finally adjudicated to have
been knowingly fraudulent, deliberately dishonest or willful
misconduct, such person shall be deemed to have satisfied any standard
of care required by or pursuant to this Article in connection with such
plan; the term "fines" shall include, without limitation, any excise
taxes assessed on a person with respect to an employee benefit plan and
shall also include any damages (including treble damages) and any other
civil penalties.
J. Survival
The indemnification and other rights provided pursuant to this Article
shall apply both to action by any director, officer, employee or agent of the
Corporation in an official capacity and to action in another capacity while
holding such office or position, and shall continue as to a person who has
ceased to be a director, officer, employee or agent of the Corporation and
shall inure to the benefit of the heirs, executors and administrators of such a
person. Notwithstanding any other provision in these Articles of Incorporation,
any indemnification rights arising under or granted pursuant to this Article
shall survive amendment or repeal of this Article with respect to any acts or
omissions occurring prior to the effective time of such amendment or repeal and
persons to whom such indemnification rights are given shall be entitled to rely
upon such indemnification rights with respect to such acts or omissions as a
binding contract with the Corporation.
K. Liability of the Directors
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It is the intention of the Corporation to limit the liability of the
directors of the Corporation, in their capacity as such, whether to the
Corporation, its shareholders or otherwise, to the fullest extent permitted by
law. Consequently, should the GBCL or any other applicable law be amended or
adopted hereafter so as to permit the elimination or limitation of such
liability, the liability of the directors of the Corporation shall be so
eliminated or limited without the need for amendment of these Articles of
Incorporation or further action on the part of the shareholders of the
Corporation.
L. Amendment
This Article may be amended, altered, changed or repealed only upon the
affirmative vote of not less than 85% of all of the outstanding shares of
capital stock of the Corporation then entitled to vote generally in the
election of directors voting together as a single class.
ARTICLE ELEVEN - AMENDMENT OF ARTICLES OF INCORPORATION
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in these Articles of Incorporation in the manner prescribed
herein for amendment of such provision and if not so prescribed then in the
manner now or hereafter prescribed by law and all rights and powers conferred
herein on shareholders, directors and officers of the Corporation are subject
to this reserved power.
10
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
NEW RALCORP HOLDINGS, INC.
(AS ADOPTED DECEMBER 18, 1996)
* * *
ARTICLE I - SHAREHOLDERS
SECTION 1. ANNUAL MEETING: The annual meeting of shareholders shall be
held at the principal office of the Company, or at such other place either
within or without the State of Missouri as the Directors may from time to time
determine, at 10:00 A.M. on the last Thursday in January in each year, or such
other time as may be determined by the Chairman of the Board, or if said day be
a legal holiday then on the next succeeding business day, commencing with
January 29, 1998, to elect Directors and transact such other business as may
properly come before the meeting. At any annual meeting of shareholders only
such business shall be conducted, and only such proposals shall be acted upon,
as shall have been properly brought before the meeting by the Board of
Directors or by a shareholder of record entitled to vote at such meeting.
SECTION 2. SPECIAL MEETINGS: Special meetings of the shareholders or of
the holders of any special class of stock of the Company, unless otherwise
prescribed by statute or by the Restated Articles of Incorporation, may be
called only by the affirmative vote of a majority of the entire Board of
Directors or by the Chairman of the Board, or the President by request for such
a meeting in writing. Such request shall be delivered to the Secretary of the
Company and shall state the purpose or purposes of the proposed meeting. Upon
such direction or request, subject to any requirements or limitations imposed
by the Company's Restated Articles of Incorporation, by these Bylaws, or by
law, it shall be the duty of the Secretary to call a special meeting of the
shareholders to be held at such time as is specified in the request. Only such
business shall be conducted, and only such proposals shall be acted upon, as is
specified in the call of any special meeting of shareholders. As used in these
Bylaws, the term "entire Board of Directors" means the total number of
Directors fixed by, or in accordance with, these Bylaws.
SECTION 3. NOTICE: Written or printed notice of each meeting of
shareholders, stating the place, day and hour of the meeting and, in case of a
special meeting, the purpose or purposes for which the meeting is called, shall
be delivered or given not less than 10 nor more than 70 days before the date of
the meeting, either personally or by mail, by or at the direction of the
Secretary to each shareholder of record entitled to vote at such meeting.
Attendance of a shareholder at any meeting shall constitute a waiver of notice
of such meeting except where such shareholder attends the meeting for the sole
and express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Any notice of a shareholders'
meeting sent by mail shall be deemed to be delivered when deposited in the
United States mail postage thereon prepaid, addressed to the shareholder at
such shareholder's address as it appears on the records of the Company.
SECTION 4. ADVANCE NOTICE OF NOMINATIONS AND SHAREHOLDER PROPOSALS:
All nominations of individuals for election to the Board of Directors and
proposals of business to be considered at any meeting of the shareholders shall
be made as set forth in this Section 4 of Article I.
(a) Annual Meeting of Shareholders. (1) Nominations of individuals for
election to the Board of Directors and the proposal of business to be
considered by the shareholders may be made at an annual meeting of shareholders
(i) pursuant to the Company's notice of meeting, (ii) by or at the direction of
the Board or (iii) by any shareholder of
<PAGE> 2
the Company who was a shareholder of record at the time of giving of notice
provided for in this Section 4(a) of Article I, who is entitled to vote at the
meeting and who complied with the notice procedures set forth in this Section
4(a) of Article I.
(2) For nominations or other business to be properly brought before an
annual meeting of shareholders by a shareholder pursuant to clause (iii) of
paragraph (a)(1) of this Section 4 of Article I, the shareholder must have
given timely notice thereof in writing to the Secretary of the Company. To be
timely, a shareholder's notice shall be delivered to the Secretary of the
Company at the principal executive offices of the Company not less than 60 days
nor more than 90 days prior to the first anniversary of the preceding year's
annual meeting or not less than 60 days nor more than 90 days prior to January
29, 1998, in the case of the first annual meeting; provided, however, that in
the event that the date of the annual meeting is advanced by more than 30 days
or delayed by more than 60 days from such date, notice by the shareholder to be
timely must be so delivered not earlier than the 90th day prior to such annual
meeting and not later than the close of business on the later of the 60th day
prior to such annual meeting or the tenth day following the day on which public
announcement of the date of such meeting is first made. Such shareholder's
notice shall set forth (i) as to each person whom the shareholder proposes to
nominate for election or reelection as a director (a) the name, age, business
and residential addresses, and principal occupation or employment of each
proposed nominee, (b) the class and number of shares of capital stock of the
Company, if any, that are beneficially owned by such nominee on the date of
such notice, (c) a description of all arrangements or understanding between the
shareholder and each nominee, (d) all other information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
(e) the written consent of each proposed nominee to being named as a nominee in
the Company's proxy statement and to serve as a director of the Company if so
elected; (ii) as to any other business that the shareholder proposes to bring
before the meeting, a brief description of the business desired to be brought
before the meeting, the reasons for conducting such business at the meeting and
any material interest in such business of such shareholder; and (iii) as to the
shareholder giving the notice and the beneficial owner, if any, on whose behalf
the nomination or proposal is made, (x) the name and address of such
shareholder, as they appear on the Company's books, (y) the class and number of
shares of stock of the Company which are owned beneficially and of record by
such shareholder, and (z) a representation that the shareholder intends to
appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice or to propose such other business. The Company may
require any proposed nominee to furnish any information, in addition to that
furnished pursuant to clause (i) above, the Company may reasonably require to
determine the eligibility of the proposed nominee to serve as a director of the
Company.
(3) Notwithstanding anything in the second sentence of paragraph
(a)(2) of this Section 4 of Article I to the contrary, in the event that the
number of directors to be elected to the Board is increased and a public
announcement naming all of the nominees for director or specifying the number
of directors to be elected is not made by the Company at least 70 days prior to
the first anniversary of the preceding year's annual meeting, a shareholder's
notice required by this Section 4(a) of Article I shall also be considered
timely, but only with respect to nominees for any new positions created by such
increase, if it shall be delivered to the Secretary of the Company at the
principal executive offices of the Company not later than the close of business
on the tenth day following the day on which such public announcement is first
made by the Company.
(b) Special Meetings of Shareholders. Only such business shall be
conducted at a special meeting of shareholders as shall have been brought
before the meeting pursuant to the Company's notice of meeting. Nominations of
persons for election to the Board of Directors may be made at a special meeting
of shareholders at which directors are to be elected (i) pursuant to the
Company's notice of meeting, (ii) by or at the discretion of the Board of
Directors, or (iii) provided that the Board of Directors has determined that
directors shall be elected at such special meeting, by any shareholder of the
Company who is a shareholder of record at the time of giving of notice provided
for in this Section 4 of Article I, who is entitled to vote at the meeting and
who complied with the notice procedures set forth in this Section 4(b) of
Article I. In the event the Company calls a special meeting of shareholders for
the purpose of electing one or more directors to the Board of Directors, any
such shareholder may nominate a person or persons (as the case may be) for
election as a director at such meeting, if the shareholder's notice required by
paragraph (a)(2) of this Section 4 of Article I shall be delivered to the
Secretary of the Company at the principal executive offices of the Company not
earlier than the 90th day prior to such special meeting and not later than the
close of business on the later of the 60th day prior to such special meeting or
the tenth day following the day on which public announcement
<PAGE> 3
is first made of the date of the special meeting and of the nominees proposed
by the Board to be elected at such meeting. No other proposal by a shareholder
may be considered at a special meeting of the shareholders.
(c) General. (1) Only such persons who are nominated in accordance with
the procedures set forth in this Section 4 of Article I shall be eligible to
serve as directors and only such business shall be conducted at a meeting of
shareholders as shall have been brought before the meeting in accordance with
the procedures set forth in this Section 4 of Article I. The Board of Directors
may reject any nomination or shareholder proposal submitted for consideration
at the annual meeting which is not made in accordance with the terms of this
Section 4 of Article I or which is not a proper subject for shareholder action
in accordance with provisions of applicable law. Alternatively, if the Board of
Directors fails to consider the validity of any nomination or shareholder
proposal, the presiding officer of the meeting shall have the power and duty to
determine whether a nomination or any business proposed to be brought before
the meeting was made in accordance with the procedures set forth in this
Section 4 of Article I, and if any proposed nomination or business is not in
compliance with this Section 4 of Article I, to declare that such defective
nomination or proposal be disregarded. This provision shall not prevent the
consideration and approval or disapproval at the annual meeting of reports of
officers, directors and committees of the Board of Directors, but, in
connection with such reports, no new business shall be acted upon at the
meeting unless stated, filed and received as herein provided.
(2) For purposes of this Section 4 of Article I, "public announcement"
shall mean disclosure in a press release reported by the Dow Jones News
Service, Associated Press or comparable news service or in a document publicly
filed by the Company with the Securities and Exchange Commission pursuant to
Sections 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Section 4 of Article
I, a shareholder shall also comply with all applicable requirements of state
law and of the Exchange Act and the rules and regulations thereunder with
respect to the matters set forth in this Section 4 of Article I. Nothing in
this Section 4 of Article I shall be deemed to affect any rights of
shareholders to request inclusion of proposals in the Company's proxy statement
pursuant to Rule 14a-8 under the Exchange Act.
SECTION 5. QUORUM: At any meeting of shareholders, a majority of the
outstanding shares entitled to vote thereat, and present in person or
represented by proxy, shall constitute a quorum for all purposes; provided,
that in no event shall a quorum consist of less than a majority of the
outstanding shares entitled to vote, but less than such quorum shall have the
right successively to adjourn the meeting to a specified date not more than 90
days after such adjournment, and no notice need be given of such adjournment to
shareholders not present at such meeting.
SECTION 6. VOTING. On all matters to be voted on by holders of voting
stock of the Company, each outstanding share of voting stock of the Company
shall have one vote. If a quorum is present, the affirmative vote of a majority
of the shares represented at the meeting shall be the act of the shareholders
unless the vote of a greater number of shares is required by the Company's
Restated Articles of Incorporation, by these Bylaws or by law. No person shall
be admitted to vote on any shares belonging or hypothecated to the Company. A
shareholder may vote either in person or by proxy, executed in writing by the
shareholder or by his duly authorized attorney-in-fact.
SECTION 7. ACTION BY CONSENT. Unless otherwise prescribed by the Company's
Restated Articles of Incorporation, any action required or permitted to be
taken by the shareholders of the Company may, if otherwise allowed by law, be
taken without a meeting of shareholders only if consents in writing, setting
forth the action so taken, are signed by all of the shareholders entitled to
vote with respect to the subject matter thereof.
SECTION 8. ORGANIZATION: Each meeting of shareholders shall be convened by
the President, Secretary or other officer or person calling the meeting by
notice given in accordance with these Bylaws. The Chairman of the Board, or any
person appointed by the Chairman of the Board prior to any meeting of
shareholders,
<PAGE> 4
shall act as Chairman of each meeting of shareholders. In the absence of the
Chairman of the Board, or a person appointed by the Chairman of the Board to
act as Chairman of the meeting, the shareholders present at the meeting shall
designate a shareholder present to act as Chairman of the meeting. The
Secretary of the Company, or a person designated by the Chairman, shall act as
Secretary of each meeting of shareholders. Whenever the Secretary shall act as
Chairman of the meeting, or shall be absent, the Chairman of the meeting shall
appoint a shareholder present to act as Secretary of the meeting.
ARTICLE II - BOARD OF DIRECTORS
SECTION 1. ELECTION; TENURE; QUALIFICATIONS: (a) The initial Board of
Directors of the Company shall consist of three Directors. Thereafter, the
Board of Directors shall consist of not less than five nor more than twelve
members, such Directors to be classified in respect of the time for which they
shall severally hold office by dividing them into three classes of
approximately equal size, and the number of Directors shall be fixed by a
resolution of the Board of Directors adopted from time to time; and provided,
that any change in the number of Directors shall be reported to the Secretary
of State of Missouri within 30 calendar days of such change.
(b) In the event of any increase or decrease in the number of Directors,
the number of Directors assigned to each class shall be adjusted as may be
necessary so that all classes shall be as nearly equal in number as reasonably
possible, except that one class may be one greater or one less in number than
the other two classes. No reduction in the number of Directors shall affect the
term of office of any incumbent Director. Subject to the foregoing, the Board
of Directors shall determine the class or classes to which any Director shall
be assigned and the class or classes which shall be increased or decreased in
the event of any increase or decrease in the number of Directors.
(c) With respect to the members of the Board of Directors in office on
January 31, 1997, the first class of Directors shall hold office until the
first annual meeting of shareholders, the second class of Directors shall hold
office until the second annual meeting of shareholders, and the third class of
Directors shall hold office until the third annual meeting of shareholders.
Thereafter, Directors shall be elected to hold office for a term of three
years, and at each annual meeting of shareholders the successors to the class
of Directors whose term shall then expire shall be elected for a term expiring
at the third succeeding annual meeting after that election.
SECTION 2. POWERS: The Board of Directors shall have power to manage and
control the property and affairs of the Company, and to do all such lawful acts
and things which, in their absolute judgment and discretion, they may deem
necessary and appropriate for the expedient conduct and furtherance of the
Company's business.
SECTION 3. CHAIRMAN: The Directors shall elect one of their number to be
Chairman of the Board. The Chairman shall preside at all meetings of the Board,
unless absent from such meeting, in which case, if there is a quorum, the
Directors present may elect another Director to preside at such meeting.
SECTION 4. MEETINGS: (a) Regular meetings of the Board shall be held on
such days and at such times and places either within or without the State of
Missouri as shall from time to time be fixed by the Board of Directors. Notice
of such regular meetings need not be given. Special meetings of the Board may
be held at any day, time and place, within or without the State of Missouri,
upon the call of the Chairman of the Board, President or Secretary of the
Company, by oral, written, telefax or telegraphic notice duly given, sent or
mailed to each Director, at such Director's last known address, not less than
twenty-four hours before such meeting; provided, however, that any Director
may, at any time, in writing or by telegram, waive notice of any meeting at
which he or she may not be or may not have been present. Attendance of a
Director at any meeting shall constitute a waiver of notice of the meeting
except where a Director attends a meeting for the sole and express purpose of
objecting to the transaction of any business because the meeting is not
lawfully called or convened. Rules of procedure for the conduct of such
meetings may be adopted by resolution of the Board of Directors.
<PAGE> 5
(b) Members of the Board of Directors or of any committee designated by
the Board of Directors may participate in a meeting of the Board of Directors
or committee by means of conference telephone or similar communications
equipment whereby all persons participating in the meeting can hear each other,
and participation in a meeting in this manner shall constitute presence in
person at the meeting.
SECTION 5. ACTION BY CONSENT: Any action which is required to be or may be
taken at a meeting of the Directors may be taken without a meeting if consents
in writing, setting forth the action so taken, are signed by all the Directors.
SECTION 6. QUORUM: A majority of the entire Board of Directors shall
constitute a quorum at all meetings of the Board, and the act of the majority
of the Directors present at any meeting at which a quorum is present shall be
the act of the Board of Directors, unless a greater number of Directors is
required by the Company's Restated Articles of Incorporation, these Bylaws or
by law. At any meeting of Directors, whether or not a quorum is present, the
Directors present thereat may adjourn the same from time to time without notice
other than announcement at the meeting.
SECTION 7. RESIGNATION OF DIRECTORS: Any Director of the Company may
resign at any time by giving written notice of such resignation to the Board of
Directors, the Chairman of the Board, the President, or the Secretary of the
Company. Any such resignation shall take effect at the time specified therein
or, if no time is specified, upon receipt thereof by the Board of Directors or
one of the above-named officers of the Company; and, unless specified therein,
the acceptance of such resignation shall not be necessary to make it effective.
SECTION 8. VACANCIES: Vacancies on the Board of Directors and newly
created directorships resulting from any increase in the number of Directors to
constitute the Board of Directors may be filled only by a majority of the
Directors then in office, although less than a quorum, or by a sole remaining
Director, until the next election of Directors by the shareholders of the
Company.
SECTION 9. COMPENSATION OF DIRECTORS: The Board of Directors may, by
resolution passed by a majority of the entire Board of Directors, fix the terms
and amount of compensation payable to any person for his or her services as
Director, if he or she is not otherwise compensated for services rendered as an
officer or employee of the Company; provided, however, that any Director may be
reimbursed for reasonable and necessary expenses of attending meetings of the
Board of Directors, or otherwise incurred for any Company purpose; and
provided, further, that members of any special or standing committee of
Directors may also be allowed compensation and expenses similarly incurred.
Nothing herein contained shall be construed to preclude any Director from
serving the Company in any other capacity and receiving compensation therefor.
SECTION 10. COMMITTEES OF THE BOARD OF DIRECTORS: The Board of Directors
may, by resolution passed by a majority of the entire Board of Directors,
designate two or more Directors to constitute an Executive Committee of the
Board of Directors which shall have and exercise all of the authority of the
Board of Directors in the management of the Company, in the intervals between
meetings of the Board of Directors. In addition, the Board of Directors may
appoint any other committee or committees, with such members, functions, and
powers as the Board of Directors may designate. The Board of Directors shall
have the power at any time to fill vacancies in, to change the size or
membership of, or to dissolve, any one or more of such committees. Each such
committee shall have such name as may be determined by the Board of Directors,
and shall keep regular minutes of its proceedings and report the same to the
Board of Directors for approval as required. At all meetings of a committee, a
majority of the committee members then in office shall constitute a quorum for
the purpose of transacting business, and the acts of a majority of the
committee members present at any meeting at which there is a quorum shall be
the acts of the committee. A Director who may be disqualified, by reason of
personal interest, from voting on any particular matter before a meeting of a
committee may nevertheless be counted for the purpose of constituting a quorum
of the committee. Any action which is required to be or may be taken at a
meeting of a
<PAGE> 6
committee of Directors may be taken without a meeting if consents in writing,
setting forth the action so taken, are signed by all the members of the
committee.
SECTION 11. QUALIFICATIONS: No person shall be eligible for election as a
Director under Section 1 of this Article II if such person's 70th birthday
shall fall on a date prior to the commencement of the term for which such
person is to be elected or appointed. No person shall be qualified to be
elected and to hold office as a Director if such person is determined by a
majority of the Board of Directors to have acted in a manner contrary to the
best interest of the Company, including, but not limited to, the violation of
any Federal or state law, or breach of any agreement between that Director and
the Company relating to his or her services as a Director, employee or agent of
the Company. A Director need not be a shareholder.
ARTICLE III - OFFICERS
SECTION 1. OFFICERS; ELECTION: The officers of the Company shall be a
President, and a Secretary, and may be, as the Board may from time to time
designate, one or more Chief Executive Officers, one or more Vice Chairmen of
the Board, one or more Executive Vice Presidents, one or more Senior Vice
Presidents, one or more Group Vice Presidents, one or more Vice Presidents, one
or more Assistant Vice Presidents, a General Counsel, a Treasurer, a
Controller, and one or more Assistant Secretaries, Assistant Treasurers, and
Assistant Controllers. All officers of the Company shall be elected by the
Board of Directors, except that Assistant Secretaries, Assistant Treasurers and
Assistant Controllers may be appointed by the Chairman of the Board. Any two or
more offices may be held by the same person except the offices of Chairman of
the Board and Secretary.
SECTION 2. TERMS; COMPENSATION: All officers of the Company shall hold
their respective offices until the first meeting of the Board of Directors
after the next succeeding election of the Board of Directors and until their
successors shall have been duly elected and qualified, or until their earlier
death, resignation or removal. The compensation each officer is to receive from
the Company shall be determined in such manner as the Board of Directors shall
from time to time prescribe.
SECTION 3. POWERS; DUTIES: Each officer of the Company shall have such
powers and duties as may be prescribed by resolution of the Board of Directors
or as may be assigned by the Board of Directors or a Chief Executive Officer of
the Company.
SECTION 4. REMOVAL: Any officer or agent elected or appointed by the Board
of Directors may be removed by the Board of Directors, with or without cause,
whenever in its judgment the best interest of the Company will be served
thereby, but such removal shall be without prejudice to the contract rights, if
any, of the officer so removed. The Chairman of the Board may suspend any
officer until the Board of directors shall next convene. Any vacancy occurring
in any office of the Company shall be filled by the Board of Directors.
ARTICLE IV - CAPITAL STOCK
SECTION 1. STOCK CERTIFICATES: (a) All certificates of stock of the
Company shall be signed by the Chairman of the Board or the President or a Vice
President of the Company and by the Secretary or an Assistant Secretary or the
Treasurer or an Assistant Treasurer of the Company, and shall bear the
corporate seal of the Company. If the certificate is countersigned by a
transfer agent or registrar other than the Company or its employee, any other
signature and the corporate seal appearing on certificates of stock may be
facsimile, engraved or printed. In case any such officer, transfer agent or
registrar who has signed or whose facsimile signature appears on any such
certificate shall have ceased to be such officer, transfer agent or registrar
before the certificate is issued, such certificate may nevertheless be issued
by the Company with the same effect as if such officer, transfer agent or
registrar had not ceased to be such officer, transfer agent or registrar at the
date of its issue.
<PAGE> 7
(b) The Company shall not issue a certificate for a fractional share;
however, the Board of Directors may issue, in lieu of any fractional share,
scrip or other evidence of ownership upon such terms and conditions as it may
deem advisable.
(c) All certificates of stock of each class and series shall be
numbered appropriately.
SECTION 2. RECORD OWNERSHIP: The Company shall maintain a record of the
name and address of the holder of each certificate, the number of shares
represented thereby, and the date of issue and the number thereof. The Company
shall be entitled to treat the holder of record of any share of stock as the
holder in fact thereof, and accordingly it will not be bound to recognize any
legal, equitable or other claim of interest in such share on the part of any
other person, whether or not it shall have express or other notice thereof,
except as otherwise provided by the laws of the State of Missouri.
SECTION 3. TRANSFERS: Transfers of stock shall be made on the books of the
Company only by direction of the person named in the certificate or by his or
her duly authorized attorney or legal representative and upon the surrender of
the certificate therefor.
SECTION 4. TRANSFER AGENTS; REGISTRARS: The Board of Directors shall, by
resolution, from time to time appoint one or more Transfer Agents, that may be
officers or employees of the Company, to make transfers of shares of stock of
the Company, and one or more Registrars to register shares of stock issued by
or on behalf of the Company. The Board of Directors may adopt such rules as it
may deem expedient concerning the issue, transfer and registration of stock
certificates of the Company.
SECTION 5. LOST CERTIFICATES: The Company may issue a new certificate in
place of any certificate theretofore issued by it which is alleged to have been
lost, stolen or destroyed and the Board of Directors may require the owner of
the lost, stolen or destroyed certificate or the owner's legal representative
to give the Company a bond in a sum and in a form approved by the Board of
Directors, and with a surety or sureties which the Board of Directors finds
satisfactory, to indemnify the Company and its transfer agents and registrars,
if any, against any claim or liability that may be asserted against or incurred
by it or any transfer agent or registrar on account of the alleged loss, theft
or destruction of any certificate or the issuance of any new certificate. A new
certificate may be issued without requiring any bond when, in the judgment of
the Board of Directors, it is proper to do so. The Board of Directors may
delegate to any officer or officers of the Company any of the powers and
authorities contained in this section.
SECTION 6. TRANSFER BOOKS; RECORD DATES: The Board of Directors shall have
power to close the stock transfer books of the Company as permitted by law;
provided, however, that in lieu of closing the said books, the Board of
Directors may fix in advance a date, not exceeding seventy days preceding the
date of any meeting of shareholders, or the date for the payment of any
dividend, or the date for the allotment of rights, or the date when any change
or conversion or exchange of shares shall go into effect, as a record date for
the determination of the shareholders entitled to notice of, and to vote at,
any such meeting, and any adjournment thereof, or entitled to receive payment
of any such dividend, or to any such allotment of rights, or to exercise the
rights in respect of any such change, conversion or exchange of shares, and in
such case such shareholders and only such shareholders as shall be shareholders
of record on the date of closing the transfer books or on the record date so
fixed shall be entitled to notice of, and to vote at, such meeting, and any
adjournment thereof, or to receive payment of such dividend, or to receive such
allotment of rights, or to exercise such rights, as the case may be,
notwithstanding any transfer of any shares after such date of closing of the
transfer books or such record date fixed as aforesaid. If the Board of
Directors does not close the transfer books or set a record date for the
determination of the shareholders entitled to notice of and to vote at any
meeting of shareholders, only the shareholders who are shareholders of record
at the close of business on the twentieth day preceding the date of the meeting
shall be entitled to notice of and to vote at the meeting and upon any
adjournment of the meeting, except that if prior to the meeting written waivers
of notice of the meeting are signed and delivered to the Company by all of the
shareholders
<PAGE> 8
of record at the time the meeting is convened, only the shareholders who are
shareholders of record at the time the meeting is convened shall be entitled to
vote at the meeting and any adjournment of the meeting.
ARTICLE V - SEAL, BOOKS, FISCAL YEAR
SECTION 1. SEAL: The corporate seal of the Company shall be a circular
seal; the words "RALCORP HOLDINGS, INC., ST. LOUIS, MO." shall be embossed in
the outer margin; and the words "SEAL 1997" shall be embossed in the central
circular field; an impression of the same is set forth hereon.
SECTION 2. PLACE FOR KEEPING BOOKS AND SEAL: The books of the Company, and
its corporate minutes and corporate seal, shall be kept in the custody of the
Secretary at the principal office of the Company, or at such other place or
places and in the custody of such other person or persons as the Board of
Directors may from time to time determine.
SECTION 3. FISCAL YEAR: The fiscal year of the Company shall commence with
the first day of October in each year.
<PAGE> 1
EXHIBIT 4.1
SHAREHOLDER PROTECTION RIGHTS AGREEMENT
NEW RALCORP HOLDINGS, INC.
and
BOATMEN'S TRUST COMPANY
Rights Agent
Dated as of ______________, 1996
<PAGE> 2
INDEX
<TABLE>
<S> <C>
Page
Section 1. Certain Definitions................................................. 1
Section 2. Appointment of Rights Agent......................................... 4
Section 3. Issue of Right Certificates......................................... 4
Section 4. Form of Right Certificates.......................................... 6
Section 5. Countersignature and Registration................................... 7
Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen Right Certificates......................... 7
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights....... 8
Section 8. Cancellation and Destruction of Right Certificates.................. 9
Section 9. Reservation and Availability of Shares of Common Stock.............. 10
Section 10. Common Stock Record Date........................................... 11
Section 11. Adjustment of Purchase Price, Number of Shares or Number of Rights. 11
Section 12. Certificate of Adjusted Purchase Price or Number of Shares......... 17
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power................................................................... 17
Section 14. Fractional Rights and Fractional Shares............................ 19
Section 15. Rights of Action................................................... 20
Section 16. Agreement of Right Holders......................................... 21
Section 17. Right Certificate Holder Not Deemed a Stockholder.................. 21
Section 18. Concerning the Rights Agent........................................ 22
Section 19. Merger or Consolidation or Change of Name of Rights Agent.......... 22
Section 20. Duties of Rights Agent............................................. 23
Section 21. Change of Rights Agent............................................. 24
Section 22. Issuance of New Right Certificates................................. 25
Section 23. Redemption and Termination......................................... 26
Section 24. Exchange........................................................... 26
Section 25. Notice of Proposed Actions......................................... 27
Section 26. Notices............................................................ 28
</TABLE>
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<TABLE>
<S> <C>
Section 27. Supplements and Amendments...................................... 29
Section 28. Successors...................................................... 29
Section 29. Benefits of This Agreement...................................... 30
Section 30. Severability.................................................... 30
Section 31. Governing Law................................................... 30
Section 32. Counterparts.................................................... 30
Section 33. Descriptive Headings............................................ 30
</TABLE>
Exhibit A - Form of Right Certificate
Exhibit B - Summary of Common Stock Purchase Rights
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<PAGE> 4
SHAREHOLDER PROTECTION RIGHTS AGREEMENT
This Agreement, dated as of December _____, 1996 is entered into between
NEW RALCORP HOLDINGS, INC. (the "Company") and BOATMEN'S TRUST COMPANY, (the
"Rights Agent").
W I T N E S S E T H
WHEREAS, on December 18, 1996, the Board of Directors of the Company
authorized and declared a dividend distribution of one right (hereinafter
referred to as a "Right") for each share of Common Stock, par value $0.01 per
share, of the Company outstanding at the close of business on the date that the
distribution of Common Stock to the holders of common stock of Ralcorp
Holdings, Inc. occurs (the "Record Date"), (other than shares of such Common
Stock held in the Company's treasury on such date) and has authorized the
issuance of one Right in respect of each share of Common Stock of the Company
issued between the Record Date (whether originally issued or issued from the
Company's treasury) and the Distribution Date (as such term is defined in
Section 3 hereof), each Right representing the right to purchase Common Stock
of the Company upon the terms and subject to the conditions hereinafter set
forth (the "Rights"); and
WHEREAS, the Company desires to appoint the Rights Agent to act as
provided herein, and the Rights Agent is willing to so act;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (as hereinafter defined) who
or which, together with all Affiliates (as hereinafter defined) and Associates
(as hereinafter defined) of such Person, without the Prior Written Approval of
the Company (as hereinafter defined), shall be the Beneficial Owner (as
hereinafter defined) of securities of the Company constituting 20% or more of
the Voting Power (as hereinafter defined) of the Company or was such a
Beneficial Owner at any time after the date hereof, whether or not such Person
continues to be the Beneficial Owner of securities representing 20% or more of
the Voting Power of the Company, but shall not include (i) the Company, any
Subsidiary of the Company, any employee benefit plan or compensation
arrangement of the Company or any Subsidiary of the Company, or any entity
holding securities of the Company to the extent organized, appointed or
established by the Company or any Subsidiary of the Company for or pursuant to
the terms of any such employee benefit plan or compensation arrangement or (ii)
any Person who or which, together with all Affiliates and Associates of such
Person, inadvertently may become the Beneficial Owner of securities of the
Company representing 20% or more of the Voting Power of the Company or
otherwise becomes such a Beneficial Owner without a plan or intention to
acquire control of the Company, so long as such Person, individually or
together with the Affiliates and
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<PAGE> 5
Associates of such Person, promptly enters into, and delivers to the Company,
an irrevocable commitment promptly to divest, and thereafter promptly divests
(without exercising or retaining any power, including voting, with respect to
such securities), sufficient securities of the Company so that such Person,
together with all Affiliates and Associates of such Person, ceases to be the
Beneficial Owner of 20% or more of the Voting Power of the Company.
Notwithstanding the foregoing, no Person shall become an "Acquiring Person" as
the result of an acquisition of voting securities of the Company by the Company
which, by reducing the amount of such securities outstanding, increases the
proportionate voting power of such securities beneficially owned by such Person
to 20% or more of the Voting Power; provided, however, that if a Person becomes
the Beneficial Owner of securities constituting 20% or more of the Voting Power
by reason of purchases by the Company and shall, after such purchases by the
Company, become the Beneficial Owner of any additional voting securities of the
Company without the Prior Written Approval of the Company, then such Person
shall be deemed to be an Acquiring Person.
(b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in
effect on the date hereof.
(c) A Person shall be deemed the "Beneficial Owner" of, and shall be
deemed to "beneficially own", any securities:
(i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly as determined pursuant to
Rule 13d-3 of the General Rules and Regulations under the Exchange Act, as in
effect on the date hereof;
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide public
offering of securities), or upon the exercise of conversion rights, exchange
rights, rights (other than these Rights), warrants or options, or otherwise,
provided, however, that a Person shall not be deemed the "Beneficial Owner" of
securities tendered pursuant to a tender or exchange offer made by or on behalf
of such Person or any of such Person's Affiliates or Associates until such
tendered securities are accepted for payment or exchange; or (B) the right to
vote pursuant to any agreement, arrangement or understanding, provided, however,
that a Person shall not be deemed the "Beneficial Owner" of any security under
this clause (B) if the agreement, arrangement or understanding to vote such
security (1) arises solely from a revocable proxy or consent given in response
to a public proxy or consent solicitation made pursuant to, and in accordance
with, the applicable rules and regulations under the Exchange Act and (2) is
not also then reportable by such person on Schedule 13D under the Exchange Act
(or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by any
other Person with which such Person or any of such Person's Affiliates or
Associates has any agreement,
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<PAGE> 6
arrangement or understanding (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide public
offering of securities) for the purpose of acquiring, holding, voting (except
pursuant to a revocable proxy or consent as described in clause (B) of
subparagraph (ii) of this paragraph (c)) or disposing of any securities of the
Company.
Notwithstanding anything in this definition of Beneficial Ownership to the
contrary, the phrase "then outstanding", when used with reference to a Person's
Beneficial Ownership of securities of the Company, shall mean the number of
such securities then issued and outstanding together with the number of such
securities not then actually issued and outstanding which such Person would be
deemed to own beneficially hereunder.
(d) "Board of Directors" shall mean the Board of Directors of the Company
as constituted from time to time.
(e) "Business Day" shall mean any day other than a Saturday, Sunday, or a
day on which banking institutions in the State of Missouri are authorized or
obligated by law or executive order to close.
(f) "Close of business" on any given date shall mean 5:00 P.M., St. Louis,
Missouri time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 P.M., St. Louis, Missouri time, on the next
succeeding Business Day.
(g) "Common Stock" shall mean the Common Stock, par value $0.01 per share,
of the Company, except that "Common Stock" when used with reference to any
Person other than the Company shall mean the capital stock with the greatest
Voting Power of such Person or the equity securities or other equity interest
having power to control or direct the management of such Person or, if such
Person is a Subsidiary (as hereinafter defined) of another Person, of the
Person which ultimately controls such first-mentioned Person and which has
issued and outstanding such capital stock, equity securities or equity
interests.
(h) "Distribution Date" shall have the meaning set forth in Section 3
hereof.
(i) "Expiration Date" shall have the meaning set forth in Section 7(a)
hereof.
(j) "Final Expiration Date" shall have the meaning set forth in Section
7(a) hereof.
(k) "Person" shall mean any individual, firm, corporation, partnership or
other entity, and shall include any successor (by merger or otherwise) of any
such entity.
(l) "Prior Written Approval of the Company" shall mean prior express
written consent of the Company to the actions in question, executed on behalf
of the Company by a duly authorized officer of the Company following express
approval by action of at least a majority of the members of the Board of
Directors then in office.
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<PAGE> 7
(m) "Purchase Price" shall have the meaning set forth in Section 4 hereof.
(n) "Redemption Price" shall have the meaning set forth in Section 23(a)
hereof.
(o) "Section 11(b) Event" shall have the meaning set forth in Section
11(b) hereof.
(p) "Section 13 Event" shall mean an event described in clauses (x), (y)
or (z) of Section 13(a) hereof.
(q) "Stock Acquisition Date" shall mean the earlier of (i) the first date
of public announcement by the Company or an Acquiring Person that a Person has
become an Acquiring Person, or (ii) the date on which the Company first has
notice, direct or indirect, or otherwise determines that a Person has become an
Acquiring Person.
(r) "Subsidiary" shall mean, with respect to any Person, any other Person
of which securities or other ownership interests having ordinary Voting Power,
in the absence of contingencies, to elect a majority of the board of directors
(or other persons performing similar functions) of such other Person are at the
time directly or indirectly owned by such Person or one or more of such
Person's Subsidiaries, except that "Subsidiary" when used with reference to the
Company shall mean any Person of which either a majority of the Voting Power of
the voting equity securities or a majority of the equity interests is owned,
directly or indirectly, by the Company.
(s) "Voting Power" shall mean the voting power of all securities of a
Person then outstanding generally entitled to vote for the election of
directors of the Person (or, where appropriate, for the election of persons
performing similar functions).
Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights
(who, in accordance with Section 3 hereof, shall prior to the Distribution Date
also be the holders of the Common Stock) in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such Co-Rights Agents as it may deem
necessary or desirable. In the event the Company appoints one or more
Co-Rights Agents, the respective duties of the Rights Agents and any Co-Rights
Agents shall be as the Company shall determine.
Section 3. Issue of Right Certificates.
(a) Until the earlier of (i) the close of business on the tenth Business
Day after the Stock Acquisition Date or (ii) the close of business on the tenth
Business Day (or such later date as may be determined by action of the Board of
Directors but in no event later than the tenth Business Day after such time as
any Person becomes an Acquiring Person) after the date that a
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<PAGE> 8
tender or exchange offer by any Person (other than the Company, any Subsidiary
of the Company, any employee benefit plan or compensation arrangement of the
Company or of any Subsidiary of the Company, or any entity holding securities
of the Company to the extent organized, appointed or established by the Company
or any Subsidiary of the Company for or pursuant to the terms of any such
employee benefit plan or compensation arrangement) is first published or sent
or given within the meaning of Rule 14d of the General Rules and Regulations
under the Exchange Act, without the Prior Written Approval of the Company,
which tender or exchange offer would result in any Person becoming the
Beneficial Owner of Voting Power aggregating 20% or more of the outstanding
Voting Power (including any such date which is after the date of this Agreement
and prior to the issuance of the Rights; the earlier of such dates being herein
referred to as the "Distribution Date"), (y) the Rights will be evidenced
(subject to the provisions of paragraph (b) of this Section 3) by the
certificates for the Common Stock registered in the names of the holders of the
Common Stock (which certificates for Common Stock shall be deemed also to be
Right Certificates) and not by separate Right Certificates, as more fully set
forth below, and (z) the Rights (and the right to receive certificates
therefor) will be transferable only in connection with the transfer of the
underlying shares of Common Stock, as more fully set forth below. As soon as
practicable after the Company has notified the Rights Agent of the occurrence
of the Distribution Date, the Company shall prepare and execute, and the Rights
Agent shall countersign and send, by first-class, insured, postage prepaid
mail, to each record holder of the Common Stock as of the close of business on
the Distribution Date, at the address of such holder shown on the records of
the Company, a right certificate, in substantially the form of Exhibit A hereto
(the "Right Certificate"), evidencing one Right for each share of Common Stock
so held, subject to adjustment as provided herein. As of and after the
Distribution Date, the Rights will be evidenced solely by such Right
Certificates.
(b) On the Record Date or as soon as practicable thereafter, the Company
will send a copy of a Summary of Rights to Purchase Common Stock, in
substantially the form of Exhibit B hereto (the "Summary of Rights"), by
first-class, postage prepaid mail, to each record holder of the Common Stock as
of the close of business on the Record Date, at the address of such holder
shown on the records of the Company. With respect to certificates for the
Common Stock outstanding as of the Record Date, until the Distribution Date (or
the earlier redemption, expiration or termination of the Rights), the Rights
will be evidenced by such certificates for the Common Stock registered in the
names of the holders of the Common Stock and the registered holders of the
Common Stock shall also be registered holders of the associated Rights. Until
the Distribution Date (or the earlier redemption, expiration or termination of
the Rights), the surrender for transfer of any of the certificates for the
Common Stock outstanding in respect of which Rights have been issued shall also
constitute the transfer of the Rights associated with the Common Stock
represented by such certificate.
(c) Certificates for the Common Stock issued after the Record Date but
prior to the earlier of the Distribution Date or the redemption, expiration or
termination of the Rights shall be deemed also to be certificates for Rights
and shall have impressed, printed or written on or otherwise affixed to them
the following legend:
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<PAGE> 9
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Rights Agreement dated as of
December _____, 1996 between New Ralcorp Holdings, Inc. (the
"Company") and Boatmen's Trust Company (the "Rights Agreement"), as
it may from time to time be supplemented or amended, the terms of
which are incorporated herein by reference and a copy of which is
on file at the principal executive offices of the Company. Under
certain circumstances, as set forth in the Rights Agreement, such
Rights may expire or may be redeemed, exchanged or be evidenced by
separate certificates and no longer be evidenced by this
certificate. The Company will mail to the holder of this
certificate a copy of the Rights Agreement without charge promptly
after receipt of a written request therefor. Under certain
circumstances, Rights issued to or held by Acquiring Persons or
their Affiliates or Associates (as defined in the Rights Agreement)
and any subsequent holder of such Rights may become null and void.
With respect to such certificates containing the foregoing legend, until the
Distribution Date (or the earlier redemption, expiration or termination of the
Rights), the Rights associated with the Common Stock represented by such
certificates shall be evidenced by such certificates alone, and the surrender
for transfer of any of such certificates shall also constitute the transfer of
the Rights associated with the Common Stock represented by such certificates.
In the event that the Company purchases or acquires any Common Stock after
the Record Date but prior to the Distribution Date, any Rights associated with
such Common Stock shall be deemed cancelled and retired so that the Company
shall not be entitled to exercise any Rights associated with shares of Common
Stock which are no longer outstanding.
Section 4. Form of Right Certificates.
(a) The Right Certificates (and the forms of election to purchase shares
and of assignment to be printed on the reverse thereof) shall be in
substantially the same form as Exhibit A hereto and may have such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law, rule or regulation or with any rule or regulation of any stock
exchange on which the Rights may from time to time be listed, or to conform to
customary usage. Subject to the provisions of Section 11 and Section 22
hereof, the Right Certificates, whenever issued, shall be dated as of the
Record Date, and on their face shall entitle the holders thereof to purchase
such number of shares of Common Stock as shall be set forth therein at the
price per share as set forth therein (the "Purchase Price"), but the number
and identity of such shares and the Purchase Price shall be and remain subject
to adjustment as provided in Sections 11, 13 and 22 hereof.
(b) Any Right Certificate issued pursuant to Section 3(a) hereof that
represents Rights beneficially owned by an Acquiring Person or any Associate or
Affiliate thereof and any Right Certificate issued at any time upon the
transfer of any Rights to an Acquiring Person or any Associate or Affiliate
thereof or to any nominee of such Acquiring
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<PAGE> 10
Person, Associate or Affiliate, and any Right Certificate issued pursuant to
Section 6 hereof, Section 11 hereof or Section 22 hereof upon transfer,
exchange, replacement or adjustment of any other Right Certificate referred to
in this sentence, shall contain (to the extent feasible) the following legend:
The Rights represented by this Right Certificate were issued to a
Person who was an Acquiring Person or an Affiliate or an Associate
of an Acquiring Person. This Right Certificate and the Rights
represented hereby are void in the circumstances specified in
Section 7(e) of the Rights Agreement.
The failure to print the foregoing legend on any such Right Certificate or any
defect therein shall not affect in any manner whatsoever the application or
interpretation of the provisions of Section 7(e) hereof.
Section 5. Countersignature and Registration.
(a) The Right Certificates shall be executed on behalf of the Company by
its Chairman of the Board, its President or any Vice President, either manually
or by facsimile signature, and shall have affixed thereto the Company's seal or
a facsimile thereof which shall be attested by the Secretary or an Assistant
Secretary of the Company, either manually or by facsimile signature. The Right
Certificates shall be countersigned manually or by facsimile signature by the
Rights Agent or the registrar or co-registrar for the Common Stock (the
"Registrar") and shall not be valid for any purpose unless so countersigned.
In case any officer of the Company whose manual or facsimile signature is
affixed to the Right Certificates shall cease to be such officer of the Company
before countersignature by the Rights Agent or the Registrar and issuance and
delivery by the Company, such Right Certificates, nevertheless, may be
countersigned by the Rights Agent or the Registrar, issued and delivered with
the same force and effect as though the person who signed such Right
Certificates had not ceased to be such officer of the Company. Any Right
Certificate may be signed on behalf of the Company by any person who, at the
actual date of the execution of such Right Certificate, shall be a proper
officer of the Company to sign such Right Certificate, although at the date of
the execution of this Rights Agreement any such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or cause
to be kept, at its stockholder services office or such other office designated
for such purpose, books for registration and transfer of the Right Certificates
issued hereunder. Such books shall show the names and addresses of the
respective holders of the Right Certificates, the number of Rights evidenced on
its face by each of the Right Certificates, the certificate number of each of
the Right Certificates and the date of each of the Right Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. Subject
to the provisions of Section 14 hereof, at any time after the close of business
on the Distribution Date, and at or prior to the close of business on the
Expiration Date (as such term is defined in Section 7(a) hereof), any Right
Certificate or Right Certificates may be transferred, split up, combined or
exchanged for another
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<PAGE> 11
Right Certificate or Right Certificates, entitling the registered holder to
purchase a like number of shares of Common Stock as the Right Certificate or
Right Certificates surrendered then entitled such holder to purchase. Any
registered holder desiring to transfer, split up, combine or exchange any Right
Certificate shall make such request in writing delivered to the Rights Agent,
and shall surrender the Right Certificate or Right Certificates to be
transferred, split up, combined or exchanged at the stockholder services office
of the Rights Agent or such office designated for such purpose. Thereupon, the
Rights Agent shall countersign and deliver to the person entitled thereto a
Right Certificate or Right Certificates, as the case may be, as so requested.
The Company may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer, split
up, combination or exchange of Right Certificates.
Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Right
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and reimbursement to the Company and
the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Right Certificate if
mutilated, the Company will make and deliver a new Right Certificate of like
tenor to the Rights Agent for countersignature and delivery to the registered
owner in lieu of the Right Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
(a) The registered holder of any Right Certificate may exercise the Rights
evidenced thereby (except as otherwise provided herein) in whole or in part at
any time after the Distribution Date upon surrender of the Right Certificate,
with the form of election to purchase on the reverse side thereof duly
executed, to the Rights Agent at the stockholder services office of the Rights
Agent or such office designated for such purpose, together with payment of the
Purchase Price for each share of Common Stock as to which the Rights are
exercised, at or prior to the close of business on the Expiration Date. The
"Expiration Date", as used in this Agreement, shall be the earliest of (i) the
Final Expiration Date (as defined below), (ii) the time at which the Rights are
redeemed as provided in Section 23 hereof, or (iii) the time at which the
Rights are exchanged as provided in Section 24 hereof. The "Final Expiration
Date", as used in this Agreement, shall be the later to occur of the ten year
anniversary of the date on which the distribution of Common Stock to the
holders of common stock of Ralcorp Holdings, Inc. is effected, or, January 31,
2007.
(b) The Purchase Price for each share of Common Stock pursuant to the
exercise of a Right shall initially be $30, which shall be subject
to adjustment from time to time as provided in Sections 11 and 13 hereof and
shall be payable in lawful money of the United States of America in accordance
with paragraph (c) below.
(c) Upon receipt of a Right Certificate, with the form of election to
purchase duly executed, accompanied by payment of the Purchase Price for each
share of Common Stock to be purchased and an amount equal to any applicable
transfer tax required to be paid by the
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<PAGE> 12
holder of the Rights pursuant hereto in accordance with Section 9 hereof by
certified check, bank draft or money order payable to the order of the Company
or the Rights Agent, the Rights Agent shall, subject to Section 20(k) hereof,
thereupon promptly (i) requisition from any transfer agent of the shares of
Common Stock (or make available, if the Rights Agent is the transfer agent)
certificates for the number of shares of Common Stock to be purchased and the
Company hereby irrevocably authorizes its transfer agent to comply with all
such requests, (ii) promptly after receipt of such certificates cause the same
to be delivered to or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may be designated by such
holder, (iii) when appropriate, requisition from the Company the amount of cash
to be paid in lieu of issuance of fractional shares in accordance with Section
14 hereof, (iv) after receipt of any such cash, promptly deliver such cash to
or upon the order of the registered holder of such Right Certificate, (v) when
appropriate, requisition from the Company the amount of cash or securities
issuable upon exercise of a Right pursuant to the adjustment provisions of
Section 11 or the exchange provisions of Section 24, and (vi) after receipt of
any such cash or securities, promptly deliver such cash or securities to or
upon the order of the registered holder of such Right Certificate.
(d) In case the registered holder of any Right Certificate shall exercise
less than all the Rights evidenced thereby, a new Right Certificate evidencing
Rights equivalent to the Rights remaining unexercised shall be issued by the
Rights Agent to the registered holder of such Right Certificate or to his duly
authorized assigns, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, upon the
first occurrence of a Section 11(b) Event or a Section 13 Event, any Rights
that are or were at any time on or after the earlier of the Stock Acquisition
Date or the Distribution Date beneficially owned by an Acquiring Person or any
Associate or Affiliate of an Acquiring Person shall become void with respect to
the rights provided under Section 11(b), Section 13(a) and Section 24 hereof
and any holder of such Rights shall thereafter have no right to exercise such
Rights under the provisions of Section 11(b) and Section 13(a) hereof, or to
receive any Common Stock in exchange therefor pursuant to the provisions of
Section 24 hereof.
(f) Notwithstanding anything in this Agreement to the contrary, neither
the Rights Agent nor the Company shall be obligated to undertake any action
with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless the certificate contained in the
appropriate form of election to purchase set forth on the reverse side of the
Right Certificate surrendered for such exercise shall have been properly
completed and duly executed by the registered holder thereof and the Company
shall have been provided with such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Right Certificates. All Right
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it,
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<PAGE> 13
and no Right Certificates shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Rights Agreement. The Company shall
deliver to the Rights Agent for cancellation and retirement, and the Rights
Agent shall so cancel and retire, any other Right Certificate purchased or
acquired by the Company otherwise than upon the exercise thereof. The Rights
Agent shall deliver all cancelled Right Certificates to the Company, or shall,
at the written request of the Company, destroy such cancelled Right
Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company.
Section 9. Reservation and Availability of Shares of Common Stock.
(a) The Company covenants and agrees that it will cause to be reserved and
kept available out of its authorized and unissued shares of Common Stock or its
authorized and issued shares of Common Stock held in its treasury, the number
of shares of Common Stock that will be sufficient to permit the exercise in
full of all outstanding Rights and, after the occurrence of a Section 11(b)
Event or a Section 13 Event, shall so reserve and keep available a sufficient
number of shares of Common Stock and/or other securities which may be required
to permit the exercise in full of the Rights pursuant to this Agreement.
(b) The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all shares of Common Stock and/or other
securities delivered upon exercise of Rights shall, at the time of delivery of
the certificates for such shares or other securities (subject to payment of the
Purchase Price), be duly and validly authorized and issued and fully paid and
nonassessable shares or securities.
(c) The Company shall use its best efforts to (i) file, as soon as
practicable following the first occurrence of an event which would establish
the Distribution Date, a registration statement under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the securities
purchasable upon exercise of the Rights on an appropriate form, (ii) cause such
registration statement to become effective as soon as practicable after such
filing, and (iii) cause such registration statement to remain effective (with a
prospectus at all times meeting the requirements of the Securities Act) until
the Expiration Date. The Company will also take such action as may be
appropriate under the "blue sky laws" of the various states.
(d) The Company further covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery of the Right Certificates or of
any shares of Common Stock and/or other securities upon the exercise of Rights.
The Company shall not, however, be required to pay any transfer tax which may
be payable in respect of any transfer involved in the transfer or delivery of
Right Certificates or the issuance or delivery of certificates for Common Stock
and/or other securities in a name other than that of the registered holder of
the Right Certificate evidencing Rights surrendered for exercise, nor shall the
Company be required to issue or deliver any certificates for shares of Common
Stock and/or other securities upon the exercise of any Rights until any such
tax shall have been paid (any such tax being payable by the holder of such
Right Certificate at the time of surrender) or until it has been established to
the Company's satisfaction that no such tax is due.
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<PAGE> 14
Section 10. Common Stock Record Date. Each person (other than the
Company) in whose name any certificate for shares of Common Stock (or other
securities) is issued upon the exercise of Rights shall for all purposes be
deemed to have become the holder of record of the Common Stock (or other
securities) represented thereby on, and such certificate shall be dated, the
date upon which the Right Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and any applicable transfer
taxes) was made; provided, however, that if the date of such surrender and
payment is a date upon which the Common Stock (or other securities) transfer
books of the Company are closed, such person shall be deemed to have become the
record holder of such shares on, and such certificate shall be dated, the next
succeeding Business Day on which the Common Stock (or other securities)
transfer books of the Company are open. Prior to the exercise of the Rights
evidenced thereby, the holder of a Right Certificate shall not be entitled to
any rights of a stockholder of the Company with respect to shares for which the
Rights shall be exercisable, including, without limitation, the right to vote,
to receive dividends or other distributions or to exercise any preemptive
rights, and shall not be entitled to receive any notice of any proceedings of
the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number of Shares or Number of
Rights. The Purchase Price, the number and identity of shares covered by each
Right and the number of Rights outstanding are subject to adjustment from time
to time as provided in this Section 11.
(a) In the event the Company shall at any time after the date of this
Agreement (i) declare a dividend on the Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, (iii) combine the
outstanding Common Stock into a smaller number of shares or (iv) issue any
shares of its capital stock in a reclassification of the Common Stock
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation), except
as otherwise provided in this Section 11, the Purchase Price in effect at the
time of the record date for such dividend or the time of the effective date of
such subdivision, combination or reclassification, and the number and kind of
shares of capital stock, including Common Stock, issuable upon exercise of a
Right, shall be proportionately adjusted so that the holder of any Right
exercised after such time, upon payment of the aggregate consideration such
holder would have had to pay to exercise such Right prior to such time, shall
be entitled to receive the aggregate number and kind of shares of capital
stock, including Common Stock, which, if such Right had been exercised
immediately prior to such date and at a time when the Common Stock transfer
books of the Company were open, he would have owned upon such exercise and been
entitled to receive by virtue of such dividend, subdivision, combination or
reclassification.
(b) In the event any Person shall become an Acquiring Person ("Section
11(b) Event"), then proper provision shall be made so that each holder of a
Right, subject to Section 7(e) and Section 24 hereof and except as provided
below, shall after the later of the occurrence of such event and the effective
date of an appropriate registration statement pursuant to Section 9 hereof,
have a right to receive, upon exercise thereof at the then current Purchase
Price multiplied by the then number of shares of Common Stock for which a Right
is then exercisable in
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<PAGE> 15
accordance with the terms of this Agreement such number of shares of Common
Stock of the Company as shall equal the result obtained by (y) multiplying the
then current Purchase Price by the then number of shares of Common Stock for
which a Right is then exercisable and dividing that product by (z) 50% of the
current market price per one share of Common Stock (determined pursuant to
Section 11(f) hereof on the date of the occurrence of the Section 11(b) Event)
(such number of shares being referred to as the "number of Adjustment Shares").
(c) In the event that there shall not be sufficient Treasury shares or
authorized but unissued shares of Common Stock to permit the exercise in full
of the Rights in accordance with the foregoing Section 11(b), and the Rights
become so exercisable, notwithstanding any other provision of this Agreement,
to the extent necessary and permitted by applicable law and any agreements in
effect on the date hereof to which the Company is a party, each Right shall
thereafter represent the right to receive, upon exercise thereof at the then
current Purchase Price, multiplied by the then number of shares of Common Stock
for which a Right is then exercisable, in accordance with the terms of this
Agreement, a number of shares, or units of shares, of (y) Common Stock, and (z)
preferred stock (or other equity securities) of the Company equal in the
aggregate to the number of Adjustment Shares where the Board of Directors shall
have in good faith deemed such shares or units, other than the shares of Common
Stock, to have at least the same value and voting rights as the Common Stock (a
"common stock equivalent"); provided, however, if there are unavailable
sufficient shares (or fractions of shares) of Common Stock and/or common stock
equivalents, then the Company shall take all such action as may be necessary to
authorize additional shares of Common Stock or common stock equivalents for
issuance upon exercise of the Rights, including the calling of a meeting of
stockholders; and provided, further, that if the Company is unable to cause
sufficient shares of Common Stock and/or common stock equivalents to be
available for issuance upon exercise in full of the Rights, then the Company,
to the extent necessary and permitted by applicable law and any agreements or
instruments in effect on the date thereof to which it is a party, shall make
provision to pay an amount in cash equal to twice the Purchase Price (as
adjusted pursuant to this Section 11), in lieu of issuing shares of Common
Stock and/or common stock equivalents. To the extent that the Company
determines that some action needs to be taken pursuant to this Section 11(c),
the Board of Directors by action of at least a majority of its members then in
office may suspend the exercisability of the Rights for a period of up to sixty
(60) days following the date on which the Section 11(b) Event shall have
occurred, in order to decide the appropriate form of distribution to be made
pursuant to this Section 11(c) and to determine the value thereof. In the
event of any such suspension, the Company shall issue a public announcement
stating that the exercisability of the Rights has been temporarily suspended.
The Board of Directors may, but shall not be required to, establish procedures
to allocate the right to receive Common Stock and common stock equivalents upon
exercise of the Rights among holders of Rights, which such allocation may be,
but is not required to be, pro-rata.
(d) If the Company shall fix a record date for the issuance of rights
(other than any Rights hereunder) or warrants to all holders of Common Stock
entitling them (for a period expiring within 90 calendar days after such record
date) to subscribe for or purchase Common Stock (or securities having the same
or more favorable rights, privileges and preferences as the Common Stock
("equivalent common stock")) or securities convertible into Common Stock or
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<PAGE> 16
equivalent common stock, at a price per share of Common Stock or per share of
equivalent common stock or having a conversion or exercise price per share, as
the case may be, less than the current market price per share of Common Stock
(as defined in Section 11(f) hereof) on such record date, the Purchase Price to
be in effect after such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such date by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding on
such record date plus the number of shares of Common Stock which the aggregate
offering price of the total number of shares of Common Stock or equivalent
common stock to be offered (and/or the aggregate initial conversion price of
the convertible securities so to be offered) would purchase at such current
market price, and the denominator of which shall be the number of shares of
Common Stock outstanding on such record date plus the number of additional
shares of Common Stock and/or equivalent common stock to be offered for
subscription or purchase (or into which the convertible securities so to be
offered are initially convertible). In case such subscription price may be
paid in a consideration, part or all of which shall be in a form other than
cash, the value of such consideration shall be as determined in good faith by a
majority of the Board of Directors, whose determination shall be described in a
statement filed with the Rights Agent. Shares of Common Stock owned by or held
for the account of the Company shall not be deemed outstanding for the purpose
of any such computation. Such adjustment shall be made successively whenever
such a record date is fixed; and in the event that such rights or warrants are
not so issued, the Purchase Price shall be adjusted to be the Purchase Price
which would then be in effect if such record date had not been fixed.
(e) If the Company shall fix a record date for the making of a
distribution to all holders of Common Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing or surviving corporation) of evidences of indebtedness, cash (other
than a regular periodic cash dividend out of earnings or retained earnings of
the Company), assets (other than a dividend payable in Common Stock, but
including any dividend payable in stock other than Common Stock) or convertible
securities, subscription rights or warrants (excluding those referred to in
Section 11(d) hereof), the Purchase Price to be in effect after such record
date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the current market price for one share of Common Stock (as defined in
Section 11(f) hereof) on such record date less the fair market value (as
determined in good faith by a majority of the Board of Directors, whose
determination shall be described in a statement filed with the Rights Agent) of
the portion of the assets or evidences of indebtedness so to be distributed or
of such convertible securities, subscription rights or warrants applicable to
one share of Common Stock, and the denominator of which shall be such current
market price for one share of Common Stock. Such adjustments shall be made
successively whenever such a record date is fixed; and in the event that such
distribution is not so made, the Purchase Price shall again be adjusted to be
the Purchase Price which would then be in effect if such record date had not
been fixed.
(f) For the purpose of any computation hereunder, the "current market
price" of any security (a "Security" for purposes of this Section 11(f)), on
any date shall be deemed to be the average of the daily closing prices per
share of such Security for the 30 consecutive Trading Days (as hereinafter
defined) immediately prior to such date; provided, however, that in
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<PAGE> 17
the event that the current market price per share of such Security is
determined during a period following the announcement by the issuer of such
Security of (i) a dividend or distribution on such Security payable in shares
of such Security or securities convertible into shares of such Security or (ii)
any subdivision, combination or reclassification of such Security, and prior to
the expiration of 30 Trading Days after the ex-dividend date for such dividend
or distribution or the record date for such subdivision, combination or
reclassification, then, and in each such case, the "current market price" shall
be appropriately adjusted to reflect the current market price per share
equivalent of such Security. The closing price for each day shall be the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the Security is not listed or admitted to trading on the New
York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading on
the principal national securities exchange on which the Security is listed or
admitted to trading or, if the Security is not listed or admitted to trading on
any national securities exchange, as reported by the National Association of
Securities Dealers, Inc. Automated Quotation System ("NASDAQ") National Market
System, or if the Security is not listed or admitted to trading on any national
securities exchange or included in the NASDAQ National Market System, the
average of the high bid and low asked prices in the over-the-counter market, as
reported by NASDAQ or such other system then in use, or, if on any such date
the Security is not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a
market in the Security selected by a majority of the Board of Directors. If on
any such date no market maker is making a market in the Security, the fair
value of such Security on such date as determined in good faith by a majority
of the Board of Directors shall be used. The term "Trading Day" shall mean a
day on which the principal national securities exchange on which the Security
is listed or admitted to trading is open for the transaction of business or, if
the Security is not listed or admitted to trading on any national securities
exchange a day on which the NASDAQ National Market System is open for the
transaction of business or, if the Security is not listed or admitted to
trading on any national securities exchange or included in the NASDAQ National
Market System, a Business Day. If the Security is not publicly held or not so
listed or traded, "current market price" shall mean the fair value as
determined in good faith by a majority of the Board of Directors, whose
determination shall be described in a statement filed with the Rights Agent.
(g) No adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in the Purchase
Price; provided, however, that any adjustments which by reason of this Section
11(g) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 11
shall be made to the nearest cent or to the nearest ten-thousandth of a share,
as the case may be. Notwithstanding the first sentence of this Section 11(g),
any adjustment required by this Section 11 shall be made no later than the
earlier of (i) three years from the date of the transaction which mandates such
adjustment or (ii) the Expiration Date.
(h) In the event that at any time, as a result of an adjustment made
pursuant to Section 11(a) or (b) hereof, the holder of any Right shall be
entitled to receive upon exercise of
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<PAGE> 18
such Right any shares of capital stock of the Company other than shares of
Common Stock, thereafter the number of such other shares so receivable upon
exercise of any Right shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the shares contained in Section 11(a) through (e) hereof, inclusive,
and the provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the
shares of Common Stock shall apply on like terms to any such other shares.
(i) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of shares of Common Stock
or other capital stock of the Company purchasable from time to time hereunder
upon exercise of the Rights, all subject to further adjustment of the Purchase
Price.
(j) Unless the Company shall have exercised its election as provided in
Section 11(k) hereof, upon each adjustment of the Purchase Price as a result of
the calculations made in Section 11(d) and (e) hereof, each Right outstanding
immediately prior to the making of such adjustment shall thereafter evidence
the right to purchase, at the adjusted Purchase Price, that number of shares of
Common Stock (calculated to the nearest ten-thousandth) obtained by (i)
multiplying (A) the number of shares of Common Stock covered by a Right
immediately prior to the adjustment by (B) the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price and (ii) dividing
the product so obtained by the Purchase Price in effect immediately after such
adjustment of the Purchase Price.
(k) The Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of shares of Common Stock purchasable upon the
exercise of a Right. Each of the Rights outstanding after such adjustment of
the number of Rights shall be exercisable for the number of shares of Common
Stock for which such Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment of the number
of Rights shall become that number of Rights (calculated to the nearest
ten-thousandth) obtained by dividing the Purchase Price in effect immediately
prior to adjustment of the Purchase Price by the Purchase Price in effect
immediately after adjustment of the Purchase Price. The Company shall make a
public announcement of its election to adjust the number of Rights, indicating
the record date for the adjustment, and, if known at the time, the amount of
the adjustment to be made. This record date may be the date on which the
Purchase Price is adjusted or any day thereafter, but, if the Right
Certificates have been issued, shall be at least 10 days later than the date of
the public announcement. If Right Certificates have been issued, upon each
adjustment of the number of Rights pursuant to this Section 11(k), the Company
shall, as promptly as practicable, cause to be distributed to holders of record
of Right Certificates on such record date Right Certificates evidencing,
subject to Section 14 hereof, the additional Rights to which such holders shall
be entitled as a result of such adjustment, or, at the option of the Company,
shall cause to be distributed to such holders of record in substitution and
replacement for the Right Certificates held by such holders prior to the date
of adjustment, and upon surrender thereof, if required by the Company, new
Right Certificates evidencing all the Rights to which such holders shall be
entitled after such adjustment. Right Certificates so to be distributed shall
be issued, executed
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<PAGE> 19
and countersigned in the manner provided for herein (and may bear, at the
option of the Company, the adjusted Purchase Price) and shall be registered in
the names of the holders of record of Right Certificates on the record date
specified in the public announcement.
(l) Irrespective of any adjustment or change in the Purchase Price or the
number of shares of Common Stock issuable upon the exercise of the Rights, the
Right Certificates theretofore and thereafter issued may continue to express
the Purchase Price and the number of shares which were expressed in the initial
Right Certificates issued hereunder.
(m) Before taking any action that would cause an adjustment reducing the
Purchase Price below the then par value, if any, of the shares of Common Stock
or other securities issuable upon exercise of the Rights, the Company shall
take any corporate action which may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue fully paid
and nonassessable shares of such Common Stock or other securities at such
adjusted Purchase Price. If upon any exercise of the Rights, a holder is to
receive a combination of Common Stock and common stock equivalents, a portion
of the consideration paid upon such exercise, equal to at least the then par
value of a share of Common Stock of the Company, shall be allocated as the
payment for each share of Common Stock of the Company so received.
(n) In any case in which this Section 11 shall require that an adjustment
in the Purchase Price be made effective as of a record date for a specified
event, the Company may elect to defer until the occurrence of such event the
issuing to the holder of any Right exercised after such record date the shares
of Common Stock and other capital stock or securities of the Company, if any,
issuable upon such exercise over and above the shares of Common Stock and other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment;
provided, however, that the Company shall deliver to such holder a due bill or
other appropriate instrument evidencing such holder's right to receive such
additional shares upon the occurrence of the event requiring such adjustment.
(o) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in their good faith judgment a majority of the Board of
Directors shall determine to be advisable in order that any (i) consolidation
or subdivision of the Common Stock, (ii) issuance wholly for cash of any Common
Stock at less than the then current market price, (iii) issuance wholly for
cash of Common Stock or securities which by their terms are convertible into or
exchangeable for Common Stock, (iv) stock dividends or (v) issuance of rights,
options or warrants referred to hereinabove in this Section 11, hereafter made
by the Company to the holders of its Common Stock, shall not be taxable to such
stockholders.
(p) The Company covenants and agrees that it shall not, at any time after
the Distribution Date and so long as the Rights have not been redeemed pursuant
to Section 23 hereof or exchanged pursuant to Section 24 hereof, (i)
consolidate with, (ii) merge with or into,
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<PAGE> 20
or (iii) sell or transfer, in one or more transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to, any other Person, if at the time of or
immediately after such consolidation, merger or sale there are any rights,
warrants or other instruments or securities outstanding or agreements in effect
which would substantially diminish or otherwise eliminate the benefits intended
to be afforded by the Rights.
(q) The Company covenants and agrees that, after the Stock Acquisition
Date, it will not, except as permitted by Sections 23 and 24 hereof, take any
action the purpose or effect of which is to diminish substantially or otherwise
eliminate the benefits intended to be afforded by the Rights.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Sections 11 or 13 hereof, the
Company shall (a) promptly prepare a certificate setting forth such adjustment,
and a brief statement of the facts accounting for such adjustment, (b) promptly
file with the Rights Agent and with each transfer agent for the Common Stock a
copy of such certificate and (c) include a brief summary thereof in a mailing
to each holder of a Right Certificate in accordance with Section 26 hereof, or
prior to the Distribution Date, disclose a brief summary in a filing under the
Securities Exchange Act of 1934, as amended. The Rights Agent shall be fully
protected in relying on any such certificate and on any adjustments therein
contained.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power.
(a) In the event that, directly or indirectly, following the Distribution
Date, (x) the Company shall consolidate with, or merge with and into, any other
Person, (y) any Person shall consolidate with or merge with and into the
Company, and the Company shall be the continuing or surviving corporation of
such merger and, in connection with such merger, all or part of the Common
Stock shall be changed into or exchanged for stock or other securities of any
other Person or cash or any other property, or (z) the Company shall sell, or
otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise
transfer), in one or more transactions, assets or earning power aggregating 50%
or more of the assets or earning power of the Company and its Subsidiaries
(taken as a whole) to any other Person other than to the Company or one or more
of its wholly-owned Subsidiaries, then, and in each such case, proper provision
shall be made so that (i) each holder of a Right, subject to Section 7(e)
hereof, shall thereafter have the right to receive, upon the exercise thereof
at the then current Purchase Price multiplied by the then number of shares of
Common Stock for which a Right is then exercisable (or if a Section 11(b) Event
has occurred prior to the first occurrence of a Section 13 Event, multiplying
the number of such shares for which a Right was exercisable immediately prior
to the first occurrence of a Section 11(b) Event by the Purchase Price in
effect immediately prior to such first occurrence) in accordance with the terms
of this Agreement, such number of shares of freely tradeable Common Stock of
the Principal Party (as hereinafter defined), free and clear of liens, rights
of call or first refusal, encumbrances or other adverse claims, as shall be
equal to the result obtained by (A) multiplying the then current Purchase Price
by the number of shares of Common
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<PAGE> 21
Stock for which a Right is then exercisable (or if a Section 11(b) Event has
occurred prior to the first occurrence of a Section 13 Event, multiplying the
number of such shares of Common Stock for which a Right was exercisable
immediately prior to the first occurrence of a Section 11(b) Event by the
Purchase Price in effect immediately prior to such first occurrence), and
dividing that product by (B) 50% of the current market price per share of the
Common Stock of such Principal Party (determined in the manner described in
Section 11(f) hereof) on the date of consummation of such consolidation,
merger, sale or transfer; (ii) the Principal Party shall thereafter be liable
for, and shall assume, by virtue of such consolidation, merger, sale or
transfer, all the obligations and duties of the Company pursuant to this
Agreement; (iii) the term "Company" shall thereafter be deemed to refer to such
Principal Party, it being specifically intended that the provisions of Section
11 hereof, except for the provisions of 11(b), shall apply to such Principal
Party; and (iv) such Principal Party shall take such steps (including, but not
limited to, the authorization and reservation of a sufficient number of shares
of its Common Stock to permit exercise of all outstanding Rights in accordance
with this Section 13(a)) in connection with such consummation as may be
necessary to assure that the provisions hereof shall thereafter be applicable,
as nearly as reasonably may be, in relation to the shares of its Common Stock
thereafter deliverable upon the exercise of the Rights.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in clause (x) or (y) of
the first sentence of Section 13(a) hereof, the Person that is the issuer of
any securities into which shares of Common Stock of the Company are converted in
such merger or consolidation, and if no securities are so issued, the Person,
including the Company, that is the other party to the merger or consolidation;
and
(ii) in the case of any transaction described in clause (z) of the
first sentence of Section 13(a) hereof, the Person that is the party receiving
the greatest portion of the assets or earning power transferred pursuant to such
transaction or transactions; provided, however, that in any case described in
clause (i) or (ii) in this Section 13(b), (x) if the Common Stock of such
Person is not at such time and has not been continuously over the preceding
12-month period registered under Section 12 of the Exchange Act, and such
Person is a direct or indirect Subsidiary or Affiliate of another Person,
"Principal Party" shall refer to such other Person; (y) in case such Person is
a Subsidiary, directly or indirectly, or Affiliate of more than one Person, the
Common Stocks of all of which are and have been so registered, "Principal
Party" shall refer to whichever of such Persons is the issuer of the Common
Stock having the greatest aggregate market value, and (z) in case such Person
is, or is owned directly or indirectly by, a partnership or joint venture
formed by two or more Persons that are not owned, directly or indirectly, by
the same Person, the rules set forth in (x) and (y) above shall apply to each
of the chains of ownership having an interest in such joint venture as if such
party were a "Subsidiary" of both or all of such joint venturers and the
Principal Parties in each such chain shall bear the obligations set forth in
this Section 13 in the same ratio as their direct or indirect interests in such
Person bear to the total of such interests.
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<PAGE> 22
(c) The Company shall not consummate any such consolidation, merger, sale
or transfer unless the Principal Party shall have a sufficient number of shares
of its authorized Common Stock which have not been issued or reserved for
issuance to permit the exercise in full of the Rights in accordance with this
Section 13 and unless prior thereto the Company and each Principal Party and
each other Person who may become a Principal Party as a result of such
consolidation, merger, sale or transfer shall have executed and delivered to
the Rights Agent a supplemental agreement providing for the terms set forth in
paragraphs (a) and (b) of this Section 13 and further providing that, as soon
as practicable after the date of any consolidation, merger, sale or transfer of
assets mentioned in paragraph (a) of this Section 13, the Principal Party will:
(i) prepare and file a registration statement under the Securities Act
with respect to the Rights and the securities purchasable upon exercise of the
Rights on an appropriate form, will use its best efforts to cause such
registration statement to become effective as soon as practicable after such
filing and will use its best efforts to cause such registration statement to
remain effective (with a prospectus at all times meeting the requirements of
the Securities Act) until the Expiration Date;
(ii) use its best efforts to qualify or register the Rights and the
securities purchasable upon exercise of the Rights under the "blue sky laws" of
such jurisdictions as may be necessary or appropriate; and
(iii) will deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which comply in
all respects with the requirements for registration on Form 10 under the
Exchange Act.
The provisions of this Section 13 shall similarly apply to successive
mergers or consolidations or sales or other transfers. In the event that a
Section 13 Event shall occur at any time after the occurrence of a Section
11(b) Event, the Rights which have not theretofore been exercised shall
thereafter also become exercisable in the manner described in Section 13(a)
hereof.
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of Rights or to
distribute Right Certificates which evidence fractional Rights. In lieu of
such fractional Rights, there shall be paid to the registered holders of the
Right Certificates with regard to which such fractional Rights would otherwise
be issuable, an amount in cash equal to the same fraction of the current
market value of a whole Right. For the purposes of this Section 14(a), the
current market value of a whole Right shall be the closing price of the Rights
for the Trading Day immediately prior to the date on which such fractional
Rights would have been otherwise issuable. The closing price for any day shall
be the last sale price, regular way, or, in case no such sale takes place on
such day, the average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the Rights are not listed or admitted to trading on the
New York Stock Exchange, as reported in the principal
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<PAGE> 23
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the principal national securities exchange on which the
Rights are listed or admitted to trading or, if the Rights are not listed or
admitted to trading on any national securities exchange, as reported by the
NASDAQ National Market System or, if the Rights are not listed or admitted to
trading on any national securities exchange or included in the NASDAQ National
Market System, the last quoted price, or, if not so quoted, the average of the
high bid and low asked prices in the over-the-counter market, as reported by
NASDAQ or such other system then in use or, if on any such date the Rights are
not quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the
Rights selected by a majority of the Board of Directors. If on any such date
no such market maker is making a market in the Rights, the fair value of the
Rights on such date as determined in good faith by a majority of the Board of
Directors shall be used.
(b) The Company shall not be required to issue fractions of shares of
Common Stock upon exercise of the Rights or to distribute certificates which
evidence fractional shares of Common Stock. In lieu of fractional shares of
Common Stock the Company may pay to the registered holders of Right
Certificates at the time such Right Certificates are exercised as herein
provided an amount in cash equal to the same fraction of the current market
value of a share of Common Stock. For purposes of this Section 14(b), the
current market value of a share of Common Stock shall be the closing price of a
share of Common Stock (as determined pursuant to Section 11(f) hereof) for the
Trading Day immediately prior to the date of such exercise.
(c) Following the occurrence of one of the transactions or events
specified in Section 11 hereof giving rise to the right to receive common stock
equivalents (other than Common Stock) or other securities upon the exercise of
a Right, the Company shall not be required to issue fractions of shares or
units of such common stock equivalents or other securities upon exercise of the
Rights or to distribute certificates which evidence fractional shares of such
common stock equivalents or other securities. In lieu of fractional shares or
units of such common stock equivalents or other securities, the Company may pay
to the registered holders of Right Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of
the current market value of a share or unit of such common stock equivalent or
other securities. For purposes of this Section 14(c), the current market value
shall be determined in the manner set forth in Section 11(f) hereof for the
Trading Day immediately prior to the date of such exercise and, if such common
stock equivalent is not traded, each such common stock equivalent shall have
the value of one share of Common Stock.
(d) Except as otherwise expressly provided in this Section 14, the holder
of a Right by the acceptance of the Right expressly waives his right to receive
any fractional Rights or any fractional share upon exercise of Rights.
Section 15. Rights of Action. All rights of action in respect of this
Agreement, except for rights of action given to the Rights Agent under Section
18 or Section 20 hereof, are vested in the respective registered holders of the
Right Certificates (and, prior to the Distribution Date, the registered holders
of Common Stock); and any registered holder of any Right
20
<PAGE> 24
Certificate (or, prior to the Distribution Date, of the Common Stock), without
the consent of the Rights Agent or of the holder of any other Right Certificate
(or, prior to the Distribution Date, of the Common Stock), may, in his own
behalf and for his own benefit, enforce, and may institute and maintain any
suit, action or proceeding against the Company to enforce, or otherwise act in
respect of, his right to exercise the Rights evidenced by such Right
Certificate in the manner provided in such Right Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
will be entitled to specific performance of the obligations under, and
injunctive relief against actual or threatened violations of, the obligations
of any Person subject to this Agreement. Holders of Rights shall be entitled
to recover the reasonable costs and expenses, including attorneys' fees,
incurred by them in any action to enforce the provisions of this Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable only
in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Right Certificates are transferable
only on the registry books of the Rights Agent if surrendered at the
stockholder services office of the Rights Agent or such office designated for
such purpose, duly endorsed or accompanied by a proper instrument of transfer;
and
(c) the Company and the Rights Agent may deem and treat the person in
whose name the Right Certificate (or, prior to the Distribution Date, the
associated Common Stock Certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on the Right Certificate or the associated Common Stock
Certificate made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary.
Section 17. Right Certificate Holder Not Deemed a Stockholder. No
holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of Common Stock or any other
securities of the Company which may at any time be issuable on the exercise of
the Rights represented thereby, nor shall anything contained herein or in any
Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 25 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Right Certificate shall have been exercised in accordance with the
provisions hereof.
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<PAGE> 25
Section 18. Concerning the Rights Agent. The Company agrees to pay to
the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and other disbursements incurred in the
administration and execution of this Agreement and the exercise and performance
of its duties hereunder. The Company also agrees to indemnify the Rights Agent
for, and to hold it harmless against, any loss, liability, or expense, incurred
without negligence, bad faith or willful misconduct on the part of the Rights
Agent, for anything done or omitted by the Rights Agent in connection with the
acceptance and administration of this Agreement, including the costs and
expenses of defending against any claim of liability.
The Rights Agent shall be protected and shall incur no liability for or in
respect of any action taken, suffered or omitted by it in connection with its
administration of this Agreement in reliance upon any Right Certificate or
certificate for Common Stock or for other securities of the Company, instrument
of assignment or transfer, power of attorney, endorsement, affidavit, letter,
notice, direction, consent, certificate, statement, or other paper or document
believed by it to be genuine and to be signed, executed and, where necessary,
verified or acknowledged, by the proper Person or Persons.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
Any corporation into which the Rights Agent or any successor Rights Agent may
be merged or with which it may be consolidated, or any corporation resulting
from any merger or consolidation to which the Rights Agent or any successor
Rights Agent shall be a party, or any corporation succeeding to the corporate
trust business or stock transfer business of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties hereto, provided that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of Section 21
hereof. In case at the time such successor Rights Agent shall succeed to the
agency created by this Agreement, any of the Right Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Right
Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor
Rights Agent or in the name of the successor Rights Agent; and in all such
cases such Right Certificates shall have the full force provided in the Right
Certificates and in this Agreement.
In case at any time the name of the Rights Agent shall be changed and at
such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and in case at that time any
of the Right Certificates shall not have been countersigned, the Rights Agent
may countersign such Right Certificates either in its prior name or in its
changed name; and in all such cases such Right Certificates shall have the full
force provided in the Right Certificates and in this Agreement.
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<PAGE> 26
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Right Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by the Chairman of the Board, the President
or any Vice President and by the Treasurer or any Assistant Treasurer or the
Secretary or any Assistant Secretary of the Company and delivered to the Rights
Agent; and such certificate shall be full authorization to the Rights Agent for
any action taken or suffered in good faith by it under the provisions of this
Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Right
Certificates (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof (except the
due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Right Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Right Certificate; nor shall it
be responsible for any adjustment required under the provisions of Sections 11
or 13 hereof or responsible for the manner, method or amount of any such
adjustment or the ascertaining of the existence of facts that would require any
such adjustment (except with respect to the exercise of Rights evidenced by
Right Certificates after actual notice to the Rights Agent of any such
adjustment); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any shares
of Common Stock or other securities to be issued pursuant to this Agreement or
any Right Certificate or as to whether any shares of Common Stock or other
securities will, when issued, be validly authorized and issued, fully paid and
nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and
23
<PAGE> 27
other acts, instruments and assurances as may reasonably be required by the
Rights Agent for the carrying out or performing by the Rights Agent of the
provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
[Chairman of the Board, the President, any Vice President, the Secretary, any
Assistant Secretary, the Treasurer or any Assistant Treasurer] of the Company,
and to apply to such officers for advice or instructions in connection with its
duties, and it shall not be liable for any action taken or suffered to be taken
by it in good faith in accordance with instructions of any such officer.
(h) The Rights Agent and any stockholder, director, officer, employee,
agent or representative of the Rights Agent may buy, sell or deal in any of the
Rights or other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract with or
lend money to the Company or otherwise act as fully and freely as though it
were not the Rights Agent under this Agreement. Nothing herein shall preclude
the Rights Agent from acting in any other capacity for the Company or for any
other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable
or accountable for any act, default, neglect or misconduct of any such
attorneys or agents or for any loss to the Company resulting from any such act,
default, neglect or misconduct, provided reasonable care was exercised in the
selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Rights Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1, clause 2
and/or, in the case of the certificate attached to the form of election to
purchase, clause 3 thereof, the Rights Agent shall not take any further action
with respect to such requested exercise of transfer without first consulting
with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer
agent of the Common Stock by registered or certified mail, and to the holders
of the Right Certificates by first-class mail. The Company may remove the
Rights Agent or any successor Rights Agent upon 30 days' notice in writing,
mailed to the Rights Agent or successor Rights Agent, as the case may be, and
to each transfer agent of the Common Stock by registered or certified mail, and
to the holders of the Right Certificates by first-class mail or, prior to the
Distribution Date, through any filing made by the Company
24
<PAGE> 28
pursuant to the Securities Exchange Act of 1934, as amended. If the Rights
Agent shall resign or be removed or shall otherwise become incapable of acting,
the Company shall appoint a successor to the Rights Agent. If the Company
shall fail to make such appointment within a period of 30 days after such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Right Certificate (who shall, with such notice, submit his Right Certificate
for inspection by the Company), then the registered holder of any Right
Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether
appointed by the Company or by such a court, shall be (a) a corporation
organized and doing business under the laws of the United States or of any
state, in good standing, having an office in the States of New York or
Missouri, which is authorized under such laws to exercise corporate trust or
stock transfer powers and is subject to supervision or examination by federal
or state authority and which has at the time of its appointment as Rights Agent
a combined capital and surplus of at least $25,000,000, or (b) an affiliate of
a corporation described in clause (a) of this sentence. After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and
transfer to the successor Rights Agent any property at the time held by it
hereunder, and execute and deliver any further assurance, conveyance, act or
deed necessary for the purpose. Not later than the effective date of any such
appointment the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Stock, and mail
a notice thereof in writing to the registered holders of the Right Certificates
or, prior to the Distribution Date, through any filing made by the Company
pursuant to the Securities Exchange Act of 1934, as amended. Failure to give
any notice provided for this Section 21, however, or any defect therein, shall
not affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Right Certificates. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Right Certificates evidencing Rights in such form
as may be approved by a majority of the Board of Directors to reflect any
adjustment or change in the Purchase Price and the number or kind or class of
shares of stock or other securities or property purchasable under the Right
Certificates made in accordance with the provisions of this Agreement.
In addition, in connection with the issuance or sale of Common Stock
following the Distribution Date and prior to the redemption, exchange or
expiration of the Rights, the Company (a) shall with respect to shares of
Common Stock so issued or sold pursuant to the exercise of stock options or
under any employee benefit plan or arrangement, or upon the exercise,
conversion or exchange of securities hereinafter issued by the Company, and (b)
may, in any other case, if deemed necessary or appropriate by the Board of
Directors of the Company, issue Right Certificates representing the appropriate
number of Rights in connection with such issuance or sale; provided, however,
that (i) no such Right Certificates shall be issued if, and to the extent that,
the Company shall be advised by counsel that such issuance would create a
significant risk of material adverse tax consequences to the Company or the
Person to whom such Right Certificates would be issued, and (ii) no Right
Certificate shall be issued if, and to the
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<PAGE> 29
extent that, appropriate adjustment shall otherwise have been made in lieu of
the issuance thereof.
Section 23. Redemption and Termination.
(a) A majority of the Board of Directors of the Company may, at its
option, at any time prior to the earlier of (i) the close of business on the
[tenth Business Day following the] Stock Acquisition Date or (ii) the close of
business on the Final Expiration Date, elect to redeem all but not less than
all of the then outstanding Rights at a redemption price of $.01 per Right, as
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such redemption price being
hereinafter referred to as the "Redemption Price"). Notwithstanding anything
contained in this Agreement to the contrary, the Rights shall not be
exercisable after the first occurrence of a Section 11(b) Event until such time
as the Company's right of redemption hereunder has expired. The redemption of
the Rights by the Board of Directors may be made effective at such time, on
such basis and with such conditions as the Board of Directors in its sole
discretion may establish.
(b) Immediately upon the action of a majority of the Board of Directors
electing to redeem the Rights, evidence of which shall be promptly filed with
the Rights Agent, or, when appropriate, immediately upon the time or
satisfaction of such conditions as the Board of Directors may have established,
and without any further action and without any notice, the right to exercise
the Rights will terminate and the only right thereafter of the holders of
Rights shall be to receive the Redemption Price. The Company shall promptly
give public disclosure of any such redemption; provided, however, that the
failure to give, or any defect in, any such disclosure shall not affect the
validity of such redemption. Within 10 days after the action of the Board of
Directors ordering the redemption of the Rights, the Company shall give notice
of such redemption to the holders of the then outstanding Rights by mailing
such notice to all such holders at their last addresses as they appear upon the
registry books of the Rights Agent or, prior to the Distribution Date, on the
registry books of the Transfer Agent for the Common Stock. Any notice which is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice. Each such notice of redemption will state the
method by which the payment of the Redemption Price will be made.
(c) Neither the Company nor any of its Affiliates or Associates may
redeem, acquire or purchase for value any Rights at any time in any manner
other than that specifically set forth in this Section 23, Section 24 hereof
and other than in connection with the purchase of Common Stock prior to the
Distribution Date.
Section 24. Exchange.
(a) The Board of Directors of the Company may, at its option, at any time
after any Person becomes an Acquiring Person, exchange all or part of the then
outstanding and exercisable Rights (which shall not include Rights that have
become void pursuant to the provisions of Section 7(e) hereof) for Common Stock
at an exchange ratio of one share of Common Stock per Right, appropriately
adjusted to reflect any stock split, stock dividend or
26
<PAGE> 30
similar transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "Exchange Ratio"). Notwithstanding the
foregoing, the Board of Directors shall not be empowered to effect such
exchange at any time after any Person (other than the Company, any Subsidiary
of the Company, any employee benefit plan or compensation arrangement of the
Company or any such Subsidiary, or any entity holding securities of the Company
to the extent organized, appointed or established by the Company or any such
Subsidiary for or pursuant to the terms of any such employee benefit plan or
compensation arrangement), together with all Affiliates and Associates of such
Person, becomes the Beneficial Owner of 50% or more of the Voting Power of the
Company.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the exchange of any Rights pursuant to subsection (a) of this Section
24 and without any further action and without any notice, the right to exercise
such Rights shall terminate and the only right thereafter of a holder of such
Rights shall be to receive that number of shares of Common Stock equal to the
number of such Rights held by such holder multiplied by the Exchange Ratio.
The Company promptly shall give public notice of any such exchange; provided,
however, that the failure to give, or any defect in, such notice shall not
affect the validity of such exchange. The Company promptly shall mail a notice
of any such exchange to all of the holders of such Rights at their last
addresses as they appear upon the registry books of the Rights Agent. Any
notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of exchange
will state the method by which the exchange of Common Stock for Rights will be
effected and, in the event of any partial exchange, the number of Rights which
will be exchanged. Any partial exchange shall be effected pro rata based on
the number of Rights (other than Rights which have become void pursuant to the
provisions of Section 7(e) hereof) held by each holder of Rights.
(c) In the event that there shall not be sufficient shares of Common Stock
issued but not outstanding or authorized but unissued to permit any exchange of
Rights as contemplated in accordance with this Section 24, the Company shall
take all such action as may be necessary to authorize additional shares of
Common Stock for issuance upon exchange of the Rights.
(d) The Company shall not be required to issue fractions of Common Stock
or to distribute certificates which evidence fractional shares of Common Stock.
In lieu of such fractional shares of Common Stock, the Company shall pay to
the registered holders of the Right Certificates with regard to which such
fractional shares of Common Stock would otherwise be issuable an amount in cash
equal to the same fraction of the current market value of a whole share of
Common Stock. For the purposes of this paragraph (d), the current market value
of a whole share of Common Stock shall be the closing price of a share of
Common Stock (as determined pursuant to the second sentence of Section 11(f)
hereof) for the Trading Day immediately prior to the date of exchange pursuant
to this Section 24.
Section 25. Notice of Proposed Actions. In case the Company shall
propose at any time after the Distribution Date (a) to pay any dividend payable
in stock of any class to the holders of its Common Stock or to make any other
distribution to the holders of its Common
27
<PAGE> 31
Stock (other than a regular periodic cash dividend out of earnings or retained
earnings of the Company), or (b) to offer to the holders of its Common Stock
rights or warrants to subscribe for or to purchase any additional shares of
Common Stock or shares of stock of any other class or any other securities,
rights or options, or (c) to effect any reclassification of its Common Stock
(other than a reclassification involving only the subdivision of outstanding
shares of Common Stock), or (d) to effect any consolidation or merger into or
with, or to effect any sale or other transfer (or to permit one or more of its
Subsidiaries to effect any sales or other transfer), in one or more
transactions, of 50% or more of the assets or earning power of the Company and
its Subsidiaries (taken as a whole) to, any other Person, or (e) to effect the
liquidation, dissolution or winding up of the Company, or (f) to declare or pay
any dividend on the Common Stock payable in Common Stock or to effect a
subdivision, combination or consolidation of the Common Stock (by
reclassification or otherwise than by payment of dividends in Common Stock),
then, in each such case, the Company shall give to each holder of a Right, in
accordance with Section 26 hereof, a notice of such proposed action, which
shall specify the record date for the purposes of such stock dividend,
distribution of rights or warrants, or the date on which such reclassification,
consolidation, merger, sale, transfer, liquidation, dissolution, or winding up
is to take place and the date of participation therein by the holders of the
Common Stock, if any such date is to be fixed. Such notice shall be so given
in the case of any action covered by clauses (a) or (b) above at least ten days
prior to the record date for determining holders of the Common Stock for
purposes of such action, and in the case of any such other action, at least ten
days prior to the date of the taking of such proposed action or the date of
participation therein by the holders of Common Stock, whichever shall be the
earlier. The failure to give notice required by this Section 25 or any defect
therein shall not affect the legality or validity of the action taken by the
Company or the vote upon any such action.
In case a Section 11(b) Event shall occur, then the Company shall as soon
as practicable thereafter give to each holder of a Right Certificate, in
accordance with Section 26 hereof, a notice of the occurrence of such event,
which shall specify the event and the consequences of the event to holders of
Rights under Section 11(b) hereof.
Section 26. Notices. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Right Certificate
to or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing
with the Rights Agent) as follows:
New Ralcorp Holdings, Inc.
800 Market Street, Suite 2900
St. Louis, Missouri 63101
Attention: Secretary
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
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<PAGE> 32
Boatmen's Trust Company
100 North Broadway
St. Louis, Missouri 63101
Attention:
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
of the Company.
Section 27. Supplements and Amendments. The Company may from time to
time supplement or amend this Agreement without the approval of any holders of
Right Certificates in order (a) to cure any ambiguity, (b) to correct or
supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, (c) to shorten or lengthen any
time period hereunder (including without limitation to extend the Final
Expiration Date), (d) increase or decrease the Purchase Price, or (e) to change
or supplement the provisions hereunder in any manner which the Company may deem
necessary or desirable which shall not adversely affect the interests of the
holders of Right Certificates (other than an Acquiring Person or an Affiliate
or Associate of an Acquiring Person); provided, however, that from and after
such time as any Person becomes an Acquiring Person, this Agreement shall not
be amended in any manner which would adversely affect the interests of the
holders of Rights; provided further that this Agreement may not be supplemented
or amended to lengthen pursuant to clause (c) of this sentence, (A) the time
period relating to the when the Rights may be redeemed at such time as the
Rights are not then redeemable, or (B) any other time period unless such
lengthening is for the purpose of protecting, enhancing or clarifying the
rights of, and/or the benefits to, the holders of the Rights; provided further
that the Company shall have the right to make any changes unilaterally
necessary to facilitate the appointment of a successor Rights Agent, which such
changes shall be set forth in a writing by the Company or by the Company and
such successor Rights Agent. Without limiting the foregoing, the Company may
at any time prior to such time as any Person becomes an Acquiring Person amend
this Agreement to lower the thresholds set forth in Sections 1(a) and 3(a)
hereof from 20% to not less than the greater of (i) any percentage greater
than the largest percentage of the Voting Power of the Company then known by
the Company to be beneficially owned by any Person (other than the Company, any
Subsidiary of the Company, or any employee benefit plan or compensation
arrangement of the Company or any Subsidiary of the Company, and any entity
holding securities of the Company to the extent organized, appointed or
established by the Company or any such Subsidiary for or pursuant to the terms
of any such employee benefit plan or compensation arrangement) together with
all Affiliates or Associates of such Person and (ii) 10%. Upon the delivery of
a certificate from an appropriate officer of the Company which states that the
proposed supplement or amendment is in compliance with the terms of this
Section 27, the Rights Agent shall execute such supplement or amendment.
Section 28. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
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<PAGE> 33
Section 29. Benefits of This Agreement. Nothing in this Agreement shall
be construed to give to any person or corporation other than the Company, the
Rights Agent and the registered holders of the Right Certificates (and, prior
to the Distribution Date, the Common Stock) any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Rights Agent and the registered
holders of the Right Certificates (and, prior to the Distribution Date, the
Common Stock).
Section 30. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
It is the intent of the parties hereto to enforce the remainder of the terms,
provisions, covenants and restrictions of this Agreement to the maximum extent
permitted by law.
Section 31. Governing Law. This Agreement and each Right Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of Missouri and for all purposes shall be governed by and construed in
accordance with the laws of such State applicable to contracts to be made and
performed entirely within such State.
Section 32. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
Section 33. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
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<PAGE> 34
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, all as of the day and year first above written.
Attest: NEW RALCORP HOLDINGS, INC.
By By
------------------------------- -----------------------------
Name: Name:
Title: Title:
Attest: BOATMEN'S TRUST COMPANY
By By
-------------------------------- ---------------------------
Name: Name:
Title: Title:
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<PAGE> 35
Exhibit A
[Form of Right Certificate]
Certificate No. R- Rights
---
NOT EXERCISABLE AFTER THE EXPIRATION DATE.
AT THE OPTION OF THE COMPANY, THE RIGHTS ARE SUBJECT
TO REDEMPTION AT $.01 PER RIGHT OR EXCHANGE FOR
COMMON STOCK, UNDER THE CIRCUMSTANCES AND
ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
[THE RIGHTS REPRESENTED BY THIS RIGHT CERTIFICATE
WERE ISSUED TO A PERSON WHO WAS AN ACQUIRING
PERSON OR AN AFFILIATE OR AN ASSOCIATE OF AN
ACQUIRING PERSON. THIS RIGHT CERTIFICATE AND
THE RIGHTS REPRESENTED HEREBY ARE VOID
IN THE CIRCUMSTANCES SPECIFIED IN SECTION
7(e) OF THE RIGHTS AGREEMENT.]*
Right Certificate
NEW RALCORP HOLDINGS, INC.
This certifies that _______________, or registered assigns, is the
registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Shareholder Protection Rights Agreement dated as of ____________, 1996 (the
"Rights Agreement") between New Ralcorp Holdings, Inc., a Missouri corporation
(the "Company"), and Boatmen's Trust Company (the "Rights Agent"), to purchase
from the Company at any time after the Distribution Date (as such term is
defined in the Rights Agreement) and prior to 5:00 p.m. St. Louis, Missouri
time on the Expiration Date, as that term is defined in the Rights Agreement,
at the stockholder services office (or such office designated for such purpose)
of the Rights Agent, or its successor as Rights
*/ The portion of the legend in brackets shall be inserted
only if applicable.
1
<PAGE> 36
Agent, one fully paid, nonassessable share of the Common Stock, par value $0.01
per share ("Common Stock"), of the Company, at a purchase price of $__________
per share (the "Purchase Price") upon presentation and surrender of this Right
Certificate with the Form of Election to Purchase duly executed. The number of
Rights evidenced by this Right Certificate (and the number of shares which may
be purchased upon exercise of each Right) and the Purchase Price set forth
above, are the number and Purchase Price as of [_________________] based on
the shares of Common Stock of the Company as constituted at such date.
The Purchase Price and the number of shares of Common Stock which may be
purchased upon the exercise of each of the Rights evidenced by this Right
Certificate are subject to modification and adjustment upon the happening of
certain events as provided in the Rights Agreement.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates. Copies of
the Rights Agreement are on file at the Company and the above-mentioned office
of the Rights Agent and are also available upon written request to the Company.
This Right Certificate, with or without other Right Certificates, upon
surrender at the stockholder services office (or such office designated for
such purpose) of the Rights Agent, may be exchanged for another Right
Certificate or Right Certificates of like tenor and date evidencing Rights
entitling the holder to purchase a like aggregate number of shares of Common
Stock as the Rights evidenced by the Right Certificate or Right Certificates
surrendered shall have entitled such holder to purchase. If this Right
Certificate shall be exercised in part, the holder shall be entitled to
receive, upon surrender hereof, another Right Certificate or Right Certificates
for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate may be redeemed by the Company at its option at a redemption
price of $.01 per Right on or prior to the Stock Acquisition Date (as defined
in the Rights Agreement). In addition, subject to the provisions of the Rights
Agreement, each Right evidenced by this Certificate may be exchanged by the
Company at its option for one share of Common Stock following the Stock
Acquisition Date and prior to the time an Acquiring Person, as that term is
defined in the Rights Agreement, owns 50% or more of the Voting Power, as that
term is defined in the Rights Agreement, of the Company.
No fractional shares of Common Stock will be issued upon the exercise of
any Rights evidenced hereby. In lieu of fractions of a share, a cash payment
will be made, as provided in the Rights Agreement.
No holder of this Right Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of shares of Common Stock or
of any other securities of the Company which may at any time be issuable on the
exercise hereof, nor shall anything
2
<PAGE> 37
contained in the Rights Agreement or herein be construed to confer upon the
holder hereof, as such, any of the rights of a stockholder of the Company or
any right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in the Rights Agreement), or to receive
dividends or subscription rights, or otherwise, until the Rights evidenced by
this Right Certificate shall have been exercised as provided in the Rights
Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal. Dated as of _______ __, 19___.
Attest: NEW RALCORP HOLDINGS, INC.
By__________________________ By__________________________
Name: Name:
Title: Title:
Countersigned:
____________________________
By__________________________
Authorized signature
3
<PAGE> 38
[Form of Reverse Side of Right Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED ___________________________ hereby sells, assigns and
transfers unto _______________________________________________________________
(Please print name and address of transferee)
this Right Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _________________________
Attorney to transfer the within Right Certificate on the books of the
within-named Company, with full power of substitution.
Dated:_________ , 19__
__________________________________________
Signature
(Signature must conform in all respects to
name of holder as specified on the face of
this Right Certificate)
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
4
<PAGE> 39
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Right Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as such terms are defined
pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Right Certificate from any
Person who is, was or subsequently became an Acquiring Person or an Affiliate
or Associate of an Acquiring Person.
Dated:____, 19__
______________________________
Signature
(Signature must conform in all
respects to name of holder as
specified on the face of this Right
Certificate)
5
<PAGE> 40
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise the Right Certificate.)
To New Ralcorp Holdings, Inc.:
The undersigned hereby irrevocably elects to exercise
Rights represented by this Right Certificate to purchase the shares of
Common Stock issuable upon the exercise of such Rights and requests that
certificates for such shares be issued in the name of:
Name: ____________________
Address___________________
___________________
Social security
or taxpayer identification
number:___________________
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Name: ____________________
Address: _________________
____________________
Social security
or taxpayer identification
number:___________________
Dated:___________ , 19
_________________________________________
Signature
(Signature must conform in all respects to
name of holder as specified on the face of
this Right Certificate)
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
6
<PAGE> 41
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Right Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person
or an Affiliate or Associate of any such Acquiring Person (as such terms are
defined pursuant to the Rights Agreement);
(2) this Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as such terms are defined
pursuant to the Rights Agreement);
(3) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Right Certificate from any
Person who is, was or became an Acquiring Person or an Affiliate or Associate
of an Acquiring Person.
Dated:_________, 19__
______________________________
Signature
(Signature must conform in all
respects to name of holder as
specified on the face of this
Right Certificate)
NOTICE
The signature in the foregoing Forms of Assignment and Election must
conform to the name as written upon the face of this Right Certificate in every
particular, without alteration or enlargement or any change whatsoever.
In the event the certification set forth above in the form of Assignment
or the form of Election to Purchase, as the case may be, is not completed, the
Company and the Rights Agent will deem the beneficial owner of the Rights
evidenced by this Right Certificate to be an Acquiring Person or an Affiliate
or Associate thereof (as defined in the Rights Agreement) and such Assignment
or Election to Purchase will not be honored as described in Section 7(e) of the
Rights Agreement.
7
<PAGE> 42
EXHIBIT B
NEW RALCORP HOLDINGS, INC.
SUMMARY OF COMMON STOCK
PURCHASE RIGHTS
On December 18, 1996, the Board of Directors of New Ralcorp Holdings, Inc.
(the "Company") declared a dividend distribution of one Common Stock Purchase
Right (the "Rights") for each outstanding share of Common Stock, par value
$0.01 per share (the "Common Stock"), of the Company (other than shares held in
the Company's treasury). The dividend distribution is payable on _________,
1996 to the stockholders of record at the close of business on ________, 1996.
Except as set forth below, each Right entitles the registered holder to
purchase from the Company one share of Common Stock at a price of $30 per
share, subject to adjustment (the "Purchase Price"). The description and terms
of the Rights are set forth in a Shareholder Protection Rights Agreement ("the
Rights Agreement") between the Company and Boatmen's Trust Company, as Rights
Agent (the "Rights Agent").
Until the earlier of (i) the close of business on the tenth business day
following the public announcement or the date that a person or group of
affiliated or associated persons (other than the Company, any subsidiary of the
Company or any employee benefit plan of the Company) (an "Acquiring Person")
has acquired, or obtained the right to acquire, 20% or more of the outstanding
shares of Common Stock of the Company without the prior express written consent
of the Company executed on behalf of the Company by a duly authorized officer
of the Company following express approval by action of at least a majority of
the members of the Board of Directors then in office (the "Stock Acquisition
Date"), or (ii) the close of business on the tenth business day (or such later
date as determined by the Board of Directors but not later than the Stock
Acquisition Date) following the commencement of a tender offer or exchange
offer, without the prior written consent of the Company, by a person (other
than the Company, any subsidiary of the Company or any employee benefit plan of
the Company) which, upon consummation, would result in such party's control of
more than 20% or more of the Company's voting stock (the earlier of the dates
in clause (i) or (ii) above being called the "Distribution Date"), the Rights
will be evidenced, with respect to any of the Company's Common Stock
certificates outstanding as of __________, 1996 (other than shares held in the
Company's treasury), by such Common Stock certificates. The Rights Agreement
provides that, until the Distribution Date, the Rights will be transferred with
and only with the Company's Common Stock. Until the Distribution Date (or
earlier redemption, exchange or expiration of the Rights), new Common Stock
certificates issued after ___________, 1996, upon transfer, new issuance or
issuance from the Company's treasury of the Company's Common Stock, will
contain a notation incorporating the Rights Agreement by reference. Until the
Distribution Date (or earlier redemption, exchange or expiration of the
Rights), the surrender for transfer of any of the Company's Common Stock
certificates outstanding as of ___________, 1996 will also constitute the
transfer of the Rights associated with the Common Stock represented by such
certificate. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Right Certificates") will be mailed to
holders of record of the Company's Common Stock as of
1
<PAGE> 43
the close of business on the Distribution Date and such separate certificates
alone will then evidence the Rights.
The Rights are not exercisable until the Distribution Date. The Rights
will expire on the later to occur of the ten year anniversary of the date on
which the distribution of Common Stock to the holders of common stock of
Ralcorp Holdings, Inc. is effected, or January 31, 2007, unless earlier
redeemed or exchanged by the Company, as described below.
The Purchase Price payable, and the number of shares of Common Stock or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of the Common
Stock, (ii) upon the issuance of Common Stock or rights to subscribe for shares
of Common Stock or securities convertible into Common Stock at less than the
then current market price of the Common Stock, or (iii) upon the distribution
to holders of Common Stock of securities (other than those described in (ii)
above), evidences of indebtedness or assets (excluding regular periodic cash
dividends out of earnings or retained earnings).
If any person or group (other than the Company, any subsidiary of the
Company or any employee benefit plan of the Company) acquires 20% or more of
the Company's outstanding voting stock without the prior written consent of the
Board of Directors, each Right, except those held by such persons, would
entitle each holder of a Right to acquire such number of shares of the
Company's Common Stock as shall equal the result obtained by multiplying the
then current Purchase Price by the number of shares of Common Stock for which a
Right is then exercisable and dividing that product by 50% of the then current
per-share market price of Company Common Stock.
If any person or group (other than the Company, any subsidiary of the
Company or any employee benefit plan of the Company) acquires more than 20% but
less than 50% of the outstanding Company Common Stock without prior written
consent of the Board of Directors, each Right, except those held by such
persons, may be exchanged by the Board of Directors for one share of Company
Common Stock.
If the Company were acquired in a merger or other business combination
transaction where the Company is not the surviving corporation or where Company
Common Stock is exchanged or changed or 50% or more of the Company's assets or
earnings power is sold in one or several transactions without the prior written
consent of the Board of Directors, each Right would entitle the holders thereof
(except for the Acquiring Person) to receive such number of shares of the
acquiring company's common stock as shall be equal to the result obtained by
multiplying the then current Purchase Price by the number of shares of Company
Common Stock for which a Right is then exercisable and dividing that product by
50% of the then current market price per share of the common stock of the
acquiring company on the date of such merger or other business combination
transaction.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional shares will be issued. In lieu of
fractional shares, an adjustment in cash will be made based
2
<PAGE> 44
on the market price of the Common Stock on the last trading date prior to
the date of exercise.
The Rights can be redeemed by the Board of Directors for $.01 per Right at
any time prior to the tenth business day following the Stock Acquisition Date
(as defined above). Immediately upon the action of the Board of Directors of
the Company electing to redeem the Rights, the Company shall make announcement
thereof, and the right to exercise the Rights will terminate and the only right
of the holders of Rights will be to receive the redemption price.
The terms of the Rights may be amended by the Board of Directors of the
Company without the consent of the holders of the Rights, including, but not
limited to, an amendment to lower certain thresholds described above to not
less than the greater of: (i) any percentage greater than the largest
percentage of the Voting Power (as defined in the Rights Agreement) of the
Company then known by the Company to be beneficially owned by any person or
group of affiliated or associated persons (other than an excepted person); and
(ii) 10%; except that from and after such time as any person or group of
affiliated or associated persons becomes an Acquiring Person no such amendment
may adversely affect the interests of the holders of the Rights.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the
right to vote or to receive dividends.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 10 dated
December ___, 1996. A copy of the Rights Agreement is available free of charge
from the Company. This summary description of the Rights does not purport to
be complete and is qualified in its entirety by reference to the Rights
Agreement, which is incorporated herein by reference.
3
<PAGE> 1
EXHIBIT 10.01
RALCORP HOLDINGS, INC. INCENTIVE STOCK PLAN
Section I. General Provisions
A. Purpose of Plan
The purpose of the Ralcorp Incentive Stock Plan (the "Plan") is to enhance
the profitability and value of the Company for the benefit of its shareholders
by providing for stock options and other stock awards to attract, retain and
motivate directors, officers and other key employees who make important
contributions to the success of the Company.
B. Definitions of Terms as Used in the Plan
1. "Affiliate" means any subsidiary, whether directly or indirectly owned,
or parent of the Company, or any other entity designated by the Committee.
2. "Award" means a Stock Option granted under Section II of the Plan or
Other Stock Award granted under Section III of the Plan.
3. "Board" means the Board of Directors of Ralcorp Holdings, Inc.
4. "Committee" means the Nominating and Compensation Committee of the
Board of Directors of the Company or any successor committee the Board of
Directors may designate to administer the Plan.
5. "Company" means Ralcorp Holdings, Inc.
6. "Employee" means any person who is employed by the Company or an
Affiliate.
7. "Fair Market Value" of any class or series of Stock means the fair and
reasonable value thereof as determined by the Committee according to prices in
trades as reported on the New York Stock Exchange--Composite Transactions. If
there are no prices so reported or if, in the opinion of the Committee, such
reported prices do not represent the fair and reasonable value of the Stock,
then the Committee shall determine Fair Market Value by any means it deems
reasonable under the circumstances.
8. "Stock" means the Ralcorp Common Stock or any other authorized class or
series of common stock or any such other security outstanding upon the
reclassification of any of such classes or series of common stock, including,
without limitation, any stock split-up, stock dividend, creation of targeted
stock, spin-off or other distributions of stock in respect of stock, or any
reverse stock split-up, or recapitalization of the Company or any merger or
consolidation of the Company with any Affiliate.
C. Scope of Plan and Eligibility
Any Employee or Director selected by the Board or Committee shall be
eligible for any Award contemplated under the Plan.
D. Authorization and Reservation
<PAGE> 2
There shall be established a reserve of 2,900,000 authorized shares of
Stock, which shall be the total number of shares of Stock that may be presently
issued pursuant to Awards. (Subject to adjustments pursuant to other
provisions of the Plan.) The reserves may consist of authorized but unissued
shares of Stock or of reacquired shares, or both. Upon the cancellation or
expiration of an Award, all shares of Stock not issued thereunder shall become
available for the granting of additional Awards. The total number of shares of
Stock that may be issued to any one participant during the term of Plan shall
not exceed 1,500,000 shares of Stock.
E. Administration of the Plan
1. The Committee shall administer the Plan and, in connection therewith,
it shall have full power to grant Awards, construe and interpret the Plan,
establish rules and regulations and perform all other acts it believes
reasonable and proper, including the power to delegate responsibility to others
to assist it in administering the Plan.
2. The Committee shall include three or more members of the Board of
Directors of the Company. Its members shall be appointed by and serve at the
pleasure of the Board of Directors.
3. The determination of those eligible to receive Awards, and the amount
and type of each Award shall rest in the sole discretion of the Committee or
the Board, subject to the provisions of the Plan.
Section II. Stock Options
A. Description
The Committee or the Board may grant options with respect to any class or
series of Stock ("Stock Options") that qualify as "Incentive Stock Options"
under Section 422A of the Internal Revenue Code of 1986, as amended, and it may
grant Stock Options that do not so qualify.
B. Terms and Conditions
1. Each Stock Option shall be set forth in a written agreement containing
such terms and conditions as the Committee or the Board may determine, subject
to the provisions of the Plan.
2. The purchase price of any shares exercised under any Stock Option must
be paid in full upon such exercise. The payment shall be made in such form,
which may be cash or Stock, as the Committee or the Board may determine.
3. No Incentive Stock Option may be exercised after the expiration of ten
(10) years from the date such option is granted.
4. The option price of shares subject to any Stock Option may be any price
determined by the Committee or the Board.
5. In the case of an Incentive Stock Option, the aggregate Fair Market
Value (determined as of the time the option is granted) of the appropriate
class or series of Stock with respect to which options are exercisable for the
first time by any Employee during any calendar year (under all such plans of
his employer corporation and its parent and subsidiary corporations) shall not
exceed $100,000.
<PAGE> 3
Section III. Other Stock Awards
In addition to Stock Options, the Committee or the Board may grant Other
Stock Awards payable in any class or series of Stock upon such terms and
conditions as the Committee or the Board may determine, subject to the
provisions of the Plan. Other Stock Awards may include, but are not limited to,
the following types of Awards:
1. Restricted Stock Awards. The Committee or the Board may grant
Restricted Stock Awards, each of which consists of a grant of shares of any
class or series of Stock subject to terms and conditions determined by the
Committee or the Board in each entity's discretion, subject to the provisions
of the Plan. Such terms and conditions shall be set forth in written
agreements. The shares of Stock granted will be restricted and may not be sold,
pledged, transferred or otherwise disposed of until the lapse or release of
restrictions in accordance with the terms of the agreement and the Plan. Prior
to the lapse or release of restrictions, all shares of Stock are subject to
forfeiture in accordance with Section IV of the Plan. Shares of Stock issued
pursuant to a Restricted Stock Award will be issued for no monetary
consideration.
2. Stock Related Deferred Compensation. The Committee or the Board may,
in its discretion, permit the deferral of payment of an Employee's cash bonus or
other cash compensation in the form of either cash or any class or series of
Stock (or Stock equivalents, each corresponding to a share of such Stock) under
such terms and conditions as the Committee or the Board may prescribe. Payment
of such compensation may be deferred for such period or until the occurrence of
such event as the Committee or the Board may determine. The Committee or the
Board may, in each entity's discretion, determine whether any deferral, whether
made in cash or such class or series of Stock (or Stock equivalents) shall be
paid on distribution in cash or in Stock. If a deferral is permitted in the
form of Stock or Stock equivalents, the number of shares of Stock or number of
Stock equivalents deferred will be determined by dividing the amount of the
Employee's bonus or other cash compensation being deferred by the average of
the closing prices of the appropriate class or series of Stock, as reported by
the New York Stock Exchange-Composite Transactions, during the ten trading days
preceding the effective date of the Committee's or the Board's decision to
defer. If the Committee or the Board directs the payments in any class or
series of Stock of any portion of amounts deferred in cash, the number of
shares of such Stock paid will be determined based on the average of the
closing prices of such Stock, as reported by the New York Stock
Exchange-Composite Transactions, during the ten trading days before the payment
is due. The Committee, or the Board in its discretion, may permit the
conversion of deferrals in any class or series of Stock or Stock equivalents
into deferrals in cash, or the conversion of deferrals in cash into deferrals
in any class or series of Stock or Stock equivalents. In the event such
conversion is permitted, the conversion price of the appropriate class or
series of Stock shall be based on the Fair Market Value of such Stock.
Additional rights or restrictions may apply in the event of a change in control
of the Company.
Section IV. Forfeiture of Awards
A. Unless the Committee or the Board shall have determined otherwise, the
recipient of an Award shall forfeit all amounts not payable or rights not
exercisable upon the occurrence of any of the following events:
<PAGE> 4
1. The recipient is discharged for cause.
2. The recipient voluntarily terminates his employment other than
by retirement after attainment of age 62, or such other age as may be
provided for in the Award.
3. The recipient engages in competition with the Company or any
Affiliate.
4. The recipient engages in any activity or conduct contrary to the
best interests of the Company or any Affiliate.
B. The Committee or the Board may include in any Award any additional or
different conditions of forfeiture it may deem appropriate. The Committee or
the Board also, after taking into account the relevant circumstances, may waive
any condition of forfeiture stated above or in the Award contract.
C. In the event of forfeiture, the recipient shall lose all rights in
and to the Award. Except in the case of Restricted Stock Awards as to which the
restrictions have not lapsed, this provision, however, shall not be invoked to
force any recipient to return any Stock already received under an Award.
D. Such determinations as may be necessary for application of this
Section, including any grant of authority to others to make determinations
under this Section, shall be at the sole discretion of the Committee or the
Board, and its determinations shall be conclusive.
Section V. Death of Awardee
Upon the death of an Award recipient, the following rules apply:
1. A Stock Option, to the extent exercisable on the date of his
death, may be exercised at any time within six (6) months, or such longer
period not exceeding three years as the Committee or the Board may
determine, after the recipient's death, but not after the expiration of
the term of the Option, by the recipient's designated beneficiary or
personal representative or the person or persons entitled thereto by will
or in accordance with the laws of descent and distribution.
2. In the case of any other Award, the Stock due shall be
determined as of the date of the recipient's death, and the Company shall
issue the appropriate number of shares of the appropriate class or series
of Stock or pay cash equal to the Fair Market Value thereof or such other
value as the Committee or the Board may in its sole discretion determine.
Such issuance of shares of such Stock or payment of cash shall be made to
recipient's designated beneficiary or personal representative or the
person or persons entitled thereto by will or in accordance with the laws
of descent and distribution.
An Award recipient may file with the Committee a written designation of a
beneficiary or beneficiaries (subject to such limitations as to the classes and
number of beneficiaries and contingent beneficiaries as the Committee and the
Board may from time to time prescribe) to exercise, in the event of the death
of the recipient, a Stock Option, or to receive, in such event, any Other Stock
Awards. The Committee and the Board reserve the right to review and approve
beneficiary designations. A recipient may from time to time revoke or change
any such designation or beneficiary and any designation of beneficiary
<PAGE> 5
under the Plan shall be controlling over any other disposition, testamentary or
otherwise; provided, however, that if the Committee or the Board shall be in
doubt as to the right of any such beneficiary to exercise any Stock Option or
to receive any Other Stock Award, the Committee or the Board, as the case may
be, may determine to recognize only an exercise by the legal representative of
the recipient, in which case the Company and the Committee and the Board and
the members thereof shall not be under any further liability to anyone.
Section VI. Other Governing Provisions
A. Transferability
Except as otherwise noted herein, no award shall be transferable other
than by beneficiary designation, will or the laws of descent and distribution,
and any right granted under an Award may be exercised during the lifetime of
the holder thereof only by him or by his guardian or legal representative.
B. Rights as a Shareholder
A recipient of an Award shall, unless the terms of the Award provide
otherwise, have no rights as a shareholder, with respect to any options or
shares which may be issued in connection with the Award until the issuance of a
Stock certificate for such shares, and no adjustment other than as stated
herein shall be made for dividends or other rights for which the record date is
prior to the issuance of such Stock certificate.
C. General Conditions of Awards
No Employee or other person shall have any right with respect to this
Plan, the shares reserved or in any Award, contingent or otherwise, until
written evidence of the Award shall have been delivered to the recipient and
all the terms, conditions and provisions of the Plan applicable to such
recipient have been met.
D. Reservation of Rights of Company
The selection of an Employee for any Award shall not give such person any
right to continue as an Employee and the right to discharge any Employee is
specifically reserved.
E. Acceleration
The Committee or the Board may, in its sole discretion, accelerate the
date of exercise of any Award.
F. Adjustments
Upon any stock split-up, spin-off, stock dividend, issuance of any
targeted stock, combination or reclassification with respect to any outstanding
class or series of Stock, or consolidation, merger or sale of all or
substantially all of the assets of the Company, appropriate adjustments shall
be made to the shares reserved under Section I.D. of the Plan and the terms of
all outstanding Awards.
G. Withholding of Taxes
The Company shall deduct from any payment, or otherwise collect from the
recipient, any taxes required to be withheld by federal, state or local
governments in connection with any Award. The recipient may elect, subject to
approval by the Committee
<PAGE> 6
or the Board, to have shares withheld by the Company in satisfaction of such
taxes, or to deliver other shares of Stock owned by the recipient in
satisfaction of such taxes. Provided, however, that no such election may be
made within six months of the date of grant of the relevant award, with respect
to Awards of recipients subject to Section 16 of the Securities Exchange Act of
1934 ("Section 16"). The number of shares to be withheld or delivered shall be
calculated by reference to the Fair Market Value of the appropriate class or
series of Stock on the date that such taxes are determined.
H. No Warranty of Tax Effect
Except as may be contained in the terms of any Award, no opinion is
expressed nor warranties made as to the effect for federal, state, or local tax
purposes of any Award.
I. Amendment of Plan
The Board of Directors of the Company may, from time to time, amend,
suspend or terminate the Plan in whole or in part, and if terminated may
reinstate any or all of the provisions of the Plan, except that no amendment,
suspension or termination may apply to the terms of any Award (contingent or
otherwise) granted prior to the effective date of such amendment, suspension or
termination without the recipient's consent.
J. Construction of Plan
The place of administration of the Plan shall be in the State of Missouri,
and the validity, construction, interpretation, administration and effect of
the Plan and of its rules and regulations, and rights relating to the Plan,
shall be determined solely in accordance with the laws of the State of
Missouri.
K. Elections of Corporate Officers
Notwithstanding anything to the contrary stated herein, any election or
other action with respect to an Award of a recipient subject to Section 16 will
be null and void if any such election or other action would cause said
recipient to be subject to short-swing profit recovery under Section 16.
Section VII. Effective Date and Term
This Plan shall be effective upon adoption by the shareholders of the
Company. The Plan shall continue in effect until January 31, 2007, when it
shall terminate. Upon termination, any balances in the share reserve shall be
canceled, and no Awards shall be granted under the Plan thereafter. The Plan
shall continue in effect, however, insofar as is necessary to complete all of
the Company's obligations under outstanding Awards to conclude the
administration of the Plan.
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EXHIBIT 10.03
MANAGEMENT CONTINUITY AGREEMENT
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 his position, and
that Ralcorp be able to receive and rely upon his advice, if it is requested,
as to the best interests of Ralcorp and its shareholders without concern that
he 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 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 his 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 his
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 his last annual bonus awarded by
Ralston Purina Company, Ralcorp's former parent
company).
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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.
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 January 31, 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 his regular occupation because of injury or
sickness.
To determine whether the Executive is Disabled, he 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.
h. "Discount Rate" means 4.57% compounded semi-annually
(120% of the applicable Federal rate determined under Section
1274(d) of the Code and the regulations thereunder and
utilized pursuant to the Retirement Plan to determine the
present value of benefits payable under the Retirement Plan).
i. "Involuntary Termination" shall be any termination of
the Executive's employment with the Company (a) to which the
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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, he is required to be based anywhere
other than his 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 executive
benefit or compensation plan, stock ownership plan, stock
purchase plan, stock option 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.
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(v) the liquidation, dissolution, consolidation, or merger
of the Company or transfer of all or a significant portion
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.
j. "Normal Retirement Date" shall be the date on which
the Executive attains age 65.
k. "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.
l. 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 year
following the Change in Control -- 36 months;
(ii) if the Qualifying Termination is an
Involuntary Termination that occurs at any time during
the second year following the Change in Control -- 24
months;
(iii) 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
(iv) if the Qualifying Termination is a
Voluntary Termination that occurs at any time during
the three years following the Change in Control -- 12
months,
but in no event shall the Payment Period extend beyond the
Executive's Normal Retirement Date.
m. "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 his Normal
Retirement Date or Termination for Cause. "Qualifying
Termination" shall not include any change in the Executive's
employment status due to Disability.
n. "Retirement Plan" means the Ralcorp Holdings, Inc.
Retirement Plan or any successor qualified plan.
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<PAGE> 5
o. "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.
p. "Supplemental Plan" means the Ralcorp Holdings, Inc.
Supplemental Retirement Plan, as amended.
q. A "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 his 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
his duties; or
(ii) the willful engaging by the Executive in misconduct which is
materially injurious to the Company, monetarily or otherwise,
in either 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 his opposition to or support
thereof).
r. "Voluntary Termination" shall be any termination of
the Executive's employment with the Company other than an
Involuntary Termination.
2. Operation of Agreement. This Agreement shall not 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
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Agreement is not exclusive with regard to benefits to be provided to the
Executive on his 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
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, he shall be entitled to the following "Severance Benefits":
a. Subject to any offer provided in Section 3g below,
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 his 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 he 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. Subject to any offer provided in Section 3g below, 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 his beneficiary, if applicable, would have been entitled to
receive if he had remained employed by Ralcorp at a compensation
level equal to his Base Compensation for the entirety of the
applicable Payment Period, and (b) his actual benefit, if any, to
which he and his 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;
d. Subject to any offer provided in Section 3g below, 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
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<PAGE> 7
Agreement, or to recover or recoup from the Executive or
his 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;
e. 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 paragraph 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 following such
Executive's Qualifying Termination; and
f. The Company shall be entitled to withhold from any
payments made pursuant to this paragraph three any federal,
state or local taxes required to be withheld by law or
regulation.
g. The Company shall off-set from any amounts otherwise
payable to the Executive under a, c and d above, the amount
payable or to be paid for similar matters pursuant to any
Employment Agreement between the Executive and the Company.
The Executive may file with the 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 his 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 his 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 his 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 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,
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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 herein before 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 (3) above.
5. Missouri Law to Govern. This Agreement shall be 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 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.
7. Taxes; Set-off. All payments to be made to the 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 him or anyone else.
8. Severability. The invalidity and unenforceability of 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 unenforceable provision were omitted.
IN WITNESS WHEREOF, the undersigned have executed this Agreement effective
the ______ day of ______________________________ , 1994.
RALCORP HOLDINGS, INC.
___________________________ _______________________________
Executive
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EXHIBIT 10.04
EMPLOYMENT AGREEMENT
This Contract made between Joe R. Micheletto ("Employee"), whose address
is ______________________ and Ralcorp Holdings, Inc. a corporation with its
principal place of business at 800 Market Street, St. Louis, Missouri, and its
subsidiaries and affiliates ("the Company).
In consideration of the mutual convenants and promises, hereinafter set
forth, the parties hereto agree as follows:
RECITALS
WHEREAS, Employee is presently employed by the Company as its Chief
Executive Officer and has extensive experience as an executive level manager
for the Company, and
WHEREAS, the Company is presently contemplating a spin-off from its parent
company, Ralcorp Holdings, Inc., and a business reorganization and desires to
secure Employee's employment for a definite period of time in anticipation of
such spin-off and reorganization, and
WHEREAS, Employee desired to be employed by the Company in the executive
capacity described below:
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the Company and Employee hereby agree as follows:
SECTION ONE
EMPLOYMENT
The Company hereby employs Employee as its Chief Executive Officer.
Employee's day to day reporting responsibilities shall be to the Company's
Board of Directors. The Company
<PAGE> 2
may modify or realign Employee's duties and
responsibilities as it deems necessary during the term of this Agreement.
SECTION TWO
BEST EFFORTS OF EMPLOYEE
Employee agrees that he will at all times faithfully and to the best of
his ability, experience and talent, perform all of the duties that may be
required of or from him pursuant to the express and implicit terms hereof.
Employee acknowledges that he is obligated to manage the business of the
Company in a sound and business like manner and in conformity with all laws and
regulations governing the conduct of the business of the Company including, but
not limited to, laws and regulations relating to anti-trust, employment
practices, employee health and safety, and environmental matters.
SECTION THREE
TERM
A. This Employment Agreement is contingent upon the Company's completion
of its anticipated spin-off and reorganization. In the event that such
spin-off and reorganization does not occur, this Agreement shall be deemed to
be null, void and of no effect.
B. In the event that such spin-off and reorganization is completed, this
Agreement shall continue until January 31, 2000 unless otherwise terminated in
accordance with the provisions of SECTION SIX hereof. This Agreement may be
extended for additional periods upon the mutual written agreement of the
parties.
SECTION FOUR
COMPENSATION
A. Effective the first day of the month following the spin date the
Company shall pay Employee a monthly base salary of $25,000, payable on the
last day of each month. The base
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salary may be changed by mutual agreement of the parties at any time during the
term of this Agreement; provided, however, that until January 31, 2000,
Employee's monthly base salary shall not be less than the amount set forth
above.
B. In addition to the base salary set forth in Paragraph A, the Company
shall pay Employee an annual bonus of $150,000, payable in October of each
year. The bonus may be changed by mutual agreement of the parties at any time
during the term of this Agreement; provided, however, that until January 31,
2000, Employee's bonus shall not be less than the amount set forth above.
C. In addition to the base salary set forth in Paragraph A, Employee shall
be provided with an executive level benefit program including stock options
and/or stock grants as determined by the Company.
SECTION FIVE
CHANGE OF CONTROL
After the spin-off and reorganization of the Company, Employee and the
Company will enter into a Management Continuity Agreement. Such Agreement will
be in addition to this Agreement. Prior to the spin-off and reorganization,
the Management Continuity Agreement previous entered into by Employee shall
control in the event of a change in control involving the Company.
SECTION SIX
TERMINATION
A. The Company reserves the right to terminate the employment of Employee
at any time without cause. However, except as provided in SECTION SIX B below,
if such termination occurs prior to January 31, 2000, Employee shall be
entitled to his base salary and bonus as set forth in SECTIONS FOUR A and B
until January 31, 2000, provided that Employee remains in compliance with the
terms and conditions of this Agreement. In addition, any awards previously
granted to Employee under the Company's Incentive Stock Plan, including, but
not limited to
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any restricted stock awards, stock options or similar incentive stock awards,
or benefits, including a Company matching contribution under its
Deferred Compensation Plan for Key Employees, shall vest, unless such
termination occurs pursuant to SECTION SIX B. During any period of time in
which Employee's base salary and bonus is continued pursuant to this SECTION
SIX, Employee agrees that he shall make himself available to render consulting
services, as requested by the Company, from time to time until such time as he
may become employed on a full-time basis elsewhere.
B. Notwithstanding the other provisions of this Agreement, the Company
shall be entitled to terminate this Agreement immediately and without notice
if, at any time during this Agreement Employee: (i) refuses without cause to
perform his assigned duties, be openly critical in the media of officers or
directors of the Company, engage in any conduct which the Board of Directors
determines to be inimical to or contrary to the best interests of the Company,
be convicted or plead guilty or nolo contendere to any felony or any charge
involving illegal drugs or any other crime involving moral turpitude, or
otherwise materially breach this Agreement; (ii) becomes incapable by reason of
physical or mental disability of performing the essential functions of his
position; or (iii) dies. In such case the Company shall only be obligated to
pay Employee any base salary due (prorated on a daily basis) to the date of the
breach or other occurrence.
C. In the event Employee voluntarily terminates his employment, Employee
shall not be entitled to receive any of the pay or benefits that are provided
pursuant to this Agreement, unless such termination is a constructive
termination. In the event of such termination, the remaining provisions of
this Agreement shall remain effective. A constructive termination is defined as
a material change in the Employee's title, responsibilities, office location,
compensation or benefit.
D. In the event that Employee's employment is terminated for any reason,
Employee shall not be eligible to participate in any severance pay plan
established by the Company for its employees.
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SECTION SEVEN
BENEFITS
It is agreed that, during the term of this Agreement, Employee shall be
eligible for coverage under such pension plan, group health insurance plan,
401(k) plan, vacation, holiday and other employee programs or policies in
effect from time to time for salaried employees of the Company, except as
provided in SECTION SIX C above. Neither participation in any such plan,
program or policy nor continuation of base compensation to Employee pursuant to
SECTION SIX A shall be deemed to extend Employee's employment with the Company
or his participation in any such plan, program or policy.
SECTION EIGHT
CONFIDENTIALITY
Employee agrees that, in addition to any other limitations contained in
this Agreement, regardless of the circumstances of Employee's termination of
employment, he will not take, or communicate or disclose to any person, firm,
corporation or other entity, any information relating to the Company's customer
lists, prices, trade secrets, methods, systems, advertising, or any other
confidential knowledge or secrets that Employee might from time to time acquire
with respect to the business of the Company or any of its affiliates or
subsidiaries, unless Employee obtains written consent of the Company. Employee
also specifically acknowledges the continued validity and effect of any
Agreement as to Confidentiality and Inventions previously signed by Employee
and that the terms of any such agreement are incorporated into this Agreement
by this reference.
SECTION NINE
NON-COMPETITION
In the event Employee's employment terminates pursuant to SECTION SIX,
Employee will not, for the duration of this Agreement and six months
thereafter, for himself, or on behalf of
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any other person, firm, partnership or corporation, engage in the business of
selling or marketing or engage in the design, manufacture and/or sale of any
item or product handled from time-to-time by the Company; nor will he directly
or indirectly, for himself or on behalf of, or in conjunction with, any other
person, firm, partnership or corporation, solicit or attempt to solicit the
business or patronage of any person, firm or corporation or partnership for the
purposes of selling or marketing products manufactured by the Company or other
products similar to those manufactured by the Company or perform such other
incidental business and service in which the Company currently engages.
SECTION TEN
ARBITRATION
As additional consideration for this Employment Agreement, Employee agrees
that any differences, claims, or matters in dispute arising between the
Company and Employee out of or in connection with his employment or the
termination of his employment by the Company including, but not limited to the
terms and conditions of this Agreement, allegations of wrongful termination,
allegations of employment discrimination or allegations of discriminatory or
retaliatory discharge under any federal, state or local discrimination law
shall be submitted by them to arbitration by the American Arbitration
Association, or its successor, and the determination of the American
Arbitration Association, or its successor, shall be final and absolute. The
arbitrator shall be governed by the duly promulgated rules and regulations of
the American Arbitration Association, or its successor, and the pertinent
provisions of the laws of the State of Missouri relating to arbitration. The
decision of the arbitrator may be entered as a judgment in any court of the
State of Missouri or elsewhere.
SECTION ELEVEN
MISCELLANEOUS PROVISIONS
A. This Agreement represents the entire agreement between the parties and
any prior understandings or representations of any kind preceding the date of
this Agreement shall not be
6
<PAGE> 7
binding on either party except to the extent incorporated into this Agreement.
This Agreement shall not be altered, amended or modified except in writing
signed by the Chief Executive Officer of the Company and by Employee.
B. This Agreement shall be binding upon and shall inure to the benefit of
the assigns, heirs, legatees or personal representatives of Employee and the
successors or assigns of the Company.
C. Neither this Agreement nor any right or interest hereunder shall be
assignable or transferable by Employee, his beneficiaries or legal
representatives without the Company's prior written consent; provided, however,
that nothing in this Section shall preclude (i) Employee from designating a
beneficiary to receive any benefit payable hereunder upon his death, or (ii)
the executors, administrators, or other legal representatives of his estate
from assigning or transferring any rights hereunder to the person or persons
entitled thereunto.
D. The headings of sections are included solely for convenience of
reference and shall not control the meaning or interpretation of any of the
provisions of this Agreement.
E. This Agreement shall be construed according to the laws of the State of
Missouri.
F. No term or condition of the Agreement shall be deemed to have been
waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver unless specifically stated therein, and each such waiver
shall operate only as to the specific term or condition waived and shall not
constitute a wavier of such term or condition for the future or of any act
other than that specifically waived.
G. If, for any reason, any provision of the Agreement is held invalid,
such invalidity shall not affect any other provision of the Agreement not held
so invalid, and each such other provision shall to the full extent consistent
with law continue in full force and effect.
The parties have entered into this Employment Agreement based solely upon
the terms and conditions set forth herein. THIS AGREEMENT CONTAINS A BINDING
ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES.
7
<PAGE> 8
IN WITNESS WHEREOF, the parties have executed this Agreement on the
_________ day of __________________, 19__.
RALCORP HOLDINGS, INC.
____________________________ By:_________________________
Joe R. Micheletto William P. Stiritz
Chairman
8
<PAGE> 1
EXHIBIT 10.05(A)
EMPLOYMENT AGREEMENT
This Contract made between James A. Nichols ("Employee"), whose address is
______________________ and Ralcorp Holdings, Inc., a corporation with its
principal place of business at 800 Market Street, St. Louis, Missouri, and its
subsidiaries and affiliates ("the Company).
In consideration of the mutual convenants and promises, hereinafter set
forth, the parties hereto agree as follows:
RECITALS
WHEREAS, Employee is presently employed by the Company as Corporate Vice
President and President, Ralston Foods, Inc., and has extensive experience as
an executive level manager for the Company, and
WHEREAS, the Company is presently contemplating a spin-off from its parent
company, Ralcorp Holdings, Inc., and a business reorganization and desires to
secure Employee's employment for a definite period of time in anticipation of
such spin-off and reorganization, and
WHEREAS, Employee desired to be employed by the Company in the executive
capacity described below:
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the Company and Employee hereby agree as follows:
SECTION ONE
EMPLOYMENT
The Company hereby employs Employee as its Corporate Vice President and
President, Ralston Foods, Inc. Employee's day to day reporting
responsibilities shall be to the Company's
<PAGE> 2
Chief Executive Officer. The Company may modify or realign Employee's duties
and responsibilities as it deems necessary during the term of this Agreement.
SECTION TWO
BEST EFFORTS OF EMPLOYEE
Employee agrees that he will at all times faithfully and to the best of
his ability, experience and talent, perform all of the duties that may be
required of or from him pursuant to the express and implicit terms hereof.
Employee acknowledges that he is obligated to manage the business of the
Company in a sound and business like manner and in conformity with all laws and
regulations governing the conduct of the business of the Company including, but
not limited to, laws and regulations relating to anti-trust, employment
practices, employee health and safety, and environmental matters.
SECTION THREE
TERM
A. This Employment Agreement is contingent upon the Company's completion
of its anticipated spin-off and reorganization. In the event that such
spin-off and reorganization does not occur, this Agreement shall be deemed to
be null, void and of no effect.
B. In the event that such spin-off and reorganization is completed, this
Agreement shall continue until January 31, 2000 unless otherwise terminated in
accordance with the provisions of SECTION SIX hereof. This Agreement may be
extended for additional periods upon the mutual written agreement of the
parties.
SECTION FOUR
COMPENSATION
A. Effective the first day of the month following the spin date the
Company shall pay Employee a monthly base salary of $15,000, payable on the
last day of each month. The base
2
<PAGE> 3
salary may be changed by mutual agreement of the parties at any time during the
term of this Agreement; provided, however, that until January 31, 2000,
Employee's monthly base salary shall not be less than the amount set forth
above.
B. In addition to the base salary set forth in Paragraph A, the Company
shall pay Employee an annual bonus of $90,000, payable in October of each year.
The bonus may be changed by mutual agreement of the parties at any time during
the term of this Agreement; provided, however, that until January 31, 2000,
Employee's bonus shall not be less than the amount set forth above.
C. In addition to the base salary set forth in Paragraph A, Employee shall
be provided with an executive level benefit program including stock options
and/or stock grants as determined by the Company.
SECTION FIVE
CHANGE OF CONTROL
After the spin-off and reorganization of the Company, Employee and the
Company will enter into a Management Continuity Agreement. Such Agreement will
be in addition to this Agreement. Prior to the spin-off and reorganization,
the Management Continuity Agreement previous entered into by Employee shall
control in the event of a change in control involving the Company.
SECTION SIX
TERMINATION
A. The Company reserves the right to terminate the employment of Employee
at any time without cause. However, except as provided in SECTION SIX B below,
if such termination occurs prior to January 31, 2000, Employee shall be
entitled to his base salary and bonus as set forth in SECTIONS FOUR A and B
until January 31, 2000, provided that Employee remains in compliance with the
terms and conditions of this Agreement. In addition, any awards previously
granted to Employee under the Company's Incentive Stock Plan, including, but
not limited to
3
<PAGE> 4
any restricted stock awards, stock options or similar incentive stock awards,
or benefits, including a Company matching contribution under its Deferred
Compensation Plan for Key Employees, shall vest, unless such termination occurs
pursuant to SECTION SIX B. During any period of time in which Employee's base
salary and bonus is continued pursuant to this SECTION SIX, Employee agrees
that he shall make himself available to render consulting services, as
requested by the Company, from time to time until such time as he may become
employed on a full-time basis elsewhere.
B. Notwithstanding the other provisions of this Agreement, the Company
shall be entitled to terminate this Agreement immediately and without notice
if, at any time during this Agreement Employee: (i) refuses without cause to
perform his assigned duties, be openly critical in the media of officers or
directors of the Company, engage in any conduct which the Board of Directors
determines to be inimical to or contrary to the best interests of the Company,
be convicted or plead guilty or nolo contendere to any felony or any charge
involving illegal drugs or any other crime involving moral turpitude, or
otherwise materially breach this Agreement; (ii) becomes incapable by reason of
physical or mental disability of performing the essential functions of his
position; or (iii) dies. In such case the Company shall only be obligated to
pay Employee any base salary due (prorated on a daily basis) to the date of the
breach or other occurrence.
C. In the event Employee voluntarily terminates his employment, Employee
shall not be entitled to receive any of the pay or benefits that are provided
pursuant to this Agreement, unless such termination is a constructive
termination. In the event of such termination, the remaining provisions
of this Agreement shall remain effective. A constructive termination is defined
as a material change in the Employee's title, responsibilities, office
location, compensation or benefit.
D. In the event that Employee's employment is terminated for any reason,
Employee shall not be eligible to participate in any severance pay plan
established by the Company for its employees.
4
<PAGE> 5
SECTION SEVEN
BENEFITS
It is agreed that, during the term of this Agreement, Employee shall be
eligible for coverage under such pension plan, group health insurance plan,
401(k) plan, vacation, holiday and other employee programs or policies in
effect from time to time for salaried employees of the Company, except as
provided in SECTION SIX C above. Neither participation in any such plan,
program or policy nor continuation of base compensation to Employee pursuant to
SECTION SIX A shall be deemed to extend Employee's employment with the Company
or his participation in any such plan, program or policy.
SECTION EIGHT
CONFIDENTIALITY
Employee agrees that, in addition to any other limitations contained in
this Agreement, regardless of the circumstances of Employee's termination of
employment, he will not take, or communicate or disclose to any person, firm,
corporation or other entity, any information relating to the Company's customer
lists, prices, trade secrets, methods, systems, advertising, or any other
confidential knowledge or secrets that Employee might from time to time acquire
with respect to the business of the Company or any of its affiliates or
subsidiaries, unless Employee obtains written consent of the Company. Employee
also specifically acknowledges the continued validity and effect of any
Agreement as to Confidentiality and Inventions previously signed by Employee
and that the terms of any such agreement are incorporated into this Agreement
by this reference.
SECTION NINE
NON-COMPETITION
In the event Employee's employment terminates pursuant to SECTION SIX,
Employee will not, for the duration of this Agreement and six months
thereafter, for himself, or on behalf of
5
<PAGE> 6
any other person, firm, partnership or corporation, engage in the business of
selling or marketing or engage in the design, manufacture and/or sale of any
item or product handled from time-to-time by the Company; nor will he directly
or indirectly, for himself or on behalf of, or in conjunction with, any other
person, firm, partnership or corporation, solicit or attempt to solicit the
business or patronage of any person, firm or corporation or partnership for the
purposes of selling or marketing products manufactured by the Company or other
products similar to those manufactured by the Company or perform such other
incidental business and service in which the Company currently engages.
SECTION TEN
ARBITRATION
As additional consideration for this Employment Agreement, Employee agrees
that any differences, claims, or matters in dispute arising between the
Company and Employee out of or in connection with his employment or the
termination of his employment by the Company including, but not limited to the
terms and conditions of this Agreement, allegations of wrongful termination,
allegations of employment discrimination or allegations of discriminatory or
retaliatory discharge under any federal, state or local discrimination law
shall be submitted by them to arbitration by the American Arbitration
Association, or its successor, and the determination of the American
Arbitration Association, or its successor, shall be final and absolute. The
arbitrator shall be governed by the duly promulgated rules and regulations of
the American Arbitration Association, or its successor, and the pertinent
provisions of the laws of the State of Missouri relating to arbitration. The
decision of the arbitrator may be entered as a judgment in any court of the
State of Missouri or elsewhere.
SECTION ELEVEN
MISCELLANEOUS PROVISIONS
A. This Agreement represents the entire agreement between the parties and
any prior understandings or representations of any kind preceding the date of
this Agreement shall not be
6
<PAGE> 7
binding on either party except to the extent incorporated into this Agreement.
This Agreement shall not be altered, amended or modified except in writing
signed by the Chief Executive Officer of the Company and by Employee.
B. This Agreement shall be binding upon and shall inure to the benefit of
the assigns, heirs, legatees or personal representatives of Employee and the
successors or assigns of the Company.
C. Neither this Agreement nor any right or interest hereunder shall be
assignable or transferable by Employee, his beneficiaries or legal
representatives without the Company's prior written consent; provided, however,
that nothing in this Section shall preclude (i) Employee from designating a
beneficiary to receive any benefit payable hereunder upon his death, or (ii)
the executors, administrators, or other legal representatives of his estate
from assigning or transferring any rights hereunder to the person or persons
entitled thereunto.
D. The headings of sections are included solely for convenience of
reference and shall not control the meaning or interpretation of any of the
provisions of this Agreement.
E. This Agreement shall be construed according to the laws of the State of
Missouri.
F. No term or condition of the Agreement shall be deemed to have been
waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver unless specifically stated therein, and each such waiver
shall operate only as to the specific term or condition waived and shall not
constitute a wavier of such term or condition for the future or of any act
other than that specifically waived.
G. If, for any reason, any provision of the Agreement is held invalid,
such invalidity shall not affect any other provision of the Agreement not held
so invalid, and each such other provision shall to the full extent consistent
with law continue in full force and effect.
The parties have entered into this Employment Agreement based solely upon
the terms and conditions set forth herein. THIS AGREEMENT CONTAINS A BINDING
ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES.
7
<PAGE> 8
IN WITNESS WHEREOF, the parties have executed this Agreement on the
_________ day of __________________, 19__.
RALCORP HOLDINGS, INC.
____________________________ By:_________________________
James A. Nichols Joe R. Micheletto
Chief Executive Officer
8
<PAGE> 1
EXHIBIT 10.05(B)
EMPLOYMENT AGREEMENT
This Contract made between Kevin J. Hunt ("Employee"), whose address is
______________________ and Ralcorp Holdings, Inc., a corporation with its
principal place of business at 800 Market Street, St. Louis, Missouri, and its
subsidiaries and affiliates ("the Company).
In consideration of the mutual convenants and promises, hereinafter set
forth, the parties hereto agree as follows:
RECITALS
WHEREAS, Employee is presently employed by the Company as Corporate Vice
President and President, Bremner, Inc., and has extensive experience as an
executive level manager for the Company, and
WHEREAS, the Company is presently contemplating a spin-off from its parent
company, Ralcorp Holdings, Inc., and a business reorganization and desires to
secure Employee's employment for a definite period of time in anticipation of
such spin-off and reorganization, and
WHEREAS, Employee desired to be employed by the Company in the executive
capacity described below:
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the Company and Employee hereby agree as follows:
SECTION ONE
EMPLOYMENT
The Company hereby employs Employee as its Corporate Vice President and
President, Bremner, Inc. Employee's day to day reporting responsibilities
shall be to the Company's Chief
<PAGE> 2
Executive Officer. The Company may modify or realign Employee's duties and
responsibilities as it deems necessary during the term of this Agreement.
SECTION TWO
BEST EFFORTS OF EMPLOYEE
Employee agrees that he will at all times faithfully and to the best of
his ability, experience and talent, perform all of the duties that may be
required of or from him pursuant to the express and implicit terms hereof.
Employee acknowledges that he is obligated to manage the business of the
Company in a sound and business like manner and in conformity with all laws and
regulations governing the conduct of the business of the Company including, but
not limited to, laws and regulations relating to anti-trust, employment
practices, employee health and safety, and environmental matters.
SECTION THREE
TERM
A. This Employment Agreement is contingent upon the Company's completion
of its anticipated spin-off and reorganization. In the event that such
spin-off and reorganization does not occur, this Agreement shall be deemed to
be null, void and of no effect.
B. In the event that such spin-off and reorganization is completed, this
Agreement shall continue until January 31, 2000 unless otherwise terminated in
accordance with the provisions of SECTION SIX hereof. This Agreement may be
extended for additional periods upon the mutual written agreement of the
parties.
SECTION FOUR
COMPENSATION
A. Effective the first day of the month following the spin date the
Company shall pay Employee a monthly base salary of $11,667, payable on the
last day of each month. The base
2
<PAGE> 3
salary may be changed by mutual agreement of the parties at any time during the
term of this Agreement; provided, however, that until January 31, 2000,
Employee's monthly base salary shall not be less than the amount set forth
above.
B. In addition to the base salary set forth in Paragraph A, the Company
shall pay Employee an annual bonus of $70,000, payable in October of each year.
The bonus may be changed by mutual agreement of the parties at any time during
the term of this Agreement; provided, however, that until January 31, 2000,
Employee's bonus shall not be less than the amount set forth above.
C. In addition to the base salary set forth in Paragraph A, Employee shall
be provided with an executive level benefit program including stock options
and/or stock grants as determined by the Company.
SECTION FIVE
CHANGE OF CONTROL
After the spin-off and reorganization of the Company, Employee and the
Company will enter into a Management Continuity Agreement. Such Agreement will
be in addition to this Agreement. Prior to the spin-off and reorganization,
the Management Continuity Agreement previous entered into by Employee shall
control in the event of a change in control involving the Company.
SECTION SIX
TERMINATION
A. The Company reserves the right to terminate the employment of Employee
at any time without cause. However, except as provided in SECTION SIX B below,
if such termination occurs prior to January 31, 2000, Employee shall be
entitled to his base salary and bonus as set forth in SECTIONS FOUR A and B
until January 31, 2000, provided that Employee remains in compliance with the
terms and conditions of this Agreement. In addition, any awards previously
granted to Employee under the Company's Incentive Stock Plan, including, but
not limited to
3
<PAGE> 4
any restricted stock awards, stock options or similar incentive stock awards,
or benefits, including a Company matching contribution under its Deferred
Compensation Plan for Key Employees, shall vest, unless such termination occurs
pursuant to SECTION SIX B. During any period of time in which Employee's base
salary and bonus is continued pursuant to this SECTION SIX, Employee agrees
that he shall make himself available to render consulting services, as
requested by the Company, from time to time until such time as he may become
employed on a full-time basis elsewhere.
B. Notwithstanding the other provisions of this Agreement, the Company
shall be entitled to terminate this Agreement immediately and without notice
if, at any time during this Agreement Employee: (i) refuses without cause to
perform his assigned duties, be openly critical in the media of officers or
directors of the Company, engage in any conduct which the Board of Directors
determines to be inimical to or contrary to the best interests of the Company,
be convicted or plead guilty or nolo contendere to any felony or any charge
involving illegal drugs or any other crime involving moral turpitude, or
otherwise materially breach this Agreement; (ii) becomes incapable by reason of
physical or mental disability of performing the essential functions of his
position; or (iii) dies. In such case the Company shall only be obligated to
pay Employee any base salary due (prorated on a daily basis) to the date of the
breach or other occurrence.
C. In the event Employee voluntarily terminates his employment, Employee
shall not be entitled to receive any of the pay or benefits that are provided
pursuant to this Agreement, unless such termination is a constructive
termination. In the event of such termination, the remaining provisions of
this Agreement shall remain effective. A constructive termination is defined
as a material change in the Employee's title, responsibilities, office
location, compensation or benefit.
D. In the event that Employee's employment is terminated for any reason,
Employee shall not be eligible to participate in any severance pay plan
established by the Company for its employees.
4
<PAGE> 5
SECTION SEVEN
BENEFITS
It is agreed that, during the term of this Agreement, Employee shall be
eligible for coverage under such pension plan, group health insurance plan,
401(k) plan, vacation, holiday and other employee programs or policies in
effect from time to time for salaried employees of the Company, except as
provided in SECTION SIX C above. Neither participation in any such plan,
program or policy nor continuation of base compensation to Employee pursuant to
SECTION SIX A shall be deemed to extend Employee's employment with the Company
or his participation in any such plan, program or policy.
SECTION EIGHT
CONFIDENTIALITY
Employee agrees that, in addition to any other limitations contained in
this Agreement, regardless of the circumstances of Employee's termination of
employment, he will not take, or communicate or disclose to any person, firm,
corporation or other entity, any information relating to the Company's customer
lists, prices, trade secrets, methods, systems, advertising, or any other
confidential knowledge or secrets that Employee might from time to time acquire
with respect to the business of the Company or any of its affiliates or
subsidiaries, unless Employee obtains written consent of the Company. Employee
also specifically acknowledges the continued validity and effect of any
Agreement as to Confidentiality and Inventions previously signed by Employee
and that the terms of any such agreement are incorporated into this Agreement
by this reference.
SECTION NINE
NON-COMPETITION
In the event Employee's employment terminates pursuant to SECTION SIX,
Employee will not, for the duration of this Agreement and six months
thereafter, for himself, or on behalf of
5
<PAGE> 6
any other person, firm, partnership or corporation, engage in the business of
selling or marketing or engage in the design, manufacture and/or sale of any
item or product handled from time-to-time by the Company; nor will he directly
or indirectly, for himself or on behalf of, or in conjunction with, any other
person, firm, partnership or corporation, solicit or attempt to solicit the
business or patronage of any person, firm or corporation or partnership for the
purposes of selling or marketing products manufactured by the Company or other
products similar to those manufactured by the Company or perform such other
incidental business and service in which the Company currently engages.
SECTION TEN
ARBITRATION
As additional consideration for this Employment Agreement, Employee agrees
that any differences, claims, or matters in dispute arising between the
Company and Employee out of or in connection with his employment or the
termination of his employment by the Company including, but not limited to the
terms and conditions of this Agreement, allegations of wrongful termination,
allegations of employment discrimination or allegations of discriminatory or
retaliatory discharge under any federal, state or local discrimination law
shall be submitted by them to arbitration by the American Arbitration
Association, or its successor, and the determination of the American
Arbitration Association, or its successor, shall be final and absolute. The
arbitrator shall be governed by the duly promulgated rules and regulations of
the American Arbitration Association, or its successor, and the pertinent
provisions of the laws of the State of Missouri relating to arbitration. The
decision of the arbitrator may be entered as a judgment in any court of the
State of Missouri or elsewhere.
SECTION ELEVEN
MISCELLANEOUS PROVISIONS
A. This Agreement represents the entire agreement between the parties and
any prior understandings or representations of any kind preceding the date of
this Agreement shall not be
6
<PAGE> 7
binding on either party except to the extent incorporated into this Agreement.
This Agreement shall not be altered, amended or modified except in writing
signed by the Chief Executive Officer of the Company and by Employee.
B. This Agreement shall be binding upon and shall inure to the benefit of
the assigns, heirs, legatees or personal representatives of Employee and the
successors or assigns of the Company.
C. Neither this Agreement nor any right or interest hereunder shall be
assignable or transferable by Employee, his beneficiaries or legal
representatives without the Company's prior written consent; provided, however,
that nothing in this Section shall preclude (i) Employee from designating a
beneficiary to receive any benefit payable hereunder upon his death, or (ii)
the executors, administrators, or other legal representatives of his estate
from assigning or transferring any rights hereunder to the person or persons
entitled thereunto.
D. The headings of sections are included solely for convenience of
reference and shall not control the meaning or interpretation of any of the
provisions of this Agreement.
E. This Agreement shall be construed according to the laws of the State of
Missouri.
F. No term or condition of the Agreement shall be deemed to have been
waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver unless specifically stated therein, and each such waiver
shall operate only as to the specific term or condition waived and shall not
constitute a wavier of such term or condition for the future or of any act
other than that specifically waived.
G. If, for any reason, any provision of the Agreement is held invalid,
such invalidity shall not affect any other provision of the Agreement not held
so invalid, and each such other provision shall to the full extent consistent
with law continue in full force and effect.
The parties have entered into this Employment Agreement based solely upon
the terms and conditions set forth herein. THIS AGREEMENT CONTAINS A BINDING
ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES.
7
<PAGE> 8
IN WITNESS WHEREOF, the parties have executed this Agreement on the
_________ day of __________________, 19__.
RALCORP HOLDINGS, INC.
____________________________ By:_________________________
Kevin J. Hunt Joe R. Micheletto
Chief Executive Officer
<PAGE> 1
EXHIBIT 10.05(C)
EMPLOYMENT AGREEMENT
This Contract made between Robert W. Lockwood ("Employee"), whose address
is ______________________ and Ralcorp Holdings, Inc., a corporation with its
principal place of business at 800 Market Street, St. Louis, Missouri, and its
subsidiaries and affiliates ("the Company).
In consideration of the mutual convenants and promises, hereinafter set
forth, the parties hereto agree as follows:
RECITALS
WHEREAS, Employee is presently employed by the Company as Corporate Vice
President, General Counsel and Secretary and has extensive experience as an
executive level manager for the Company, and
WHEREAS, the Company is presently contemplating a spin-off from its parent
company, Ralcorp Holdings, Inc., and a business reorganization and desires to
secure Employee's employment for a definite period of time in anticipation of
such spin-off and reorganization, and
WHEREAS, Employee desired to be employed by the Company in the executive
capacity described below:
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the Company and Employee hereby agree as follows:
SECTION ONE
EMPLOYMENT
The Company hereby employs Employee as its Corporate Vice President,
General Counsel and Secretary. Employee's day to day reporting
responsibilities shall be to the
<PAGE> 2
Company's Chief Executive Officer. The Company may modify or realign
Employee's duties and responsibilities as it deems necessary during the term of
this Agreement.
SECTION TWO
BEST EFFORTS OF EMPLOYEE
Employee agrees that he will at all times faithfully and to the best of
his ability, experience and talent, perform all of the duties that may be
required of or from him pursuant to the express and implicit terms hereof.
Employee acknowledges that he is obligated to manage the business of the
Company in a sound and business like manner and in conformity with all laws and
regulations governing the conduct of the business of the Company including, but
not limited to, laws and regulations relating to anti-trust, employment
practices, employee health and safety, and environmental matters.
SECTION THREE
TERM
A. This Employment Agreement is contingent upon the Company's completion
of its anticipated spin-off and reorganization. In the event that such
spin-off and reorganization does not occur, this Agreement shall be deemed to
be null, void and of no effect.
B. In the event that such spin-off and reorganization is completed, this
Agreement shall continue until January 31, 2000 unless otherwise terminated in
accordance with the provisions of SECTION SIX hereof. This Agreement may be
extended for additional periods upon the mutual written agreement of the
parties.
SECTION FOUR
COMPENSATION
A. Effective the first day of the month following the spin date the
Company shall pay Employee a monthly base salary of $15,167, payable on the
last day of each month. The base
2
<PAGE> 3
salary may be changed by mutual agreement of the parties at any time during the
term of this Agreement; provided, however, that until January 31, 2000,
Employee's monthly base salary shall not be less than the amount set forth
above.
B. In addition to the base salary set forth in Paragraph A, the Company
shall pay Employee an annual bonus of $43,000, payable in October of each year.
The bonus may be changed by mutual agreement of the parties at any time during
the term of this Agreement; provided, however, that until January 31, 2000,
Employee's bonus shall not be less than the amount set forth above.
C. In addition to the base salary set forth in Paragraph A, Employee shall
be provided with an executive level benefit program including stock options
and/or stock grants as determined by the Company.
SECTION FIVE
CHANGE OF CONTROL
After the spin-off and reorganization of the Company, Employee and the
Company will enter into a Management Continuity Agreement. Such Agreement will
be in addition to this Agreement. Prior to the spin-off and reorganization,
the Management Continuity Agreement previous entered into by Employee shall
control in the event of a change in control involving the Company.
SECTION SIX
TERMINATION
A. The Company reserves the right to terminate the employment of Employee
at any time without cause. However, except as provided in SECTION SIX B below,
if such termination occurs prior to January 31, 2000, Employee shall be
entitled to his base salary and bonus as set forth in SECTIONS FOUR A and B
until January 31, 2000, provided that Employee remains in compliance with the
terms and conditions of this Agreement. In addition, any awards previously
granted to Employee under the Company's Incentive Stock Plan, including, but
not limited to
3
<PAGE> 4
any restricted stock awards, stock options or similar incentive stock awards,
or benefits, including a Company matching contribution under its Deferred
Compensation Plan for Key Employees, shall vest, unless such termination occurs
pursuant to SECTION SIX B. During any period of time in which Employee's base
salary and bonus is continued pursuant to this SECTION SIX, Employee agrees
that he shall make himself available to render consulting services, as
requested by the Company, from time to time until such time as he may become
employed on a full-time basis elsewhere.
B. Notwithstanding the other provisions of this Agreement, the Company
shall be entitled to terminate this Agreement immediately and without notice
if, at any time during this Agreement Employee: (i) refuses without cause to
perform his assigned duties, be openly critical in the media of officers or
directors of the Company, engage in any conduct which the Board of Directors
determines to be inimical to or contrary to the best interests of the Company,
be convicted or plead guilty or nolo contendere to any felony or any charge
involving illegal drugs or any other crime involving moral turpitude, or
otherwise materially breach this Agreement; (ii) becomes incapable by reason of
physical or mental disability of performing the essential functions of his
position; or (iii) dies. In such case the Company shall only be obligated to
pay Employee any base salary due (prorated on a daily basis) to the date of the
breach or other occurrence.
C. In the event Employee voluntarily terminates his employment, Employee
shall not be entitled to receive any of the pay or benefits that are provided
pursuant to this Agreement, unless such termination is a constructive
termination. In the event of such termination, the remaining provisions
of this Agreement shall remain effective. A constructive termination is defined
as a material change in the Employee's title, responsibilities, office
location, compensation or benefit.
D. In the event that Employee's employment is terminated for any reason,
Employee shall not be eligible to participate in any severance pay plan
established by the Company for its employees.
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<PAGE> 5
SECTION SEVEN
BENEFITS
It is agreed that, during the term of this Agreement, Employee shall be
eligible for coverage under such pension plan, group health insurance plan,
401(k) plan, vacation, holiday and other employee programs or policies in
effect from time to time for salaried employees of the Company, except as
provided in SECTION SIX C above. Neither participation in any such plan,
program or policy nor continuation of base compensation to Employee pursuant to
SECTION SIX A shall be deemed to extend Employee's employment with the Company
or his participation in any such plan, program or policy.
SECTION EIGHT
CONFIDENTIALITY
Employee agrees that, in addition to any other limitations contained in
this Agreement, regardless of the circumstances of Employee's termination of
employment, he will not take, or communicate or disclose to any person, firm,
corporation or other entity, any information relating to the Company's customer
lists, prices, trade secrets, methods, systems, advertising, or any other
confidential knowledge or secrets that Employee might from time to time acquire
with respect to the business of the Company or any of its affiliates or
subsidiaries, unless Employee obtains written consent of the Company. Employee
also specifically acknowledges the continued validity and effect of any
Agreement as to Confidentiality and Inventions previously signed by Employee
and that the terms of any such agreement are incorporated into this Agreement
by this reference.
SECTION NINE
NON-COMPETITION
In the event Employee's employment terminates pursuant to SECTION SIX,
Employee will not, for the duration of this Agreement and six months
thereafter, for himself, or on behalf of
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<PAGE> 6
any other person, firm, partnership or corporation, engage in the business of
selling or marketing or engage in the design, manufacture and/or sale of any
item or product handled from time-to-time by the Company; nor will he directly
or indirectly, for himself or on behalf of, or in conjunction with, any other
person, firm, partnership or corporation, solicit or attempt to solicit the
business or patronage of any person, firm or corporation or partnership for the
purposes of selling or marketing products manufactured by the Company or other
products similar to those manufactured by the Company or perform such other
incidental business and service in which the Company currently engages.
SECTION TEN
ARBITRATION
As additional consideration for this Employment Agreement, Employee agrees
that any differences, claims, or matters in dispute arising between the
Company and Employee out of or in connection with his employment or the
termination of his employment by the Company including, but not limited to the
terms and conditions of this Agreement, allegations of wrongful termination,
allegations of employment discrimination or allegations of discriminatory or
retaliatory discharge under any federal, state or local discrimination law
shall be submitted by them to arbitration by the American Arbitration
Association, or its successor, and the determination of the American
Arbitration Association, or its successor, shall be final and absolute. The
arbitrator shall be governed by the duly promulgated rules and regulations of
the American Arbitration Association, or its successor, and the pertinent
provisions of the laws of the State of Missouri relating to arbitration. The
decision of the arbitrator may be entered as a judgment in any court of the
State of Missouri or elsewhere.
SECTION ELEVEN
MISCELLANEOUS PROVISIONS
A. This Agreement represents the entire agreement between the parties and
any prior understandings or representations of any kind preceding the date of
this Agreement shall not be
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<PAGE> 7
binding on either party except to the extent incorporated into this Agreement.
This Agreement shall not be altered, amended or modified except in writing
signed by the Chief Executive Officer of the Company and by Employee.
B. This Agreement shall be binding upon and shall inure to the benefit of
the assigns, heirs, legatees or personal representatives of Employee and the
successors or assigns of the Company.
C. Neither this Agreement nor any right or interest hereunder shall be
assignable or transferable by Employee, his beneficiaries or legal
representatives without the Company's prior written consent; provided, however,
that nothing in this Section shall preclude (i) Employee from designating a
beneficiary to receive any benefit payable hereunder upon his death, or (ii)
the executors, administrators, or other legal representatives of his estate
from assigning or transferring any rights hereunder to the person or persons
entitled thereunto.
D. The headings of sections are included solely for convenience of
reference and shall not control the meaning or interpretation of any of the
provisions of this Agreement.
E. This Agreement shall be construed according to the laws of the State of
Missouri.
F. No term or condition of the Agreement shall be deemed to have been
waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver unless specifically stated therein, and each such waiver
shall operate only as to the specific term or condition waived and shall not
constitute a wavier of such term or condition for the future or of any act
other than that specifically waived.
G. If, for any reason, any provision of the Agreement is held invalid,
such invalidity shall not affect any other provision of the Agreement not held
so invalid, and each such other provision shall to the full extent consistent
with law continue in full force and effect.
The parties have entered into this Employment Agreement based solely upon
the terms and conditions set forth herein. THIS AGREEMENT CONTAINS A BINDING
ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES.
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<PAGE> 8
IN WITNESS WHEREOF, the parties have executed this Agreement on the
_________ day of __________________, 19__.
RALCORP HOLDINGS, INC.
____________________________ By:_________________________
Robert W. Lockwood Joe R. Micheletto
Chief Executive Officer
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<PAGE> 1
EXHIBIT 10.05(D)
EMPLOYMENT AGREEMENT
This Contract made between David P. Skarie ("Employee"), whose address is
______________________ and Ralcorp Holdings, Inc., a corporation with its
principal place of business at 800 Market Street, St. Louis, Missouri, and its
subsidiaries and affiliates ("the Company).
In consideration of the mutual convenants and promises, hereinafter set
forth, the parties hereto agree as follows:
RECITALS
WHEREAS, Employee is presently employed by the Company as Corporate Vice
President and Director of Customer Development, Ralston Foods, Inc., and has
extensive experience as an executive level manager for the Company, and
WHEREAS, the Company is presently contemplating a spin-off from its parent
company, Ralcorp Holdings, Inc., and a business reorganization and desires to
secure Employee's employment for a definite period of time in anticipation of
such spin-off and reorganization, and
WHEREAS, Employee desired to be employed by the Company in the executive
capacity described below:
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the Company and Employee hereby agree as follows:
SECTION ONE
EMPLOYMENT
The Company hereby employs Employee as its Corporate Vice President and
Director of Customer Development, Ralston Foods, Inc. Employee's day to day
reporting responsibilities
<PAGE> 2
shall be to the Company's Chief Executive Officer. The Company may modify
or realign Employee's duties and responsibilities as it deems necessary during
the term of this Agreement.
SECTION TWO
BEST EFFORTS OF EMPLOYEE
Employee agrees that he will at all times faithfully and to the best of
his ability, experience and talent, perform all of the duties that may be
required of or from him pursuant to the express and implicit terms hereof.
Employee acknowledges that he is obligated to manage the business of the
Company in a sound and business like manner and in conformity with all laws and
regulations governing the conduct of the business of the Company including, but
not limited to, laws and regulations relating to anti-trust, employment
practices, employee health and safety, and environmental matters.
SECTION THREE
TERM
A. This Employment Agreement is contingent upon the Company's completion
of its anticipated spin-off and reorganization. In the event that such
spin-off and reorganization does not occur, this Agreement shall be deemed to
be null, void and of no effect.
B. In the event that such spin-off and reorganization is completed, this
Agreement shall continue until January 31, 2000 unless otherwise terminated in
accordance with the provisions of SECTION SIX hereof. This Agreement may be
extended for additional periods upon the mutual written agreement of the
parties.
SECTION FOUR
COMPENSATION
A. Effective the first day of the month following the spin date the
Company shall pay Employee a monthly base salary of $12,667, payable on the
last day of each month. The base
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<PAGE> 3
salary may be changed by mutual agreement of the parties at any time during the
term of this Agreement; provided, however, that until January 31, 2000,
Employee's monthly base salary shall not be less than the amount set forth
above.
B. In addition to the base salary set forth in Paragraph A, the Company
shall pay Employee an annual bonus of $55,000, payable in October of each year.
The bonus may be changed by mutual agreement of the parties at any time during
the term of this Agreement; provided, however, that until January 31, 2000,
Employee's bonus shall not be less than the amount set forth above.
C. In addition to the base salary set forth in Paragraph A, Employee shall
be provided with an executive level benefit program including stock options
and/or stock grants as determined by the Company.
SECTION FIVE
CHANGE OF CONTROL
After the spin-off and reorganization of the Company, Employee and the
Company will enter into a Management Continuity Agreement. Such Agreement will
be in addition to this Agreement. Prior to the spin-off and reorganization,
the Management Continuity Agreement previous entered into by Employee shall
control in the event of a change in control involving the Company.
SECTION SIX
TERMINATION
A. The Company reserves the right to terminate the employment of Employee
at any time without cause. However, except as provided in SECTION SIX B below,
if such termination occurs prior to January 31, 2000, Employee shall be
entitled to his base salary and bonus as set forth in SECTIONS FOUR A and B
until January 31, 2000, provided that Employee remains in compliance with the
terms and conditions of this Agreement. In addition, any awards previously
granted to Employee under the Company's Incentive Stock Plan, including, but
not limited to
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<PAGE> 4
any restricted stock awards, stock options or similar incentive stock awards,
or benefits, including a Company matching contribution under its Deferred
Compensation Plan for Key Employees, shall vest, unless such termination occurs
pursuant to SECTION SIX B. During any period of time in which Employee's base
salary and bonus is continued pursuant to this SECTION SIX, Employee agrees
that he shall make himself available to render consulting services, as
requested by the Company, from time to time until such time as he may become
employed on a full-time basis elsewhere.
B. Notwithstanding the other provisions of this Agreement, the Company
shall be entitled to terminate this Agreement immediately and without notice
if, at any time during this Agreement Employee: (i) refuses without cause to
perform his assigned duties, be openly critical in the media of officers or
directors of the Company, engage in any conduct which the Board of Directors
determines to be inimical to or contrary to the best interests of the Company,
be convicted or plead guilty or nolo contendere to any felony or any charge
involving illegal drugs or any other crime involving moral turpitude, or
otherwise materially breach this Agreement; (ii) becomes incapable by reason of
physical or mental disability of performing the essential functions of his
position; or (iii) dies. In such case the Company shall only be obligated to
pay Employee any base salary due (prorated on a daily basis) to the date of the
breach or other occurrence.
C. In the event Employee voluntarily terminates his employment, Employee
shall not be entitled to receive any of the pay or benefits that are provided
pursuant to this Agreement, unless such termination is a constructive
termination. In the event of such termination, the remaining provisions
of this Agreement shall remain effective. A constructive termination is defined
as a material change in the Employee's title, responsibilities, office
location, compensation or benefit.
D. In the event that Employee's employment is terminated for any reason,
Employee shall not be eligible to participate in any severance pay plan
established by the Company for its employees.
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<PAGE> 5
SECTION SEVEN
BENEFITS
It is agreed that, during the term of this Agreement, Employee shall be
eligible for coverage under such pension plan, group health insurance plan,
401(k) plan, vacation, holiday and other employee programs or policies in
effect from time to time for salaried employees of the Company, except as
provided in SECTION SIX C above. Neither participation in any such plan,
program or policy nor continuation of base compensation to Employee pursuant to
SECTION SIX A shall be deemed to extend Employee's employment with the Company
or his participation in any such plan, program or policy.
SECTION EIGHT
CONFIDENTIALITY
Employee agrees that, in addition to any other limitations contained in
this Agreement, regardless of the circumstances of Employee's termination of
employment, he will not take, or communicate or disclose to any person, firm,
corporation or other entity, any information relating to the Company's customer
lists, prices, trade secrets, methods, systems, advertising, or any other
confidential knowledge or secrets that Employee might from time to time acquire
with respect to the business of the Company or any of its affiliates or
subsidiaries, unless Employee obtains written consent of the Company. Employee
also specifically acknowledges the continued validity and effect of any
Agreement as to Confidentiality and Inventions previously signed by Employee
and that the terms of any such agreement are incorporated into this Agreement
by this reference.
SECTION NINE
NON-COMPETITION
In the event Employee's employment terminates pursuant to SECTION SIX,
Employee will not, for the duration of this Agreement and six months
thereafter, for himself, or on behalf of
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<PAGE> 6
any other person, firm, partnership or corporation, engage in the business of
selling or marketing or engage in the design, manufacture and/or sale of any
item or product handled from time-to-time by the Company; nor will he directly
or indirectly, for himself or on behalf of, or in conjunction with, any other
person, firm, partnership or corporation, solicit or attempt to solicit the
business or patronage of any person, firm or corporation or partnership for the
purposes of selling or marketing products manufactured by the Company or other
products similar to those manufactured by the Company or perform such other
incidental business and service in which the Company currently engages.
SECTION TEN
ARBITRATION
As additional consideration for this Employment Agreement, Employee agrees
that any differences, claims, or matters in dispute arising between the
Company and Employee out of or in connection with his employment or the
termination of his employment by the Company including, but not limited to the
terms and conditions of this Agreement, allegations of wrongful termination,
allegations of employment discrimination or allegations of discriminatory or
retaliatory discharge under any federal, state or local discrimination law
shall be submitted by them to arbitration by the American Arbitration
Association, or its successor, and the determination of the American
Arbitration Association, or its successor, shall be final and absolute. The
arbitrator shall be governed by the duly promulgated rules and regulations of
the American Arbitration Association, or its successor, and the pertinent
provisions of the laws of the State of Missouri relating to arbitration. The
decision of the arbitrator may be entered as a judgment in any court of the
State of Missouri or elsewhere.
SECTION ELEVEN
MISCELLANEOUS PROVISIONS
A. This Agreement represents the entire agreement between the parties and
any prior understandings or representations of any kind preceding the date of
this Agreement shall not be
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<PAGE> 7
binding on either party except to the extent incorporated into this Agreement.
This Agreement shall not be altered, amended or modified except in writing
signed by the Chief Executive Officer of the Company and by Employee.
B. This Agreement shall be binding upon and shall inure to the benefit of
the assigns, heirs, legatees or personal representatives of Employee and the
successors or assigns of the Company.
C. Neither this Agreement nor any right or interest hereunder shall be
assignable or transferable by Employee, his beneficiaries or legal
representatives without the Company's prior written consent; provided, however,
that nothing in this Section shall preclude (i) Employee from designating a
beneficiary to receive any benefit payable hereunder upon his death, or (ii)
the executors, administrators, or other legal representatives of his estate
from assigning or transferring any rights hereunder to the person or persons
entitled thereunto.
D. The headings of sections are included solely for convenience of
reference and shall not control the meaning or interpretation of any of the
provisions of this Agreement.
E. This Agreement shall be construed according to the laws of the State of
Missouri.
F. No term or condition of the Agreement shall be deemed to have been
waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver unless specifically stated therein, and each such waiver
shall operate only as to the specific term or condition waived and shall not
constitute a wavier of such term or condition for the future or of any act
other than that specifically waived.
G. If, for any reason, any provision of the Agreement is held invalid,
such invalidity shall not affect any other provision of the Agreement not held
so invalid, and each such other provision shall to the full extent consistent
with law continue in full force and effect.
The parties have entered into this Employment Agreement based solely upon
the terms and conditions set forth herein. THIS AGREEMENT CONTAINS A BINDING
ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES.
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<PAGE> 8
IN WITNESS WHEREOF, the parties have executed this Agreement on the
_________ day of __________________, 19__.
RALCORP HOLDINGS, INC.
____________________________ By:_________________________
David P. Skarie Joe R. Micheletto
Chief Executive Officer
<PAGE> 1
EXHIBIT 10.06
RALCORP HOLDINGS, INC.
CHANGE IN CONTROL SEVERANCE COMPENSATION PLAN
1. PURPOSE OF PLAN
The purpose of the Plan is to protect and retain qualified employees in
the event of a hostile takeover of Ralcorp Holdings, Inc. and to reward
them for loyal service by providing for severance compensation in the
event of their involuntary termination of employment after a Change in
Control.
2. DEFINITIONS
(a) "Acquiring Person" means any person who is or becomes, or
together with any Affiliates or Associates is or becomes, the
beneficial owner, directly or indirectly, of 20% or more of the
issued and outstanding Stock.
(b) "Affiliate" means, with respect to a specified person, a
person that directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common
control with, the person specified.
(c) "Associate" means, with respect to a specified person, (i)
any corporation or organization of which such person is an officer
or partner or is, directly or indirectly, the beneficial owner of
10% or more of any class of equity securities; (ii) any trust or
other estate in which such person has a substantial beneficial
interest or as to which such person serves as trustee or in a
similar fiduciary capacity, and (iii) any person who is a director
or officer of the specified person or any of its parents or
subsidiaries, or who is a relative or spouse of such specified
person, or any relative of such spouse, who has the same home as
such person.
(d) "Base Amount" means an Employee's "Base Amount" as defined
and determined pursuant to Section 280G of the Code and regulations
applicable thereunder at the time of such Employee's Qualifying
Termination.
(e) "Base Compensation" means (i) the greater of an Employee's
monthly gross salary (including amounts deferred pursuant to any
Ralcorp, Subsidiary or Subsequent Employer plan or program) for the
last full month preceding the Employee's Qualifying Termination or
the last full month preceding a Change in Control, plus (ii)
one-twelfth of the greater of such Employee's last annual bonus from
Ralcorp, a Subsidiary or a Subsequent Employer, whether paid or
deferred, prior to the Employee's Qualifying Termination or prior to
a Change in Control.
<PAGE> 2
(f) "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 Exchange Act, of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or
more 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 of its Subsidiaries; 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.
(g) "Chief Executive Officer" means either Chief Executive
Officer of Ralcorp.
(h) "Code" means the Internal Revenue Code of 1986, as amended.
(i) "Committee" means the Nominating and Compensation Committee
of the Board of Directors of Ralcorp, or any successor board
committee performing similar functions.
(j) "Continuing Director" means any member of the Board of
Directors of Ralcorp, while such person is a member of the Board,
who is not an Acquiring Person, or an Affiliate or Associate
thereof, or a member of a "group," within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act, which has acquired
beneficial ownership of at least 50% of the issued and outstanding
Stock, or an Affiliate or Associate thereof or of any member of said
"group," and who was a member of the Board prior to the time when
such Acquiring Person became an Acquiring Person or such "group"
acquired such beneficial ownership, and any successor of a
Continuing Director, while such successor is a member of the Board,
who is not an Acquiring Person or a member of such a "group," or an
Affiliate, Associate, nominee or representative thereof and who is
recommended or elected to succeed the Continuing Director by a
majority of the Continuing Directors.
(k) "Disability" means any disability of an Employee recognized
as such for purposes of the Ralcorp Holdings, Inc. Long-Term
Disability Plan or any successor plan or plan of a Subsidiary
pursuant to which benefits are paid to an Employee upon the
occurrence of an event of permanent and total disability.
(l) "Discount Rate" means the discount rate utilized pursuant to
the Retirement Plan to determine the present value of lump sum cash
distributions permitted by Section 417 of the Code, as such rate may
be determined or adjusted from time to time.
(m) "Employee" means those regular employees of Ralcorp or any of
its Subsidiaries (other than temporary employees) employed as of the
date of a Change in Control in a sales, administrative, professional
or clerical capacity.
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(n) "Exchange Act" means the Securities and Exchange Act of 1934,
as amended.
(o) "Pension Bridging Date" means, with respect to any Employee,
the later to occur of the Employee's Qualifying Termination or
attainment of age 50.
(p) "Pension Bridging Payments" means the payments described in
paragraph 6 of the Plan.
(q) "Plan" means the Ralcorp Holdings, Inc. Change in Control
Severance Compensation Plan.
(r) "Qualifying Service" means an Employee's employment by, or
service for, Ralcorp, any of its Subsidiaries, and any Subsequent
Employer, and employment by, or service for, (i) Ralston Purina
Company or any of its subsidiaries, prior to April 1, 1994, and (ii)
the former Ralcorp Holdings, Inc. prior to January 31, 1997.
(s) "Qualifying Termination" means an Employee's involuntary
termination of employment with Ralcorp, any of its Subsidiaries or a
Subsequent Employer within two years after a Change in Control,
other than (i) an involuntary termination by reason of the
Employee's death; (ii) an involuntary termination which qualifies as
a Termination for Cause; or (iii) a termination of employment with
Ralcorp or any Subsidiary as a result of the sale or other
divestiture by Ralcorp or a Subsidiary of a Subsidiary, division or
other operating unit if such Employee remains or becomes employed by
a Subsequent Employer. "Qualifying Termination" shall not include
any change in the Employee's employment status by reason of the
Employee's Disability.
(t) "Ralcorp" means Ralcorp Holdings, Inc.
(u) "Retirement Plan" means the Ralcorp Retirement Plan for
Sales, Administrative, Clerical, and Production Employees, or any
successor qualified plan.
(v) "Stock" means the $.01 par value common stock of Ralcorp or
such other security outstanding upon the reclassification of
Ralcorp's common stock, including, without limitation, any stock
split-up, stock dividend, or other distributions of stock in respect
of stock, or any reverse stock split-up, or recapitalization of
Ralcorp or any merger or consolidation of Ralcorp with an Affiliate.
(w) "Subsequent Employer" means any Subsidiary, division or other
operating unit of Ralcorp or any of its Subsidiaries which is
divested by Ralcorp or a Subsidiary after a Change in Control,
and/or the acquiror of such Subsidiary, division or operating unit,
or any Affiliate of such acquiror.
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(x) "Subsidiary" means any directly or indirectly owned
subsidiary or Affiliate of Ralcorp.
(y) "Supplemental Retirement Plan" means the Ralcorp Supplemental
Retirement Plan.
(z) "Termination for Cause" means an Employee's termination of
employment with Ralcorp, any of its Subsidiaries or a Subsequent
Employer because of (i) the continued failure by the Employee to
devote reasonable time and effort to the performance of that
Employee's duties (other than any such failure resulting from the
Employee's incapacity due to physical or mental illness) after
written demand therefor has been delivered to the Employee by such
employer which specifically identifies how the Employee has not
devoted reasonable time and effort to the performance of that
Employee's duties; or (ii) the willful engaging by the Employee in
gross misconduct; provided, however, that a Termination for Cause
shall not include a termination attributable to: (i) poor work
performance, bad judgment or negligence on the part of the Employee;
or (ii) an act or omission believed by the Employee in good faith to
have been in or not opposed to the best interests of the Employee's
employer and reasonably believed by the Employee to be lawful; or
(iii) the good faith conduct of an Employee in connection with a
Change in Control (including the Employee's opposition to or support
of such Change in Control).
3. GENERAL ELIGIBILITY REQUIREMENTS
The following Employees are eligible for benefits under the Plan upon
their Qualifying Termination:
(i) Any Employee employed by Ralcorp or a Subsidiary at an
office in the St. Louis, Missouri, metropolitan area who is paid at
the rate of $30,000 per year (gross salary) and who has at least
one year of Qualifying Service (said gross salary amount being
subject to adjustment at any time prior to a Change in Control in
the discretion of the Chief Executive Officer); and,
(ii) Any other Employee of Ralcorp or a Subsidiary, designated as
eligible to participate generally or specifically by the Chief
Executive Officer.
Notwithstanding the above, the following groups of Employees shall not be
deemed eligible to receive such severance compensation and continuation
of benefits:
(i) Any Employee who has entered into a "Management Continuity
Agreement" with Ralcorp or any of its Subsidiaries;
(ii) Any Employee whose terms and conditions of employment are
determined by a collective bargaining agreement; and,
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(iii) Any Employee whose term of continued employment with Ralcorp
or any of its Subsidiaries has been defined in a written agreement
between any of such Employees and Ralcorp or such Subsidiary.
In the event that an otherwise eligible Employee has entered into an
individual written employment contract or any other written agreement
regarding the Employee's continued employment with Ralcorp, any of its
Subsidiaries or Subsequent Employer, which agreement provides for
severance compensation and/or continuation of benefits upon a termination
of employment, such Employee shall not be entitled to receive the
severance compensation described in paragraph 4 hereof or the
continuation of benefits described in paragraph 5 hereof unless the
Employee specifically waives, in writing, the benefits which would
otherwise be paid to the Employee pursuant to said individual employment
contract or other agreement.
4. SEVERANCE COMPENSATION
Upon the Qualifying Termination of an eligible Employee, such Employee
shall be entitled to the following severance compensation:
(i) if such Employee has fewer than five years of Qualifying
Service, the Employee shall receive, by lump sum payment, the
present value as of the date of termination of the right to receive
the Employee's Base Compensation each month for the twelve months
following the Employee's Qualifying Termination, discounted at the
Discount Rate, or
(ii) if such Employee has five or more years of Qualifying
Service, the Employee shall receive, by lump sum payment, the
present value as of the date of termination of the right to receive
twice the Employee's Base Compensation each month for the twelve
months following the Employee's Qualifying Termination, discounted
at the Discount Rate.
The severance compensation described herein shall be paid to such
Employee by Ralcorp or its successors or assigns promptly after the
Employee's Qualifying Termination.
5. CONTINUATION OF BENEFITS
Upon the Qualifying Termination of an eligible Employee, such Employee
shall be entitled to participate (i) for a period of one year from the
date of such Qualifying Termination if the Employee has less than five
years of Qualifying Service, (ii) for a period of two years from the date
of such Qualifying Termination if the Employee has five or more years of
Qualifying Service, or (iii) if the Employee is also eligible to receive
Pension Bridging Payments, for the period commencing on the Pension
Bridging Date and continuing until such Employee's attainment of age 55,
in each Ralcorp or Subsidiary life, health, accident (other than the
Ralcorp Holdings, Inc. Travel Accident
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<PAGE> 6
Plan) and disability plan or program in which such Employee participated
immediately prior to a Change in Control, upon the same terms available
as of such Change in Control, provided, however, that if the terms of any
such plan or program do not permit such participation by such Employee,
then Ralcorp will arrange to provide such Employee benefits substantially
similar to and no less favorable than, and at no greater cost than, the
benefits the Employee would have been entitled to receive under such plan
or program if the coverage thereunder immediately prior to such Change in
Control had remained in effect.
6. PENSION BRIDGING PAYMENTS
In addition to the severance compensation and continuation of benefits
provided for in paragraphs 4 and 5 above, any Employee meeting the
eligibility requirements described in paragraph 3 above who has attained,
or will attain the age of 50 (i) within one year of the Employee's
Qualifying Termination, if the Employee has fewer than five years of
Qualifying Service, or (ii) within two years of the Employee's Qualifying
Termination, if the Employee has five or more years of Qualifying
Service, shall be entitled to receive, beginning on the Employee's
Pension Bridging Date and continuing until the Employee's attainment of
age 55, monthly payments equal to those the Employee would be entitled to
receive pursuant to the Retirement Plan and the Supplemental Retirement
Plan, upon retirement from Ralcorp or any Subsidiary at age 55 with years
of service equal to such Employee's Credited Service (as defined in the
Retirement Plan) as of the Employee's Qualifying Termination and with
Average Annual Earnings (as defined in the Retirement Plan) as of the
Employee's Qualifying Termination (such payments are hereinafter referred
to as "Pension Bridging Payments"). Notwithstanding the above, an
otherwise eligible Employee shall not be entitled to receive monthly
Pension Bridging Payments if such Employee receives monthly benefits
prior to the attainment of age 55 pursuant to the Retirement Plan and/or
the Supplemental Retirement Plan. The calculation of an Employee's
Pension Bridging Payments shall be made in accordance with such rules and
regulations which may be established from time to time prior to a Change
in Control by either Chief Executive Officer or their designees.
7. LIMITATION ON PLAN BENEFITS
With respect to any eligible Employee subject to the provisions of
Section 280G of the Code in no event shall the aggregate present value,
on the date of such eligible Employee's Qualifying Termination, of the
severance compensation provided for under paragraph 4 of the Plan, the
value of the continuation of benefits provided for in paragraph 5 and the
value of the Pension Bridging Payments provided for in paragraph 6
(collectively the "Severance Benefits") equal or exceed three times such
Employee's Base Amount. The present value of such Severance Benefits
shall be determined in accordance with Section 280G of the Code. In the
event that the limitation set forth above is exceeded, then the Severance
Benefits shall be reduced to the extent necessary to cause such Severance
Benefits to comply with the limitation; provided, however, that the
6
<PAGE> 7
total Severance Benefits shall not be reduced below the maximum
permissible under Section 280G of the Code.
8. ENTITLEMENT TO BENEFITS
Notwithstanding any other provision of this Plan, no Employee shall be
entitled to receive benefits pursuant to paragraphs 4, 5 and 6 of the
Plan upon termination of employment after a Change in Control if, prior
to said Change in Control, a majority of the Continuing Directors approve
a resolution providing that no such benefits shall be paid to Employees
terminated after the occurrence of said Change in Control; provided,
however, that a majority of such Continuing Directors may at any time,
prior to or after such Change in Control, rescind such resolution and
upon such rescission, Employees shall be entitled to receive benefits as
provided pursuant to the Plan.
9. GENERAL PROVISIONS
(a) Amendment. Ralcorp reserves the right at any time to
terminate or amend this Plan in any respect and without the consent
of any Employee. The power to terminate or amend the Plan at any
time is reserved to the Board of Directors of Ralcorp except that
the Committee may make amendments which do not materially affect the
nature and scope of the Plan. Notwithstanding anything to the
contrary contained herein, the Plan may not be terminated or amended
in any respect after a Change in Control.
(b) Ralcorp's Obligations Unfunded. All benefits due an Employee
or the Employee's beneficiary under this Plan are unfunded and
unsecured and are payable out of the general funds of Ralcorp.
Ralcorp, in its sole and absolute discretion, may establish a
"grantor trust" for the payment of benefits and obligations
hereunder, the assets of which shall be at all times subject to the
claims of creditors of Ralcorp as provided for in such trust,
provided that such trust does not alter the characterization of the
Plan as an "unfunded plan" for purposes of the Employee Retirement
Income Security Act of 1974, as amended. Such trust shall make
distributions in accordance with the terms of the Plan.
(c) Transferability of Benefits. The right to receive payment of
any benefits pursuant to this Plan shall not be transferred,
assigned or pledged except by beneficiary designation or by will or
pursuant to the laws of descent and distribution.
(d) Taxes. Ralcorp may withhold from any payment due hereunder
any taxes required to be withheld under applicable federal, state or
local tax laws or regulations.
(e) Gender. The use of masculine pronouns herein shall be deemed
to include both males and females.
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<PAGE> 8
(f) Construction, Governing Laws. Except insofar as federal
legislation or applicable regulation shall govern, the validity and
construction of the Plan and each of its provisions shall be subject
to and governed by the laws of the State of Missouri.
(g) Separability. If any provision of this Plan is found, held
or deemed to be void, unlawful or unenforceable under any applicable
statute or other controlling law, the remainder of this Plan shall
continue in full force and effect.
(h) Written Contracts. Ralcorp or any of its Subsidiaries may,
from time to time, enter into written contracts with employees
guaranteeing the benefits provided hereunder to eligible Employees
upon their Qualifying Termination; the failure to enter into such
written contracts with any eligible Employees shall not affect the
enforceability of the Plan nor the entitlement of such Employees,
upon a Qualifying Termination, to benefits pursuant to the Plan.
8
<PAGE> 9
CHANGE IN CONTROL SEVERANCE COMPENSATION AGREEMENT
Ralcorp Holdings, Inc. ("Company") and _________________________________
("Participant") hereby agree and acknowledge that in consideration of
Participant's service to the Company and Participant's remaining in the employ
of the Company or one of its subsidiaries or affiliates, the Company will, upon
the Participant's Qualifying Termination, as defined in the Ralcorp Holdings,
Inc. Change in Control Severance Compensation Plan (the "Plan"), a copy of
which has been provided to Participant and which is incorporated by reference
herein, pay to Participant the severance compensation and pension bridging
payments, and extend to Participant the continuation of benefits, provided for
in the Plan, upon such terms and conditions as are set forth in the Plan, as it
may be amended from time to time; provided, however, that the entitlement of
Participant to payments and continuation of benefits pursuant to this Agreement
is subject in all respects to the provisions of the Plan, including, but not
limited to, the eligibility requirements set forth in the Plan.
Nothing in this Agreement shall be deemed to amend the Plan or to provide
payments or benefits in excess of those provided pursuant to the Plan. In case
of any conflict between the provisions of this Agreement and those contained in
the Plan, the terms of the Plan, as it may be amended from time to time, shall
control. The Company reserves the right to amend or terminate the Plan at any
time prior to a Change in Control, as defined therein, and upon such action,
this Agreement shall be accordingly modified or revoked. After a Change in
Control, no action may be taken to deprive Participant of payments and benefits
hereunder and under the Plan.
This Agreement is not an employment contract, nor a guarantee of
employment for any period of time, and shall not affect the Participant's terms
and conditions of employment, except upon the Participant's Qualifying
Termination as defined in the Plan.
This Agreement shall be effective as of January 31, 1997.
RALCORP HOLDINGS, INC.
______________________________ By:____________________________________
Participant [Name]______________________________
[Title]_______________________________
<PAGE> 1
EXHIBIT 10.07
DESCRIPTION OF SPLIT-DOLLAR
LIFE INSURANCE ARRANGEMENT
RALCORP HOLDINGS, INC.
The Company pays a portion of the premiums due under the Split-Dollar Insurance
policies of certain executive officers. The policies insure an employee and
spouse under one policy for the purpose of funding the couple's estate tax
obligations. The portion of premiums paid by the Company will be repaid out of
the cash value of the policies.
<PAGE> 1
EXHIBIT 10.08
DEFERRED COMPENSATION PLAN FOR
NON-MANAGEMENT DIRECTORS
(Effective: January 31, 1997)
1. General Provisions
1.1 Purpose of Plan
The purpose of the Plan is to enhance the profitability and
value of the Company for the benefit of its shareholders by
providing a supplemental retirement program to attract and retain
qualified non-management directors who have made or will make
important contributions to the success of the Company.
1.2 Definitions
(a) "Acquiring Person" means any person or group of
Affiliates or Associates who is or becomes the beneficial
owner, directly or indirectly, of shares representing 20% or
more of the outstanding Stock.
(b) "Affiliate" or "Associate" shall have the
meanings set forth as of March 1, 1990, in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange
Act of 1934, as amended.
(c) "Beneficiary" means the person or persons
(including legal entities) who have been designated in
accordance with Section 3.2 hereof to receive benefits under
this Plan following a Participant's death.
(d) "Board" means the Board of Directors of Ralcorp
Holdings, Inc.
(e) "Change in Control" means the time when (i) any
person, either individually or together with such person's
Affiliates or Associates, shall have become the beneficial
owner, directly or indirectly, of shares representing at least
50% of the outstanding Stock and there shall have been a
public announcement of such occurrence by the Company or such
person 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
Holdings, Inc.; provided however, that in the case of either
clause (i) or clause (ii), a Change in Control shall not be
deemed to have occurred if the event shall have been approved
prior to the occurrence thereof by a majority of the
Continuing Directors who shall then be members of such Board
of Directors.
(f) "Company" means Ralcorp Holdings, Inc. and its
subsidiaries and affiliates.
(g) "Compensation" means all or any part of any cash,
or other consideration to be paid to a Director by the Company
as directors' fees or retainers.
(h) "Continuing Director" means any member of the
Board while such person is a member of the Board, who is not
an Affiliate or Associate of an Acquiring Person or of any
such Acquiring Person's Affiliate or Associate and was a
member of the Board prior to the time when such Acquiring
<PAGE> 2
Person became an Acquiring Person, and any successor of a
Continuing Director, while such successor is a member of the
Board, who is not an Acquiring Person or an Affiliate or
Associate of an Acquiring Person or a representative or
nominee of an Acquiring Person or of any Affiliate or
Associate of such Acquiring Person and is recommended or
elected to succeed the Continuing Director by a majority of
the Continuing Directors.
(i) "Date of Crediting" means, with respect to any
Compensation deferred pursuant to the Plan, the first day of
the month following the date when such Compensation would
otherwise be paid to a Participant.
(j) "Director" means any member of the Board.
(k) "Market Value" means, in the case of Stock, the
average of the closing prices of the Stock as reported by the
New York Stock Exchange - Composite Transactions during the
ten (10) trading days immediately preceding the date in
question, or, if the Stock is not quoted on such composite
tape or if such Stock is not listed on such exchange, on the
principal United States securities exchange registered under
the Securities Exchange Act of 1934, as amended, on which the
Stock is listed, or if the Stock is not listed on any such
exchange, the average of the closing bid quotations with
respect to a share of the Stock during the ten (10) days
immediately preceding the date in question on the NASDAQ Stock
Market National Market System or any system then in use, or if
no such quotations are available, the fair market value on the
date in question of a share of the Stock as determined by a
majority of the Continuing Directors in good faith.
(l) "Non-Management Director" means any Director who
is not an officer or employee of the Company.
(m) "Old Ralcorp" means the Ralcorp Holdings, Inc.
acquired by General Mills, Inc. on or about January 31, 1997.
(n) "Old Ralcorp Deferred Compensation Plan for
Non-Management Directors" means the Ralcorp Deferred
Compensation Plan for Non-Management Directors maintained by
Old Ralcorp.
(o) "Participant" means any Director who participates
in the Plan.
(p) "Plan" means the Deferred Compensation Plan for
Non-Management Directors.
(q) "Stock" means the Company's $.01 par value common
stock or any such other security outstanding upon the
reclassification of the Company's common stock, including,
without limitation, any Stock split-up, Stock dividend, or
other distributions of stock in respect of Stock, or any
reverse Stock split-up, or recapitalization of the Company or
any merger or consolidation of the Company with any subsidiary
or affiliate, or any other transaction, whether or not with or
into or otherwise involving an Acquiring Person.
(r) "Year" means calendar year unless otherwise
specified.
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<PAGE> 3
1.3 Eligibility and Participation
Any Non-Management Director who is entitled to Compensation,
and who is permitted to request the deferral of such Compensation by
an independent majority of the Board is eligible to participate in the
Plan. An eligible Director becomes a Participant in this Plan upon
the effective date of an agreement executed by the parties pursuant to
Section 2.1(c).
1.4 Administration of the Plan
The Board shall administer the Plan and, in connection
therewith, shall have full power and sole discretion to designate or
approve Directors eligible to participate in the Plan; to approve or
disapprove eligible Directors' requests for deferral in any option; to
impose on any deferral any terms and conditions in addition to those
set forth in the Plan; to construe and interpret the Plan; to
establish rules and regulations; to delegate responsibilities to
others to assist it in administering the Plan or performing any
responsibilities hereunder; and to perform all other acts it believes
reasonable and proper in connection with the administration of the
Plan.
1.5 Power to Amend
The power to amend, modify or terminate this Plan at any time
is reserved to the Board except that no amendment, modification or
termination which would reasonably be considered to be adverse to a
Participant or Beneficiary may apply to or affect the terms of any
deferral of Compensation deferred prior to the effective date of such
amendment, modification or termination, without the consent of the
Participant or Beneficiary affected thereby.
2. Deferral Options
2.1 Terms and Conditions
(a) Deferral options available - The options for
deferral of Compensation offered under this Plan shall consist
of the Equity Option, the Variable Interest Option and such
other options as the Board may from time to time determine.
Prior to commencement of directorships, or with respect to
existing Directors, on or before December 31 of the Year prior
to the Year in which any such Compensation will be earned, an
eligible director may request in writing that the Board
approve a deferral either into or under any single deferral
option provided under this Plan, or any combination thereof.
The Board, in its sole discretion, may permit amounts deferred
by an eligible Director pursuant to any other deferred
compensation program of the Company to be converted into any
deferral option provided under this Plan. Participants in
this Plan shall be permitted once each calendar year to
transfer any amounts which have been deferred for at least one
year (other than Company Matching Deferrals, as hereinafter
defined) in a Deferred Stock Equivalent Account established
pursuant to the Equity Option or a Deferred Cash Account
established pursuant to the Variable Interest Option. Company
Matching Deferrals may not be transferred from the Stock
Equivalent Account to which they are originally credited.
(b) Source of terms and conditions - Any deferral
under the Plan shall be subject to the provisions of the Plan,
any other conditions imposed by law,
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<PAGE> 4
and the terms of any award of Compensation. Approval of a
deferral of Compensation shall in no event constitute a
waiver by the Company of any conditions to the receipt of
such Compensation.
(c) Written agreement - Every deferral that is
approved by the Board or its designees shall be made pursuant
to a written agreement signed by the Participant and the
Company. Any modifications or amendments to such agreement
shall also be in writing, signed by the parties. In the event
of any conflict or inconsistency between the terms of such
written agreement and the terms of the Plan, such written
agreement shall control.
(d) Transfers from Old Ralcorp Deferred Compensation
Plan for Non-Management Directors - As of January 31, 1997,
account balances of the Company's Employees in the Equity
Option and the Variable Interest Option of the Old Ralcorp
Deferred Compensation Plan for Non-Management Directors will
be converted to account balances under this Plan upon terms
and under conditions approved by the Board. After January 31,
1997, the Company shall be responsible for the payment of all
liabilities and obligations for benefits unpaid with respect
to all the Company's Directors under this Plan, and the Equity
and Variable Interest Options of the Old Ralcorp Deferred
Compensation Plan for Non-Management Directors, and Old
Ralcorp shall cease to have any liability with respect
thereto.
2.2 Equity Option
(a) Stock equivalents - Upon approval of a deferral
in the Equity Option, a "Deferred Stock Equivalent Account"
shall be established in the Participant's name. Stock
equivalents and fractions thereof shall be credited to such
Deferred Stock Equivalent Account in an amount determined by
dividing the amount of Compensation to be deferred under this
option by the Market Value of the Stock on the Date of
Crediting. Upon the occurrence of any of the events described
in Section IV of the Ralcorp Holdings, Inc. Incentive Stock
Plan, the number of Stock equivalents in each Deferred Stock
Equivalent Account shall, to the extent appropriate, be
adjusted accordingly.
(b) Company Matching Deferral - Upon a deferral into
the Equity Option and the associated crediting of Stock
equivalents to a Participant's Deferred Stock Equivalent
Account, the Company shall credit such Deferred Stock
Equivalent Account, on the same Date of Crediting, with
additional Stock equivalents equal to 33-1/3% of the
Compensation deferred into such Deferred Stock Equivalent
Account divided by the Market Value of the Stock on the Date
of Crediting. Such additionally credited Stock equivalents,
and all dividend equivalents associated therewith, are
hereinafter referred to as "Company Matching Deferrals".
(c) Time of crediting - Deferrals in Stock
equivalents shall be credited to a Participant's Deferred
Stock Equivalent Account on the Date of Crediting.
(d) Dividend Equivalents - To the extent dividends on
the Stock are paid, dividend equivalents and fractions thereof
on the stock equivalents and fractions thereof in a
Participant's Deferred Stock Equivalent Account shall be
awarded, converted to additional Stock equivalents and
credited to the Deferred Stock Equivalent Account as of the
dividend payment dates.
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<PAGE> 5
The number of Stock equivalents to be credited as of each
such date shall be determined by dividing the amount of the
dividend equivalent by the Market Value of the Stock on the
dividend payment date. The Participant's Deferred Stock
Equivalent Account shall continue to earn such dividend
equivalents until fully distributed if distributed in Stock,
otherwise such dividend equivalents shall be earned only
until the time of a Participant's termination or the
effective date of the commencement of total and permanent
disability. At the discretion of the Board, dividend
equivalents may be credited in cash to a Deferred Cash
Account established or existing for the Participant under the
"Variable Interest Option", described in Section 2.3 hereof,
instead of converting them to additional Stock equivalents.
(e) Form of distribution - Distributions under this
Option, including distributions of Company Matching Deferrals,
shall be in cash. The amount of cash to be distributed shall
be the number of whole and/or fractional Stock equivalents in
each Deferred Stock Equivalent Account multiplied by the
Market Value on the date of the Participant's termination or
the effective date of the determination of total and permanent
disability, with interest accruing, at the rate described in
Section 2.3(a) hereof, from such date of termination or
determination of total and permanent disability until the time
of distribution.
(f) Time of distribution to Participant - All amounts
due to the Participant under the Equity Option shall be
payable on the 60th day following the Participant's
termination. Distributions to Participants found to be
totally and permanently disabled shall be on the 60th day
following the determination of such disability. No amounts
shall be payable to a Participant prior to such Participant's
termination or total and permanent disability.
(g) Distribution upon death - In the event of the
Participant's death, all amounts due under this Option shall
be paid to the Beneficiary; but if none is designated then
benefits shall be paid to Participant's estate or as provided
by law. Distribution in full shall be made on the 60th day
following the Participant's death.
(h) Change in Control - Upon a Change in Control,
deferrals into the Equity Option will no longer be permitted
and each Deferred Stock Equivalent Account shall be
immediately converted into a Deferred Cash Account established
pursuant to Section 2.3(a) hereof. The amount of cash to be
credited to each such Deferred Cash Account shall be equal to
the number of whole and/or fractional Stock equivalents in
each Deferred Stock Equivalent Account multiplied by the
Market Value as of the Change in Control. Each Participant
whose Deferred Stock Equivalent Account is hereby converted to
a Deferred Cash Account shall have the right, at his sole
discretion, to convert such Deferred Cash Account into any
other deferral option which may thereafter be established
pursuant to the Plan or any other deferred compensation plan
established by the Company or any successor.
2.3 Variable Interest Option
(a) Interest equivalents - Upon approval of a
deferral in the Variable Interest Option, a "Deferred Cash
Account" shall be established in the Participant's
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<PAGE> 6
name. The amount of Compensation being deferred under this
option will be credited to this account on or before the Date
of Crediting. Interest equivalents on amounts deferred under
this option shall be calculated annually as of December 31 of
each year for the period from the Date of Crediting until
December 31, or, if such period is greater than one year, for
the one-year period commencing with the previous January 1.
Such equivalents shall be based on the average of the daily
close of business prime rates for the 365 days of such year,
with respect to amounts credited prior to such year, or, with
respect to amounts credited during such year, for the number
of days from the Date of Crediting. The daily close of
business prime rates shall be as established by Morgan
Guaranty Trust Company of New York or such other bank as may
be designated by the Board. At distribution, interest
equivalents shall be similarly calculated on amounts in the
Deferred Cash Account based on average daily prime rates from
the preceding January 1, or, if later, the Date of Crediting,
through the date of distribution, and added to the total to
be distributed. The crediting of interest equivalents to the
Participant's Deferred Cash Account shall continue until the
balance in such account is fully distributed.
(b) Time of crediting - The interest equivalents
calculated each December 31 shall be credited to a
Participant's Deferred Cash Account on January 1 of the next
Year. Prior to distribution to a Participant pursuant to
Section 2.3(d) hereof, interest equivalents calculated as
described above shall be credited to such Participant's
Deferred Cash Account.
(c) Form of distribution - Distribution under this
option shall be in cash.
(d) Time of distribution to Participant - All amounts
due to the Participant under the Variable Interest Option
shall be payable on the 60th day following the Participant's
termination. Distributions to Participants found to be
totally and permanently disabled shall be on the 60th day
following the determination of such disability. No amounts
shall be payable to a Participant prior to such Participant's
termination or total and permanent disability.
(e) Distribution upon death - In the event of the
Participant's death, all amounts due under this Option shall
be paid to the Beneficiary; but if none is designated then
benefits shall be paid to Participant's estate or as provided
by law. Distribution in full shall be made in a lump sum on
the 60th day following the Participant's death.
3. Other Governing Provisions
3.1 Company's Obligations Unfunded - All benefits due a
Participant or a Beneficiary under this Plan are unfunded and
unsecured and are payable out of the general funds of the Company.
The Company, in its sole and absolute discretion, may establish a
"grantor trust" for the payment of benefits and obligations
hereunder, the assets of which shall be at all times subject to the
claims of creditors of the Company as provided for in such trust,
provided that such trust does not alter the characterization of the
Plan as an "unfunded plan" for purposes of the Employee Retirement
Income Security Act, as amended. Such trust shall make
distributions in accordance with the terms of the Plan.
- 6 -
<PAGE> 7
3.2 Beneficiary Designation - A Participant may file with the
Secretary of the Company a written designation of a beneficiary or
beneficiaries (subject to such limitations as to the classes and
number of beneficiaries and contingent beneficiaries as the Board
may from time to time prescribe) to receive, following the death of
the Participant, benefits payable under any option of the Plan. The
Board reserves the right to review and approve beneficiary
designations. A Participant may from time to time revoke or change
any such designation of beneficiary and any designation of
beneficiary under the Plan shall be controlling over any other
disposition, testamentary or otherwise; provided, however, that if
the Board shall be in doubt as to the right of such beneficiary to
receive any benefits under the Plan, the Board may determine to
recognize only the rights of the legal representative of the
Participant, in which case the Company, the Board and the members
thereof shall not be under any further liability to anyone.
3.3 Hardship Withdrawals - The Board in its sole and absolute
discretion may permit withdrawal by a Participant of any amount from
his accounts under the Equity Option or the Variable Interest
Option, if the Board determines, in its discretion, that such funds
are needed due to serious and immediate financial hardship from an
unforeseeable emergency. Serious and immediate financial hardship
to the Participant must result from a sudden and unexpected illness
or accident of the Participant or a dependent, loss of property due
to casualty, or other similar extraordinary and unforeseeable
circumstances arising from events beyond the control of the
Participant. A distribution based upon such financial hardship
cannot exceed the amount necessary to meet such immediate financial
need. In addition, the Board may impose suspensions or other
penalties as a condition to such withdrawals.
3.4 Transferability of Benefits - The right to receive payment of
benefits under this Plan shall not be transferred, assigned or
pledged except by beneficiary designation, will or pursuant to the
laws of descent and distribution.
3.5 Address of Participant or Beneficiary - A Participant shall
keep the Company apprised of his current address and that of any
Beneficiary at all times during his participation in the Plan. At
the death of a Participant, a Beneficiary who is entitled to receive
payment of benefits under the Plan shall keep the Company apprised
of his current address until the entire amount to be distributed to
him has been paid.
3.6 Taxes - Any taxes required to be withheld under applicable
federal, state or local tax laws or regulations may be withheld from
any payment due hereunder.
3.7 Gender - The use of masculine pronouns herein shall be deemed
to include both males and females.
3.8 Compliance with Section 16 - Notwithstanding any election made
or action taken by a Participant who is subject to Section 16 of the
Securities Exchange Act of 1934 ("Section 16") with respect to such
Participants account in the Equity Option shall be null and void if
any such election or action subject such Participant to short-swing
profit recovery under Section 16.
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<PAGE> 1
EXHIBIT 10.09
RALCORP HOLDINGS, INC.
DEFERRED COMPENSATION PLAN FOR KEY EMPLOYEES
(EFFECTIVE: JANUARY 31, 1997)
1. GENERAL PROVISIONS
1.1 Purpose of Plan
The purpose of the Plan is to enhance the profitability and value of the
Company for the benefit of its shareholders by providing a supplemental
retirement program to attract, retain and motivate a select group of key
employees who make important contributions to the success of the Company.
1.2 Definitions
(a) "Acquiring Person" means any person or group of Affiliates or
Associates who is or becomes the beneficial owner, directly or
indirectly, of 20% or more of the outstanding Stock.
(b) "Affiliate" or "Associate" shall have the meanings set forth as
of March 1, 1994 in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended.
(c) "Beneficiary" means the person or persons (including legal
entities) who have been designated in accordance with Section 3.2
hereof to receive benefits under this Plan following a Participant's
death.
(d) "Change in Control" means the time when (i) any person, either
individually or together with such person's Affiliates or
Associates, shall have become the beneficial owner, directly or
indirectly, of at least 50% of the outstanding Stock and there shall
have been a public announcement of such occurrence by the Company or
such person 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 Holdings, Inc.;
provided, however, that in the case of either clause (i) or clause
(ii), a Change in Control shall not be deemed to have occurred if the
event shall have been approved prior to the occurrence thereof by a
majority of the Continuing Directors who shall then be members of
such Board of Directors.
(e) "Committee" means the Nominating and Compensation Committee of
the Board of Directors of Ralcorp Holdings, Inc. or any successor to
such Committee.
(f) "Company" means Ralcorp Holdings, Inc. and its subsidiaries and
affiliates.
(g) "Compensation" means all or any part of any cash or other
consideration to be paid to an Employee for services rendered or to
be rendered to the Company.
<PAGE> 2
(h) "Continuing Director" means any member of the Board of
Directors of Ralcorp Holdings, Inc., while such person is a member of
such Board, who is not an Affiliate or Associate of an Acquiring
Person or of any such Acquiring Person's Affiliate or Associate and
was a member of such Board prior to the time when such Acquiring
Person became an Acquiring Person, and any successor of a Continuing
Director, while such successor is a member of such Board, who is not
an Acquiring Person or an Affiliate or Associate of an Acquiring
Person or a representative or nominee of an Acquiring Person or of
any Affiliate or Associate of such Acquiring Person and is
recommended or elected to succeed the Continuing Director by a
majority of the Continuing Directors.
(i) "Human Resources Department" means the Human Resources
Department of Ralcorp Holdings, Inc. or any successor department or
individual performing the same functions.
(j) "Date of Crediting" means, with respect to any Compensation
deferred pursuant to the Plan, the first day of November of the year
during which such Compensation would otherwise be paid to a
Participant, provided, however, with respect to the deferral of
special, not annual, bonuses which are not paid at the same time as
annual bonuses and which are deferred pursuant to the Plan, Date of
Crediting shall mean the date on which such Compensation would
otherwise be paid to a Participant.
(k) "Employee" means any regular employee of the Company.
(l) "Market Value" means, in the case of Stock, the average of the
closing prices as reported by the New York Stock Exchange - Composite
Transactions during the ten (10) trading days immediately preceding
the date in question, or, if the Stock is not quoted on such
composite tape or if such Stock is not listed on such exchange, on
the principal United States securities exchange registered under the
Securities Exchange Act of 1934, as amended, on which the Stock is
listed, or if the Stock is not listed on any such exchange, the
average of the closing bid quotations with respect to a share of the
Stock during the ten (10) days immediately preceding the date in
question on the National Association of Securities Dealers, Inc.
Automated Quotations System or any system then in use, or if no such
quotations are available, the fair market value on the date in
question of a share of the Stock as determined by a majority of the
Continuing Directors in good faith.
(m) "Old Ralcorp" means the Ralcorp Holdings, Inc. acquired by
General Mills, Inc. on or about January 31, 1997.
(n) "Old Ralcorp Deferred Compensation Plan for Key Employees"
means the Ralcorp Deferred Compensation Plan for Key Employees
maintained by Old Ralcorp.
(o) "Participant" means any Employee who participates in the Plan.
(p) "Plan" means the Deferred Compensation Plan for Key Employees.
(q) "Ralston" means Ralston Purina Company, a Missouri corporation.
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<PAGE> 3
(r) "Retirement" means an Employee's voluntary or involuntary
termination of employment with the Company following attainment of
age 55.
(s) "Stock" means the Company's $.01 par value common stock or any
such other security outstanding upon the reclassification of the
Company's common stock, including, without limitation, any Stock
split-up, Stock dividend, or other distributions of stock in respect
of Stock, or any reverse Stock split-up, or recapitalization of the
Company or any merger or consolidation of the Company with any
Affiliate, or any other transaction, whether or not with or into or
otherwise involving an Acquiring Person.
(t) "Termination for Cause" means a Participant's termination of
employment with the Company because the Participant willfully engaged
in gross misconduct; provided, however, that a "Termination for
Cause" shall not include a termination attributable to:
(i) poor work performance, bad judgment or negligence
on the part of the Participant; or
(ii) an act or omission reasonably believed by the
Participant in good faith to have been in or not opposed to the
best interests of his employer and reasonably believed by the
Participant to be lawful.
(u) "Year" means calendar year unless otherwise specified.
1.3 Eligibility and Participation
Any Employee who is entitled to Compensation, and who is permitted to
request the deferral of such Compensation by the Committee, is eligible to
participate in the Plan. An eligible Employee becomes a Participant in
this Plan upon the effective date of an agreement executed by the parties
pursuant to Section 2.1(d).
1.4 Administration of the Plan
The Committee shall administer the Plan and, in connection therewith,
shall have full power and sole discretion to designate or approve
Employees eligible to participate in the Plan; to designate types of
Compensation which may be deferred; to approve or disapprove eligible
Employees' requests for deferral in any option; to impose on any deferral
any terms and conditions in addition to those set forth in the Plan; to
construe and interpret the Plan; to establish rules and regulations; to
delegate responsibilities to others to assist it in administering the Plan
or performing any responsibilities hereunder; and to perform all other
acts it believes reasonable and proper in connection with the
administration of the Plan.
1.5 Power to Amend
The power to amend, modify or terminate this Plan at any time is reserved
to the Committee except that any Chief Executive Officer of the Company
may make amendments to resolve ambiguities, supply omissions and cure
defects, any amendments deemed necessary or desirable to comply with
federal tax law or regulations to avoid loss of qualification or adverse
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<PAGE> 4
tax consequences, and any other amendments deemed necessary or desirable,
which shall be reported to the Committee. Notwithstanding the foregoing,
no amendment, modification or termination which would reasonably be
considered to be adverse to a Participant or Beneficiary may apply to or
affect the terms of any deferral of Compensation prior to the effective
date of such amendment, modification or termination, without the consent
of the Participant or Beneficiary affected thereby.
2. DEFERRAL OPTIONS
2.1 Terms and Conditions
(a) Deferral options available - The options for deferral of
Compensation offered under this Plan shall consist of the Equity
Option, the Variable Interest Option and such other options as the
Committee may from time to time determine. Prior to commencement of
employment, or with respect to existing Employees, on or before
December 31 of the Year prior to the Year in which any such
Compensation will be earned, an eligible Employee may request in
writing that the Committee approve a deferral either into or under
any single deferral option provided under this Plan, or any
combination thereof. The Committee, in its sole discretion, may
permit amounts deferred by an eligible Employee pursuant to any other
deferred compensation program of the Company to be converted into any
deferral option provided under this Plan. Participants in this Plan
shall be permitted once each calendar year, in such manner and at
such time as may be determined by the Committee, to transfer any
amounts which have been deferred for at least one year (other than
Company Matching Deferrals, as hereinafter defined) in a Deferred
Stock Equivalent Account established pursuant to the Equity Option,
or a Deferred Cash Account established pursuant to the Variable
Interest Option, as the case may be, to any other account established
pursuant to the Equity Option or the Variable Interest Option.
Company Matching Deferrals may not be transferred from the Stock
Equivalent Account to which they are originally credited.
(b) Transfers from Old Ralcorp Deferred Compensation Plan for Key
Employees - As of January 31, 1997, account balances of the Company's
Employees in the Equity Option and the Variable Interest Option of
the Old Ralcorp Deferred Compensation Plan for Key Employees will be
converted to account balances under this Plan upon terms and under
conditions approved by the Committee. After January 31, 1997, the
Company shall be responsible for the payment of all liabilities and
obligations for benefits unpaid with respect to all the Company's
Employees under this Plan, and the Equity and Variable Interest
Options of the Old Ralcorp Deferred Compensation Plan for Key
Employees, and Old Ralcorp shall cease to have any liability with
respect thereto. With respect to account balances of the Company's
Employees in the Fixed Benefit Option of the Ralston Deferred
Compensation Plan for Key Employees, Ralston shall retain liability
for all unpaid benefits, obligations and liabilities with respect
thereto.
(c) Source of terms and conditions - Any deferral under the Plan
shall be subject to the provisions of the Plan, any other conditions
imposed by law, and the terms of any award of Compensation. Approval
of a deferral of Compensation shall in no event constitute a waiver
by the Company of any conditions to the receipt of such Compensation.
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<PAGE> 5
(d) Written agreement - Every deferral that is approved by the
Committee shall be made pursuant to a written agreement signed by the
Participant and the Company. Any modifications or amendments to such
agreement shall also be in writing, signed by the parties. In the
event of any conflict or inconsistency between the terms of such
written agreement and the terms of the Plan, such written agreement
shall control.
2.2 Equity Option
(a) Stock equivalents - Upon approval of a deferral in the Equity
Option, a "Deferred Stock Equivalent Account" shall be established in
the Participant's name. Stock equivalents and fractions thereof
shall be credited to such Deferred Stock Equivalent Account in an
amount determined by dividing the amount of Compensation to be
deferred under this option by the Market Value of the Stock on the
Date of Crediting. Upon the occurrence of any of the events
described in Section IV of the Ralcorp Holdings, Inc. Incentive Stock
Plan, the number of Stock equivalents in each Deferred Stock
Equivalent Account shall be adjusted accordingly.
(b) Company Matching Deferral - The Committee may determine that
the additional matching deferral described in this subparagraph (b)
shall be made with respect to Participant deferrals in any specific
fiscal year of the Company; absent such determination with respect to
any such fiscal year deferrals, no Participant shall be entitled to
the additional matching deferrals described herein. Upon such
determination by the Committee and upon a deferral into the Equity
Option and the associated crediting of Stock equivalents to a
Participant's Deferred Stock Equivalent Account, the Company shall
credit such Deferred Stock Equivalent Account, on the same Date of
Crediting, with additional Stock equivalents equal to a percentage
(as determined by the Committee) of the Compensation being deferred
at that time into such Deferred Stock Equivalent Account divided by
the Market Value of the Stock on the Date of Crediting. Such
additionally credited Stock equivalents, and all dividend equivalents
associated therewith, are hereinafter referred to as "Company
Matching Deferrals". A Company Matching Deferral shall not vest
until a Participant has been employed by the Company for a period of
at least 5 years following the relevant Date of Crediting with
respect to such Company Matching Deferral, and all non-vested Company
Matching Deferrals shall be forfeited upon a Participant's
termination of employment with the Company; provided, however, if a
Participant's termination of employment is by reason of Retirement,
20% of a Participant's otherwise non-vested Company Matching
Deferrals shall be deemed vested for each full year of the
Participant's employment with the Company following deferral.
Notwithstanding the above, all vested Company Matching Deferrals
shall also be forfeited upon a Participant's Termination for Cause or
voluntary termination of employment prior to attaining age 55,
unless, in the case of a voluntary termination, such termination was
previously approved by the Chief Executive Officer of the Company.
In addition, if at any time within two years after a Participant's
termination of employment prior to age 55, the Committee determines
that the Participant has engaged in competition with the Company, the
Participant's right to the Company Matching Deferrals shall be
forfeited and the Participant shall promptly, upon written demand by
the Company, remit all Company Matching Deferrals paid to him or her
upon termination to the Company. The determination that a
Participant is
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<PAGE> 6
engaging in competition with the Company shall be made by the
Committee in its sole and absolute discretion. In exercising its
discretion, the Committee shall consider, among other factors, the
nature of the competitive activity, the potential harm to the
Company which may result from the competitive activity, the
Participant's ability to find non-competitive employment and the
Participant's financial need. Upon request, the Committee shall
advise a Participant whether it deems an activity in which the
Participant proposes to engage to be a competitive activity.
Notwithstanding the above, however, upon a Change in Control there
will be no forfeiting of Company Matching Deferrals in the event of
a Participant's engaging in competition with the Company.
Notwithstanding anything else contained herein, in the event of a
Change in Control, Company Matching Deferrals shall vest in their
entirety and shall not be subject to forfeiture.
(c) Time of crediting - Deferrals in Stock equivalents shall be
credited to a Participant's Deferred Stock Equivalent Account on the
Date of Crediting.
(d) Dividend Equivalents - To the extent dividends on Stock are
paid, dividend equivalents and fractions thereof with respect to the
stock equivalents and fractions thereof in a Participant's Deferred
Stock Equivalent Account shall be awarded, converted to additional
Stock equivalents and credited to the appropriate Deferred Stock
Equivalent Account as of the dividend payment dates. The number of
Stock equivalents to be credited as of each such date shall be
determined by dividing the amount of the dividend equivalent by the
Market Value of the Stock on the dividend payment date. The
Participant's Deferred Stock Equivalent Account shall continue to
earn such dividend equivalents until fully distributed if distributed
in Stock, otherwise such dividend equivalents shall be earned only
until the time of a Participant's Retirement or other termination or
the effective date of the commencement of total and permanent
disability. At the discretion of the Committee, dividend equivalents
may be credited in cash to a Deferred Cash Account established or
existing for the Participant under the "Variable Interest Option",
described in Section 2.3 hereof, instead of converting them to
additional Stock equivalents.
(e) Other conditions of award - Deferrals in the Equity Option are
"Other Stock Awards" under the Ralcorp Holdings, Inc. Incentive Stock
Plan and are subject to the provisions of that plan in addition to
the terms of this Plan.
(f) Form of distribution - Distributions under this option,
including distributions of Company Matching Deferrals, shall be in
Stock, with cash for any fractional shares, unless the Committee in
its discretion changes the form of distribution to all cash or any
other combination of Stock and cash; provided, however, that any
distribution by a trust established pursuant to Section 3.1 hereof
shall be in the form of cash. The amount of cash to be distributed
shall be the number of whole and/or fractional Stock equivalents in
each Deferred Stock Equivalent Account multiplied by the Market Value
on the date of the Participant's Retirement or other termination or
the effective date of the determination of total and permanent
disability with interest accruing, at the rate described in Section
2.3(a) hereof, from such date of Retirement, other termination or
determination of disability until the time of distribution.
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<PAGE> 7
(g) Time of distribution to Participant - All amounts due to the
Participant under the Equity Option shall be payable on the 60th day
following the Participant's Retirement or other termination.
Distributions to Participants found to be totally and permanently
disabled shall be on the 60th day following the determination of such
disability. No amounts shall be payable to a Participant prior to
such Participant's Retirement, other termination or total and
permanent disability.
(h) Distribution upon death - In the event of the Participant's
death, all amounts due under this Option shall be paid to the
Beneficiary; but if none is designated then benefits shall be paid to
Participant's estate or as provided by law. Distribution in full
shall be made on the 60th day following the Participant's death.
(i) Change in Control - Upon a Change in Control, deferrals into
the Equity Option will no longer be permitted and each Deferred Stock
Equivalent Account shall be immediately converted into a Deferred
Cash Account established pursuant to Section 2.3(a) hereof. The
amount of cash to be credited to each such Deferred Cash Account
shall be equal to the number of whole and/or fractional Stock
equivalents in each Deferred Stock Equivalent Account multiplied by
the Market Value as of the Change in Control. Each Participant whose
Deferred Stock Equivalent Account is hereby converted to a Deferred
Cash Account shall have the right, at his or her sole discretion, to
convert such Deferred Cash Account into any other deferral option
which may thereafter be established pursuant to the Plan or any other
deferred compensation plan established by the Company or any
successor.
2.3 Variable Interest Option
(a) Interest equivalents - Upon approval of a deferral in the
Variable Interest Option, a "Deferred Cash Account" shall be
established in the Participant's name. The amount of Compensation
being deferred under this option will be credited to this account on
or before the Date of Crediting. Interest equivalents on amounts
deferred under this option shall be calculated annually as of October
31 of each year for the period from the Date of Crediting through the
following October 31, or, if such period is greater than one year,
for the one-year period commencing with the previous November 1.
Such equivalents shall be based on the average of the daily close of
business prime rates for the 365 days of such year, with respect to
amounts credited prior to such year, or, with respect to amounts
credited during such year, for the number of days from the Date of
Crediting. The daily close of business rates shall be as established
by Morgan Guaranty Trust Company of New York or such other bank as
may be designated by the Committee. At distribution, interest
equivalents shall similarly be calculated on amounts in the Deferred
Cash Account based on average daily prime rates from the preceding
November 1, or, if later, the Date of Crediting, through the date of
distribution, and added to the total to be distributed. The
crediting of interest equivalents to the Participant's Deferred Cash
Account shall continue until the balance in such account is fully
distributed.
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<PAGE> 8
(b) Time of crediting - The interest equivalent calculated each
October 31 shall be credited to a Participant's Deferred Cash Account
on November 1 of that Year. Prior to distribution to a Participant
pursuant to Section 2.3(d) hereof, interest equivalents calculated as
described above shall be credited to such Participant's Deferred Cash
Account.
(c) Form of distribution - Distribution under this option shall be
in cash; provided, however, that prior to a Change in Control, the
Committee in its discretion may, other than with respect to the
officers referred to in Section 2.2(f) hereof, change the form to all
Stock or a combination of cash and Stock.
(d) Time of distribution to Participant - All amounts due to the
Participant under the Variable Interest Option shall be payable on
the 60th day following the Participant's Retirement or other
termination. Distributions to Participants found to be totally and
permanently disabled shall be on the 60th day following the
determination of such disability. No amounts shall be payable to a
Participant prior to such Participant's Retirement, other termination
or total and permanent disability.
(e) Distribution upon death - In the event of the Participant's
death, all amounts due under this Option shall be paid to the
Beneficiary; but if none is designated then benefits shall be paid to
Participant's estate or as provided by law. Distribution in full
shall be made on the 60th day following the Participant's death.
3. OTHER GOVERNING PROVISIONS
3.1 Company's Obligations Unfunded - All benefits due a Participant or a
Beneficiary under this Plan are unfunded and unsecured and are payable out
of the general funds of the Company. The Company, in its sole and
absolute discretion, may establish a "grantor trust" for the payment of
benefits and obligations hereunder, the assets of which shall be at all
times subject to the claims of creditors of the Company as provided for in
such trust, provided that such trust does not alter the characterization
of the Plan as an "unfunded plan" for purposes of the Employee Retirement
Income Security Act, as amended. Such trust shall make distributions in
accordance with the terms of the Plan.
3.2 Beneficiary Designation - A Participant may file with the Human Resources
Department a written designation of a beneficiary or beneficiaries
(subject to such limitations as to the classes and number of beneficiaries
and contingent beneficiaries as the Committee may from time to time
prescribe) to receive, following the death of the Participant, benefits
payable under any option of the Plan. The Committee reserves the right to
review and approve beneficiary designations. A Participant may from time
to time revoke or change any such designation of beneficiary and any
designation of beneficiary under the Plan shall be controlling over any
other disposition, testamentary or otherwise; provided, however, that if
the Committee shall be in doubt as to the right of any such beneficiary to
receive any benefits under the Plan, the Committee may determine to
recognize only the rights of the legal representative of the Participant,
in which case the Company, the Committee and the members thereof shall not
be under any further liability to anyone.
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<PAGE> 9
3.3 Hardship Withdrawals - The Committee in its sole and absolute discretion
may permit withdrawal by a Participant of any amount from his accounts if
the Committee determines, in its discretion, that such funds are needed
due to serious and immediate financial hardship from an unforeseeable
emergency. Serious and immediate financial hardship to the Participant
must result from a sudden and unexpected illness or accident of the
Participant or a dependent, loss of property due to casualty, or other
similar extraordinary and unforeseeable circumstances arising from events
beyond the control of the Participant. A distribution based upon such
financial hardship cannot exceed the amount necessary to meet such
immediate financial need. In addition, the Committee may impose
suspensions or other penalties as a condition to such withdrawals.
3.4 Transferability of Benefits - The right to receive payment of benefits
under this Plan shall not be transferred, assigned or pledged except by
beneficiary designation, will or pursuant to the laws of descent and
distribution.
3.5 Address of Participant or Beneficiary - A Participant shall keep the
Company apprised of his current address and that of any Beneficiary at all
times during his participation in the Plan. At the death of a
Participant, a Beneficiary who is entitled to receive payment of benefits
under the Plan shall keep the Company apprised of his current address
until the entire amount to be distributed to him has been paid.
3.6 Taxes - Any taxes required to be withheld under applicable federal, state
or local tax laws or regulations may be withheld from any payment due
hereunder.
3.7 Gender - The use of masculine pronouns herein shall be deemed to include
both males and females.
3.8 Compliance with Section 16 - Notwithstanding any election made or
action taken by a Participant who is subject to Section 16 of the
Securities Exchange Act of 1934 ("Section 16") with respect to such
Participants account in the Equity Option shall be null and void if any
such election or action subject such Participant to short-swing profit
recovery under Section 16.
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EXHIBIT 10.10
DESCRIPTION OF
EXECUTIVE LIFE INSURANCE PLAN
RALCORP HOLDINGS, INC.
The Executive Life Insurance Plan may pay a death benefit to the beneficiaries
of certain key management employees.
Eligibility
The CEO or any Corporate or Executive Vice President of the Company or its
operating subsidiaries.
Any other person selected by Nominating and Compensation Committee or the CEO.
Must have been participant in Company's Group Life Insurance Plan at
retirement.
Benefits
Beneficiaries of eligible retired key employees will be provided a death
benefit in an amount equal to 50% of the earnings recognized under the
Company's benefit plans for the key employee during the last full year of
employment.
Funding
No funding provision - benefits payable from the Company's general assets.
<PAGE> 1
EXHIBIT 10.11
DESCRIPTION OF RALCORP HOLDINGS, INC.
EXECUTIVE HEALTH PLAN
RALCORP HOLDINGS, INC.
The Executive Health Plan provides hospital and medical reimbursement for
certain key management employees and their dependents.
Eligibility
The CEO or any Corporate or Executive Vice President of the Company or its
operating subsidiaries.
Any other employees selected by Nominating and Compensation Committee or the
CEO.
Must enroll in Company's Comprehensive Health Plan, which is available to
certain Company employees, at their own expense.
Coverage
At no cost to Participant, Plan pays 100% of medical expenses incurred, up to
$35,000 per year, provided such expenses would constitute deductible medical
expenses for federal income tax purposes and provided that the expenses are not
payable by the Company's Comprehensive Health Plan.
Funding
The Company has purchased insurance to fund the benefits.
<PAGE> 1
EXHIBIT 10.12
DESCRIPTION OF
EXECUTIVE LONG-TERM DISABILITY PLAN
RALCORP HOLDINGS, INC.
The Executive Disability Plan may provide monthly disability benefits to
certain key employees.
Eligibility
The CEO or any Corporate or Executive Vice President of the Company or its
operating subsidiaries.
Any other person selected by Nominating and Compensation Committee or the CEO.
Must participate, at their own expense, in the Company's Long-Term Disability
Plan.
Benefits
The monthly benefits that a Participant would have received under the Company's
Long-Term Disability Plan, if the Participant's monthly benefit under such plan
was not capped at $5,000 per month.
Monthly Benefit payable upon find of total disability under the Company's
Long-Term Disability Plan.
Payable until death, age 65 or until no longer disabled.
Funding
No funding provision - benefits payable from the Company's general assets.
<PAGE> 1
EXHIBIT 10.13
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT (the "Agreement") made this ______ day of
_____________, 1995, between RALCORP HOLDINGS, INC., a Missouri corporation
(the "Company") and _____________________ ("Participant").
WHEREAS, Participant is a [Director] [Officer] [Director and an Officer]
of the Company, and in such capacities is performing a valuable service for
Company; and
WHEREAS, the Company's Restated Articles of Incorporation (the "Articles")
and Section 351.355 of the Missouri Revised Statutes, as amended to date (the
"Indemnification Statute"), permit the indemnification of directors, officers,
employees and certain agents of the Company, under certain circumstances; and
WHEREAS, in order to induce Participant to continue to serve as a
[Director] [Officer] [Director and an Officer] of the Company, Company has
determined and agreed to enter into this contract with Participant;
NOW THEREFORE, in consideration of Participant's continued service as a
[Director] [Officer] [Director and an Officer] of the Company after the date
hereof, the Company and Participant agree as follows:
1. Indemnity of Participant. Company hereby agrees to hold harmless and
indemnify Participant to the full extent authorized or permitted by the
provisions of the Indemnification Statute, or by any amendment thereof, or any
other statutory provisions authorizing or permitting such indemnification which
is adopted after the date hereof.
2. Additional Indemnity. Subject to the exclusions set forth in Section 3
hereof, Company further agrees to hold harmless and indemnify Participant
against any and all expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement, actually and reasonably incurred by Participant in
connection with any Claim.
<PAGE> 2
Such indemnification shall be made by the Company without regard to whether or
not there has been a determination that Participant has met any standard of
conduct prescribed by law or otherwise in connection with the specific matter
for which indemnification is sought by (i) a majority of a quorum of
disinterested directors, (ii) independent legal counsel by written opinion, or
(iii) the Company's shareholders by a majority vote. For purposes of this
Indemnification Agreement, a "Claim" is a threatened, pending or completed
action, claim, suit, or proceeding, whether civil, criminal, administrative or
investigative (including an action by or in the right of the Company) to which
Participant is, was or at any time becomes a party, or is threatened to be made
a party, by reason of the fact that Participant is, was or at any time (whether
before or after the date of this Agreement) becomes a director, officer,
employee or agent of the Company, or is or was serving or at any time (whether
before or after the date of this Agreement) serves at the request of the
Company as a director, officer, employee, member, trustee, or agent of another
corporation, partnership, joint venture, trust, trade or industry association
or other enterprise (whether incorporated or unincorporated, for-profit or
not-for-profit).
3. Limitations on Additional Indemnity. Notwithstanding anything else
contained in this Agreement, no indemnity shall be paid by Company pursuant to
this Indemnification Agreement:
(a) In respect to remuneration paid to Participant if it shall be finally
judicially adjudged that such remuneration was paid in violation of law;
(b) On account of any suit for an accounting of profits made from the
purchase or sale by Participant of securities of the Company pursuant to the
provisions of Section 16(b) of the Securities Exchange Act of 1934, as amended
or similar provisions of any state or local statutory law;
(c) On account of Participant's conduct which is finally judicially
adjudged to have been knowingly fraudulent, deliberately dishonest or willful
misconduct;
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(d) If a final decision by a Court having jurisdiction in the matter (all
appeals having been denied or none having been taken) shall determine that such
indemnification is not lawful; or
(e) In connection with indemnity pursuant to Section 2 only, except to the
extent the aggregate of losses to be indemnified thereunder exceeds the amount
of such losses for which the Participant actually receives payments pursuant to
Section 1 hereof or pursuant to any insurance policies or other comparable
policies purchased and maintained by the Company.
4. Continuation of Indemnity. All agreements and obligations of Company
contained herein shall continue during the period Participant is a Director or
an Officer of Company and shall continue thereafter so long as Participant
shall be subject to any possible Claim.
5. Notification and Defense of Claim. Promptly after receipt by
Participant of notice of the commencement of any Claim, Participant will notify
Company of the commencement thereof; provided, however, that the omission to so
notify Company will not relieve Company from any liability which it may have to
Participant under this Agreement unless and to the extent that Company's rights
are prejudiced by such failure. With respect to any Claim, as to which
Participant notifies Company of the commencement thereof:
(a) Company will be entitled to participate in the defense thereof at its
own expense;
(b) Except as otherwise provided below, Company jointly with any other
party will be entitled to assume the defense thereof at Company's expense, with
counsel satisfactory to Participant. After notice from Company to Participant
of its election to so assume the defense thereof, Company will not be liable to
Participant under this Agreement for any legal or other expenses subsequently
incurred by Participant in connection with the defense thereof unless
Participant shall have reasonably concluded
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<PAGE> 4
that there may be a conflict of interest between Company and Participant in the
conduct of the defense of such Claim, in which case, Company shall not be
entitled to assume the defense of such Claim. For purposes of this
Indemnification Agreement, there shall be deemed to be a conflict of interest
between Company and Participant with respect to any Claim brought by or in the
right of the Company; and
(c) Company shall not be liable to indemnify Participant under this
Agreement for any amounts paid in settlement of any Claim effected without the
Company's written consent. Company shall not settle any Claim in any manner
which would impose any penalty or limitation on Participant without
Participant's written consent. Neither Company nor Participant will
unreasonably withhold their consent to any proposed settlement.
6. Advancement and Repayment of Expenses.
(a) To the extent that the Company assumes the defense of any Claim,
Participant agrees that he will reimburse Company for all reasonable expenses
paid by Company in defending such Claim in the event and only to the extent
that it shall be ultimately judicially determined that Participant is not
entitled to be indemnified by Company for such expenses under the provisions of
either the Indemnification Statute, the Articles, this Agreement or otherwise.
(b) To the extent that the Company does not assume the defense of any
Claim, Company shall advance to Participant all reasonable expenses, including
all reasonable attorneys' fees, retainers, court costs, transcript costs, fees
of experts, witness fees, travel expenses, duplicating costs, printing and
binding costs, telephone charges, postage, delivery service fees, and all other
disbursements or expenses of the types customarily incurred in connection with
defending, preparing to defend or investigating any civil or criminal action,
suit or proceeding, within twenty days after the receipt by Company of a
statement or statements from Participant requesting such advance or advances,
whether prior to or after final disposition of such Claim. Such statement or
statements shall
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<PAGE> 5
reasonably evidence the expenses incurred by Participant and shall include or
be preceded or accompanied by an undertaking by or on behalf of Participant to
repay all of such expenses advanced if it shall be ultimately judicially
determined that Participant is not entitled to be indemnified against such
expenses. Any advances and undertakings to repay pursuant to this paragraph
shall be unsecured and interest free.
7. Enforcement.
(a) Company expressly confirms and agrees that it has entered into this
Agreement and assumed the obligations imposed on Company hereby in order to
induce Participant to continue to serve as a Director and an Officer of
Company, and acknowledges that Participant is relying upon this Agreement in
continuing in such capacity.
(b) In the event Participant is required to bring any action to enforce
rights or to collect moneys due under this Agreement and is successful in such
action, Company shall reimburse Participant for all of Participant's attorneys'
fees and expenses in bringing and pursuing such action.
8. Separability. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any provision
hereof shall be held to be invalid or unenforceable for any reason, such
invalidity or unenforceability shall not affect the validity or enforceability
of the other provisions hereof.
9. Governing law; Binding Effect; Amendment and Termination.
(a) This Agreement shall be interpreted and enforced in accordance with
the laws of the State of Missouri without giving effect to the conflict of laws
provisions thereof..
(b) This Agreement shall be binding upon Participant and upon Company, its
successors and assigns, and shall inure to the benefit of Participant, his
heirs, personal representatives and assigns, and to the benefit of the Company,
its successors and assigns.
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(c) No amendment, modification, termination or cancellation of this
Agreement shall be effective unless signed in writing by both parties hereto.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the day and year first above written.
RALCORP HOLDINGS, INC.
By:____________________________
Secretary
By:____________________________
Participant
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EXHIBIT 10.14
RALCORP HOLDINGS, INC.
SUPPLEMENTAL RETIREMENT PLAN
ARTICLE I
DEFINITIONS
1.1 "AFFILIATED COMPANY" means Ralcorp Holdings, Inc., those domestic
corporations in which Ralcorp Holdings, Inc. owns directly or indirectly more
than 50% of the voting stock, or any other entity so designated by the
Committee.
1.2 "BENEFICIARY" means:
i) with respect to benefits payable pursuant to
Article Three, either a Surviving Spouse (as defined in the
Retirement Plan) or any other person (including a trust)
designated pursuant to the terms of the Retirement Plan to
receive benefits under the terms of that Plan as a result of
an Employee's death; and
ii) with respect to benefits payable pursuant to
Article Four, the person or persons, including a Surviving
Spouse or a trust, designated by the Employee on a beneficiary
designation form provided for this Plan; and if no such
Beneficiary survives the Employee, then the Employee's estate.
1.3 "CODE" means the Internal Revenue Code of 1986, as amended.
1.4 "COMMITTEE" means the Nominating and Compensations Committee of the
Board of Directors of Ralcorp Holdings, Inc., its designates, or any successor
to such Committee.
1.5 "COMPENSATION" means compensation included for purposes of computation
of benefits pursuant to the Retirement Plan.
1.6 "DEFERRAL OF COMPENSATION" means a deferral of Compensation by an
Employee pursuant to the terms of the plans or programs listed in Appendix A
attached hereto, as such Appendix may be amended from time to time at the sole
discretion of the Committee or its designates.
1.7 "EMPLOYEE" means a person employed by any of the Affiliated Companies
who is one of a select group of management or highly-compensated employees.
1.8 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
1.9 "PLAN" means the Ralcorp Holdings, Inc. Supplemental Retirement Plan.
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1.10 "RALCORP" means Ralcorp Holdings, Inc..
1.11 "RETIREMENT" means the effective date on which an Employee or such
Employee's Beneficiary begins to receive benefits pursuant to an election under
the Retirement Plan.
1.12 "RETIREMENT PLAN" means the Ralcorp Holdings, Inc. Retirement Plan or
any successor plan.
1.13 "SECTION 415 LIMITATION" means the limitation, imposed by Section 415
of the Code, on the amount of retirement benefits payable from a qualified
retirement plan to a participant in such plan.
1.14 "SUPPLEMENTAL RETIREMENT AWARD" ("SRA") means a retirement benefit
awarded pursuant to Article Four of the Plan.
1.15 "SUPPLEMENTAL RETIREMENT BENEFITS" means benefits payable pursuant to
Article Three of the Plan.
1.16 "SURVIVING SPOUSE" means the spouse of an Employee who dies prior to
Retirement.
ARTICLE II
ELIGIBILITY
2.1 SUPPLEMENTAL RETIREMENT BENEFITS. (a) Any Employee described in
Section 2.1(b) shall be eligible to accrue Supplemental Retirement Benefits as
described in Article Three in the event that such Employee's retirement
benefits accrued pursuant to the Retirement Plan are less than they would be
but for the following factors:
i) the Employee's making a Deferral of Compensation
ii) the Section 415 Limitation; and/or
iii) the Compensation limitations imposed by Section
401(a) of the Code.
Such factors shall collectively be known as the Benefit Limitations.
(b) The following Employees shall be eligible to accrue Supplemental
Retirement Benefits under the circumstances described in Section 2.1(a):
i) Principal Corporate Officers of Ralcorp:
Chairman of the Board, Chief Executive Officer, President, any
Vice President, Secretary, Treasurer; or
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ii) Any other Employee designated by the Chief
Executive Officer of Ralcorp.
2.2 SUPPLEMENTAL RETIREMENT AWARDS. An Employee shall be eligible for a
Supplemental Retirement Award ("SRA") as described in Article Four if:
i) he or she is a Corporate officer of Ralcorp and
an SRA for such Employee is approved by the Committee; or
ii) he or she is not a Corporate officer of Ralcorp
and an SRA with a present value in excess of $200,000 (as
determined for pension expense purposes of the Affiliated
Companies) has been approved for such Employee by the
Committee; or
iii) he or she is not a Corporate officer of Ralcorp
and an SRA with a present value of $200,000 or less (as
determined for pension expense purposes of the Affiliated
Companies) has been approved for such Employee by the Chief
Executive Officer of Ralcorp.
ARTICLE III
SUPPLEMENTAL RETIREMENT BENEFITS
3.1 AMOUNT AND FORM OF EMPLOYEE'S BENEFIT. Any Employee who meets the
eligibility requirements of Section 2.1 shall be entitled to receive a
Supplemental Retirement Benefit which shall be equal in value to the additional
benefit which such Employee would have received pursuant to the Retirement Plan
but for the Benefit Limitations.
Notwithstanding the form of benefit selected by the Employee to be paid
from the Retirement Plan, the amounts payable pursuant to this Section 3.1
shall be paid in the form of a five-year certain annuity if the Employee is
unmarried at the time of commencement of payment, or in the form of a 50%
contingent annuitant benefit if the Employee is married at that time, such
optional forms to be calculated in a manner consistent with administration of
the Retirement Plan; except that an Employee may irrevocably elect, in the year
prior to the year in which such Employee first accrues a benefit under the
Plan, to receive benefits pursuant to this Section in any other form of payment
permitted under the Retirement Plan.
Benefits shall be payable to an Employee in monthly installments on the
first day of each month following Retirement.
3.2 BENEFICIARIES. In the event of an eligible Employee's death, such
Employee's Beneficiary shall receive Supplemental Retirement Benefits equal in
amount to the additional monthly benefit which such Beneficiary would have
received from the Retirement Plan but for the Benefit Limitations applicable to
the Employee's accrued benefit.
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3.3 LUMP SUM PAYMENTS. In lieu of monthly installment payments described
in Section 3.1 and 3.2, the Committee, at its sole discretion, may pay, on the
sixtieth day after Retirement or death of an Employee, Supplemental Retirement
Benefits in the form of a single lump-sum distribution equal in amount to the
present value of the right to receive such Supplemental Retirement Benefits on
a monthly basis, but only in the event that such monthly benefit payment is
less than $100. The present value shall be determined using the discount rate
utilized in the Retirement Plan to determine the present value of lump-sum cash
distributions permitted by Section 417 of the Code, as such rate may be
determined or adjusted from time to time.
ARTICLE IV
SUPPLEMENTAL RETIREMENT AWARDS
4.1 AMOUNT AND FORM OF EMPLOYEE'S BENEFIT. An Employee who meets the
eligibility requirements of Section 2.2 shall be entitled to receive an SRA in
the amount approved by the Committee or the Chief Executive Officer of Ralcorp,
as applicable.
The SRA shall be payable to the Employee in equal monthly installments for
the lifetime of the Employee beginning at his or her Retirement at age 62 or
later. Such amount shall be subject to reduction, change in form of payment or
forfeiture for retirement or termination before age 62 as described in Section
4.2.
4.2 REDUCTION, CHANGE IN FORM OF PAYMENT OR FORFEITURE. The monthly
benefit payable to Employee at his or her Retirement at age 62 or later shall
be reduced by 5/12% for each month or fraction thereof by which the Employee's
Retirement at or after age 55 precedes the Employee's sixty-second birthday, to
a maximum reduction of 35% at age 55. If the Employee remains in the employ of
an Affiliated Company until age 62, the SRA shall be paid with no reduction for
early retirement. The SRA shall not be increased if the Employee remains in
the employ of an Affiliated Company after age 62.
If the Employee voluntarily terminates employment prior to age 55, whether
by Retirement or other termination, or if the Employee is terminated for cause
at any time, no benefit shall be payable under the Article Four of the Plan
either to the Employee or to his or her beneficiaries. If the Employee is
involuntarily terminated prior to age 55 other than for cause, as soon as
practicable he or she will be paid a lump sum equal to the Minimum Benefit
described in Section 4.3 in lieu of the SRA described in Sections 4.1 and 4.2.
4.3 MINIMUM BENEFIT. If the Employee should die before commencement of
payment of the SRA described in Sections 4.1 or 4.2, the Employee's beneficiary
shall be paid a lump sum in cash equal to the Minimum Benefit approved by the
Committee or the Chief Executive Officer of Ralcorp at the time the SRA was
granted. The beneficiary shall be designated by the Employee on a beneficiary
designation form provided in connection with this Plan. If no such Beneficiary
has been designated on a form received by the Employee Benefits
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Department of Ralcorp, or if no such Beneficiary survives the Employee, then
the Minimum Benefit shall be paid to the Employee's estate.
If the Employee dies after payment of the SRA described in Sections 4.1 or
4.2 has commenced, but before an amount equal to the Minimum Benefit has been
paid, then the Beneficiary shall be paid a lump sum in cash equal to the
difference between the Minimum Benefit and the amount of the SRA paid prior to
the Employee's death.
4.4 CALCULATION OF MINIMUM BENEFIT. The Minimum Benefit shall be a lump
sum equal to the present value of the SRA described in Section 4.1 as if it
were payable beginning at the Employee's age 65. Except in unusual
circumstances approved by the Committee or the Chief Executive Officer at the
time an SRA is approved, the present value of the Minimum Benefit shall be
calculated by using the discount rate utilized by Ralcorp calculating pension
expense for financial accounting purposes as of the date the Award is approved.
The present value shall also be based on mortality assumptions used in
qualified defined benefit plans of the Affiliated Companies for their United
States employees and certain other assumptions deemed reasonable by Ralcorp.
4.5 TOTAL AND PERMANENT DISABILITY. If the Employee becomes totally and
permanently disabled at or after age 55, payment of benefits shall commence at
the time the finding of disability is made. Reduction factors described in
Section 4.2 for termination or Retirement at or after age 55 shall apply. An
Employee's disability beginning before age 55 shall be considered an
involuntary termination of employment and the Minimum Benefit shall be paid to
the Employee at the time the finding of disability is made.
ARTICLE V
ERISA BENEFIT LIMITATION
5.1 OBLIGATIONS UNFUNDED. All benefits due an Employee or Beneficiary
pursuant to the Plan are unfunded and unsecured and are payable out of the
general funds of the Affiliated Companies. The Affiliated Companies shall make
no provision for the funding or insuring of any benefits payable hereunder. In
the event that an Affiliated Company shall decide to establish an advance
accrual reserve on its books against the future expense of payments made
hereunder, such reserve shall not under any circumstances be deemed to be an
asset of the Plan, nor a source of payment of any claims under the Plan but at
all times shall remain a part of the general assets of the Affiliated Company,
and shall be subject to the claims of its creditors.
Ralcorp may, in its sole and absolute discretion, establish a grantor
trust for the payment of benefits hereunder, the assets of which shall be at
all times subject to the claims of creditors of Ralcorp, as provided for in
such trust, provided that such trust does not alter the characterization of the
Plan as an unfunded plan for purposes of the Employee Retirement Income
Security Act of 1974, as amended. Such trust shall make distributions in
accordance with the terms of the Plan.
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5.2 EXCESS BENEFIT PLAN. The portion of the Plan relating to Supplemental
Retirement Benefits payable on account of the Section 415 Limitations
constitutes an excess benefit plan as defined in Section 3(36) of ERISA.
5.3 NO RIGHT TO CONTINUED EMPLOYMENT. Neither the establishment of the
Plan nor the payment of any benefits thereunder nor any action of the
Affiliated Companies shall be held or construed to confer upon any person any
legal right to be continued in the employ of any Affiliated Company.
5.4 POWER TO AMEND OR TERMINATE. The Board of Directors of Ralcorp, the
Committee and their delegates are each empowered to amend, modify or terminate
this Plan at any time, except that no amendment, modification or termination
may reduce or otherwise detrimentally affect benefits payable under this Plan
to an Employee or his Beneficiary without regard to such amendment unless the
Employee (or Beneficiary, if the Employee is deceased) consents to such change.
Notwithstanding the foregoing, Appendix A may be amended prospectively without
the consent of any Employee or Beneficiary and such amendment shall apply to
Deferrals of Compensation made after the effective date of such amendment.
5.5 BENEFITS UPON DIVESTITURE OR OTHER DISPOSITION OF BUSINESS. In the
event that, as a result of a sale of stock or assets or another transaction by
which all or part of an Affiliated Company ceases to be an affiliate of
Ralcorp, an Employee's employment with an Affiliated Company is terminated or
his employer is no longer an Affiliated Company, Ralcorp reserves the right to
offset against any Supplemental Retirement Benefits, otherwise payable to such
Employee or his Beneficiary, retirement benefits payable to such Employee or
his Beneficiary from any pension or retirement plan of such purchaser, its
affiliate or successor ("Purchaser") after consummation of such sale to the
extent such benefits duplicate the benefits payable under this Plan. Ralcorp
also reserves the right to assign its rights and obligations pursuant to this
Plan and, upon the assumption of such rights and obligations by a third party,
Ralcorp shall guarantee the payment of such transferred obligations in the
event that the assignee fails to pay them.
5.6 TRANSFERABILITY OF BENEFITS. The Employee's right to receive payment
of benefits under this Plan shall not be transferred, assigned or pledged
except by beneficiary designation, by will or pursuant to the laws of descent
and distribution.
5.7 ANTICIPATION OF BENEFITS. An Employee shall have a claim upon an
Affiliated Company only to the extent of the monthly payments, if any, due such
Employee up to and including the then current month, and the Employee shall not
have a claim against any Affiliated Company for any subsequent monthly payment
unless and until such payments shall become due and payable.
5.8 TAXES. Any taxes required to be withheld under applicable federal,
state or local tax laws or regulations may be withheld from any payment due
hereunder.
5.9 MISSOURI LAW TO GOVERN. Except to the extent preempted by federal
law, all questions pertaining to the interpretation, construction,
administration, validity and effect of the
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provisions of the Plan shall be determined in accordance with the laws of the
State of Missouri without giving effect to the conflict of laws provisions
thereof.
5.10 HEADINGS. Headings of Articles and Sections of the Plan are inserted
for convenience of reference, and constitute no part of the Plan.
5.11 GENDER. The use of masculine pronouns herein shall be deemed to
include both males and females.
RALCORP HOLDINGS, INC.
Date_______________ By: ____________________________
Title: ___________________________
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APPENDIX A
RALCORP HOLDINGS, INC.
SUPPLEMENTAL RETIREMENT PLAN
Deferred Compensation Plan for Key Employees
Ralcorp Holdings, Inc. Executive Savings Investment Plan
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EXHIBIT 10.15
RALCORP HOLDINGS, INC.
EXECUTIVE SAVINGS INVESTMENT PLAN
ARTICLE I
DEFINITIONS
SECTION 1.1 BOARD. The Board of Directors of Ralcorp Holdings, Inc..
SECTION 1.2 CODE. The Internal Revenue Code of 1986, as amended.
SECTION 1.3 COMMITTEE. The Nominating and Compensation Committee of the
Board.
SECTION 1.4 COMPANY. Ralcorp Holdings, Inc..
SECTION 1.5 COMPENSATION. All or any part of any cash compensation and
other consideration due to an Employee for services rendered or to be rendered
to an Employer, as determined by the Committee.
SECTION 1.6 DISABILITY. A finding by the Committee of a Participant's
permanent and total disability.
SECTION 1.7 EMPLOYEE. Any individual who is employed by an Employer and
who is one of a select group of management or highly-compensated employees.
SECTION 1.8 EMPLOYEE BENEFITS DEPARTMENT. The Employee Benefits
Department of Ralcorp Holdings, Inc..
SECTION 1.9 EMPLOYER. Ralcorp Holdings, Inc. or one of its principal
United States subsidiaries so designated by the Board.
SECTION 1.10 ENTRY DATE. The last day of any payroll period during which
or with respect to which an Employee, meeting the eligibility requirements of
Section 2.2 and 2.3, has his or her deferrals pursuant to the SIP limited by
the deferral limitations of ERISA.
SECTION 1.11 ERISA. The Employee Retirement Income Security Act of 1974,
as amended.
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SECTION 1.12 PARTICIPANT. An Employee who is deferring, or an Employee
or former Employee who has deferred, Compensation pursuant to Article III of
the Plan.
SECTION 1.13 PLAN. The Ralcorp Holdings, Inc. Executive Savings
Investment Plan, as amended from time to time.
SECTION 1.14 RETIREMENT. Termination of Employment at or after age 55.
SECTION 1.15 SIP. The Ralcorp Holdings, Inc. Savings Investment Plan, as
amended from time to time.
SECTION 1.16 TERMINATION OF EMPLOYMENT. Separation from employment with
the Company, any other Employer, or any other affiliate of the Company for
reasons other than death of the Participant; provided, however, that a transfer
in employment between the Company, any other Employer or an affiliate of the
Company shall not be deemed a Termination of Employment. For purposes of this
Plan, the sale by the Company or an affiliate of all or substantially all of
the outstanding capital stock of an Employer or other affiliate of the Company
shall be deemed to be a Termination of Employment of Participants employed by
such Employer or other affiliate.
SECTION 1.17 VALUATION DATE. December 31 of each Year.
SECTION 1.18 YEAR. A calendar year, unless otherwise specified.
ARTICLE II
ELIGIBILITY AND PARTICIPATION
SECTION 2.1 PARTICIPATION. An Employee who is entitled to Compensation
shall be eligible to elect to participate in the Plan during the period of time
in which the Employee is:
(a)(1) a Principal Corporate Officer of the Company: Chairman of the
Board, Chief Executive Officer, President, Vice President,
Secretary or Treasurer;
(2) designated by a Chief Executive Officer of Ralcorp
Holdings, Inc. as eligible to participate in the Plan;
and,
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(b) has elected to defer Compensation as permitted under the
terms of the SIP.
SECTION 2.3 INITIAL ENROLLMENT. An Employee may first become a
Participant upon an Entry Date if he or she has previously completed and
submitted to the Employee Benefits Department an enrollment form, supplied by
the Department, by which an Employee elects to defer a specified percentage of
compensation in accordance with Article III.
SECTION 2.4 ANNUAL DEFERRAL ELECTIONS. A new election to defer
compensation must be submitted in December each Year to the Employee Benefits
Department on forms provided by it in order for a Participant to defer income
pursuant to the Plan during the following Year. Each deferral election is
effective for an entire Year, and cannot be increased or decreased during that
period.
SECTION 2.5 CESSATION OF DEFERRALS. A Participant who ceases to meet the
eligibility requirements of Section 2.2(a) may no longer defer Compensation
pursuant to the Plan effective as of the first payroll period beginning after
such cessation of eligibility. Such Participant shall continue to be a
Participant in the Plan for all other purposes until distribution of his or her
account balance.
ARTICLE III
CONTRIBUTIONS
SECTION 3.1 DEFERRALS INTO THE PLAN. A Participant whose deferrals into
the SIP are limited during a Year by the deferral limits imposed by ERISA and
the Code may defer a portion of such Participant's Compensation, in excess of
that permitted to be deferred pursuant to the SIP, on a before-tax basis into
the Plan. No after-tax deferrals are permitted under the Plan. If a
Participant's deferrals from a single payment of Compensation must be
apportioned between the SIP and the Plan, the deferral percentage applicable to
the initial deferral under the Plan shall be equal to the deferral percentage
then in effect for the SIP. Subsequent deferrals pursuant to the Plan shall be
made at the deferral percentage elected by the Participant for the Plan for
that Year.
SECTION 3.2 BASIC MATCHED CONTRIBUTIONS. Subject to Section 3.1, each
Participant may defer receipt of a portion of his or her Compensation in any
amount from 2% to 6%, in 1% increments, for each payroll period in a Year
beginning with that payroll period in which the Participant exceeds the
deferral limits in the SIP. Such deferrals into the Plan shall be defined as
Basic Matched Contributions and shall be credited to a Ralcorp common stock
equivalent book reserve account.
SECTION 3.3 BASIC UNMATCHED CONTRIBUTIONS. Subject to Section 3.1, each
Participant who has elected the maximum Basic Matched Contribution rate of 6%
may defer receipt of a
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portion of his or her Compensation by an additional 1% to 6%, in 1% increments,
for each payroll period in a calendar year beginning with that payroll period
in which the Participant exceeds the deferral limits in the SIP. Such
deferrals into the Plan shall be defined as Basic Unmatched Contributions and
may be credited to either a Ralcorp common stock equivalent account or an
interest bearing account or portions to both accounts.
SECTION 3.4 COMPANY MATCHING CONTRIBUTIONS. With respect to each payroll
period, the Company shall contribute on behalf of each Participant an amount
equal to the same percentage of such Participant's Basic Matched Contributions
as is contributed by the Company to the Participant's account in the SIP. Such
contributions shall be defined as Company Matching Contributions and will be
credited to the Ralcorp common stock equivalent account.
SECTION 3.5 PARTICIPANTS' ACCOUNTS.
(a) The Company shall establish one or more book reserve
account(s) for each Participant. With respect to each payroll
period, as appropriate, the Company shall credit to a Participant's
account(s) his or her Basic Matched Contribution under Section 3.2,
Basic Unmatched Contributions under Section 3.3, and Company
Matching Contributions in accordance with Section 3.4.
(b) Each Participant's Company stock equivalent account balance
shall be credited, effective as of December 31 each Year, with
annual earnings equal to the rate of return (dividends, stock
appreciation and interest, net of expenses) for that Year under the
Ralcorp Stock Fund of the SIP. Deferrals made during a Year will be
credited at the end of that first Year with a pro-rata share of
annual earnings from the time of deferral.
(c) Each Participant's interest bearing account shall be
credited, effective as of December 31 each year, with annual
earnings equal to the rate of return of the Fixed Income Fund of the
SIP. Deferrals made during a Year will be credited at the end of
that first Year with a pro-rata share of annual earnings from the
time of deferral.
(d) Each Participant shall be furnished annually a statement
setting forth the value of his or her account.
ARTICLE IV
VESTING OF CONTRIBUTIONS
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SECTION 4.1 VESTING OF BASIC CONTRIBUTIONS. Each Participant shall be
vested at all times in amounts attributable to his or her Basic Matched
Contributions, Basic Unmatched Contributions, and any earnings thereon.
SECTION 4.2 VESTING OF COMPANY MATCHING CONTRIBUTIONS. A Participant
shall be vested in the following manner in Company Matching Contributions made
to such Participant's account:
(a) at the rate of 25% for each whole year of employment with the
Company as recognized under the terms of the SIP; or
(b) 100% vested in the event of the occurrence of any one of the
following:
(1) attainment of age 65
(2) Retirement
(3) Disability
(4) death
(5) termination of the Plan.
ARTICLE V
DISTRIBUTIONS
SECTION 5.1 TIME OF DISTRIBUTION TO PARTICIPANT. Amounts due to a
Participant including, to the extent it can be calculated and paid
simultaneously with the rest of the distribution, interest on such amounts,
shall be paid on the 60th day after such Participant's Retirement or other
Termination of Employment. Any interest accrued on such distribution that
cannot be calculated at the time of the initial distribution shall be paid as
promptly thereafter as practicable. Notwithstanding the foregoing,
distributions to Participants found to be Disabled shall be made on the 60th
day following the determination of such Disability. No distribution to a
Participant shall be made upon termination of the Plan until such Participant's
Retirement, Termination of Employment or Disability.
SECTION 5.2 DISTRIBUTION UPON DEATH. In the event of the Participant's
death, all amounts due to be distributed shall be paid to the Beneficiary
designated by the Participant in a writing submitted to the Employee Benefits
Department; but if none is designated, then benefits
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shall be paid to the Participant's estate or as provided by law. Changes in
designation may be made by filing a written request with the Employee Benefits
Department. Distribution in full shall be paid on the 60th day following the
Participant's death. The Committee reserves the right to review and approve
Beneficiary designations.
SECTION 5.3 AMOUNT TO BE DISTRIBUTED. At the appropriate time of
distribution described in Sections 5.1 or 5.2, the Company shall distribute the
value of a Participant's entire Basic Matched Contributions, Basic Unmatched
Contributions and the vested amount of such Participant's Company Matching
Contributions. Earnings on the vested portion of a Participant's account
balance, calculated at the interest rate applicable to the Valuation Date
immediately preceding the distribution, shall be credited to the Participant's
account for the period between the most recent Valuation Date and the date of
distribution of the principal account balance.
SECTION 5.4 FORM OF DISTRIBUTION. All distributions shall be made in
cash.
SECTION 5.5 WITHDRAWALS AND LOANS.
(a) Loans are not permitted under the Plan.
(b) No withdrawals are permitted except that the Committee, in
its sole and absolute discretion, may permit withdrawals by a
Participant of any vested amount from such Participant's accounts if
the Committee determines, in its discretion, that such funds are
needed due to serious and immediate financial hardship from an
unforeseeable emergency. Serious and immediate financial hardship
to the Participant must result from a sudden and unexpected illness
or accident of the Participant or a dependent, loss of property due
to casualty, or other similar extraordinary and unforeseeable
circumstances arising from events beyond the control of the
Participant. A distribution based upon such financial hardship
cannot exceed the amount necessary to meet such immediate financial
need. In addition, the Committee may impose suspension of a
Participant's deferrals into the Plan or other penalties as a
condition of such withdrawals.
ARTICLE VI
FORFEITURES
SECTION 6.1 TIME OF FORFEITURE. In the event of a Participant's
Termination of Employment prior to the attainment of age 65, the unvested, if
any, portion of Company Matching Contributions allocated to such Participant's
account, and any earnings thereon, shall be forfeited as of the date of such
Termination of Employment.
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SECTION 6.2 DISPOSITION OF FORFEITURES. All forfeitures arising out of
the application of the provisions of Section 6.1 shall be used to reduce
Company Matching Contributions otherwise payable to Participants' accounts
under the Plan.
ARTICLE VII
AMENDMENT AND ADMINISTRATION OF THE PLAN
SECTION 7.1 POWER TO AMEND. The power to amend, modify or terminate this
Plan at any time is reserved to the Committee; provided that, no amendment,
modification or termination may apply to or affect the terms of any deferral of
Compensation deferred prior to the effective date of such amendment,
modification or termination, without the consent of the Participant or
Beneficiary affected thereby.
SECTION 7.2 ADMINISTRATION OF THE PLAN. The Committee shall administer
the Plan and, in connection therewith, shall have full power to designate types
of Compensation which may be deferred and upon which a Company Matching
Contribution may be calculated; to construe and interpret the Plan; to
establish rules and regulations; to delegate responsibilities to others to
assist it in administering the Plan or performing any responsibilities
hereunder; and to perform all other acts it believes reasonable and proper in
connection with the administration of the Plan.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 COMPANY'S OBLIGATIONS UNFUNDED. All benefits due a
Participant or Beneficiary under the Plan are unfunded and unsecured and are
payable out of the general funds of the Company. The Company, in its sole and
absolute discretion, may establish a grantor trust for the payment of benefits
and obligations hereunder, the assets of which shall be at all times subject to
the claims of creditors of the Company as provided for in such trust, provided
that such trust does not alter the characterization of the Plan as an unfunded
plan for purposes of ERISA. Such trust shall make distributions in accordance
with the terms of the Plan.
SECTION 8.2 NO RIGHT TO CONTINUED EMPLOYMENT. Neither the establishment
of the Plan nor the payment of any benefits thereunder nor any action of the
Company, its affiliates, the Board, or the Committee shall be held or construed
to confer upon any person any legal right to be continued in the employ of an
Employer or any affiliate of an Employer.
7
<PAGE> 8
SECTION 8.3 TRANSFERABILITY OF BENEFITS. The right to receive payment of
benefits under this Plan shall not be transferred, assigned or pledged except
by beneficiary designation, will or pursuant to the laws of descent and
distribution.
SECTION 8.4 ADDRESS OF PARTICIPANT OR BENEFICIARY. A Participant shall
keep the Employee Benefits Department apprised of the Participant's current
address and that of any Beneficiary at all times during participation in the
Plan. At the death of a Participant, a Beneficiary who is entitled to receive
payment of benefits under the Plan shall keep the Employee Benefits Department
apprised of such Beneficiary's current address until the entire amount to be
distributed has been paid.
SECTION 8.5 TAXES. Any taxes required to be withheld under applicable
federal, state or local tax laws or regulations may be withheld from any
payment due hereunder.
SECTION 8.6 MISSOURI LAW TO GOVERN. All questions pertaining to the
interpretation, construction, administration, validity and effect of the
provisions of the Plan shall be determined in accordance with the laws of the
State of Missouri.
SECTION 8.7 HEADINGS. Headings of Articles and Sections of the Plan are
inserted for convenience of reference. They constitute no part of the Plan.
RALCORP HOLDINGS, INC.
BY:_________________________
TITLE:______________________
8
<PAGE> 1
EXHIBIT 10.16
STOCK PURCHASE AGREEMENT
AMONG
VAIL RESORTS, INC.,
RALSTON FOODS, INC.
AND
RALSTON RESORTS, INC.
JULY 22, 1996
<PAGE> 2
TABLE OF CONTENTS
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PAGE
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ARTICLE I - DEFINITIONS. . . . . . . . . . . . . . . . . . . 1
ARTICLE II - SALE AND PURCHASE OF RALSTON STOCK;
CERTAIN PRE-CLOSING AND POST-CLOSING
MATTERS
2.1 Sale and Purchase of Ralston Stock. . . . . . 11
2.2 Purchase Price. . . . . . . . . . . . . . . . 11
2.3 Post-Closing Adjustments. . . . . . . . . . . 11
2.4 Vail Dividend . . . . . . . . . . . . . . . . 13
ARTICLE III - FOODS' REPRESENTATIONS AND WARRANTIES
3.1 Ralston Stock . . . . . . . . . . . . . . . . 13
3.2 Rights To Acquire Ralston Stock . . . . . . . 13
3.3 Transfer of the Ralston Stock . . . . . . . . 13
3.4 Corporate Standing of Foods . . . . . . . . . 14
3.5 Authority of Foods. . . . . . . . . . . . . . 14
3.6 Corporate Standing. . . . . . . . . . . . . . 15
3.7 Authority of Ralston. . . . . . . . . . . . . 15
3.8 Qualifications To Do Business . . . . . . . . 16
3.9 Capital Stock of Subsidiaries . . . . . . . . 16
3.10 Corporate and Stock Transfer Records. . . . . 16
3.11 Employee Loans and Other Employee Interests
in Ralston. . . . . . . . . . . . . . . . . . 17
3.12 Ralston Financial Statements; No Material
Adverse Change. . . . . . . . . . . . . . . . 17
3.13 Conduct of Business . . . . . . . . . . . . . 17
3.14 Dividends . . . . . . . . . . . . . . . . . . 19
3.15 Absence of Undisclosed Liabilities. . . . . . 19
3.16 Title to Property . . . . . . . . . . . . . . 20
3.17 Real Property . . . . . . . . . . . . . . . . 20
3.18 Personal Property . . . . . . . . . . . . . . 23
3.19 Litigation and Claims . . . . . . . . . . . . 24
3.20 Compliance with Laws. . . . . . . . . . . . . 24
3.21 Orders and Consent Decrees. . . . . . . . . . 24
3.22 Labor Agreements. . . . . . . . . . . . . . . 24
3.23 Employees . . . . . . . . . . . . . . . . . . 25
3.24 Contracts . . . . . . . . . . . . . . . . . . 25
3.25 Validity of Material Contracts. . . . . . . . 26
3.26 Trademarks and Copyrights . . . . . . . . . . 27
3.27 Powers of Attorney. . . . . . . . . . . . . . 28
3.28 Taxes . . . . . . . . . . . . . . . . . . . . 28
3.29 Employee Benefit Plans. . . . . . . . . . . . 30
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PAGE
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3.30 Environmental Matters . . . . . . . . . . . . 32
3.31 Liability and Casualty Insurance. . . . . . . 33
3.32 Consents or Approvals . . . . . . . . . . . . 33
3.33 Transaction Fees. . . . . . . . . . . . . . . 34
3.34 Bank Accounts . . . . . . . . . . . . . . . . 34
3.35 Ownership of Ralston Stock; Ralston Assets. . 34
3.36 Vail Stock Acquired For Foods' Account. . . . 34
3.37 United States Forest Service. . . . . . . . . 35
3.38 Passenger Tramway . . . . . . . . . . . . . . 35
3.39 Clean Water Act . . . . . . . . . . . . . . . 36
3.40 Keystone/Intrawest L.L.C. . . . . . . . . . . 37
3.41 Water Rights. . . . . . . . . . . . . . . . . 40
ARTICLE IV - VAIL'S REPRESENTATIONS AND WARRANTIES
4.1 Capital Stock . . . . . . . . . . . . . . . . 41
4.2 Transfer of the Vail Stock. . . . . . . . . . 41
4.3 Authority of Vail . . . . . . . . . . . . . . 41
4.4 Corporate Standing. . . . . . . . . . . . . . 42
4.5 Qualifications To Do Business . . . . . . . . 42
4.6 Capital Stock of Subsidiaries . . . . . . . . 43
4.7 Corporate Records . . . . . . . . . . . . . . 43
4.8 Employee Loans and Other Employee Interests
in Vail . . . . . . . . . . . . . . . . . . . 43
4.9 Vail Financial Statements; No Material
Adverse Change. . . . . . . . . . . . . . . . 44
4.10 Conduct of Business . . . . . . . . . . . . . 44
4.11 Dividends . . . . . . . . . . . . . . . . . . 46
4.12 Absence of Undisclosed Liabilities. . . . . . 46
4.13 Title to Property . . . . . . . . . . . . . . 46
4.14 Real Property . . . . . . . . . . . . . . . . 46
4.15 Personal Property . . . . . . . . . . . . . . 49
4.16 Litigation and Claims . . . . . . . . . . . . 50
4.17 Compliance with Laws. . . . . . . . . . . . . 50
4.18 Orders and Consent Decrees. . . . . . . . . . 50
4.19 Labor Agreements. . . . . . . . . . . . . . . 50
4.20 Employees . . . . . . . . . . . . . . . . . . 50
4.21 Contracts . . . . . . . . . . . . . . . . . . 51
4.22 Validity of Material Contracts. . . . . . . . 52
4.23 Trademarks and Copyrights . . . . . . . . . . 52
4.24 Powers of Attorney. . . . . . . . . . . . . . 53
4.25 Taxes . . . . . . . . . . . . . . . . . . . . 53
4.26 Employee Benefit Plans. . . . . . . . . . . . 56
4.27 Environmental Matters . . . . . . . . . . . . 58
4.28 Liability and Casualty Insurance. . . . . . . 58
4.29 Consents or Approvals . . . . . . . . . . . . 59
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PAGE
----
4.30 Transaction Fees. . . . . . . . . . . . . . . 59
4.31 Ralston Stock Acquired for Vail's Account . . 59
4.32 United States Forest Service. . . . . . . . . 59
4.33 Passenger Tramway . . . . . . . . . . . . . . 60
4.34 Clean Water Act . . . . . . . . . . . . . . . 61
4.35 Water Rights. . . . . . . . . . . . . . . . . 61
4.36 Financing Commitment. . . . . . . . . . . . . 61
ARTICLE V - COVENANTS PENDING CLOSING
5.1 Ralston Operations. . . . . . . . . . . . . . 61
5.2 Vail Operations . . . . . . . . . . . . . . . 66
5.3 Due Diligence Review. . . . . . . . . . . . . 67
5.4 Insurance . . . . . . . . . . . . . . . . . . 68
5.5 Public Announcements. . . . . . . . . . . . . 68
5.6 Hart-Scott-Rodino Filing; Investigations
or Litigation . . . . . . . . . . . . . . . . 68
5.7 No Solicitation . . . . . . . . . . . . . . . 69
5.8 Audit of Ralston Financial Statements;
Delivery of Additional Financial
Statements. . . . . . . . . . . . . . . . . . 69
5.9 Supplemental Disclosure . . . . . . . . . . . 70
5.10 Real Property Transfer Laws . . . . . . . . . 71
5.11 Cooperation . . . . . . . . . . . . . . . . . 71
5.12 Foods Receivables and Payables. . . . . . . . 71
5.13 Environmental Surveys . . . . . . . . . . . . 71
5.14 Affiliate Guarantors. . . . . . . . . . . . . 71
5.15 Notice of Certain Transactions. . . . . . . . 71
5.16 Guarantee Fees. . . . . . . . . . . . . . . . 72
ARTICLE VI - CONDITIONS TO CLOSING
6.1 Conditions of Vail. . . . . . . . . . . . . . 72
6.2 Conditions of Foods . . . . . . . . . . . . . 74
6.3 Hart-Scott-Rodino . . . . . . . . . . . . . . 74
6.4 No Litigation . . . . . . . . . . . . . . . . 74
6.5 Material Change in Market Circumstances . . . 75
ARTICLE VII - THE CLOSING
7.1 Place of Closing. . . . . . . . . . . . . . . 75
7.2 Date of Closing . . . . . . . . . . . . . . . 75
7.3 Effective Time of Closing . . . . . . . . . . 75
7.4 Delivery of Closing Documents . . . . . . . . 75
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PAGE
----
ARTICLE VIII - CLOSING TRANSACTIONS
8.1 Transfer of Ralston Stock . . . . . . . . . . 76
8.2 Delivery of Vail Stock. . . . . . . . . . . . 76
8.3 Receipt . . . . . . . . . . . . . . . . . . . 76
8.4 Opinion of Counsel of Foods . . . . . . . . . 76
8.5 Opinion of Counsel of Vail. . . . . . . . . . 78
8.6 Good Standing Certificates. . . . . . . . . . 80
8.7 Corporate Resolutions of Foods. . . . . . . . 80
8.8 Corporate Resolutions of Vail . . . . . . . . 80
8.9 Certificate of Foods. . . . . . . . . . . . . 80
8.10 Certificate of Vail . . . . . . . . . . . . . 81
8.11 Shareholder Agreement . . . . . . . . . . . . 81
8.12 Resignation of Ralston Corporate Officers . . 81
8.13 Consents. . . . . . . . . . . . . . . . . . . 81
8.14 Ancillary Documents . . . . . . . . . . . . . 81
ARTICLE IX - ADDITIONAL COVENANTS
9.1 Commissions and Fees. . . . . . . . . . . . . 81
9.2 Costs and Expenses. . . . . . . . . . . . . . 82
9.3 Bank Accounts . . . . . . . . . . . . . . . . 82
9.4 Business Relationships. . . . . . . . . . . . 83
9.5 Insurance Proceeds. . . . . . . . . . . . . . 83
9.6 Further Action. . . . . . . . . . . . . . . . 83
9.7 Records . . . . . . . . . . . . . . . . . . . 84
9.8 Employee Benefit Plan Matters . . . . . . . . 84
9.9 Confidentiality Agreement . . . . . . . . . . 86
9.10 Tax Election. . . . . . . . . . . . . . . . . 87
9.11 Resale of Ralston Stock . . . . . . . . . . . 87
9.12 Non-Competition . . . . . . . . . . . . . . . 87
ARTICLE X - INDEMNIFICATION
10.1 Indemnification of Vail . . . . . . . . . . . 88
10.2 Indemnification of Foods. . . . . . . . . . . 88
10.3 Indemnification Procedure . . . . . . . . . . 89
10.4 Third Party Claims. . . . . . . . . . . . . . 89
10.5 Tax Indemnification . . . . . . . . . . . . . 90
10.6 Limitation of Indemnification . . . . . . . . 91
10.7 Procedures Relating to Indemnification of
Tax Claims. . . . . . . . . . . . . . . . . . 91
10.8 Survival of Representations and
Warranties. . . . . . . . . . . . . . . . . . 93
10.9 Survival of Indemnities . . . . . . . . . . . 93
10.10 Transfer Taxes. . . . . . . . . . . . . . . . 93
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<PAGE> 6
10.11 Return Filings, Refunds and Credits . . . . . 94
10.12 Refunds from Carrybacks . . . . . . . . . . . 95
10.13 Termination of Tax Sharing Agreements . . . . 95
10.14 Payments. . . . . . . . . . . . . . . . . . . 95
ARTICLE XI - TERMINATION
11.1 Mutual Consent. . . . . . . . . . . . . . . . 96
11.2 Obligation To Close . . . . . . . . . . . . . 96
11.3 Final Closing Date. . . . . . . . . . . . . . 96
11.4 Obligations After Termination . . . . . . . . 96
ARTICLE XII - MISCELLANEOUS PROVISIONS
12.1 Entire Agreement. . . . . . . . . . . . . . . 96
12.2 Effect of Supplemental Information. . . . . . 96
12.3 Choice of Law . . . . . . . . . . . . . . . . 97
12.4 Venue . . . . . . . . . . . . . . . . . . . . 97
12.5 Notices . . . . . . . . . . . . . . . . . . . 97
12.6 Effective Date of Notice. . . . . . . . . . . 98
12.7 Amendments. . . . . . . . . . . . . . . . . . 99
12.8 Gender and Number . . . . . . . . . . . . . . 99
12.9 Assignments . . . . . . . . . . . . . . . . . 99
12.10 Headings and Captions . . . . . . . . . . . . 99
12.11 Schedules and Exhibits. . . . . . . . . . . . 99
12.12 Severability. . . . . . . . . . . . . . . . . 99
12.13 Counterparts. . . . . . . . . . . . . . . . . 99
12.14 Remedies. . . . . . . . . . . . . . . . . . . 100
12.15 Third-Party Beneficiaries . . . . . . . . . . 100
12.16 Binding Agreement . . . . . . . . . . . . . . 100
Exhibit A - Shareholder Agreement
-v-
<PAGE> 7
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made
and entered into this 22nd day of July, 1996, by and among Vail
Resorts, Inc., a Delaware corporation ("Vail"), Ralston Foods,
Inc., a Nevada corporation ("Foods"), and Ralston Resorts, Inc., a
Colorado corporation ("Ralston").
WHEREAS, Foods is the owner of all the issued and
outstanding capital stock of Ralston; and
WHEREAS, Foods desires to sell all of the capital stock
of Ralston to Vail in accordance with the terms and subject to the
conditions of this Agreement; and
WHEREAS, Vail desires to purchase all of the capital
stock of Ralston in accordance with the terms and subject to the
conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises
and covenants contained herein, and subject to the terms and
conditions of this Agreement, Foods and Vail agree as follows:
ARTICLE I
DEFINITIONS
"Active Ralston Employee" shall have the meaning given it in Section
9.8(a).
"Adjusted Balance Sheet" shall mean the Ralston balance sheet as of
June 30, 1996, adjusted to remove the Excluded Assets, as set forth on Schedule
1.1.
"Affiliate" shall have the meaning given in the Shareholder Agreement.
"Affiliated Group" shall have the meaning given to it in Section 3.28(a).
"ANSI" shall have the meaning given it in Section 3.38(b).
<PAGE> 8
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"Business Day" shall mean any day other than a Saturday, Sunday or
legal holiday for commercial banks in New York City or St. Louis, Missouri.
"Clean Water Act" shall have the meaning given it in Section 3.39(a).
"Closing" shall mean the consummation of the transactions contemplated
by this Agreement.
"Closing Contribution Adjustment" shall mean the lesser of (A) (i) the
Contribution Adjustment of Ralston for the period from August 1, 1996 through
the Closing Date, less (ii) the amount, if any, by which $6,676,000 exceeds the
Contribution Adjustment of Ralston for the period from July 1, 1996 through
July 31, 1996; and (B) the greater of (x) $18,000,000 and (y) the amount set
forth in the certificate of an officer of Foods delivered pursuant to Section
6.1(k).
"Closing Date" shall mean the fifth Business Day after the date on
which the last to be received of all authorizations, approvals, consents,
permits and licenses from governmental and regulatory bodies and third parties
set forth in this Agreement that are conditions to the consummation of the
transactions contemplated hereby have been obtained.
"Closing Date Statements" shall have the meaning given it in Section
2.3(a).
"Code" shall mean the Internal Revenue Code of
1986, as amended, and all regulations promulgated thereunder.
"Confidentiality Agreement" shall mean, collectively, (i) the
Confidentiality Agreement dated March 19, 1996 between Ralcorp Holdings, Inc.
and Apollo Advisors, L.P. and (ii) the Confidentiality and Exclusivity
Agreement dated May 16, 1996, as supplemented by a letter agreement dated July
10, 1996, between Ralcorp Holdings, Inc. and Apollo Advisors, L.P.
"Contribution Adjustment" shall mean for any period (i) the Net
Investment during such period, less (ii) EBITDA for such period, plus (iii) Net
Assets on the last day of such period, less (iv) Net Assets on the first day of
such period.
"Contribution Agreement" shall mean the Contribution Agreement between
Ralston and Intrawest, dated February 7, 1994.
<PAGE> 9
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"Corporate Officers" of Ralston are Ingrid Keiser, Howard Maves,
Joe R. Micheletto, John Rutter and Brian Smith; and of Vail are Andrew
P. Daly, Gerald E. Flynn, James S. Mandel, J. Kent Myers and Christopher P.
Ryman.
"CPTSB" shall have the meaning given it in Section 3.38(a).
"EBITDA" shall mean for any period (i) earnings before interest and
taxes, plus (ii) depreciation and amortization expense, plus (iii)
other noncash charges (including, but not limited to, losses on sale of assets,
write down of assets or extraordinary charges), plus (iv) losses related to the
LLC or other investments, less (v) income related to the LLC or other
investments. All terms shall be calculated for Ralston and its subsidiaries on
a consolidated basis according to GAAP.
"Employee Benefit Plans" shall mean all employee benefit plans as such
term is defined in Section 3(3) of ERISA, but excluding all pension and
welfare plans which are Multiemployer Plans or are otherwise maintained
pursuant to a collective bargaining agreement and to which more than one
employer contributes and any other deferred compensation, stock option,
restricted stock or unit, performance share or unit, bonus, vacation,
severance, sick leave or other welfare or incentive plan.
"Environmental Claims" shall mean any and all administrative, regulatory
or judicial actions, suits, demands, liens, notices of noncompliance or
violation, investigations or proceedings relating to any Environmental Law or
Environmental Permit including, without limitation, (a) any demands or claims
by governmental or regulatory authorities for enforcement, cleanup, removal,
response or remedial action, (b) any demands or claims for damages pursuant to
any applicable Environmental Law, and (c) any demands or claims by any third
party seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from any Hazardous Substance.
"Environmental Law" shall mean the following federal laws (including
related regulations) and all Colorado state or local equivalents
thereof: The Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of
1986; the Emergency Planning and Community RighttoKnow Act; the Resource
Conservation and Recovery Act; the Federal Water
<PAGE> 10
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Pollution Control Act; the Clean Air Act; the Clean Water Act; the Safe
Drinking Water Act; the Toxic Substances Control Act; the Oil Pollution Act of
1990; and the Hazardous Materials Transportation Act.
"Environmental Permit" shall mean a permit, identification number,
license or other written authorization required under any applicable
Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, and all regulations promulgated thereunder.
"ERISA Affiliate" shall mean with respect to a party, (a) any entity that
is (or at any relevant time was) a member of a "controlled group of
corporations" with or under "common control" with such party (as such terms are
defined in Section 414(b) and (c) of the Code), or (b) any entity that is (or
at any relevant time was) a member of an "affiliated service group" (as such
term is defined in Section 414(m) of the Code) that includes such party.
"Excluded Assets" means those assets set forth on Schedule 1.1 as the
"Excluded Assets."
"Foods Affiliates" shall have the meaning given it in Section 9.12.
"GAAP" shall mean accounting principles which are (a) consistent with the
principles promulgated or adopted by the Financial Accounting Standards
Board and its predecessors, in effect from time to time, and (b) applied on a
basis consistent with prior periods.
"HartScottRodino" shall mean the HartScottRodino Antitrust Improvements
Act of 1976, as amended, and all regulations promulgated thereunder.
"Hazardous Substances" shall mean: (a) any chemical, material or
substance defined as, or included in the definition of, "hazardous
substances," "hazardous wastes," "hazardous materials," "toxic substances or
toxic pollutants," "contaminants," "toxic or hazardous chemicals" or
"pesticides" in any applicable Environmental Law, or (b) any petroleum or
petroleum product or asbestoscontaining materials in a condition that would
pose an imminent danger to public health.
<PAGE> 11
-5-
"Income Tax" or "Income Taxes" shall mean any tax or taxes imposed or
based on income, including, but not limited to, any income,
environmental, minimum or franchise tax based on income, alternative net worth
tax or single business tax, imposed by any foreign, federal, state, county or
local government, or any subdivision or agency thereof, and any interest,
penalty or expense relating to such taxes.
"Indebtedness" shall mean (i) any liability, contingent or otherwise, of
Ralston or any of its subsidiaries (A) for borrowed money (whether or
not the recourse of the lender is to the whole of the assets of Ralston or any
of its subsidiaries or only to a portion thereof) or (B) evidenced by a note,
debenture or similar instrument or letter of credit (including a purchase money
obligation or other obligation relating to the deferred purchase price of
property and trade payables that are more than 30 days past due); (ii) any
liability of others of the kind described in the preceding clause (i) which
Ralston or any of its subsidiaries has guaranteed or which is otherwise its
legal liability; (iii) any obligation secured by a lien to which the property
or assets of Ralston or any of its subsidiaries are subject, whether or not the
obligations secured thereby shall have been assumed by it or shall otherwise be
its legal liability; (iv) all capitalized lease obligations of Ralston or any
of its subsidiaries; and (v) any liability of Ralston or any of its
subsidiaries for debt owing to the National Bank of Australia relating to the
Conference Center. For purposes of this definition of Indebtedness,
Indebtedness of the LLC shall not be considered Indebtedness of Ralston or any
of its subsidiaries unless Ralston or any of its subsidiaries has guaranteed or
otherwise become liable with respect to such Indebtedness (other than by virtue
of the pledge of the Option Land).
"Intrawest" shall mean Intrawest Resorts, Inc., a Delaware Corporation.
"IRS" shall mean the Internal Revenue Service.
"Knowledge" or "best knowledge" shall mean, when used in connection with
the representations and warranties and covenants herein, the knowledge,
after reasonable inquiry of the relevant facts and circumstances, of the
applicable party's Corporate Officers and not any other employees of the party
making the representation or warranty or covenant.
<PAGE> 12
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"LLC" shall mean the Keystone/Intrawest Limited Liability Company formed
pursuant to the LLC Agreement.
"LLC Agreement" shall mean the Limited Liability Company Agreement between
Ralston and Intrawest, dated February 7, 1994.
"Loss" shall mean any liability, loss, damage, assessment, obligation,
settlement payment, award, fine, penalty, judgment, cost or expense,
including reasonable attorneys' fees, auditors' fees and experts' fees (but
excluding punitive damages that may be imposed on or against the indemnified
party because of its egregious conduct after the Closing), suffered by a party
hereto, including expenses related to investigating, defending and settling
indemnifiable claims, but net of any insurance proceeds received by the injured
party with respect to a Loss.
"Management Agreement" shall mean the Real Estate Development Management
Services Agreement between Intrawest and the LLC, dated February 7, 1994.
"Material Adverse Change" shall mean, with respect to a party, any event,
occurrence or change or effect that is materially adverse to the
business, operations, results of operations or condition (financial or
otherwise) or prospects of such party and its subsidiaries, taken as a whole.
"Multiemployer Plan" shall mean, with respect to a party, any
"multiemployer plan" as defined in Section 3(37) of ERISA that such
party or any ERISA Affiliate of such party contributes to or is required to
contribute to, or under which such party or any ERISA Affiliate of such party
may incur any liability.
"Net Assets" shall mean (i) current assets (excluding cash and cash
equivalents and any Excluded Assets), less (ii) total liabilities
(excluding any liabilities which would be included in the definition of Total
Ralston Indebtedness or liabilities to Foods or any of its Affiliates). All
terms shall be calculated for Ralston and its subsidiaries on a consolidated
basis according to GAAP.
"Net Investment" shall mean for any period (i) additions to property,
plant and equipment, plus (ii) cash investments in or loans to the LLC,
plus (iii) acquisitions for cash of real estate held for sale, less (iv) the
proceeds from
<PAGE> 13
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the sale or disposal of any noncurrent assets (including real
estate held for sale and property, plant and equipment), less
(v) cash received from the LLC or any other investment. All
terms shall be calculated for Ralston and its subsidiaries on a
consolidated basis according to GAAP.
"Notice of Claim" shall mean a written notice delivered by a party
claiming a right of indemnification to a party that would be required
to indemnify an injured party or hold such injured party harmless in accordance
with the terms of this Agreement.
"Option Land" shall mean the "option land" as defined in the LLC Agreement.
"Permitted Debt Level" shall mean $165,000,000.
"Permitted Encumbrances" shall mean, collectively: (a) liens for Taxes,
fees, levies, duties or other governmental charges of any kind which
are not yet delinquent or are being contested in good faith by appropriate
proceedings; or (b) liens that arise by operation of law for work performed or
materials supplied to any of the real properties owned by Ralston or any of its
subsidiaries after the date hereof; or (c) easements, rightsofway, restrictions
and covenants, none of which (a) through (c) above, individually or in the
aggregate, would be material as to the particular site or asset in question as
it relates to its current or presently intended use.
"PreClosing Tax Period" shall have the meaning given it in Section 10.5(a).
"Ralcorp" means Ralcorp Holdings, Inc., a Delaware corporation.
"Ralston Budget" means the 19961997 Ralston Budget (which includes
details as to estimated operating cash flow and capital expenditures
for the period commencing with July 1, 1996 and ending with December 31, 1996
on a monthtomonth basis) as set forth on Schedule 1.1(a) hereto.
"Ralston Employee" shall mean an individual who (a) is employed by
Ralston or any of its subsidiaries on the date of the Closing, or (b)
was employed by Ralston or any of its subsidiaries immediately prior to his or
her retirement or other termination of employment prior to the date of the
<PAGE> 14
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Closing, or (c) is, as of the Closing, on any approved leave of absence
from employment with Ralston or any of its subsidiaries, including, but not
limited to, leave due to disability.
"Ralston Employee Benefit Plans" has the meaning given it in Section
3.29(a).
"Ralston Financial Statements" shall mean (i) the unaudited consolidated
balance sheets of Ralston as of September 30, 1994 and September 30,
1995, the consolidated statements of earnings and cash flow for the years ended
September 30, 1993, 1994 and 1995, the unaudited consolidated balance sheet of
Ralston as of June 30, 1996 and the consolidated statement of earnings and cash
flow for the nine months ended June 30, 1996, and (ii) any other financial
statements of Ralston delivered to Vail pursuant to Section 5.8(b).
"Ralston Leased Property" shall have the meaning given it in Section
3.17(a).
"Ralston Participant" shall mean any Ralston Employee, or a dependent,
beneficiary or alternate payee of a Ralston Employee, who, on the date
of Closing, was participating in, or was otherwise entitled to benefits from,
an Employee Benefit Plan maintained for Ralston Employees by Ralston or Foods
or Ralcorp or one of their Affiliates.
"Ralston Stock" shall mean all of the outstanding common stock of
Ralston, par value $10.00 per share.
"Retirement Plan" shall have the meaning given it in Section 9.8(b).
"Savings Plan" shall have the meaning given it in Section 9.8(b).
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act of 1933" shall mean the Securities Act of 1933, as
amended, and all regulations promulgated thereunder.
"Shareholder Agreement" means the Shareholder Agreement, substantially in
the form of Exhibit A hereto, among Foods, Vail and Apollo Ski Partners, L.P.
<PAGE> 15
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"Straddle Period" shall have the meaning given it in Section 10.5(c).
"Tax" or "Taxes" shall mean all taxes, charges, fees, levies or other
assessments including without limitation all federal, state, local or
foreign net income, gross income, gross receipts, license, payroll, employment,
excise, severance, stamp, documentary, occupation, windfall profits,
environmental (including Taxes under Section 59A of the Code), customs duties,
capital stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, estimated alternative or addon minimum or
other tax, fee, assessment or charge of any kind whatsoever and shall include
all interest or penalties on Taxes, additions to tax or additional amounts
imposed by any taxing authority (domestic or foreign), whether or not disputed.
"Tax Claim" shall have the meaning given it in Section 10.7(a).
"Tax Indemnified Party" shall have the meaning given it in Section 10.7(a).
"Tax Indemnifying Party" shall have the meaning given it in Section
10.7(a).
"Tax Notice" shall have the meaning given it in Section 10.7(a).
"Tax Return" shall mean a return, declaration, report, claim for refund
or information return relating to Taxes including, without limitation,
any statement, information or documentation required to be provided to any
taxing authority with respect to Taxes, including any schedule or attachment
thereto, and including any amendment thereof.
"Tax Sharing Agreements" shall have the meaning given it in Section 10.13.
"Total Ralston Indebtedness" shall mean, as of any date, the sum of the
aggregate principal amount of and accrued interest on Indebtedness of
Ralston and its subsidiaries as of such date.
"Uncleared Ralston Checks" shall have the meaning given it in Section
9.3(b).
<PAGE> 16
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"USFS" and "USFS Permits" shall have the meanings given in Section 3.37(a).
"Vail Dividend" shall mean the distribution to the then existing
shareholders of Vail made prior to the Closing of the right to receive
up to $55 million in cash at one or more times prior to or subsequent to the
Closing Date.
"Vail Employee" shall mean an individual who (a) is employed by Vail or
any of its subsidiaries on the date of the Closing, or (b) was employed
by Vail or any of its subsidiaries immediately prior to his or her retirement
or other termination of employment prior to the date of the Closing, or (c) is,
as of the Closing, on any approved leave of absence from employment with Vail
or any of its subsidiaries, including, but not limited to, leave due to
disability.
"Vail Employee Benefit Plans" shall have the meaning given it in Section
4.26(a).
"Vail Financial Statements" shall mean (i) the consolidated balance sheet
of Vail as of September 30, 1995 and September 30, 1994, and the
related statements of earnings and cash flow for the year ended September 30,
1995 and September 30, 1994 and the period from October 9, 1992 through
September 30, 1993, as audited by Arthur Andersen LLP, (ii) the consolidated
balance sheet of Vail as of April 30, 1996 and the related statement of
earnings and cash flow for the seven months ended April 30, 1996 and (iii) any
other financial statements of Vail delivered to Foods pursuant to Section
5.8(d).
"Vail Leased Property" shall have the meaning given it in Section 4.14(a).
"Vail Stock" shall mean the Common Stock, $.01 par value, of Vail.
"Ventures" shall have the meaning given it in Section 3.9.
<PAGE> 17
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ARTICLE II
SALE AND PURCHASE OF RALSTON STOCK;
CERTAIN PRE-CLOSING AND POST-CLOSING MATTERS
2.1 Sale and Purchase of Ralston Stock. Upon the terms and subject to the
conditions contained in this Agreement, in reliance upon the representations,
warranties and agreements contained in this Agreement and in consideration of
the payment of the purchase price as provided in Section 2.2 below, on the date
of the Closing, Foods shall sell, transfer, convey, assign and deliver to Vail,
or its nominee, all of the issued and outstanding shares of Ralston Stock.
2.2 Purchase Price. Upon the terms and subject to the conditions
contained in this Agreement, in reliance upon the representations, warranties
and agreements contained in this Agreement and in consideration of the aforesaid
sale, transfer, conveyance, assignment and delivery of the outstanding shares of
Ralston Stock, on the date of the Closing, Vail will deliver to Foods, or its
nominee, 3,777,203 shares of Vail Stock.
2.3 Post-Closing Adjustments.
(a) Within 30 days after the Closing Date, Ralston shall deliver to Foods
and Vail (i) an audited consolidated balance sheet of Ralston as of the Closing
Date, (ii) an audited consolidated income statement and statement of cash flows
of Ralston for the period from July 1, 1996 to the Closing Date, and (iii) a
statement from Price Waterhouse, the independent auditors of Ralston, setting
forth the calculation of Total Ralston Indebtedness and the Closing Contribution
Adjustment (collectively, the "Closing Date Statements").
(b) Vail and Foods shall have 30 days to review the Closing Date
Statements after receipt thereof. Unless Vail or Foods deliver written notice
to the other party on or prior to the 30th day after receipt of the Closing Date
Statements of Vail's or Foods' objection to the Closing Date Statements and
specifying in reasonable detail all disputed items and the basis therefor, Vail
and Foods shall be deemed to have accepted and agreed to the Closing Date
Statements. If Vail or Foods so notify Ralston of their objection to the
Closing Date Statements, Vail and Foods shall, within 30 days following such
notice (the "Resolution Period"), attempt to resolve their
<PAGE> 18
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differences, and any resolution by them as to any disputed
amounts shall be final, binding and conclusive.
(c) If, at the conclusion of the Resolution Period,
any amounts remain in dispute, then all such amounts remaining in
dispute shall be submitted to Deloitte & Touche LLP (the "Neutral
Auditors"). Each of Vail, Foods and Ralston agrees to execute,
if requested by the Neutral Auditors, a reasonable engagement
letter. In the event that Vail, Foods and Ralston are unable to
engage the Neutral Auditors within five days after the conclusion
of the Resolution Period then they shall engage KPMG Peat Marwick
LLP to act as alternative neutral auditors (the "Alternative
Neutral Auditors"). All fees and expenses relating to the work,
if any, to be performed by the Neutral Auditors or the
Alternative Neutral Auditors, as the case may be, shall be borne
(i) 50% by Vail and (ii) 50% by Foods. The Neutral Auditors or
the Alternative Neutral Auditors, as the case may be, shall act
as an arbitrator to determine, based solely on presentations by
Vail and Foods, and not by independent review, only those issues
still in dispute. Vail and Foods shall use their reasonable best
efforts to cause the determination of the Neutral Auditors or the
Alternative Neutral Auditors, as the case may be, to be made
within 30 days of submission as provided above, whether or not
such presentation by Foods and Vail have been made within such
period and shall be set forth in a written statement delivered to
Foods and Vail and shall be final, binding and conclusive.
(d) To the extent that the amount of Total Ralston
Indebtedness exceeds or is less than the Permitted Debt Level on
the Closing Date, Foods will promptly pay to Vail, upon its
demand, an amount equal to such excess (or Vail will promptly pay
to Foods, upon its demand, an amount equal to such deficiency) in
immediately available funds.
(e) Prior to Closing, Ralston shall (i) incur third
party Indebtedness in an amount not exceeding the Permitted Debt
Level less the principal amount of third party Indebtedness of
Ralston outstanding at such time (the "Foods Dividend Amount")
and (ii) shall dividend the Foods Dividend Amount to Foods prior
to Closing (the "Foods Dividend"). On the Closing Date, Vail
shall repay in full the third party Indebtedness incurred by
Ralston to pay the Foods Dividend so that Foods and its
Affiliates are unconditionally released from any guarantee of
said Indebtedness. In addition, prior to Closing, Ralston shall
distribute to Foods the Excluded Assets.
<PAGE> 19
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(f) Within 10 days after the Closing Date Statements
have been agreed to or have become final, Vail will deliver to
Foods, or its nominee, a number of shares of Vail Stock equal to
the excess, if any, of (a) the number obtained by dividing the
Closing Contribution Adjustment by the amount set forth on
Schedule 2.3(e) over (b) 96,120.
2.4 Vail Dividend. Prior to the Closing, Vail shall declare the Vail
Dividend to its then existing shareholders (and Foods shall not be entitled to
any participation therein).
ARTICLE III
FOODS' REPRESENTATIONS AND WARRANTIES
Foods represents and warrants that:
3.1 Ralston Stock. The Ralston Stock is the only authorized class of
capital stock of Ralston. There are 100 shares of Ralston Stock authorized and
100 shares outstanding. All outstanding shares of Ralston Stock are duly
authorized, validly issued, fully paid and non-assessable. There are no
options, warrants, calls or agreements of any character for the issuance of
additional shares of Ralston Stock. There are no contracts for the
authorization or issuance of any other class of securities of Ralston, and there
are no outstanding securities convertible or exchangeable into Ralston Stock.
3.2 Rights To Acquire Ralston Stock. Neither Foods nor Ralston or any of
its subsidiaries is a party to any agreement or understanding, oral or written,
which (a) grants an option or other right to acquire any of the Ralston Stock or
any other equitable interest in Ralston, (b) grants a right of first refusal or
other such similar right upon the sale of any of the Ralston Stock, or (c)
restricts or affects the voting rights of any of the Ralston Stock.
3.3 Transfer of the Ralston Stock. The stock certificate(s) representing
all of the outstanding shares of Ralston Stock to be delivered to Vail, or its
nominee, at the Closing, and the signatures or endorsements thereon (or on stock
powers delivered therewith), when duly executed, shall be valid and genuine, and
shall transfer to and vest in Vail, or its nominee, good, valid, marketable and
indefeasible title to all of the outstanding shares of the Ralston Stock,
subject to
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no lien, security interest or other encumbrance on the Ralston Stock. Upon the
transfer of the Ralston Stock contemplated hereby, Vail will own the entire
equity interest in Ralston.
3.4 Corporate Standing of Foods. Foods is a corporation duly organized,
validly existing and in good standing under the laws of the State of Missouri.
The execution and delivery of this Agreement, and such other agreements,
instruments and documents required to be executed by Foods in connection
herewith, do not, and the consummation of the transactions contemplated herein
and therein will not, conflict with, or result in any violation of, breach of or
default (with or without notice or lapse of time) under, or give rise to a right
of termination, cancellation or acceleration of any obligation or the loss of a
benefit under, (a) any provision of the Articles of Incorporation or bylaws of
Foods, or (b) except as set forth on Schedule 3.4, any loan or credit agreement,
note, bond, mortgage, indenture, lease, contract, judgment, order, decree, writ
or injunction to which Foods is a party, or by which it or its properties or
assets are bound, or result in the creation or imposition of any lien upon any
such properties or assets.
3.5 Authority of Foods.
(a) Foods has taken all action required by its Articles of Incorporation
and its bylaws to authorize the execution and delivery of this Agreement, and
such other agreements, instruments and documents required to be executed by
Foods in connection herewith, and the performance of the transactions
contemplated herein and therein. Foods has all requisite corporate power and
authority to authorize the execution and delivery of this Agreement, and such
other agreements, instruments and documents required to be executed in
connection herewith, to consummate the transactions contemplated herein and
therein, and to take all other actions required to be taken by Foods pursuant to
the provisions hereof. This Agreement, and such other agreements, instruments
and documents required to be executed in connection herewith, when duly executed
and delivered, shall constitute a valid and binding obligation of Foods
enforceable in accordance with its terms except to the extent that
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the enforcement of creditors'
rights generally or by general equitable or fiduciary principles.
(b) No approvals on the part of any class (whether voting together or as
separate classes) of Foods' shareholders
<PAGE> 21
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are necessary to authorize this Agreement or any other agreements, instruments
and documents required to be executed in connection herewith, or the
transactions contemplated herein or therein.
3.6 Corporate Standing. Each of Ralston and its subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has the corporate power and
authority to own its property and assets and to carry on its business in the
same manner as now being conducted. The execution and delivery of this
Agreement, and such other agreements, instruments and documents required to be
executed by Ralston in connection herewith, do not, and the consummation of the
transaction contemplated herein and therein will not, conflict with, or result
in any violation of, breach of or default (with or without notice or lapse of
time or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or the loss of a benefit under, (a) any provision
of the Articles of Incorporation or bylaws of Ralston or any of its
subsidiaries, or (b) except as set forth on Schedule 3.6 hereto, any loan or
credit agreement, note, bond, mortgage, indenture, lease, contract, agreement,
instrument or permit, judgment, order, decree, writ or injunction to which
Ralston or any of its subsidiaries is a party, or by which it or any of its
subsidiaries or its or any of its subsidiaries' properties or assets are bound,
or result in the creation or imposition of any lien upon any of such properties
or assets.
3.7 Authority of Ralston. Ralston has taken all action required by its
Articles of Incorporation and its by-laws to authorize the execution and
delivery of this Agreement, and such other agreements, instruments and documents
required to be executed by Ralston in connection herewith, and the performance
of the transactions contemplated herein and therein. Ralston has all requisite
corporate power and authority to authorize the execution and delivery of this
Agreement, and such other agreements, instruments and documents required to be
executed in connection herewith, to consummate the transactions contemplated
herein and therein, and to take all other actions required to be taken by
Ralston pursuant to the provisions hereof. This Agreement, and such other
agreements, instruments and documents required to be executed in connection
herewith, when duly executed and delivered, shall constitute a valid and binding
obligation of Ralston enforceable in accordance with its terms except to the
extent that enforceability may be limited by applicable bankruptcy, insolvency,
reorganization,
<PAGE> 22
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moratorium or other laws affecting the enforcement of creditors'
rights generally or by general equitable or fiduciary principles.
3.8 Qualifications To Do Business. Each of Ralston and its subsidiaries
is duly qualified and in good standing as a foreign corporation and authorized
to do business in each jurisdiction set forth on Schedule 3.8 hereto. Each of
Ralston and its subsidiaries is qualified and in good standing in every other
jurisdiction in which the ownership of its property or the conduct of its
business requires it to be qualified to do business, except in those
jurisdictions where the failure to be so qualified would not, individually or in
the aggregate, result in a Material Adverse Change on Ralston.
3.9 Capital Stock of Subsidiaries. The only direct or indirect
subsidiaries of Ralston are those listed on Schedule 3.9. hereto. Except as set
forth on Schedule 3.9 hereto, Ralston is directly or indirectly the record and
beneficial owner of all of the outstanding shares of capital stock of each of
its subsidiaries, there are no proxies with respect to such shares, and no
equity securities of any of such subsidiaries are or may be required to be
issued by reason of any options, warrants, scrip, rights to subscribe for, calls
or commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, shares of any capital stock of any such
subsidiary, and there are no contracts, commitments, understandings or
arrangements by which any such subsidiary is bound to issue additional shares of
its capital stock or securities convertible into or exchangeable for such
shares. Other than as set forth on Schedule 3.9 hereto, all of such shares so
owned by Ralston are validly issued, fully paid and nonassessable and are owned
by it free and clear of any claim, lien or encumbrance of any kind with respect
thereto. Except as disclosed on Schedule 3.9 hereto, Ralston does not directly
or indirectly own any interest in any corporation, partnership, joint venture or
other business association or entity. For purposes of this Section 3.9, the
LLC, Clinton Ditch & Reservoir Company, Ski the Summit and Starfire Ventures
(collectively, the "Ventures") shall each be considered a subsidiary of Ralston.
3.10 Corporate and Stock Transfer Records. True and correct copies of the
Articles of Incorporation and bylaws of Ralston have previously been delivered
to Vail. All minutes of Ralston contained in the minute books of Ralston
accurately reflect the substance of all actions taken by shareholders of
<PAGE> 23
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Ralston and Ralston's Board of Directors. The Ralston Stock transfer register
is true, complete, correct and current.
3.11 Employee Loans and Other Employee Interests in Ralston. Except as
set forth on Schedule 3.11, there are no outstanding loans by or to Ralston or
any of its subsidiaries to or from any Ralston Employee, other than (a)
emergency loans which do not exceed $10,000 in the aggregate, and none of which
exceed $1,000 individually, (b) housing loans which do not exceed $10,000 in the
aggregate, and none of which exceed $1,000 individually, (c) ordinary travel
advances or (d) employee charges not exceeding $5,000 individually, and $50,000
in the aggregate. Except as set forth on Schedule 3.11, no Ralston Employee
currently employed has any material interest, direct or indirect, in any lease
or contract of Ralston.
3.12 Ralston Financial Statements; No Material Adverse Change. Except as
set forth on Schedule 3.12, the Ralston Financial Statements present fairly, in
all material respects, the consolidated financial position and results of
operations of Ralston and its subsidiaries as of the dates thereof, all in
conformity with GAAP applied on a consistent basis, except as set forth in the
notes to those financial statements, and EBITDA of Ralston and its subsidiaries
(excluding the Ventures) is at least $42,921,000 for the nine months ended June
30, 1996. Since June 30, 1996, there has not occurred a Material Adverse Change
of Ralston, or any event that, individually or in the aggregate, would
reasonably be expected to result in a Material Adverse Change of Ralston.
Neither this Section 3.12 nor any other Section in this Agreement shall be
construed as a representation or warranty as to the accuracy or attainability of
budgets or projections relating to or reflecting the business of Resorts.
3.13 Conduct of Business. Except as and to the extent set forth on
Schedule 3.13, since June 30, 1996, Foods on behalf of Ralston and its
subsidiaries has not, and Ralston and its subsidiaries have not:
(a) made any commitments for capital expenditures or commitments for
additions to property, plant, equipment or intangible capital assets other
than (i) those included in the Ralston Budget or (ii) commitments for
$100,000 or less made in the ordinary course of business;
(b) acquired (by merger, consolidation or acquisition of stock or assets)
any corporation, partnership,
<PAGE> 24
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joint venture, limited liability company or other business
organization, or division thereof, or entered into any
contract or agreement with respect thereto;
(c) incurred any obligations or liabilities (whether
absolute, accrued, contingent, or otherwise and whether due
or to become due), except for (i) Indebtedness which is
permitted to be incurred pursuant to Section 2.3 and
(ii) current liabilities incurred in the ordinary course of
business consistent with past practice; or experienced any
change in any assumptions underlying or methods of
calculating any bad debt, contingency or other reserve;
(d) sold, transferred or conveyed any of its properties or
assets used in Ralston's business or operations, except for
current assets sold or converted in the ordinary course of
business and consistent with past practice, or permitted or
allowed any of the properties or assets used in Ralston's
business or operations to be mortgaged, pledged or subjected
to any lien or encumbrance, except liens or encumbrances for
taxes not yet delinquent and any mortgage, pledge, lien or
encumbrance created, assumed or incurred with respect to the
real estate development of the LLC but pertaining only to
the Option Land;
(e) paid, discharged or satisfied any claim, lien,
encumbrance or liability (whether absolute, accrued,
contingent or otherwise and whether due or to become due),
other than claims, liens, encumbrances or liabilities (i)
which are reflected or accrued for or reserved against in
the Adjusted Balance Sheet and which were paid, discharged
or satisfied since the date of the Adjusted Balance Sheet in
the ordinary course of business and consistent with past
practice, or (ii) which were incurred and paid, discharged
or satisfied since the date of the Adjusted Balance Sheet in
the ordinary course of business and consistent with past
practice;
(f) written down or determined to write down or
written up or determined to write up the value of any
inventory, or written off or determined to write off as
uncollectible any notes or accounts receivable or any
portion thereof, except for immaterial write-downs or
write-offs in the ordinary course of business, consistent
with past practice and at a rate no greater than during the
prior fifty-two (52) weeks;
<PAGE> 25
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(g) waived any material rights;
(h) granted any increase in the compensation of any director of
Ralston or Ralston Employee (including, without limitation, any increase
pursuant to any bonus, pension, profit-sharing or other plan), except for
increases (i) made pursuant to the terms of any existing Employee Benefit
Plan, or (ii) occurring in the ordinary course of business in accordance
with customary practice (for purposes of the foregoing, ordinary course of
business shall be deemed to include those customary increases granted
during ongoing negotiation of labor agreements);
(i) instituted or adopted any new Employee Benefit Plan for any
director of Ralston or any Ralston Employee;
(j) directly or indirectly redeemed, purchased or otherwise acquired
or subdivided or reclassified any Ralston Stock;
(k) been involved in any labor dispute, litigation or governmental
investigation of any material nature;
(l) entered into any material agreement with any local, state or
federal governments or agencies; or entered into any consulting agreements
or sponsorship agreements requiring the payment of $100,000 or more or
having a term of one year or more;
(m) made any amendments to the Articles of Incorporation or bylaws of
Ralston or any of its subsidiaries or any organizational or operational
documents related to the Ventures to which Ralston or any of its
subsidiaries is a party; or
(n) agreed, whether in writing or otherwise, to take any action
described in this Section 3.13.
3.14 Dividends. Since June 30, 1996, Ralston has not declared or paid any
dividends on its capital stock in cash, stock or other property (other than as
permitted by Section 2.3(e)).
3.15 Absence of Undisclosed Liabilities. Other than as set forth on
Schedule 3.15 or as set forth on other Schedules hereto, or as otherwise
included in the Adjusted Balance Sheet, there are no liabilities or obligations
of Ralston and
<PAGE> 26
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its subsidiaries of any nature, whether absolute, accrued, unmatured, contingent
or otherwise, that would be required to be reflected on the liability side of a
balance sheet prepared in accordance with GAAP or disclosed in the notes
thereto, without regard to materiality, other than liabilities incurred since
June 30, 1996 in the ordinary course of business related to Ralston's
operations. Each of the reserves provided for on the Adjusted Balance Sheet has
been established and maintained in accordance with GAAP.
3.16 Title to Property. Except as set forth on Schedule 3.16, Ralston and
its subsidiaries hold fee simple title, subject only to Permitted Encumbrances,
to all of their respective owned real properties, and Ralston and its
subsidiaries hold a good and valid leasehold title and estate to all of the
Ralston Leased Property, including, without limitation, all of such properties
and assets reflected on the Adjusted Balance Sheet and such assets which are
necessary for Ralston and its subsidiaries to conduct their business
substantially in the same manner as currently conducted. None of such owned or
leased properties (or such assets which are necessary for Ralston and its
subsidiaries to conduct their business substantially in the same manner as
presently conducted) are subject to any mortgage, deed of trust, pledge, lien,
security interest, conditional sale agreement, encumbrance, claim, mechanic's or
materialmen's lien, or charge of any kind, except liens shown on Schedule 3.16
as securing specific liabilities (with respect to which no default, or action or
omission which with the giving of notice or passage of time or both would
constitute a default, exists) and Permitted Encumbrances.
3.17 Real Property.
(a) All real property owned or leased (excluding property leased for
employee housing with leases having durations less than one year or annual
rental payments of less than $20,000) by Ralston and its subsidiaries is set
forth on Schedule 3.17(a)(i) (the "Ralston Leased Property") and such real
property is identified in a manner that reflects the properties which are owned
and those which are leased. Except as set forth on Schedule 3.17(a)(ii), all
building and structures required to operate the business of Ralston
substantially in the same manner as presently conducted located on the real
properties owned by Ralston and its subsidiaries and on the Ralston Leased
Property are in good operating condition and repair (considering the age of such
buildings and structures
<PAGE> 27
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and ordinary wear and tear excepted), and are usable for their current use.
(b) Except as set forth on Schedule 3.17(b), Ralston and its subsidiaries
have not received written notice regarding any of the following (except for
matters previously resolved): (x) any dispute from any contiguous property
owners concerning contiguous boundary lines, (y) that any of the said owned or
Ralston Leased Properties (or the buildings, structures or improvements
thereon), or Ralston's and its subsidiaries' operations, violate the zoning or
planning laws, ordinances, rules or regulations of the city, county or state in
which they are located, or any building regulations or codes of such city,
county or state, or land use laws or regulations applicable to said properties,
and no such violations exist, or (z) any claims of others to rights over, under,
across or through any of the owned or Ralston Leased Properties by virtue of use
or prescription. Except as set forth on Schedule 3.17, Ralston has or is able
to obtain without a material penalty or material incremental cost, or has a
valid exemption from the requirement to obtain, all governmental permits
(excluding permits from the United States Forest Service, which are covered in
Section 3.37), approvals, authorizations or licenses required to conduct its
business in substantially the same manner as its business is currently
conducted.
(c) Foods and Ralston have either previously delivered to Vail or will so
deliver as soon as practicable prior to Closing lists of the most recently
issued real and personal (including vehicles) property tax assessments and tax
bills, if any, for Ralston's 1994 and 1995 fiscal years for all property owned
or leased by Ralston and its subsidiaries.
(d) Except as set forth on Schedule 3.17(d), (i) all real properties owned
by Ralston or its subsidiaries are free from agreements creating an obligation
to sell, lease or grant an option to sell or lease and (ii) all Ralston Leased
Property is free of all agreements creating an obligation to sublease, grant an
assignment of lease or grant an option to sublease.
(e) Except as set forth on Schedule 3.17(e), to the Knowledge of Ralston,
all real properties owned by Ralston and its subsidiaries and Ralston Leased
Properties are currently zoned in the zoning category which permits operation of
said properties as now used, operated and maintained. To the Knowledge of
Ralston, the consummation of the transactions contemplated herein will not
result in a violation of any applicable
<PAGE> 28
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zoning ordinance or the termination of any applicable zoning variance now
existing.
(f) Schedule 3.17(f) lists all properties owned or leased by Ralston and
its subsidiaries which are not presently being used in the business or
operations of Ralston and its subsidiaries.
(g) All buildings, structures or improvements owned and/or leased by
Ralston and its subsidiaries on any of the owned or leased real properties are
located entirely within the property boundary lines of such properties and do
not materially encroach onto adjoining lands, and there are no material
encroachments of buildings, structures or improvements from adjoining land onto
such properties.
(h) To the Knowledge of Ralston, the developed owned real properties and
the Ralston Leased Property currently have access to, at or within their
property boundary lines to all gas, water, electricity, storm, sewer, sanitary
sewer, telephone, and all other utilities necessary or beneficial to the current
operation of the owned or leased properties, and all of such utilities are
adequate and sufficient for the current operation of such properties, subject to
normal interruptions in the ordinary course.
(i) Ralston and its subsidiaries hold a valid leasehold estate for each
Ralston Leased Property, as shown on Schedule 3.17(a)(i), and enjoy peaceful and
undisturbed possession thereunder. All such leases are valid, binding and
enforceable in accordance with their terms, and are in full force and effect,
Ralston and its subsidiaries have complied with all material obligations
thereunder, and there are no existing defaults by Ralston and its subsidiaries,
and, except as set forth in Schedule 3.17(i), there are no existing defaults by
any other party thereunder. No event has occurred which (whether with or
without notice, lapse of time or the happening or occurrence of any other event)
would constitute a default by Ralston and its subsidiaries and no event has
occurred which (whether with or without notice, lapse of time or the happening
or occurrence of any other event) would constitute a default by any other party
thereunder. Except as disclosed on Schedule 3.17(i), all such leases shall
continue in full force and effect (without default) after the Closing and the
consummation of the transactions contemplated by this Agreement without the
consent, approval or act of any other party, except to the extent that
enforceability may be limited
<PAGE> 29
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by applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the enforcement of creditors' rights generally or by general equitable
or fiduciary principles.
3.18 Personal Property. Except as set forth on Schedule 3.18(a), and
except for any immaterial exceptions, restrictions or limitations contained in
financing statements with respect to such property, Ralston and its subsidiaries
own, or have a valid lease or license with respect to, the tangible personal
property (including without limitation ski lift systems and snowmaking equipment
and systems) which is necessary for the operation of their business
substantially in the same manner as currently conducted, free and clear of all
liens, mortgages, pledges, security interests, charges or encumbrances other
than Permitted Encumbrances, and enjoy peaceful and undisturbed possession
thereunder. Except as set forth on Schedule 3.18(b) or as expressly set forth
in the Ralston Budget, all such property that is material to the operations of
Ralston is in reasonably good operating condition and repair, ordinary wear and
tear excepted, and is suitable for the purposes for which it is used. Schedule
3.18(c) contains a list of each lease pursuant to which Ralston and its
subsidiaries lease personal property which involves payment over the remaining
term of such lease of more than $100,000 and which in each case is not
cancelable upon six months' notice or less without penalty of more than
$100,000. All such personal property leases are valid, binding and enforceable
in accordance with their terms and are in full force and effect, Ralston and its
subsidiaries have complied with all obligations thereunder and there are no
existing material defaults by Ralston and its subsidiaries or, to the Knowledge
of Ralston, by any other party thereunder; no event has occurred which (whether
with or without notice, lapse of time or the happening or occurrence of any
other event) would constitute a material default by Ralston and its subsidiaries
thereunder; and no event has occurred which (whether with or without notice,
lapse of time or the happening or occurrence of any other event) would
constitute a material default by any other party thereunder. Except as set forth
on Schedule 3.18(d), all personal property leases which are set forth on
Schedule 3.18(c) hereto shall continue in effect after the Closing and the
consummation of the transactions contemplated by this Agreement without the
consent, approval or act of any other party. All unperformed contracts to
purchase personal property to which Ralston and its subsidiaries are party which
provide for a purchase price of $100,000 or more are set forth on Schedule
3.18(e).
<PAGE> 30
-24-
3.19 Litigation and Claims. Schedule 3.19 sets forth all pending judicial
or administrative investigations, lawsuits, actions or proceedings against
Ralston and its subsidiaries of which Foods or Ralston and its subsidiaries have
received written notice. Except as set forth on Schedule 3.19, there are no
actions, suits, investigations, administrative proceedings or orders pending or,
to Foods' Knowledge, threatened against (i) Foods, at law or in equity, which,
if adversely determined, would have an adverse effect on the ability of Foods to
perform the terms of this Agreement, or would interfere with the ability of Vail
to consummate the transactions contemplated herein, or (ii) Ralston or any of
its subsidiaries, at law or in equity.
3.20 Compliance with Laws. Except as set forth on Schedule 3.20, to the
Knowledge of Ralston, Ralston and its subsidiaries are not in violation of any
law, rule or regulation or in default in any material respect with respect to
any judgment, writ, injunction or decree of any federal, state or local
commission.
3.21 Orders and Consent Decrees. Except as set forth on Schedule 3.21, or
as specifically cross-referenced thereon from other Schedules hereto, Ralston
and its subsidiaries are not party to, or bound by, any material judicial or
administrative order, judgment, decree or consent decree relating to any past or
present practice, omission, activity or undertaking. To the Knowledge of
Ralston, Ralston and its subsidiaries are not in default in any material respect
under any of the judicial or administrative orders, judgments, decrees or
consent decrees or conciliation or compliance agreements set forth on Schedule
3.21.
3.22 Labor Agreements. There are no binding agreements of any type with
any labor union, labor organization, collective bargaining unit or employee
group to which Ralston and its subsidiaries are bound except those set forth on
Schedule 3.22. All agreements that are set forth on Schedule 3.22 are legal and
valid and, except for those that are presently under negotiation or
renegotiation due to the expiration of their stated term, are in full force and
effect. Further:
(a) Except for negotiations ongoing as of the date hereof, or as otherwise
set forth on Schedule 3.22(a), Ralston and its subsidiaries have not agreed to
any terms and conditions to be added or deleted in future
<PAGE> 31
-25-
negotiations or otherwise regarding the agreements set forth on Schedule 3.22.
(b) To the Knowledge of Ralston, there are no threatened or active
strikes, work stoppages, boycotts or concerted actions against Ralston and its
subsidiaries, other than those threats which commonly arise as a result of
normal labor contract renegotiations.
(c) Except as set forth on Schedule 3.22(c), Foods has no notice of any
pending (i) proceedings under the National Labor Relations Act or before the
National Labor Relations Board, (ii) grievances or arbitrations, or (iii)
organizational drives or unit clarification requests, in each case against or
affecting Ralston or any of its subsidiaries.
3.23 Employees. Except as set forth on Schedule 3.23, Ralston and its
subsidiaries have not received any written notice from a governmental authority
or official during the past two years of any non-compliance with any federal,
state or local laws, regulations and legal requirements relating to the
employment of labor in connection with their business, including those laws,
regulations and legal requirements relating to wages, hours, benefits,
affirmative action, equal opportunity, including the Americans with Disabilities
Act and the Occupational Safety and Health Act, collective bargaining, workers'
compensation and the payment of social security, unemployment and employment
taxes.
3.24 Contracts. All contracts of Ralston or any of its subsidiaries which
involve aggregate payments after the date of this Agreement of $100,000 or more
are set forth on Schedule 3.24 or are specifically cross-referenced thereon from
other Schedules hereto. Except as set forth on Schedule 3.24, Ralston and its
subsidiaries are not party to or obligated under any written agreement or
contract that:
(a) provides for the employment of any Corporate Officer of Ralston not
terminable at will and without liability for additional payments or
compensation, other than severance and vacation pay payable in accordance with
the established policies of Ralston as set forth on Schedule 3.24;
(b) provides for (i) the employment of any consultant or broker for a term
that would exceed one (1) year
<PAGE> 32
-26-
from the date of the Closing, or provides for payments that exceed $100,000, or
(ii) the employment of any independent attorney or accounting firm not
terminable at will;
(c) would prohibit or limit in any material respect Ralston or any of its
subsidiaries from engaging in its present business;
(d) requires the purchase of materials, inventories services or supplies
that has a remaining contractual term of more than one (1) year from the
Closing, or would require payments in the aggregate in excess of $100,000;
(e) involves the sale of any asset or property of Ralston or any of its
subsidiaries presently being used in Ralston's or any of its subsidiaries'
business or operations, other than in the normal course of business;
(f) relates to the borrowing of money or bank credit (including, but not
limited to, indentures, notes, installment obligations and capital leases) or
the mortgaging or pledging of any asset or property of Ralston or any of its
subsidiaries;
(g) guarantees the obligations of any supplier, customer or other third
party, other than endorsements in the ordinary course;
(h) is a forward, swap, option or swaption contract or any other financial
instrument with similar characteristics and/or generally characterized as a
"derivative" security to which Ralston or any of its subsidiaries are a party or
to which Ralston or any of its subsidiaries or any of their respective assets or
properties is subject or bound (including, without limitation, funds of Ralston
invested by any other person); or
(i) includes any indemnity provisions for claims based on product
liability, environmental or employee or retiree liabilities and arises out of
any purchase or acquisition of another entity or business.
3.25 Validity of Material Contracts.
(a) Except as set forth on Schedule 3.25(a), Ralston and its subsidiaries
have not: (i) received any written claim
<PAGE> 33
-27-
of breach or default from any party relating to any agreement, commitment or
contract listed on Schedule 3.24; or (ii) received any written notice of
termination from any party relating to any such agreement, commitment or
contract.
(b) Except as set forth on Schedule 3.25(b), Ralston and its subsidiaries
have not breached or defaulted in any material respect on any agreement,
commitment or contract listed on Schedule 3.24.
3.26 Trademarks and Copyrights.
(a) Schedule 3.26(a)(i) lists all registered trade- marks and copyrights
owned by Ralston and its subsidiaries and the jurisdictions in which such are
registered or in which an application has been filed for such registration.
Schedule 3.26(a)(ii) lists each license or sublicense (with a term exceeding one
year or with a royalty payment of more than $1,000) to which Ralston and its
subsidiaries are a party and pursuant to which any other person or entity is
authorized to use any such trademark or copyright. All trademarks and
copyrights listed on Schedule 3.26(a)(i) are owned by Ralston and its
subsidiaries and, except as disclosed on Schedule 3.26(a)(iii), are free and
clear of any known adverse claim of any third party.
(b) Except as set forth on Schedule 3.26(b), to the Knowledge of Ralston,
Ralston and its subsidiaries do not infringe or unlawfully or wrongly use any
trademark or copyright rights owned or claimed by any other party.
(c) To the Knowledge of Ralston, except as disclosed on Schedule 3.26(c),
no third party is now making any infringing use of any Ralston trademark or
copyright.
(d) Except as disclosed on Schedule 3.26(d) or required to be disclosed on
Schedule 3.26(a)(ii), Ralston and its subsidiaries have not sold or otherwise
disposed of, or transferred or granted, any interest in such Ralston trademarks
or copyrights listed on Schedule 3.26(a)(i).
(e) To the Knowledge of Ralston, no claims are being asserted by any
person against the use of any of the trademarks or copyrights listed on Schedule
3.26(a)(i), or challenging or questioning the validity or effectiveness of any
license or agreement related thereto. Except as disclosed on Schedule 3.26(e),
none of the Ralston trademarks or copyrights is
<PAGE> 34
-28-
subject to any outstanding order, judgment or decree restricting the use thereof
by Ralston and its subsidiaries, or restricting the licensing thereof by Ralston
and its subsidiaries to any other person or entity.
3.27 Powers of Attorney. Except as set forth on Schedule 3.27, neither
Ralston nor any of its subsidiaries has any material outstanding revocable or
irrevocable Powers of Attorney or similar authorizations issued to any
individual who is not a Ralston Employee.
3.28 Taxes.
(a) Ralston, the affiliated group, within the meaning of Section 1504 of
the Code, of which Ralcorp is the common parent and any other affiliated group,
within the meaning of Section 1504 of the Code, of which Ralston has been a
member at any time since its date of incorporation (an "Affiliated Group" and,
collectively, the "Affiliated Groups") have timely filed on or before the date
hereof all Tax Returns required to be filed in accordance with all applicable
laws (taking into account all extensions of due dates), and all such Tax Returns
are true, correct and complete and all amounts shown thereon as owing have been
paid. Except as set forth on Schedule 3.28(a): (i) all Tax bills or Tax
assessments received by or with respect to Ralston have been paid (to the extent
the Taxes shown thereon are due and owing); (ii) all Taxes with respect to
Ralston and the Affiliated Groups (whether or not shown on any Tax Returns) have
been paid or accrued and all deficiencies for Taxes asserted or assessed by a
taxing authority against Ralston or an Affiliated Group have been paid or
finally settled or are being contested by appropriate proceedings; (iii) no
claim is currently being made by an authority in a jurisdiction where Ralston or
an Affiliated Group does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction; and (iv) there are no liens on any of the assets
of Ralston or an Affiliated Group that arose in connection with any failure (or
alleged failure) to pay any Tax. The term "Ralston" when used in this Section
3.28 means Ralston and its subsidiaries.
(b) Ralston and the Affiliated Groups have collected or withheld and paid
on a timely basis all Taxes required to have been collected or withheld and paid
to any taxing authority in connection with amounts paid or owing to any
employee, independent contractor, creditor, shareholder or other third party.
<PAGE> 35
-29-
(c) Except as set forth on Schedule 3.28(c), neither Ralston nor an
Affiliated Group has received any written notice of pending or threatened
actions, audits, proceedings or investigations for the assessment or collection
of Taxes.
(d) Except as set forth on Schedule 3.28(d), neither Ralston nor an
Affiliated Group has waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to a Tax assessment or deficiency
(but only to the extent such waiver or extension is still in effect) nor are
there any outstanding requests for any extension of time within which to pay any
Taxes not yet paid. For all taxable periods subsequent to the fiscal year ended
September 30, 1990, Foods has provided to Vail (i) true, correct and complete
copies of federal Form 1120 pro forma returns for Ralston and all other
information (compiled in a true, correct and complete manner) relating to
income, deductions, credits and Taxes of Ralston that is not included in the pro
forma returns, (ii) all statements of federal Income Tax deficiencies assessed
against, or attributable to, Ralston or an Affiliated Group and (iii) a true,
correct and complete copy of any Tax Sharing Agreement to which Ralston is a
party and a true, correct and complete description of any such Tax Sharing
Agreement not reduced to writing.
(e) Except as set forth on Schedule 3.28(e), neither Ralston nor an
Affiliated Group has made, is obligated to make or is a party to any contract,
agreement, arrangement or plan covering any Ralston Employee that (taking into
account the transactions contemplated by this Agreement) could obligate it to
make any payments that would not be deductible under Section 162 of the Code (by
reason of being unreasonable in amount), Section 404, Section 162(m) or Section
280G of the Code.
(f) Schedule 3.28(f) sets forth the following information with respect to
Ralston as of the most recent practicable date: (i) the tax basis of Ralston's
assets; and (ii) the amount of any net operating loss, net capital loss, tax
credit or other carryover allocable to Ralston.
(g) Except as set forth on Schedule 3.28(g), Ralston is not a party to any
joint venture, partnership or other arrangement or contract that could be
treated as a partnership for federal income tax purposes.
(h) The unpaid Taxes of Ralston do not exceed the reserve for Tax
liability as computed in a manner consistent
<PAGE> 36
-30-
with the prior and customary accounting practice of Ralston (excluding any
reserve for deferred Taxes established to reflect timing differences between
book and tax income) set forth or included in the Adjusted Balance Sheet.
(i) All Consolidated Returns and Unitary Returns (as defined below), and
all state, local and foreign Tax Returns of Ralston and the Affiliated Groups
have been closed by applicable statute of limitations for all taxable years
ending on or before the dates shown on the attached Schedule 3.28(i).
"Consolidated Return" shall mean any consolidated federal Income Tax Return
filed by an Affiliated Group, and "Unitary Return" shall mean any Return with
respect to any Taxes, other than federal Income Taxes, filed, or required to be
filed, on a consolidated, combined or unitary basis by any group of corporations
of which Ralston is a member or has been a member at any time since its date of
incorporation.
(j) Ralston and the Affiliated Groups have made all payments of estimated
Taxes required to be made with respect to any of them under Section 6655 of the
Code and any comparable provisions of state, local and foreign law.
(k) No power of attorney has been granted by Ralston or an Affiliated
Group with respect to any matter relating to Taxes which is currently in force.
(l) No consent has been filed under Section 341(f) of the Code with
respect to Ralston or an Affiliated Group.
(m) Neither Ralston nor an Affiliated Group has incurred or assumed any
corporate acquisition indebtedness, as defined in Section 279(b) of the Code.
3.29 Employee Benefit Plans.
(a) All Employee Benefit Plans sponsored by Ralcorp, Foods or Ralston or
their Affiliates and covering Ralston Participants are set forth on Schedule
3.29(a) (the "Ralston Employee Benefit Plans"). With respect to each Ralston
Employee Benefit Plan, copies of the following have been delivered to Vail where
applicable: (i) the Plan document; (ii) a summary plan description; (iii) most
recent Annual Return/Report of Employee Benefit Plan, Form 5500 Series; (iv)
trust agreement; (v) insurance policy; and (vi) determination letter from the
IRS. The Ralston Employee Benefit Plans have in all material respects been
maintained and
<PAGE> 37
-31-
administered in compliance with applicable federal and state laws, regulations
and rules, including, but not limited to, ERISA and the Code. All contributions
required as of the Closing, by law or contract, to be made to each Ralston
Employee Benefit Plan will have been timely made.
(b) No Ralston Employee Benefit Plan (or trust or other funding vehicle
pursuant thereto) is subject to any Tax under Section 511 of the Code that
remains unpaid and assessable against Ralston after the Closing.
(c) Neither Ralston nor any plan fiduciary of any Ralston Employee Benefit
Plan has engaged in any transaction in violation of Section 404 or 406 of ERISA,
or in any "prohibited transaction" as defined in Section 4975(c)(1) of the Code,
for which no exemption exists under Section 408 of ERISA, or in violation of
Section 4975(c)(2) or 4975(d) of the Code.
(d) Except as listed on Schedule 3.29(d), neither Ralston nor any Ralston
Employee Benefit Plan is a party to any litigation with respect to Ralston
Participants relating to, or seeking benefits under, any Employee Benefit Plan.
(e) Except as set forth on Schedule 3.29(e) and except as may be required
by the terms of a collective bargaining agreement or in connection with any
pending labor negotiations, neither Ralston nor any ERISA Affiliate has any
legally binding commitments to create any additional Employee Benefit Plans
which are intended to cover Ralston Employees, or to amend or modify any
existing Employee Benefit Plan with respect to benefits for Ralston Employees.
With respect to each collective bargaining agreement, there is no legally
binding commitment to create any additional Employee Benefit Plans which are
intended to cover Ralston Employees, to amend or modify any existing Employee
Benefit Plan which covers or has covered Ralston Employees, or to begin
contributing, or increase contributions, to a Multiemployer Plan, which would
materially increase the benefits to be provided under such collective bargaining
agreement.
(f) Except as described on Schedule 3.29(f), the execution and performance
of the transactions contemplated by this Agreement, and such other agreements,
instruments and documents required to be executed in connection therewith, shall
not constitute an event under any Employee Benefit Plan or agreement under which
Ralston may incur any liability that will result in any payment (whether
severance pay or otherwise),
<PAGE> 38
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acceleration, vesting or increase of benefits with respect to any Ralston
Employee.
(g) Schedule 3.29(g) sets forth the policy as to severance benefits for
Ralston Employees in effect at the Closing, as well as the names of each Ralston
Employee that has a specific severance arrangement other than the policy.
(h) Each Ralston Employee Benefit Plan which is a retirement plan or a
savings plan has been established and operated so as to be qualified and tax
exempt under the provisions of Code Sections 401(a) and 501(a) from its adoption
to date and will be so as of the Closing. Neither Foods nor any of its
affiliates has, by its action or inaction, adversely affected the qualified
status of any such Ralston Employee Benefit Plan.
(i) Schedule 3.29(i) sets forth a summary of the retiree health and
retiree life insurance benefits provided at the Closing to all Ralston Employees
who are not covered by a collective bargaining agreement.
(j) All Ralston Employee Benefit Plans under which benefits are provided
under health maintenance and preferred provider organizations are set forth on
Schedule 3.29(j).
(k) Except as set forth on Schedule 3.29(k), neither Ralston (since
January 1, 1989) nor any ERISA Affiliate has been a party to any Multiemployer
Plan.
(l) Neither Ralston nor any of its ERISA Affiliates have incurred any
liability under Title IV of ERISA (other than for contributions not yet due or
for the payment of premiums not yet due), which liability has not been fully
paid as of the date hereof.
3.30 Environmental Matters. Except as set forth on Schedule 3.30:
(a) Ralston and its subsidiaries have obtained (or are capable of
obtaining without incurring any material incremental expense) all Environmental
Permits and all licenses and other authorizations and have made all
registrations and given all notifications that are required under any applicable
Environmental Law.
<PAGE> 39
-33-
(b) Except as set forth on Schedule 3.30(b), there is no Environmental
Claim pending (excluding any of the foregoing with respect to which Foods and/or
Ralston have not received service of process or notice, as the case may be,
except if Foods and/or Ralston have Knowledge of the existence thereof) against
Ralston and its subsidiaries under an Environmental Law.
(c) Except as set forth on Schedule 3.30(c), Ralston and its subsidiaries
are in compliance with all terms and conditions of their Environmental Permits,
and are in compliance with all applicable Environmental Laws.
(d) Except as set forth on Schedule 3.30(d), Ralston and its subsidiaries
did not generate, treat, store, transport, discharge, dispose of or release any
Hazardous Substances on any property now or previously owned, leased or used by
Ralston and its subsidiaries.
3.31 Liability and Casualty Insurance. Schedule 3.31 sets forth a
description of each liability or casualty insurance policy (including, without
limitation, fire and product liability policies) including self-insurance
maintained on the property, assets and business of Ralston and its subsidiaries,
specifying the insurer, the amount of coverage, the type of insurance, the
policy number, the expiration date and the annual premium. All such policies:
(i) are valid, outstanding and enforceable policies; (ii) shall remain in full
force and effect until their respective expiration dates as set forth on
Schedule 3.31 without the payment of additional premiums other than additional
premiums required in the ordinary course prior to the Closing; and (iii) except
as noted on Schedule 3.31, shall not in any way be adversely affected by, or
terminate or lapse by reason of, the transactions contemplated by this
Agreement.
3.32 Consents or Approvals.
(a) All consents and approvals of any third party required by the terms
hereof or required to consummate the transactions contemplated herein have been
obtained or, prior to the Closing, will be obtained and shall remain in full
force and effect through the Closing.
(b) Except as set forth in Schedule 3.32, no consent, waiver, approval or
authorization, registration, declaration or filing with any court,
administrative agency or
<PAGE> 40
-34-
commission or other governmental authority or instrumentality, domestic or
foreign, is required by or with respect to Foods or Ralston in connection with
the execution and delivery of this Agreement, and such other agreements,
instruments and documents required to be executed by Foods or Ralston in
connection herewith contemplated herein and therein, or the consummation by
Foods or Ralston of the transactions contemplated herein and therein.
3.33 Transaction Fees. Except as set forth on Schedule 3.33, neither
Foods, Ralston nor any member of their respective boards of directors has any
agreement or understanding, or has incurred any liability, requiring the payment
of a finder's fee, brokerage commission or like cost or charge to any person by
reason of this Agreement or the transactions contemplated herein. Foods is
solely responsible for all fees, commissions and other costs of the persons
listed on Schedule 3.33 and neither Ralston nor any of its subsidiaries has any
responsibility therefor.
3.34 Bank Accounts. Vail has been provided a listing of all Ralston and
its subsidiaries' bank accounts and lock boxes and Foods bank accounts and lock
boxes used by Ralston and its subsidiaries, including the names and locations of
all such banking institutions and depositories, the account numbers, and the
names of all persons authorized to draw thereon or to have access thereto.
3.35 Ownership of Ralston Stock; Ralston Assets. Foods is the owner of
record, and the legal and beneficial owner, of all of the outstanding shares of
Ralston Stock, and Foods has the full right, power and authority to transfer,
convey and deliver good, valid, marketable and indefeasible title to such shares
of Ralston Stock to Vail, or its nominee, as called for under this Agreement,
free and clear of any liabilities, obligations, options, charges, encumbrances,
liens, claims, interests, powers of attorney, restrictions or contractual rights
of others of any kind whatsoever. Except as set forth on Schedule 3.35, none of
the assets used or useful in the business of Ralston and its subsidiaries is
owned by Foods or any of its Affiliates (other than Ralston and its
subsidiaries) and neither Foods nor any of its Affiliates (other than Ralston
and its subsidiaries) owns directly or indirectly any asset included in the
Adjusted Balance Sheet.
3.36 Vail Stock Acquired for Foods' Account. The Vail Stock to be
acquired by Foods pursuant to this Agreement
<PAGE> 41
-35-
is being acquired for Foods' own account. Foods has no intention of
distributing or reselling such stock or any part thereof in any transaction that
would be in violation of the Securities Act of 1933, or the state securities law
of any state.
3.37 United States Forest Service.
(a) Except as set forth on Schedule 3.37(a), Ralston's operations and
those of its subsidiaries comply, in all material respects with the terms and
conditions set forth in each of the Term Special Use Permits issued by the
United States Department of Agriculture, Forest Service (the "USFS") to Ralston
or its subsidiaries and all documents incorporated in such permits
(collectively, the "USFS Permits") and such permits are in full force and effect
and neither Ralston nor its subsidiaries have received any notice of default
under the USFS Permits;
(b) Except as set forth on Schedule 3.37(b), neither Ralston nor its
subsidiaries have received any written notice of nor have any Knowledge that the
USFS has any intention of amending, revoking or otherwise altering the terms or
conditions of any of the USFS Permits, or portion thereof, or the application of
the USFS Permits to Ralston's or its subsidiaries' operations;
(c) Except as set forth on Schedule 3.37(c), neither Ralston nor its
subsidiaries are engaged in any on-going dispute or disagreement with the USFS
over the interpretation or application of any term or condition of any of the
USFS Permits; and
(d) Except as set forth on Schedule 3.37(d), Ralston has no Knowledge of
any third-party permittee or commercial operator operating within the areas
permitted to Ralston or its subsidiaries under any of the USFS Permits.
3.38 Passenger Tramway.
(a) Except as set forth on Schedule 3.38(a), neither Ralston nor its
subsidiaries have had, in the past three (3) ski seasons, any passenger tramway
incidents that required reporting to the Colorado Passenger Tramway Safety Board
(the "CPTSB") under CPTSB laws, rules, regulations and standards.
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(b) Except as set forth on Schedule 3.38(b), each passenger tramway
operated by Ralston or its subsidiaries complies in all material respects with
current laws, rules, regulations and standards of CPTSB and the American
National Standards Institute ("ANSI") and, further, there are no defects or
conditions which are "grandfathered" under CPTSB or ANSI laws, rules,
regulations and standards.
(c) Except as set forth on Schedule 3.38(c), Ralston and its subsidiaries
have maintained in all material respects, each passenger tramway owned or
operated by Ralston or its subsidiaries according to all CPTSB laws, rules,
regulations and standards and all maintenance and replacement procedures and
standards recommended by the manufacturer, or manufacturer's successor, of each
such passenger tramway and, further, no such maintenance or replacement is now
outstanding or has been otherwise deferred or delayed beyond the manufacturer's
recommended maintenance and replacement schedule.
(d) Except as set forth on Schedule 3.38(d), neither Ralston nor its
subsidiaries have any Knowledge of any defect or condition that would preclude
or materially limit the normal operation of any passenger tramway owned or
operated by Ralston or its subsidiaries.
3.39 Clean Water Act.
(a) To Ralston's Knowledge, there have been no material discharges of
dredged or fill material into any waters of the United States, or any other
activity, on or within property owned or operated by Ralston or its subsidiaries
in violation of the Clean Water Act, 33 U.S.C. 1344, and its implementing
regulations (collectively, the "Clean Water Act"), other than discharges or
other activities pursuant to permits (the "Existing Permits").
(b) Except as described on Schedule 3.39(b), to Ralston's Knowledge, the
Existing Permits are in full force and effect and neither Ralston, its
subsidiaries nor anyone acting for or on behalf of Ralston or its subsidiaries
has materially violated nor is currently and materially in violation of any of
the terms and conditions of the Existing Permits and there are no outstanding
mitigation requirements or unsatisfied conditions contained in any of the
Existing Permits. Ralston represents that it has all permits required under the
Clean Water Act.
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3.40 Keystone/Intrawest L.L.C.
(a) The LLC is duly organized, validly existing and in good standing under
the laws of the State of Delaware and has all requisite power and authority and
the legal right to own, lease and operate its properties and to carry on its
business as now being conducted. The LLC is duly qualified or licensed to do
business and in good standing in Colorado. True and correct copies of the LLC
Agreements (as amended) and the Certificate of Formation (the "Certificate")
filed with the Delaware Secretary of State have been delivered to Vail and,
except as described on Schedule 3.40(a), neither the LLC Agreement nor the
Certificate has been amended (whether in writing or via oral agreement or
understanding) and each of the LLC Agreement and the Certificate are in full
force and effect. The LLC is not in violation of its organizational documents.
(b) Ralston owns beneficially and of record an undivided 50% interest in
the LLC (the "Ralston Interest") and has good and marketable title to the
Ralston Interest, and Ralston has the absolute right to sell, assign and
transfer the Ralston Interest to Vail free and clear of all liens. There are no
existing options, warrants, calls, subscriptions or other rights or agreements
or commitments or claims of any nature granted by or binding upon Ralston
granting or vesting in any party any claim or potential claim to the Ralston
Interest. Intrawest owns beneficially and of record an undivided 50% interest in
the LLC.
(c) Except as set forth on Schedule 3.40(c), to Ralston's Knowledge,
neither delivery of this Agreement nor the consummation of the transactions
contemplated on the part of Ralston to be performed, nor the fulfillment of the
terms hereof, constitute a default under, require consent under, give any person
any right to terminate any (A) note, bond, mortgage, indenture or other monetary
obligation or instrument, or (B) any material license, contract or other
agreement, in either case, to which the LLC is a party or by which it or any of
its properties or assets may be bound.
(d) To Ralston's Knowledge, there are no actions, suits or proceedings
pending or threatened against the LLC.
(e) Except as set forth on Schedule 3.40(e) (which Schedule outlines the
current outstanding balance of any such debt) and to Ralston's Knowledge, the
LLC is not indebted to
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any third party and is not currently obligated for the repayment
of any loan or debt.
(f) To Ralston's Knowledge, the LLC has obtained all of the governmental
licenses and permits required to own and operate its properties and business as
currently owned and operated, such licenses and permits are in full force and
effect, and no violation exists in respect of any such license or permit. To
Ralston's Knowledge, the LLC has complied in all material respects with all
laws, regulations, ordinances and orders that relate to any of its properties
and assets.
(g) To Ralston's Knowledge, the LLC is not in default of any material
covenant or obligation under any agreement to which the LLC is a party, and no
events have occurred which with the passage of time or giving of notice would
constitute such a material default.
(h) Ralston is not in default under the LLC Agreement or the Contribution
Agreement and no events have occurred which with the passage of time or the
giving of notice would constitute such a default. Ralston has not waived any
material requirement set forth in the LLC Agreement or the Contribution
Agreement. To the Knowledge of Ralston, Intrawest is not in default in any
material respect under the LLC Agreement or the Contribution Agreement or the
Management Agreement and no events have occurred that with the passage of time
or the giving of notice would constitute such a default.
(i) Except as set forth on Schedule 3.40(i), Ralston has not received any
distribution (in cash or other property) from the LLC.
(j) There are no bankruptcy, reorganization or arrangement proceedings
pending, being contemplated by or, to the Knowledge of Ralston, threatened
against the LLC.
(k) Neither Ralston nor any of its subsidiaries has sold, conveyed,
transferred, assigned or otherwise disposed of any portion of the Option Lands.
(l) Except as set forth in Schedule 3.40(l), neither Ralston nor any of
its Subsidiaries has loaned money to or otherwise participated in any real
estate development project described in Section 3.02(b) of the LLC Agreement.
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(m) Ralston has fully satisfied and fully performed all of its material
obligations under the Contribution Agreement and all transactions contemplated
therein have been fully performed and closed.
(n) Ralston has not made any Other Capital Contributions (as such term is
defined in the LLC Agreement), except as set forth in Schedule 3.40(n), and such
Schedule reflects all Capital Contributions made by Ralston to the LLC since the
LLC's formation.
(o) Neither Ralston nor Intrawest has made any Default Loans (as such term
is defined in the LLC Agreement), and Ralston has not received or given any
notice of a failure to make a Capital Contribution (as such term is defined in
the LLC Agreement). There are no outstanding requirements of either Ralston or
Intrawest to make Capital Contributions to the LLC.
(p) The current Annual Budget (as such term is defined in the LLC
Agreement), and each Project Budget (as such term is defined in the LLC
Agreement) has been delivered to Vail and, except as set forth on Schedule
3.40(p), to Resort's Knowledge there are currently no material deviations from
such budgets.
(q) Neither Ralston nor, to Ralston's Knowledge, Intrawest has committed
any act or omission that could cause a dissolution of the LLC under Article 10
of the LLC Agreement.
(r) As of the date of this Agreement, the LLC has commenced the
construction of a minimum of 260 residential units at the Base I Property (as
such term is defined in the LLC Agreement).
(s) As of the date of this Agreement, Ralston has not purchased any
Additional Property (as such term is defined in the LLC Agreement), and Ralston
will not purchase any such Additional Property during the term of this
Agreement.
(t) True and correct copies of the Contribution Agreement and the
Management Services Agreement have been delivered to Vail and neither of such
agreements has been amended and each of such agreements are in full force and
effect.
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(u) Ralston has delivered to Vail, copies of the most currently available
LLC balance sheet and a summary of projects undertaken by the LLC which, to
Ralston's Knowledge are true and correct.
(v) Except as described on Schedule 3.40(v), projects undertaken by the
LLC are not subject to requirements or agreements of any kind not contained in
the PUD which would require Ralston to provide for ski or lift access,
infrastructure improvements or employee housing in connection with any such
project.
(w) Except as set forth in Schedule 3.40(w), the LLC holds fee simple
title, subject only to Permitted Encumbrances, to all of its owned real
properties. None of the LLC's owned properties are subject to any mortgage,
deed of trust, pledge, lien, security interest, conditional sale agreement,
encumbrance, claim, mechanic's or materialmen's lien or charge of any kind,
except liens shown on Schedule 3.40(w) as securing specific liabilities and
Permitted Encumbrances or except as securing Indebtedness of the LLC relating to
development or infrastructure projects, a listing of which is set forth on
Schedule 3.40(w).
(x) To Ralston's Knowledge, the LLC is not in violation of any law, rule
or regulation or in default in any material respect with respect to any
judgment, writ, injunction or decree of any federal, state or local commission,
nor is the LLC party to, or bound by any material judicial or administrative
order, judgment, decree or consent decree relating to any past or present
practice or undertaking.
(y) To Ralston's Knowledge, the LLC has obtained (or is capable of
obtaining without incurring any material expense) all Environmental Permits and
all licenses and other authorizations and have made all registrations and given
all notifications that are required under any applicable Environmental Law. To
Ralston's Knowledge, there is no Environmental claim pending against the LLC or
pertaining to property owned by the LLC, under an Environmental Law.
3.41 Water Rights.
The representations and warranties set forth on Schedule 3.41 are
incorporated herein by reference.
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ARTICLE IV
VAIL'S REPRESENTATIONS AND WARRANTIES
Vail represents and warrants that:
4.1 Capital Stock.
The authorized capital stock of Vail consists of 20,000,000 shares of Class
A Common Stock, par value $.01 per share (the "Class A Common Stock"),
40,000,000 shares of Vail Stock and 25,000,000 shares of Preferred Stock, par
value $.01 per share (the "Preferred Stock" and together with the Vail Stock and
Class A Common Stock the "Capital Stock"). As of the date of this Agreement,
there are 3,612,809 shares of Vail Stock issued and outstanding; 6,387,191
shares of Class A Common Stock issued and outstanding; and zero shares of
Preferred Stock issued and outstanding. All outstanding shares of Capital Stock
are duly authorized, validly issued, fully paid and non-assessable. Except as
set forth on Schedule 4.1, there are no options, warrants, calls or agreements
of any character for the issuance of additional shares of Capital Stock. Except
as set forth on Schedule 4.1, there are no contracts for the authorization or
issuance of any other class of securities of Vail, and there are no outstanding
securities convertible or exchangeable into Capital Stock.
4.2 Transfer of the Vail Stock.
The Vail Stock to be issued to Foods pursuant to this Agreement shall be
duly and validly authorized and, when issued and delivered pursuant to this
Agreement, shall be validly issued, fully paid and non-assessable and shall
transfer to and vest in Foods, or its nominee, good, valid, marketable and
indefeasible title to such shares of the Vail Stock, subject to no lien,
security interest or other encumbrance on such Vail Stock.
4.3 Authority of Vail.
(a) Vail has taken all action required by its Certificate of Incorporation
and its bylaws to authorize the execution and delivery of this Agreement, and
such other agreements, instruments and documents required to be executed by Vail
in connection herewith, and the performance of the transactions contemplated
herein and therein. Vail has all requisite corporate power and authority to
authorize the execution and delivery of this Agreement, and such other
agreements, instruments and documents required to be executed in connection
herewith, to consummate the transactions contemplated herein
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and therein, and to take all other actions required to be taken by Vail
pursuant to the provisions hereof. This Agreement, and such other agreements,
instruments and documents required to be executed in connection herewith, when
duly executed and delivered, shall constitute a valid and binding obligation of
Vail enforceable in accordance with its terms except to the extent that
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the enforcement of creditors'
rights generally or by general equitable or fiduciary principles.
(b) No approvals on the part of any class (whether voting together or as
separate classes) of Vail's shareholders are necessary to authorize this
Agreement or any other agreements, instruments and documents required to be
executed in connection herewith, or the transactions contemplated herein or
therein.
4.4 Corporate Standing.
Each of Vail and its subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has the corporate power and authority to own its property and
assets and to carry on its business in the same manner as now being conducted.
The execution and delivery of this Agreement, and such other agreements,
instruments and documents required to be executed by Vail in connection
herewith, do not, and the consummation of the transaction contemplated herein
and therein will not, conflict with, or result in any violation of, breach of or
default (with or without notice or lapse of time or both) under, or give rise to
a right of termination, cancellation or acceleration of any obligation or the
loss of a benefit under, (a) any provision of the Certificate of Incorporation
or bylaws of Vail or any of its subsidiaries, or (b) except as set forth in
Schedule 4.4 hereto, any loan or credit agreement, note, bond, mortgage,
indenture, lease, contract, agreement, instrument or permit, judgment, order,
decree, writ or injunction to which Vail or any of its subsidiaries is a party,
or by which it or any of its subsidiaries or its or any of its subsidiaries'
properties or assets are bound, or result in the creation or imposition of any
lien upon any of such properties or assets.
4.5 Qualifications To Do Business.
Each of Vail and its subsidiaries is duly qualified and in good standing as
a foreign corporation and authorized to do business in each jurisdiction set
forth on Schedule 4.5 hereto. Each of Vail and its subsidiaries is qualified
and in good standing in every
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other jurisdiction in which the ownership of its property or the conduct of its
business requires it to be qualified to do business, except in those
jurisdictions where the failure to be so qualified would not, individually or in
the aggregate, result in a Material Adverse Change of Vail.
4.6 Capital Stock of Subsidiaries.
The only direct or indirect subsidiaries of Vail are those listed on
Schedule 4.6 hereto. Except as set forth on Schedule 4.6 hereto, Vail is
directly or indirectly the record and beneficial owner of all of the outstanding
shares of capital stock of each of its subsidiaries, there are no proxies with
respect to such shares, and no equity securities of any of such subsidiaries are
or may be required to be issued by reason of any options, warrants, scrip,
rights to subscribe for, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into or exchangeable for,
shares of any capital stock of any such subsidiary, and there are no contracts,
commitments, understandings or arrangements by which any such subsidiary is
bound to issue additional shares of its capital stock or securities convertible
into or exchangeable for such shares. Other than as set forth on Schedule 4.6
hereto, all of such shares so owned by Vail are validly issued, fully paid and
nonassessable and are owned by it free and clear of any claim, lien or
encumbrance of any kind with respect thereto. Except as disclosed on Schedule
4.6 hereto, Vail does not directly or indirectly own any interest in any
corporation, partnership, joint venture or other business association or entity.
4.7 Corporate Records.
True and correct copies of the Certificate of Incorporation and bylaws of
Vail have previously been delivered to Foods.
4.8 Employee Loans and Other Employee Interests in Vail.
Except as set forth on Schedule 4.8, there are no outstanding loans by or
to Vail or any of its subsidiaries to or from any Vail Employee, other than (a)
emergency loans which do not exceed $10,000 in the aggregate, and none of which
exceed $1,000 individually, (b) housing loans which do not exceed $10,000 in the
aggregate, and none of which exceed $1,000 individually, or (c) ordinary travel
advances or (d) employee charges not exceeding $5,000 individually and $50,000
in the aggregate. Except as set forth on Schedule 4.8, no Vail Employee
currently employed has any material interest, direct or indirect, in any lease
or contract of Vail.
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4.9 Vail Financial Statements; No Material Adverse Change.
Except as set forth on Schedule 4.9, the Vail Financial Statements present
fairly, in all material respects, the consolidated financial position and
results of operations of Vail and its subsidiaries as of the dates thereof, all
in conformity with GAAP applied on a consistent basis, except as set forth in
the notes to those financial statements. Since April 30, 1996, there has not
occurred a Material Adverse Change of Vail, or any event that, individually or
in the aggregate, would reasonably be expected to result in a Material Adverse
Change of Vail. Neither this Section 4.9 nor any other Section in this
Agreement shall be construed as a representation or warranty as to the accuracy
or attainability of budgets or projections relating to or reflecting the
business of Vail.
4.10 Conduct of Business.
Except as and to the extent set forth on Schedule 4.10, since April 30,
1996, Vail and its subsidiaries have not:
(a) made any commitments for capital expenditures or commitments for
additions to property, plant, equipment or intangible capital assets other
than commitments for $100,000 or less made in the ordinary course of
business;
(b) acquired (by merger, consolidation or acquisition of stock or assets)
any corporation, partnership, joint venture, limited liability company or
other business organization, or division thereof, or entered into any
contract or agreement with respect thereto;
(c) incurred any obligations or liabilities (whether absolute, accrued,
contingent, or otherwise and whether due or to become due), except for
current liabilities incurred in the ordinary course of business consistent
with past practice; or experienced any change in any assumptions underlying
or methods of calculating any bad debt, contingency or other reserve;
(d) sold, transferred or conveyed any of its properties or assets used in
Vail's business or operations, except for current assets sold or converted
in the ordinary course of business and consistent with past practice, or
permitted or allowed any of the properties or assets used in Vail's
business or operations to be mortgaged, pledged or subjected to any lien or
encumbrance, except liens or encumbrances for taxes not yet delinquent;
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(e) paid, discharged or satisfied any claim, lien, encumbrance or
liability (whether absolute, accrued, contingent or otherwise and whether
due or to become due);
(f) written down or determined to write down or written up or determined
to write up the value of any inventory, or written off or determined to
write off as uncollectible any notes or accounts receivable or any portion
thereof, except for immaterial write-downs or write-offs in the ordinary
course of business, consistent with past practice and at a rate no greater
than during the prior fifty-two (52) weeks;
(g) waived any material rights;
(h) granted any increase in the compensation of any director of Vail or
Vail Employee (including, without limitation, any increase pursuant to any
bonus, pension, profit-sharing or other plan), except for increases (i)
made pursuant to the terms of any existing Employee Benefit Plan, or (ii)
occurring in the ordinary course of business in accordance with customary
practice (for purposes of the foregoing, ordinary course of business shall
be deemed to include those customary increases granted during ongoing
negotiation of labor agreements);
(i) instituted or adopted any new Employee Benefit Plan for any director
of Vail or any Vail Employee;
(j) directly or indirectly redeemed, purchased or otherwise acquired or
subdivided or reclassified any Vail Stock;
(k) been involved in any labor dispute, litigation or governmental
investigation of any material nature;
(l) entered into any material agreement with any local, state or federal
governments or agencies; or entered into any consulting agreements or
sponsorship agreements requiring the payment of $100,000 or more or having
a term of one year or more;
(m) made any amendments to the Certificate of Incorporation or bylaws of
Vail or any of its subsidiaries; or
(n) agreed, whether in writing or otherwise, to take any action described
in this Section 4.10.
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4.11 Dividends.
Since April 30, 1996, Vail has not declared or paid any dividends on its
capital stock in cash, stock or other property (other than the Vail Dividend).
4.12 Absence of Undisclosed Liabilities.
Other than as set forth on Schedule 4.12 or as set forth on other Schedules
hereto, or as otherwise included in the April 30, 1996 balance sheet of Vail,
there are no liabilities or obligations of Vail and its subsidiaries of any
nature, whether absolute, accrued, unmatured, contingent or otherwise, that
would be required to be reflected on the liability side of a balance sheet
prepared in accordance with GAAP or disclosed in the notes thereto, without
regard to materiality, other than liabilities incurred since April 30, 1996 in
the ordinary course of business related to Vail's operations.
4.13 Title to Property.
Except as set forth on Schedule 4.13, Vail and its subsidiaries hold fee
simple title, subject only to Permitted Encumbrances, to all of their respective
owned real property, and Vail and its subsidiaries hold a good and valid
leasehold title and estate to all of the Vail Leased Property, including,
without limitation such assets which are necessary for Vail and its subsidiaries
to conduct their business substantially in the same manner as currently
conducted. None of such owned or leased properties (or such assets which are
necessary for Vail and its subsidiaries to conduct their business substantially
in the same manner as presently conducted) are subject to any mortgage, deed of
trust, pledge, lien, security interest, conditional sale agreement, encumbrance,
claim, mechanic's or materialmen's lien, or charge of any kind, except liens
shown on Schedule 4.13 as securing specific liabilities (with respect to which
no default, or action or omission which with the giving of notice or passage of
time or both would constitute a default, exists) and Permitted Encumbrances.
4.14 Real Property.
(a) All real property owned or leased (excluding property leased for
employee housing with leases having durations less than one year or annual
rental payments of less than $20,000) by Vail and its subsidiaries is set forth
on Schedule 4.14(a)(i) (the "Vail Leased Property") and such real property is
identified in a manner that reflects the properties which are owned and those
which are leased. Except as set forth on Schedule 4.14(a)(ii), all buildings
and structures required to operate the business of Vail substantially in the
same manner
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as presently conducted located on the real properties owned by Vail and its
subsidiaries and on the Vail Leased Property are in good operating condition and
repair (considering the age of such buildings and structures and ordinary wear
and tear excepted), and are usable for their current use.
(b) Except as set forth on Schedule 4.14(b), Vail and its subsidiaries
have not received written notice regarding any of the following (except for
matters previously resolved): (x) any dispute from any contiguous property
owners concerning contiguous boundary lines, (y) that any of the said owned or
Vail Leased Properties (or the buildings, structures or improvements thereon),
or Vail's and its subsidiaries' operations, violate the zoning or planning laws,
ordinances, rules or regulations of the city, county or state in which they are
located, or any building regulations or codes of such city, county or state, or
land use laws or regulations applicable to said properties, and no such
violations exist, or (z) any claims of others to rights over, under, across or
through any of the owned or Vail Leased Properties by virtue of use or
prescription. Except as set forth on Schedule 4.14, Vail has or is able to
obtain without a material penalty or material incremental cost, or has a valid
exemption from the requirement to obtain, all governmental permits (excluding
permits from the United States Forest Service which are covered in Section
4.32), approvals, authorizations or licenses required to conduct its business in
substantially the same manner as its business is currently conducted.
(c) Vail has previously delivered to Foods or will so deliver as soon as
practicable prior to Closing lists of the most recently issued real and personal
(including vehicles) property tax assessments and tax bills, if any, for Vail's
1994 and 1995 fiscal years for all property owned or leased by Vail and its
subsidiaries.
(d) Except as set forth on Schedule 4.14(d)(i) all real properties owned
by Vail or its subsidiaries are free from agreements creating an obligation to
sell, lease or grant an option to sell or lease and (ii) all Vail Leased
Property is free of all agreements creating an obligation to sublease, grant an
assignment of lease or grant an option to sublease.
(e) Except as set forth on Schedule 4.14(e), to the Knowledge of Vail all
real properties owned by Vail and its subsidiaries and Vail Leased Properties
are currently zoned in the zoning category which permits operation of said
properties
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as now used, operated and maintained. To the Knowledge of Vail, the
consummation of the transactions contemplated herein will not
result in a violation of any applicable zoning ordinance or the
termination of any applicable zoning variance now existing.
(f) Schedule 4.14(f) lists all properties owned or leased by Vail and its
subsidiaries which are not presently being used in the business or operations of
Vail and its subsidiaries.
(g) All buildings, structures or improvements owned and/or leased by Vail
and its subsidiaries on any of the owned or leased real properties are located
entirely within the property boundary lines of such properties and do not
materially encroach onto adjoining lands, and there are no material
encroachments of buildings, structures or improvements from adjoining land onto
such properties.
(h) To the Knowledge of Vail, the developed owned real properties and the
Vail Leased Property currently have access to, at or within their property
boundary lines to all gas, water, electricity, storm, sewer, sanitary sewer,
telephone, and all other utilities necessary or beneficial to the current
operation of the owned or leased properties, and all of such utilities are
adequate and sufficient for the current operation of such properties, subject to
normal interruptions in the ordinary course.
(i) Vail and its subsidiaries hold a valid leasehold estate for each Vail
Leased Property, as shown on Schedule 4.14(a)(i), and enjoy peaceful and
undisturbed possession thereunder. All such leases are valid, binding and
enforceable in accordance with their terms, and are in full force and effect,
Vail and its subsidiaries have complied with all material obligations
thereunder, and there are no existing defaults by Vail and its subsidiaries,
and, except as set forth in Schedule 4.14(i), there are no existing defaults by
any other party thereunder. No event has occurred which (whether with or
without notice, lapse of time or the happening or occurrence of any other event)
would constitute a default by Vail and its subsidiaries and no event has
occurred which (whether with or without notice, lapse of time or the happening
or occurrence of any other event) would constitute a default by any other party
thereunder. Except as disclosed on Schedule 4.14(i), all such leases shall
continue in full force and effect (without default) after the Closing and the
consummation of the
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transactions contemplated by this Agreement without the consent, approval or act
of any other party, except to the extent that enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the enforcement of creditors' rights generally or by general equitable
or fiduciary principles.
4.15 Personal Property.
Except as set forth on Schedule 4.15(a), and except for any immaterial
exceptions, restrictions or limitations contained in financing statements with
respect to such property, Vail and its subsidiaries own, or have a valid lease
or license with respect to, the tangible personal property (including without
limitation ski lift systems and snowmaking equipment and systems) which is
necessary for the operation of their business substantially in the same manner
as currently conducted, free and clear of all liens, mortgages, pledges,
security interests, charges or encumbrances other than Permitted Encumbrances,
and enjoy peaceful and undisturbed possession thereunder. Except as set forth
on Schedule 4.15(b), all such property that is material to the operations of
Vail is in reasonably good operating condition and repair, ordinary wear and
tear excepted, and is suitable for the purposes for which it is used. Schedule
4.15(c) contains a list of each lease pursuant to which Vail and its
subsidiaries lease personal property which involves payment over the remaining
term of such lease of more than $100,000 and which in each case is not
cancelable upon six months' notice or less without penalty of more than
$100,000. All such personal property leases are valid, binding and enforceable
in accordance with their terms and are in full force and effect, Vail and its
subsidiaries have complied with all obligations thereunder and there are no
existing material defaults by Vail and its subsidiaries or, to the Knowledge of
Vail, by any other party thereunder; no event has occurred which (whether with
or without notice, lapse of time or the happening or occurrence of any other
event) would constitute a material default by Vail and its subsidiaries
thereunder; and no event has occurred which (whether with or without notice,
lapse of time or the happening or occurrence of any other event) would
constitute a material default by any other party thereunder. Except as set
forth on Schedule 4.15(d), all personal property leases which are set forth on
Schedule 4.15(c) hereto shall continue in effect after the Closing and the
consummation of the transactions contemplated by this Agreement without the
consent, approval or act of any other party. All unperformed contracts to
purchase personal property to which Vail and its
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subsidiaries are a party which provide for a purchase price of $100,000 or more
are set forth on Schedule 4.15(e).
4.16 Litigation and Claims.
Schedule 4.16 sets forth all pending judicial or administrative
investigations, lawsuits, actions or proceedings against Vail and its
subsidiaries of which Vail or Vail and its subsidiaries have received written
notice. Except as set forth on Schedule 4.16, there are no actions, suits,
investigations, administrative proceedings or orders pending or, to Vail's
Knowledge, threatened against (i) Vail, at law or in equity, which, if adversely
determined, would have an adverse effect on the ability of Vail to perform the
terms of this Agreement, or would interfere with the ability of Vail to
consummate the transactions contemplated herein, or (ii) against Vail or any of
its subsidiaries, at law or in equity.
4.17 Compliance with Laws.
Except as set forth on Schedule 4.17, to the Knowledge of Vail, Vail and
its subsidiaries are not in violation of any law, rule or regulation or in
default in any material respect with respect to any judgment, writ, injunction
or decree of any federal, state or local commission.
4.18 Orders and Consent Decrees.
Except as set forth on Schedule 4.18, or as specifically cross-referenced
thereon from other Schedules hereto, Vail and its subsidiaries are not a party
to, or bound by, any material judicial or administrative order, judgment, decree
or consent decree relating to any past or present practice, omission, activity
or undertaking. To the Knowledge of Vail, Vail and its subsidiaries are not in
default in any material respect under any of the judicial or administrative
orders, judgments, decrees or consent decrees or conciliation or compliance
agreements set forth on Schedule 4.18.
4.19 Labor Agreements.
There are no binding agreements of any type with any labor union, labor
organization, collective bargaining unit or employee group to which Vail and its
subsidiaries are bound.
4.20 Employees.
Except as set forth on Schedule 4.20, Vail and its subsidiaries have not
received any written notice from a governmental authority or official during the
past two years of any non-compliance with any federal, state or local laws,
regulations and legal requirements relating to the employment of labor in
connection with their business,
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including those laws, regulations and legal requirements relating to wages,
hours, benefits, affirmative action, equal opportunity, including the Americans
with Disabilities Act and the Occupational Safety and Health Act, collective
bargaining, workers' compensation and the payment of social security,
unemployment and employment taxes.
4.21 Contracts.
All contracts of Vail or any of its subsidiaries which involve aggregate
payments after the date of this Agreement of $100,000 or more are set forth on
Schedule 4.21 or are specifically cross-referenced thereon from other Schedules
hereto. Except as set forth on Schedule 4.21, Vail and its subsidiaries are not
a party to or obligated under any written agreement or contract that:
(a) provides for the employment of any Corporate Officer of Vail not
terminable at will and without liability for additional payments or
compensation, other than severance and vacation pay payable in accordance
with the established policies of Vail as set forth on Schedule 4.21;
(b) provides for (i) the employment of any consultant or broker for a
term that would exceed one (1) year from the date of the Closing, or
provides for payments that exceed $100,000, or (ii) the employment of any
independent attorney or accounting firm not terminable at will;
(c) would prohibit or limit in any material respect Vail or any of
its subsidiaries from engaging in their present business;
(d) requires the purchase of materials, inventories services or
supplies that has a remaining contractual term of more than one (1) year
from the Closing, or would require payments in the aggregate in excess of
$100,000;
(e) involves the sale of any asset or property of Vail or any of its
subsidiaries presently being used in Vail's or any of its subsidiaries'
business or operations, other than in the normal course of business;
(f) relates to the borrowing of money or bank credit (including, but
not limited to, indentures, notes, installment obligations and capital
leases) or the
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mortgaging or pledging of any asset or property of Vail or any of its
subsidiaries;
(g) guarantees the obligations of any supplier, customer or other third
party, other than endorsements in the ordinary course;
(h) is a forward, swap, option or swaption contract or any other financial
instrument with similar characteristics and/or generally characterized as a
"derivative" security to which Vail or any of its subsidiaries are a party
or to which Vail or any of its subsidiaries or any of their respective
assets or properties is subject or bound (including, without limitation,
funds of Vail invested by any other person); or
(i) includes any indemnity provisions for claims based on product
liability, environmental or employee or retiree liabilities and arises out
of any purchase or acquisition of another entity or business.
4.22 Validity of Material Contracts.
(a) Except as set forth on Schedule 4.22(a), Vail and its subsidiaries
have not: (i) received any written claim of breach or default from any party
relating to any agreement, commitment or contract listed on Schedule 4.21; or
(ii) received any written notice of termination from any party relating to any
such agreement, commitment or contract.
(b) Except as set forth on Schedule 4.22(b), Vail and its subsidiaries
have not breached or defaulted in any material respect on any agreement,
commitment or contract listed on Schedule 4.21.
4.23 Trademarks and Copyrights.
(a) Schedule 4.23(a)(i) lists all registered trade- marks and copyrights
owned by Vail and its subsidiaries and the jurisdictions in which such are
registered or in which an application has been filed for such registration.
Schedule 4.23(a)(ii) lists each license or sublicense (with a term exceeding one
year or with a royalty payment of more than $1,000) to which Vail and its
subsidiaries are a party and pursuant to which any other person or entity is
authorized to use any such trademark or copyright. All trademarks and
copyrights listed on Schedule 4.23(a)(i) are owned by Vail and its
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subsidiaries and, except as disclosed on Schedule 4.23(a)(iii), are free and
clear of any known adverse claim of any third party.
(b) To the Knowledge of Vail, Vail and its subsidiaries do not infringe or
unlawfully or wrongly use any trademark or copyright rights owned or
claimed by any other party.
(c) To the Knowledge of Vail, except as disclosed on Schedule 4.23(c), no
third party is now making any infringing use of any Vail trademark or
copyright.
(d) Except as disclosed on Schedule 4.23(d) or as required to be disclosed
on Schedule 4.23(a)(ii), Vail and its subsidiaries have not sold or
otherwise disposed of, or transferred or granted, any interest in such Vail
trademarks or copyrights listed on Schedule 4.23(a)(i).
(e) To the Knowledge of Vail, no claims are being asserted by any person
against the use of any of the trademarks or copyrights listed on Schedule
4.23(a)(i), or challenging or questioning the validity or effectiveness of
any license or agreement related thereto. Except as disclosed on Schedule
4.23(e), none of the Vail trademarks or copyrights is subject to any
outstanding order, judgment or decree restricting the use thereof by Vail
and its subsidiaries, or restricting the licensing thereof by Vail and its
subsidiaries to any other person or entity.
4.24 Powers of Attorney.
Except as set forth on Schedule 4.24, neither Vail nor any of its
subsidiaries has any material outstanding revocable or irrevocable Powers of
Attorney or similar authorizations issued to any individual who is not a Vail
Employee.
4.25 Taxes.
(a) Vail, the affiliated group, within the meaning of Section 1504 of the
Code, of which Vail is the common parent and any other affiliated group, within
the meaning of Section 1504 of the Code, of which Vail has been a member at any
time since its date of incorporation (an "Affiliated Group" and, collectively,
the "Affiliated Groups") have timely filed on or before the date hereof all Tax
Returns required to be filed in accordance with all applicable laws (taking into
account all extensions of due dates), and all such Tax Returns are true, correct
and complete and all amounts shown thereon as owing
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have been paid. Except as set forth on Schedule 4.25(a): (i) all Tax bills or
Tax assessments received by or with respect to Vail have been paid (to the
extent the Taxes shown thereon are due and owing); (ii) all Taxes with respect
to Vail and the Affiliated Groups (whether or not shown on any Tax Returns) have
been paid or accrued and all deficiencies for Taxes asserted or assessed by a
taxing authority against Vail or an Affiliated Group have been paid or finally
settled or are being contested by appropriate proceedings; (iii) no claim is
currently being made by an authority in a jurisdiction where Vail or an
Affiliated Group does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction; and (iv) there are no liens on any of the assets
of Vail or an Affiliated Group that arose in connection with any failure (or
alleged failure) to pay any Tax. The term "Vail" when used in this Section 4.25
means Vail and its subsidiaries.
(b) Vail and the Affiliated Groups have collected or withheld and paid on
a timely basis all Taxes required to have been collected or withheld and paid to
any taxing authority in connection with amounts paid or owing to any employee,
independent contractor, creditor, shareholder or other third party.
(c) Except as set forth on Schedule 4.25(c), neither Vail nor an
Affiliated Group has received any written notice of pending or threatened
actions, audits, proceedings or investigations for the assessment or collection
of Taxes.
(d) Except as set forth on Schedule 4.25(d), neither Vail nor an
Affiliated Group has waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to a Tax assessment or deficiency
(but only to the extent such waiver or extension is still in effect) nor are
there any outstanding requests for any extension of time within which to pay any
Taxes not yet paid. For all taxable periods subsequent to the fiscal year ended
December 31, 1989, Vail has provided to Foods (i) true, correct and complete
copies of federal Form 1120 pro forma returns for Vail and all other information
(compiled in a true, correct and complete manner) relating to income,
deductions, credits and Taxes of Vail that is not included in the pro forma
returns, (ii) all statements of federal Income Tax deficiencies assessed
against, or attributable to, Vail or an Affiliated Group and (iii) a true,
correct and complete copy of any Tax Sharing Agreement to which Vail is a party
and a true, correct and complete description of any such Tax Sharing Agreement
not reduced to writing.
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(e) Except as set forth on Schedule 4.25(e), neither Vail nor an
Affiliated Group has made, is obligated to make or is a party to any contract,
agreement, arrangement or plan covering any Vail Employee that (taking into
account the transactions contemplated by this Agreement) could obligate it to
make any payments that would not be deductible under Section 162 of the Code (by
reason of being unreasonable in amount), Section 404, Section 162(m) or Section
280G of the Code.
(f) Schedule 4.25(f) sets forth the following information with respect to
Vail as of the most recent practicable date: (i) the tax basis of Vail's
assets; and (ii) the amount of any net operating loss, net capital loss, tax
credit or other carryover allocable to Vail.
(g) Except as set forth on Schedule 4.25(g), Vail is not a party to any
joint venture, partnership or other arrangement or contract that could be
treated as a partnership for federal income tax purposes.
(h) The unpaid Taxes of Vail do not exceed the reserve for Tax liability
as computed in a manner consistent with the prior and customary accounting
practice of Vail (excluding any reserve for deferred Taxes established to
reflect timing differences between book and tax income).
(i) All Consolidated Returns and Unitary Returns (as defined below), and
all state, local and foreign Tax Returns of Vail and the Affiliated Groups have
been closed by applicable statute of limitations for all taxable years ending on
or before the dates shown on the attached Schedule 4.25(i). "Consolidated
Return" shall mean any consolidated federal Income Tax Return filed by an
Affiliated Group, and "Unitary Return" shall mean any Return with respect to any
Taxes, other than federal Income Taxes, filed, or required to be filed, on a
consolidated, combined or unitary basis by any group of corporations of which
Vail is a member or has been a member at any time since its date of
incorporation.
(j) Vail and the Affiliated Groups have made all payments of estimated
Taxes required to be made with respect to any of them under Section 6655 of the
Code and any comparable provisions of state, local and foreign law.
(k) Except as set forth on Schedule 4.25(k), no power of attorney has been
granted by Vail or an Affiliated
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Group with respect to any matter relating to Taxes which is currently in force.
(l) No consent has been filed under Section 341(f) of the Code with
respect to Vail or an Affiliated Group.
(m) Neither Vail nor an Affiliated Group has incurred or assumed any
corporate acquisition indebtedness, as defined in Section 279(b) of the Code.
4.26 Employee Benefit Plans.
(a) All Employee Benefit Plans sponsored by Vail and covering Vail
Participants are set forth on Schedule 4.26(a) (the "Vail Employee Benefit
Plans"). With respect to each Vail Employee Benefit Plan, copies of the
following have been delivered to Foods where applicable: (i) the Plan document;
(ii) a summary plan description; (iii) most recent Annual Return/Report of
Employee Benefit Plan, Form 5500 Series; (iv) trust agreement; (v) insurance
policy; and (vi) deter- mination letter from the IRS. The Vail Employee Benefit
Plans have in all material respects been maintained and administered in
compliance with applicable federal and state laws, regulations and rules,
including, but not limited to, ERISA and the Code. All contributions required as
of the Closing, by law or contract, to be made to each Vail Employee Benefit
Plan will have been timely made.
(b) No Vail Employee Benefit Plan (or trust or other funding vehicle
pursuant thereto) is subject to any Tax under Section 511 of the Code that
remains unpaid and assessable against Vail after the Closing.
(c) Neither Vail nor any plan fiduciary of any Vail Employee Benefit Plan
has engaged in any transaction in violation of Section 404 or 406 of ERISA, or
in any "prohibited transaction" as defined in Section 4975(c)(1) of the Code,
for which no exemption exists under Section 408 of ERISA, or in violation of
Section 4975(c)(2) or 4975(d) of the Code.
(d) Except as listed on Schedule 4.26(d), neither Vail nor any Vail
Employee Benefit Plan is a party to any litigation with respect to Vail
Participants relating to, or seeking benefits under, any Employee Benefit Plan.
(e) Except as set forth on Schedule 4.26(e), neither Vail nor any ERISA
Affiliate has any legally binding
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commitments to create any additional Employee Benefit Plans which are intended
to cover Vail Employees, or to amend or modify any existing Employee Benefit
Plan with respect to benefits for Vail Employees. With respect to each
collective bargaining agreement, there is no legally binding commitment to
create any additional Employee Benefit Plans which are intended to cover Vail
Employees, to amend or modify any existing Employee Benefit Plan which covers or
has covered Vail Employees, or to begin contributing, or increase contributions,
to a Multiemployer Plan, which would materially increase the benefits to be
provided under such collective bargaining agreement.
(f) Except as described on Schedule 4.26(f), the execution and performance
of the transactions contemplated by this Agreement, and such other agreements,
instruments and documents required to be executed in connection therewith, shall
not constitute an event under any Employee Benefit Plan or agreement under which
Vail may incur any liability that will result in any payment (whether severance
pay or otherwise), acceleration, vesting or increase of benefits with respect to
any Vail Employee.
(g) Each Vail Employee Benefit Plan which is a retirement plan or a
savings plan has been established and operated so as to be qualified and tax
exempt under the provisions of Code Sections 401(a) and 501(a) from its adoption
to date and will be so as of the Closing. Vail has not, by its action or
inaction, adversely affected the qualified status of any such Vail Employee
Benefit Plan.
(h) All Vail Employee Benefit Plans under which benefits are provided
under health maintenance and preferred provider organizations are set forth on
Schedule 4.26(h).
(i) Except as set forth on Schedule 4.26(i), neither Vail (since January
1, 1989) nor any ERISA Affiliate has been a party to any Multiemployer Plan in
either a "complete withdrawal" as defined in Section 4203 of ERISA or a "partial
withdrawal" as defined in Section 4205 of ERISA.
(j) Neither Vail nor any of its ERISA Affiliates have incurred any
liability under Title IV of ERISA (other than for contributions not yet due or
for the payment of premiums not yet due), which liability has not been fully
paid as of the date hereof.
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4.27 Environmental Matters. Except as set forth on Schedule 4.27:
(a) Vail and its subsidiaries have obtained (or are capable of
obtaining without incurring any material incremental expense) all
Environmental Permits and all licenses and other authorizations and have
made all registrations and given all notifications that are required under
any applicable Environmental Law.
(b) Except as set forth on Schedule 4.27(b), there is no
Environmental Claim pending (excluding any of the foregoing with respect to
which Vail has not received service of process or notice, as the case may
be, except if Vail has Knowledge of the existence thereof) against Vail and
its subsidiaries under an Environmental Law.
(c) Except as set forth on Schedule 4.27(c) Vail and its subsidiaries
are in compliance with all terms and conditions of their Environmental
Permits, and are in compliance with all applicable Environmental Laws.
(d) Except as set forth on Schedule 4.27(d) Vail and its subsidiaries
did not generate, treat, store, transport, discharge, dispose of or release
any Hazardous Substances on any property now or previously owned, leased or
used by Vail and its subsidiaries.
4.28 Liability and Casualty Insurance. Schedule 4.28 sets forth a
description of each liability or casualty insurance policy (including, without
limitation, fire and product liability policies) including self-insurance
maintained on the property, assets and business of Vail and its subsidiaries,
specifying the insurer, the amount of coverage, the type of insurance, the
policy number, the expiration date and the annual premium. All such policies:
(i) are valid, outstanding and enforceable policies; (ii) shall remain in full
force and effect until their respective expiration dates as set forth on
Schedule 4.28 without the payment of additional premiums other than additional
premiums required in the ordinary course prior to the Closing; and (iii) except
as noted on Schedule 4.28, shall not in any way be adversely affected by, or
terminate or lapse by reason of, the transactions contemplated by this
Agreement.
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4.29 Consents or Approvals.
(a) All consents and approvals of any third party required by the terms
hereof or required to consummate the transactions contemplated herein have been
obtained or, prior to the Closing, will be obtained and shall remain in full
force and effect through the Closing.
(b) Except as set forth in Schedule 4.29, no consent, waiver, approval or
authorization, registration, declaration or filing with any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, is required by or with respect to Vail in
connection with the execution and delivery of this Agreement, and such other
agreements, instruments and documents required to be executed by Vail in
connection herewith contemplated herein and therein, or the consummation by Vail
of the transactions contemplated herein and therein.
4.30 Transaction Fees. Except as set forth on Schedule 4.30, neither Vail
nor any member of its board of directors has any agreement or understanding, or
has incurred any liability, requiring the payment of a finder's fee, brokerage
commission or like cost or charge to any person by reason of this Agreement or
the transactions contemplated herein. Vail is solely responsible for all fees,
commissions and other costs of the persons listed on Schedule 4.30 and neither
Vail nor any of its subsidiaries has any responsibility therefor.
4.31 Ralston Stock Acquired for Vail's Account. The Ralston Stock to be
acquired by Vail pursuant to this Agreement is being acquired for Vail's own
account. Vail has no intention of distributing or reselling such stock or any
part thereof in any transaction which would be in violation of the Securities
Act of 1933, or the state securities laws of any state.
4.32 United States Forest Service.
(a) Except as set forth on Schedule 4.32(a), Vail's operations and those
of its subsidiaries comply, in all material respects with the terms and
conditions of the USFS Permits issued by the USFS to Vail or its subsidiaries
and such permits are in full force and effect and neither Vail nor its
subsidiaries have received any notice of default under the USFS Permits;
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(b) Except as set forth on Schedule 4.32(b), neither Vail nor its
subsidiaries have received any written notice of nor have any Knowledge that the
USFS has any intention of amending, revoking or otherwise altering the terms or
conditions of any of the USFS Permits, or portion thereof, or the application of
the USFS Permits to Vail's or its subsidiaries' operations;
(c) Except as set forth on Schedule 4.32(c), neither Vail nor its
subsidiaries are engaged in any on-going dispute or disagreement with the USFS
over the interpretation or application of any term or condition of any of the
USFS Permits; and
(d) Except as set forth on Schedule 4.32(d), Vail has no Knowledge of any
third-party permittee or commercial operator operating within the areas
permitted to Vail or its subsidiaries under any of the USFS Permits.
4.33 Passenger Tramway.
(a) Except as set forth on Schedule 4.33(a), neither Vail nor its
subsidiaries have had, in the past three (3) ski seasons, any passenger tramway
incidents that required reporting to the CPTSB under CPTSB laws, rules,
regulations and standards.
(b) Except as set forth on Schedule 4.33(b), each passenger tramway
operated by Vail or its subsidiaries complies in all material respects with
current laws, rules, regulations and standards of CPTSB and the ANSI and,
further, there are no defects or conditions which are "grandfathered" under
CPTSB or ANSI laws, rules, regulations and standards.
(c) Except as set forth on Schedule 4.33(c), Vail and its subsidiaries
have maintained in all material respects, each passenger tramway owned or
operated by Vail or its subsidiaries according to all CPTSB laws, rules,
regulations and standards and all maintenance and replacement procedures and
standards recommended by the manufacturer, or manufacturer's successor, of each
such passenger tramway and, further, no such maintenance or replacement is now
outstanding or has been otherwise deferred or delayed beyond the manufacturer's
recommended maintenance and replacement schedule.
(d) Except as set forth on Schedule 4.33(d), neither Vail nor its
subsidiaries have any Knowledge of any defect or condition that would preclude
or materially limit the normal
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operation of any passenger tramway owned or operated by Vail or
its subsidiaries.
4.34 Clean Water Act.
(a) To Vail's Knowledge, there have been no material discharges of dredged
or fill material into any waters of the United States, or any other activity, on
or within property owned or operated by Vail or its subsidiaries in violation of
the Clean Water Act, other than discharges or other activities pursuant to
permits (the "Vail Existing Permits").
(b) Except as described on Schedule 4.34(b), to Vail's Knowledge, the Vail
Existing Permits are in full force and effect and neither Vail, its subsidiaries
nor anyone acting for or on behalf of Vail or its subsidiaries has materially
violated nor is currently and materially in violation of any of the terms and
conditions of the Vail Existing Permits and there are no outstanding mitigation
requirements or unsatisfied conditions contained in any of the Vail Existing
Permits. Vail represents that it has all permits required under the Clean Water
Act.
4.35 Water Rights. The representations and warranties set forth on
Schedule 4.35 are incorporated herein by reference.
4.36 Financing Commitment. Vail has obtained a commitment to lend Vail
sufficient funds to repay Indebtedness of Ralston up to the Foods Dividend
Amount from Nationsbank of Texas, N.A. and has provided Foods a true and correct
copy of such commitment. Vail has no Knowledge of any fact or circumstance that
may cause Nationsbank of Texas, N.A. not to loan such funds to Vail on or prior
to the Closing Date.
ARTICLE V
COVENANTS PENDING CLOSING
5.1 Ralston Operations. Until the Closing, Foods and Ralston shall use,
and shall cause Ralston's subsidiaries to use, their reasonable best efforts to
conduct Ralston's business in the usual and customary manner consistent with
past practice and exclusively through Ralston and its subsidiaries. Until the
Closing, Ralston shall, and shall cause its
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subsidiaries to, continue to make capital expenditures with respect to the
properties and resorts of Ralston as contemplated by the Ralston Budget and
shall make all expenditures reasonably necessary (including but not limited to
marketing and advertising expenditures and the hiring of seasonal employees) for
the Ralston resorts opening for the 1996-1997 ski season on a basis consistent
with past practice and in accordance with the Ralston Budget. Except with the
prior written approval of Vail (which approval shall not be unreasonably
withheld) or as specifically permitted by the terms of this Agreement, Foods
shall not permit Ralston to, and Ralston shall not and shall not permit any of
its subsidiaries to:
(a) enter into any employment agreement with any officer or director,
or any agreement to increase the compensation or benefits of any officer or
director (other than pursuant to normal merit salary reviews conducted in
the ordinary course of business after consultation with Vail);
(b) increase the compensation or benefits (including, without
limitation, increasing any severance benefits) of any Ralston Employee
except: (i) as required by law; (ii) in accordance with customary
negotiations of applicable labor or employment agreements to which Ralston
or any of its subsidiaries is bound; (iii) pursuant to any changes in
Employee Benefit Plans as set forth on Schedule 3.30(f); or (iv) pursuant
to normal merit salary reviews conducted in the ordinary course of business
after consultation with Vail;
(c) make any payment under any existing Employee Benefit Plan not
required under the terms thereof, or modify, amend or terminate any
existing Employee Benefit Plan (except as required by law) to materially
increase the benefits under such plan, or adopt any new Employee Benefit
Plan;
(d) hire any new Ralston Employee at a grade level of director or
higher (other than replacement employees after consultation with Vail);
(e) merge with or into another corporation, or become a partner,
shareholder or participant in any joint venture, limited liability company
or other business organization; or acquire by purchase or otherwise all or
any part of the business or the assets of, or stock or other
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evidence of beneficial ownership in, any firm, corporation or other person;
(f) acquire or dispose of any material asset (other than current
assets in the ordinary course of business) or fail to execute all renewal
options on any Ralston Leased Property;
(g) permit any material change in any methods of calculating any bad
debt, or in the assumptions underlying such calculations;
(h) undertake any obligation or liability (whether absolute, accrued,
contingent or otherwise and whether due or to become due), except items
incurred in the ordinary course of business and consistent with past
practice, or permit any change in any assumptions underlying or methods of
calculating any bad debt, contingency or other reserves;
(i) permit or allow any of the properties (excluding the Option Land)
or assets used by Ralston or its subsidiaries in their business or
operations (whether real, personal or mixed, tangible or intangible) to be
mortgaged or pledged, or subjected to a lien, except for Permitted
Encumbrances;
(j) cancel or release any other debts or claims, or waive any rights
of substantial value or sell, transfer or convey any of its properties or
assets (whether real, personal or mixed, tangible or intangible), except in
the ordinary course of business and consistent with past practice;
(k) dispose of, or permit to lapse, or otherwise fail to use
reasonable efforts consistent with past practices, which may or may not
include the institution of litigation, to preserve the rights of Ralston or
any of its subsidiaries to use any material patent, trademark, service
mark, logo, trade dress, trade style, trade name, assumed name or copyright
or any registration or recording thereof or application therefor;
(l) dispose of, or permit to lapse, any material license, permit or
other form of material authorization; or dispose of or disclose to any
person, other than employees, consultants and representatives bound by
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confidentiality obligations or agreements, any trade secret, formula,
process or know-how;
(m) make any commitments for capital expenditures for replacements or
additions to property, plant or equipment, other than as required in the
ordinary course of business consistent with the Ralston Budget or otherwise
in the ordinary course in an aggregate amount not to exceed $100,000;
(n) declare, pay or make, or set aside for payment or making, any
dividend or other distribution in respect of its capital stock or other
securities (other than as permitted by Section 2.3 or 5.12 hereof), or
directly or indirectly redeem, purchase or otherwise acquire any of its
capital stock or other securities;
(o) issue, authorize or propose the issuance of any shares of its
capital stock, or subdivide or in any way reclassify any shares of its
capital stock;
(p) delay or defer payment of accounts payable or other obligations
of Ralston or any subsidiary, or accelerate collection of accounts
receivable or other obligations due Ralston or any subsidiary, in a manner
inconsistent with past practice, or otherwise make any material change in
any method of accounting or accounting practice;
(q) except pursuant to existing Employee Benefit Plans, pay, loan or
advance any amount to, or sell, transfer or lease, any property or asset
(whether real, personal, tangible or intangible) to, or enter into
agreement, arrangement or transaction with any of the Corporation Officers
or directors of Ralston;
(r) terminate any material contract, lease, agreement or license
except for contracts, leases, agreements or licenses expiring in the
ordinary course of business pursuant to their terms, amend or suffer the
amendment of, or fail to perform all of its material obligations under, any
material contract, lease, agreement or license;
(s) enter into any contract, lease, license or permit, except
contracts entered into in the ordinary course of business;
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(t) fail to take such action as may be reasonably necessary to
maintain, preserve, renew and keep in full force and effect the corporate
existence, qualifications, material licenses, permits, registrations and
franchises of Ralston and its subsidiaries, or fail to comply with any law
applicable to the conduct of the businesses of Ralston and its subsidiaries
where the failure to comply is reasonably likely to result in a Material
Adverse Change;
(u) amend the certificate of incorporation or by-laws of Ralston or
any of its subsidiaries, or fail to take such action as may be reasonably
necessary to maintain, preserve, renew and keep in full force and effect
the corporate existence and qualifications of Ralston or any of its
subsidiaries;
(v) incur or become liable with respect to any Indebtedness that
would be required to be repaid as a result of the transactions contemplated
by this Agreement or that would not be prepayable at any time following the
Closing without premium or penalty;
(w) enter into any agreement with any local, state or Federal
government or agency; or enter into any consulting agreement or sponsorship
agreement requiring the payment of $100,000 or more or having a term of one
year or more;
(x) knowingly take any action that would render any representation or
warranty inaccurate in any material respect at the time of Closing;
(y) take any action with respect to, or make any material change in
its accounting or Tax policies or procedures, except as may be required by
changes in generally accepted accounting principles upon the advice of its
independent accountants;
(z) make or revoke any Tax election or settle or compromise any Tax
liability, or amend any Tax Return;
(aa) take any action or fail to take any action which would constitute
a material breach or default under the LLC Agreement;
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(bb) permit its representatives to the LLC's Management Committee (as
defined in the LLC Agreement) to act upon, ratify, or approve any Major
Decisions (as defined in the LLC Agreement); or
(cc) dispose of, transfer or assign its interest or any part thereof
in the LLC.
5.2 Vail Operations. Until the Closing, Vail shall conduct its business
in the usual and customary manner consistent with past practice and shall
continue to make capital expenditures with respect to its properties and resorts
as contemplated by its 1996 fiscal budget. Except with the prior written
consent of Foods or in furtherance of the transactions contemplated by this
Agreement, Vail shall not:
(a) merge with or into another corporation;
(b) issue, authorize or propose the issuance of any shares of its capital
stock or options to acquire capital stock other than (i) the issuance of
shares of capital stock issued pursuant to the options listed on Schedule
4.1, (ii) the issuance of up to 50,000 shares of Vail Stock to officers and
employees of Vail and (iii) the grant or issuance of options for up to
300,000 shares of Vail Stock to officers and employees of Vail minus the
number of shares issued pursuant to clause (ii), or subdivide or in any way
reclassify any shares of its capital stock (other than shares of capital
stock issued in connection with Vail's stock option plan or other existing
options);
(c) declare or pay any extraordinary dividend or any other dividend other
than the Vail Dividend; or
(d) fail to take such action as may be reasonably necessary to maintain,
preserve, renew and keep in full force and effect the corporate existence
and qualification of Vail or amend the Certificate of Incorporation or
by-laws of Vail, except as contemplated herein.
In addition to the foregoing, Vail will not take any action with respect
to, or make any material change in its accounting or Tax policies or procedures,
except as may be required by changes in generally accepted accounting principles
upon the advice of its independent accountants, or make or revoke any Tax
election or settle or compromise any Tax
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liability, or amend any Tax Return, without first consulting with
Foods, it being understood that Vail may undertake such action
after such consultation.
5.3 Due Diligence Review.
(a) Until the Closing, each of Ralston and Vail shall permit each other
and their respective counsel, accountants, financial advisors and other
representatives access during normal business hours to the facilities, personnel
and accountants (including all audit work papers relating solely to Ralston
and/or its subsidiaries) of Ralston and Vail and to all of the properties,
operations, books, contracts and records of Ralston and Vail to the extent
relevant to the transactions contemplated herein, and shall furnish Ralston and
Vail during such period with all such information concerning the businesses and
operations of Ralston and Vail as Ralston or Vail may reasonably request, except
to the extent that, in the reasonable opinion of counsel, such furnishing of
information would violate or suggest a violation of any federal, state or local
statute, rule, regulation or ordinance, or any confidentiality agreements with
respect to such information. In furtherance of the foregoing, promptly
following the execution of this Agreement Ralston shall (i) permit Vail and its
representatives to directly communicate with directors and third party
consultants (at Vail's expense to the extent that the expenses of such
consultants as a result of such communications exceed $10,000) of Ralston and to
physically visit and inspect all of Ralston's resorts and properties, (ii)
provide to Vail all information reasonably requested by Vail with respect to
real estate owned or leased by Ralston and its subsidiaries and (iii) use its
best efforts prior to the Closing to permit Vail and its representatives to have
access to all of the personnel, properties, books, contracts and records of the
LLC, including attending all meetings between representatives of Ralston and of
the LLC. Vail shall coordinate and schedule any access to Ralston's and the
LLC's facilities and employees through Joe R. Micheletto and Ingrid Keiser.
(b) In the event of a material change to Ralston's or Vail's business or
operations, Ralston or Vail, as the case may be, shall notify the other party of
such material change and shall furnish such other party with all information
concerning such change as such other party may reasonably request, except to the
extent that, in the reasonable opinion of counsel, such furnishing of
information would violate or suggest a violation of any federal, state or local
statute, rule,
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regulation or ordinance or any confidentiality agreements with
respect to such information.
5.4 Insurance.
(a) Until the Closing, each of Foods and Vail shall use their best efforts
to maintain, in full force and effect, liability and casualty insurance policies
providing coverage substantially identical to the insurance coverage provided
under the policies of insurance now in effect for Ralston and Vail and set forth
on Schedules 3.31 and 4.28, respectively. Such party shall notify the other
party in writing in the event of any cancellation of insurance coverage.
(b) Ralston's insurable interest in the insurance policies listed in
Schedule 3.31 shall terminate (except for the property policy) at the Closing.
Vail shall add Ralston as additional named insured under Vail's casualties
policies effective as of the Closing. Vail shall assume Ralston's property
policy under an assignment until the expiration of such policy.
(c) Foods will provide notice in the form of claim printouts to the
respective insurers of "claims made" excess liability policies.
5.5 Public Announcements. Until the Closing, the parties hereto shall
consult with each other and shall mutually agree upon any press release or
public announcement relating to the transactions contemplated herein and will
not issue any such press release or make any such public announcements prior to
such consultation and agreement, except as may be required by applicable law or
by obligations pursuant to any listing agreement with any national securities
exchange, or that counsel deems any party should make to the investing public
and its shareholders, provided that the party proposing to issue such press
release or make such public announcement will use reasonable efforts to consult
in good faith with the other parties before issuing any such press release or
making any such public announcement.
5.6 Hart-Scott-Rodino Filing; Investigations or Litigation. Foods and
Vail shall (i) take all action necessary, as soon as reasonably practicable, to
make the filings required of Foods and Vail under Hart-Scott-Rodino, (ii)
endeavor to obtain early termination of the waiting period thereunder, (iii)
promptly comply with any request for
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additional information received by Foods or Vail from the Federal Trade
Commission or the Antitrust Division of the Department of Justice pursuant to
Hart-Scott-Rodino, (iv) use reasonable efforts to defend all lawsuits, other
legal proceedings, or investigations challenging this Agreement or the
transactions contemplated hereby (unless in the reasonable opinion of Vail, they
are unlikely to prevail in such matter), and (v) attempt to lift or rescind any
injunction or restraining order or other order adversely affecting the ability
of the parties to consummate the transactions contemplated hereby (unless in the
reasonable opinion of Vail, they are unlikely to prevail in such matter).
Without limiting the foregoing, each party will cooperate with the other parties
in connection with any filings required under Hart-Scott-Rodino, including (i)
furnishing to other parties, upon request, such information as shall reasonably
be required in connection with the preparation of the parties' filings under
Hart-Scott-Rodino, and (ii) with respect to the transactions contemplated by the
Agreement, coordinating responses and establishing reasonable schedules and
deadlines in connection with resolving any investigation, other inquiry, or
legal proceedings commenced by the Federal Trade Commission, the Antitrust
Division of the Department of Justice or any state attorney general.
5.7 No Solicitation. Unless and until this Agreement is terminated
pursuant to Article XI, Foods and Ralston shall not, and shall not permit any of
their Corporate Officers or directors to, (a) furnish any information concerning
the businesses of Ralston to any person (other than Vail) interested in
acquiring Ralston or, except in the ordinary course of business, any of its
assets, or (b) solicit any offer or enter into discussions or negotiations with
respect to any merger or sale of all or substantially all of the assets of
Ralston, or other acquisition transaction with respect to Ralston, with any
persons other than Vail. Foods shall notify Vail promptly upon the receipt of
any such inquiry, contact or offer.
5.8 Audit of Ralston Financial Statements; Delivery of Additional
Financial Statements.
(a) Promptly following the execution of this Agreement, Foods, at its
expense, shall cause its independent public accountants to audit the Ralston
Financial Statements (including the interim period ending June 30, 1996) and
cause such audit to be completed prior to August 31, 1996, together with the
delivery of such accountants' audit report with respect thereto. Foods shall
permit Vail and its accountants to have
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access to the auditors conducting such audit as well as their work papers
related thereto. Foods understands and agrees that such audited statements,
together with other relevant information concerning Ralston and its business,
will be included in a registration statement for the sale of Vail Common Stock
in a registered public offering.
(b) Until the Closing, Foods shall deliver to Vail interim consolidated
financial statements of Ralston as soon as practicable, but in no event later
than forty-five (45) days after the end of each fiscal quarter, consisting of a
balance sheet dated as of the last day of such fiscal quarter and related
statements of income and cash flow for such current and comparative prior year
and fiscal quarter, prepared in accordance with GAAP and consistent with past
practices, and thereafter such statements shall be considered Ralston Financial
Statements hereunder.
(c) To the extent not included within the Ralston Financial Statements,
Foods and Vail shall deliver to each other within twenty (20) days after the
period to which they relate unaudited monthly financial statements, including a
consolidated balance sheet and consolidated statements of earnings and cash flow
for the period then ended.
(d) Until the Closing, Vail shall make available to Foods interim
consolidated financial statements of Vail, as soon a practicable but in no event
later than forty-five (45) days after the end of each fiscal quarter, consisting
of a balance sheet dated as of the last day of such fiscal quarter, and related
statements of income, shareholders' equity and cash flow of such fiscal quarter,
prepared in accordance with GAAP and consistent with past practices, and
thereafter such statements shall be considered Vail Financial Statements
hereunder. In the event any such fiscal quarter shall be the last quarter of
the fiscal year, such statements shall be audited by independent public
accountants.
5.9 Supplemental Disclosure. Until the Closing, Foods and Vail shall have
the continuing obligation to promptly supplement the information contained in
the Schedules attached hereto with respect to any matter hereafter discovered
which was in existence on the date hereof and, if known at the date of this
Agreement, would have been required to be set forth or described in the
Schedules.
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5.10 Real Property Transfer Laws. Foods and Ralston shall comply with any
real property transfer laws that may be triggered by this transaction and Foods
and Vail shall equally pay any and all taxes, if any, thereunder.
5.11 Cooperation. Prior to the Closing, the parties shall cooperate in
preparing, and proceed with due diligence and in good faith in filing, any and
all registration statements, filings, and other documents necessary to
consummate the transactions contemplated by this Agreement.
5.12 Foods Receivables and Payables. Immediately prior to the Closing,
(i) all amounts then owing by Foods or any affiliate of Foods to Ralston or any
of its subsidiaries shall be forgiven and extinguished and (ii) all amounts then
owing to Foods or any affiliate of Foods from Ralston or any of its subsidiaries
shall be contributed to Ralston's capital and extinguished.
5.13 Environmental Surveys. In order to assist in arranging the financing
necessary for the Closing, promptly following the execution of this Agreement
Vail, in consultation with Foods, shall retain, at Vail's expense, a reputable
environmental consulting firm reasonably acceptable to Foods to conduct a Phase
I Environmental Assessment and Compliance Audit of such of the properties of
Ralston and its subsidiaries as Vail shall determine and, if recommended by such
firm, Phase II investigation of such properties. Foods, in consultation with
Vail, at its expense may have similar surveys done with respect to such of the
properties of Vail and its subsidiaries as Foods shall determine.
5.14 Affiliate Guarantors. In the event that Foods at any time Transfers
(as defined in the Shareholders Agreement) any Vail Stock to an Affiliate of
Foods, prior to making such Transfer Foods shall cause such Affiliate to execute
and deliver to Vail a guaranty of such Affiliate, in form and in substance
satisfactory to Vail, whereby such Affiliate shall unconditionally guaranty all
of Foods' obligations to Vail under Article X hereunder.
5.15 Notice of Certain Transactions. From the date of execution of this
Agreement until such time as Foods no longer has any liability under Article X
hereunder, Foods shall give Vail 20 days' prior written notice before taking any
of the following actions: (i) the distribution to shareholders of Foods'
indebtedness or of any substantial or material portion
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of the assets of Foods and its subsidiaries, taken as a whole (other than cash
dividends paid in the ordinary course); (ii) any consolidation or merger of
Foods with or into another entity or any sale of all or any substantial portion
of the assets of Foods and its subsidiaries taken as a whole; or (iii) the
voluntary dissolution, liquidation or winding up of Foods.
5.16 Guarantee Fees. Subject to Vail complying with Section 10.2(d),
Foods hereby promptly agrees to pay over to Vail any and all fees, commissions
or other amounts that Foods or any of its Affiliates may receive on or after the
Closing Date with respect to any Indebtedness of Ralston or its subsidiaries for
which Foods or any of its Affiliates remains liable for (as guarantor or
otherwise) after the Closing.
ARTICLE VI
CONDITIONS TO CLOSING
6.1 Conditions of Vail. The obligation of Vail to close the transactions
contemplated herein is subject to the following conditions:
(a) performance of all covenants, obligations and agreements of Foods
in all material respects contained in this Agreement required to be
performed at or prior to the Closing;
(b) the representations and warranties of Foods contained in this
Agreement shall be true and correct in all material respects as of the date
hereof and remain true and correct in all material respects on the date of
the Closing as if such representations and warranties are being made as of
the date of the Closing;
(c) the execution and delivery by Foods of all documents required to
be delivered by this Agreement at or prior to the Closing, including
without limitation the Shareholder Agreement;
(d) there shall not have occurred since June 30, 1996 a Material
Adverse Change of Ralston, or any event that, individually or in the
aggregate, could reasonably
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be expected to result in a Material Adverse Change of Ralston;
(e) Vail shall have received the audited Ralston
Financial Statements contemplated by Section 5.8(a) and
there shall be no differences between such audited
statements and the unaudited Ralston Financial Statements
which are material;
(f) Vail shall have arranged sufficient financing
sources, on terms satisfactory to Vail, to repay all
Indebtedness of Ralston and its subsidiaries in full on the
Closing Date, and the Indebtedness relating to the
Conference Center shall be amended to the reasonable
satisfaction of Vail;
(g) the aggregate amount reflected in the Ralston
Budget to have been spent on capital expenditures from
July 1, 1996 through the end of the month immediately
preceding the Closing Date shall not be more than $3,000,000
in excess of the aggregate amount of capital expenditures
actually made by Resorts and its subsidiaries from July 1,
1996 through the end of the month immediately preceding the
Closing Date;
(h) Vail shall have received consents and estoppel
certificates with respect to the transactions contemplated
by this Agreement from the LLC and the estate of Harry L.
Baum;
(i) all requisite consents and approvals from the
United States Forest Service with respect to the
transactions contemplated by this Agreement shall have been
received by Ralston;
(j) there shall exist no material defaults by Ralston
or any of its subsidiaries on any of the contracts or
agreements relating to the Ventures and there shall have
been no change in the percentage ownership of the Ventures
of Ralston from that which exists as of the date of this
Agreement; and
(k) Vail shall have received a certificate of an
officer of Foods setting forth Foods' estimate in good faith
of the amount determined pursuant to clause (A) in the
definition of Closing Contribution Adjustment and such
amount shall not exceed $18,000,000.
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Vail may waive any condition to the Closing; provided, however,
that such waiver shall not act as a waiver of any of Vail's
available rights or remedies against Foods pursuant to Article X
hereof.
6.2 Conditions of Foods. The obligation of Foods to close the
transactions contemplated herein is subject to the following conditions:
(a) performance of all covenants, obligations and agreements of Vail
contained in this Agreement required to be performed at or prior to the
Closing;
(b) the representations and warranties of Vail contained in this
Agreement shall be true and correct in all material respects as of the date
hereof and remain true and correct in all material respects on the date of
the Closing (other than the representations and warranties set forth in
Section 4.10) as if such representations and warranties are being made as
of the date of the Closing;
(c) the execution and delivery by Vail and Apollo Ski Partners, L.P.
of all documents required to be delivered by this Agreement at or prior to
the Closing, including without limitation the Shareholder Agreement; and
(d) there shall not have occurred since April 30, 1996 a Material
Adverse Change of Vail, or any event that, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse
Change of Vail.
Foods may waive any condition to the Closing; provided, however, that such
waiver shall not act as a waiver of any of Foods' available rights or remedies
against Vail pursuant to Article X hereof.
6.3 Hart-Scott-Rodino. No party is obligated to close (a) until the
applicable waiting period (as may be extended) under Hart-Scott-Rodino shall
have expired or been terminated by the appropriate governmental agency, or (b)
if any challenge or objection has been made to the transactions contemplated
herein by such governmental agency unless any such challenge or objection made
has been withdrawn or resolved to the satisfaction of Vail in its sole
discretion.
6.4 No Litigation. The obligation of Foods and Vail to close the
transactions contemplated herein is subject to the
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condition that, upon Closing, there shall exist no bona fide
lawsuit or other legal action (or any administrative proceeding
or investigation) by any governmental authority that challenges
or seeks to enjoin or modify the transactions contemplated
herein, or any other lawsuit, action, proceeding or investigation
which, in Vail's reasonable opinion, could materially interfere
with the consummation of the transactions contemplated by this
Agreement.
6.5 Material Change in Market Circumstances. There shall not have occurred
any material adverse change in the financial markets in the United States or any
other calamity or crisis, the effect of which has resulted in a material adverse
effect on the market in the United States for equity securities in general.
ARTICLE VII
THE CLOSING
7.1 Place of Closing. The Closing will be held at such place as shall be
mutually agreed upon by the parties.
7.2 Date of Closing. The Closing shall occur on the Closing Date;
provided, however, if the conditions contained herein have not been met or
waived by December 31, 1996, this Agreement shall terminate.
7.3 Effective Time of Closing. The Closing shall be deemed effective at
11:59 p.m., Denver time, on the date of Closing.
7.4 Delivery of Closing Documents. All matters at the Closing shall be
considered to take place simultaneously, and no delivery of any document shall
be deemed complete until all documents are delivered and all transactions
contemplated herein are completed.
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ARTICLE VIII
CLOSING TRANSACTIONS
8.1 Transfer of Ralston Stock. At the Closing, Foods shall deliver to
Vail stock certificate(s) representing that whole number of the issued and
outstanding shares of Ralston Stock, duly and validly endorsed in blank by Foods
for transfer, or accompanied by duly and validly executed stock powers, with all
necessary stock transfer or other documentary stamps attached and any other
documents that are necessary to transfer legal valid title.
8.2 Delivery of Vail Stock. As consideration for the purchase of the
Ralston Stock, Vail will deliver to Foods, or its nominee, 3,777,203 shares of
Vail Stock.
8.3 Receipt. At the Closing, after receipt of the Vail Stock, Foods shall
deliver to Vail an appropriate receipt for the Vail Stock.
8.4 Opinion of Counsel of Foods. At the Closing, Foods shall deliver to
Vail an Opinion of Counsel from counsel for Foods, dated as of the Closing, to
the effect that:
(a) Foods is a corporation duly organized, validly existing and in
good standing under the laws of the State of Missouri; and Ralston is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Colorado;
(b) Ralston and each of its subsidiaries have the corporate power and
authority to own their properties and assets and carry on their business,
and are duly qualified and in good standing as a foreign corporation in
each jurisdiction set forth in Schedule 3.8 hereto;
(c) Foods (through a wholly owned subsidiary) is the record and
beneficial owner of all of the issued and outstanding Ralston Stock, and
the Ralston Stock certificate(s) or stock powers that have been duly
executed and delivered by Foods transfer all rights to such stock to Vail,
or its nominee, free and clear of any and all liens, encumbrances or rights
of any other party;
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(d) Foods has taken all action required by its
Articles of Incorporation and its by-laws, and Ralston has
taken all action required by its Articles of Incorporation
and by-laws, to authorize the execution and delivery of this
Agreement and such other agreements, instruments and
documents required to be executed in connection herewith;
(e) Foods and Ralston have the corporate power and
authority to execute and deliver this Agreement and, when
executed and delivered, this Agreement, and such other
agreements, instruments and documents required to be
executed in connection herewith, constitute legal, valid and
binding obligations of Foods and Ralston, enforceable in
accordance with their terms, except that enforcement may be
limited by bankruptcy, insolvency, moratorium or other
similar laws affecting the enforcement of creditors' rights
generally and general principles of equity;
(f) The execution and delivery of this Agreement, and
such other agreements, instruments and documents required to
be executed in connection herewith, and the consummation of
the transactions contemplated herein and therein, do not
conflict with any provision of the Articles of Incorporation
or by-laws of Foods or conflict with any provision of the
Certificates of Incorporation or by-laws of Foods or Ralston
or any of Ralston's subsidiaries;
(g) The authorized and outstanding capital stock of
Ralston consists solely of 100 shares of Ralston Stock, with
all 100 shares owned of record and beneficially by Foods;
all outstanding shares of Ralston Stock are duly authorized,
validly issued, fully paid and non-assessable, and there are
no other shares of capital stock or other securities of
Ralston outstanding;
(h) Neither the execution or delivery of this
Agreement, and such other agreements, instruments and
documents required to be executed in connection herewith,
nor the consummation of the transactions contemplated herein
and therein, to the knowledge of counsel: (i) violates any
statute, law, rule or regulation, or any order, award,
judgment or decree of any court or governmental authority
affecting Ralston or any of its subsidiaries or Foods;
(ii) causes (with or without notice, the passage of time or
both) the maturity of any debt, liability or obligations of
Ralston or any of its subsidiaries or Foods to be
accelerated, or increases or will increase any such
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liability or obligation; or (iii) requires any filing with, the
notification of, or the obtaining of any authorization, consent or approval
of, any federal or state governmental or regulatory authority, other than
filings under Hart-Scott-Rodino and the approval of the U.S. Forest
Service, and licenses and permits as may be necessary for Ralston or any of
its subsidiaries to carry on its business subsequent to the Closing;
(i) Except as set forth in Schedule 3.19 of this Agreement, to the best
knowledge of counsel, there does not exist any action, proceeding or
investigation pending or threatened in writing against Foods or Ralston or
any of its subsidiaries attempting to enjoin this Agreement or the
transactions contemplated by this Agreement, and such other agreements,
instruments and documents required to be executed in connection herewith;
and
(j) Ralston is not (i) an "investment company" as defined in, or
subject to regulation under, the Investment Company Act of 1940, or (ii) a
"holding company" as defined in, or subject to regulation under, the Public
Utility Company Act of 1935.
8.5 Opinion of Counsel of Vail. At the Closing, Vail shall deliver to
Foods an Opinion of Counsel from counsel for Vail (which opinion may be made by
Vail's in-house counsel), with such counsel relying on opinions of other counsel
and such certificates of Corporate Officers of Vail as he or she deems
appropriate, dated as of the Closing, to the effect that:
(a) Vail is a corporation validly existing and in good standing under
the laws of the State of Delaware;
(b) Vail has the corporate power and authority to own its properties
and carry on its businesses as presently conducted;
(c) Vail has taken all action required by its Certificate of
Incorporation and by-laws to authorize the execution and delivery of this
Agreement, and such other agreements, instruments and documents required to
be executed in accordance herewith;
(d) Vail has the corporate power and authority to execute and deliver
this Agreement and, when executed and
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delivered, this Agreement, and such other agreements,
instruments and documents required to be executed in
connection herewith, constitute legal, valid and binding
obligations of Vail, enforceable in accordance with their
terms, except that enforcement may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and general
principles of equity;
(e) The execution and delivery of this Agreement, and
such other agreements, instruments and documents required to
be executed in connection herewith, and the consummation of
the transactions contemplated herein and therein, do not
conflict with any provision of the Certificate of
Incorporation or by-laws of Vail;
(f) Neither the execution or delivery of this
Agreement, and such other agreements, instruments and
documents required to be executed in connection herewith,
nor the consummation of the transactions contemplated herein
and therein, to the knowledge of counsel: (i) violates any
statute, law, rule or regulation, or any order, award,
judgment or decree of any court or governmental authority
affecting Vail; (ii) violates or conflicts with, or
constitutes a default under any provision of, any contract,
agreement or trust to which Vail is a party, or by which
Vail's assets are bound; (iii) causes (with or without
notice, the passage of time or both) the maturity of any
debt, liability or obligation of Vail to be accelerated, or
increases or will increase any such liability or obligation;
or (iv) requires any filing with, the notification of, or
the obtaining of any authorization, consent or approval of
any federal governmental or regulatory authority, other than
filings under Hart-Scott-Rodino;
(g) The authorized capital stock of Vail consists
solely of 25,000,000 shares of preferred stock, 20,000,000
shares of Class A Common Stock and 40,000,000 shares of
Common Stock; the Vail Stock issued to Foods pursuant to
this Agreement has been duly authorized and is validly
issued, fully paid and non-assessable; and
(h) To counsel's knowledge, there does not exist any
action, proceeding or investigation pending or threatened
against Vail attempting to enjoin this Agreement or the
transactions contemplated by this Agreement, and such
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other agreements, instruments and documents required to be executed in
connection herewith.
8.6 Good Standing Certificates. At the Closing, Foods shall deliver to
Vail a Certificate of Good Standing for each of Foods and Ralston from the
Secretary of State of their respective state of incorporation, dated not more
than fifteen (15) days prior to the Closing, with bring-down certificates as of
the date of the Closing if available from the applicable Secretary of State; and
Vail shall deliver to Foods Certificates of Good Standing for Vail from the
Secretary of State for the State of Delaware, dated not more than fifteen (15)
days prior to the Closing, with bring-down certificates as of the date of the
Closing.
8.7 Corporate Resolutions of Foods. At the Closing, Foods shall deliver
to Vail (x) a copy of the resolutions adopted by the Board of Directors of Foods
(or its Executive Committee), and a copy of the resolutions adopted by the Board
of Directors of Foods, authorizing the execution and delivery of this Agreement
and the consummation of the transactions contemplated herein, duly certified to
as of the Closing by the appropriate corporate secretary or assistant secretary
and (y) the original corporate minute books and stock transfer records of
Ralston.
8.8 Corporate Resolutions of Vail. At the Closing, Vail shall deliver to
Foods a copy of the resolutions adopted by the Board of Directors of Vail (or
its Executive Committee), and a copy of the resolutions adopted by the Board of
Directors of Vail, authorizing the execution and delivery of this Agreement and
the consummation of the transactions contemplated herein, duly certified to as
of the Closing by the appropriate corporate secretary or assistant secretary.
8.9 Certificate of Foods. At the Closing, Foods shall deliver to Vail
certificates signed by a corporate officer of Foods, on behalf of Foods, dated
as of the Closing, certifying (i) as to the truth and accuracy of the
representations and warranties made by Foods in this Agreement, and reaffirming
and remaking such representations and warranties of Foods as of the Closing and
(ii) that Foods has performed and complied in all material respects with all
covenants and agreements required by this Agreement to be performed or complied
with by it on or prior to the Closing Date.
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8.10 Certificate of Vail. At the Closing, Vail shall deliver to Foods
certificates, signed by a senior officer of Vail, on behalf of Vail, dated as of
the Closing, certifying (i) as to the truth and accuracy of the representations
and warranties made by Vail in this Agreement, and reaffirming and remaking such
representations and warranties of Vail as of the Closing and (ii) that Vail has
performed and complied in all material respects with all covenants and
agreements required by this Agreement to be performed or complied with by it on
or prior to the Closing Date.
8.11 Shareholder Agreement. At the Closing, Foods, Vail and Apollo Ski
Partners, L.P. shall execute and deliver the Shareholder Agreement.
8.12 Resignation of Ralston Corporate Officers. At the Closing, Foods
shall deliver to Vail the executed resignation, dated as of the date of the
Closing and effective immediately prior to the Closing, for all of the members
of the board of directors of Ralston and each of its subsidiaries and, to the
extent requested by Vail, of the officers of Ralston and each of its
subsidiaries.
8.13 Consents. At the Closing, Foods and Ralston shall deliver to Vail
any consents from third parties required for the execution, delivery and
performance of this Agreement, and such other agreements, instruments and
documents required to be executed in connection herewith, and the consummation
of the transactions contemplated herein and therein.
8.14 Ancillary Documents. At the Closing, Foods shall deliver to Vail all
assignments, sublicenses, bills of sale or other instruments, in form acceptable
to Vail, as may be necessary or reasonably requested by Vail in order to
effectively sell, convey, transfer and assign to Ralston good and marketable
title to all assets used in Ralston's business or operations.
ARTICLE IX
ADDITIONAL COVENANTS
9.1 Commissions and Fees. Each party hereto shall pay any and all
finder's fees, brokerage commissions or like
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costs or charges to be paid by reason of the transactions contemplated herein
that may have been incurred by such party.
9.2 Costs and Expenses. Foods shall pay its own and Ralston's costs and
expenses, including fees of attorneys, accountants and financial advisors,
necessary in the preparation of this Agreement, and such other agreements,
instruments and documents required to be executed in connection herewith, and
the consummation of the transactions contemplated herein and therein. Vail shall
pay its own costs and expenses, including fees of attorneys, accountants and
financial advisors, necessary in the preparation of this Agreement, and such
other agreements, instruments and documents required to be executed in
connection herewith, and the consummation of the transactions contemplated
herein and therein. Notwithstanding the foregoing, Foods and Vail shall each
pay one-half of the fees of an economist jointly selected by them for
Hart-Scott-Rodino purposes.
9.3 Bank Accounts.
(a) Until the Closing, Foods shall continue to employ cash management
practices consistent with those employed immediately prior to the date of this
Agreement, including:
(i) continuing to collect funds generated from the business or
operations of Ralston from bank accounts and bank lock boxes of Foods or
Ralston and through Foods' standard depository transfer system; and
(ii) continuing to fund the bank accounts of Foods or Ralston in
connection with cash disbursements related to the business or operations of
Ralston.
(b) All collection and concentration bank accounts used in Ralston's
business (and all cash and checks therein) shall remain the property of Foods
after Closing. All disbursement accounts used in Resort's business shall remain
the property of Foods at Closing. All uncleared checks, drafts or other
withdrawal instruments written on such disbursements accounts prior to closing
("Uncleared Ralston Checks") shall be the responsibility of Foods after Closing.
Foods will assist Ralston in establishing its own bank accounts so that Ralston
will be able to write checks, drafts or other withdrawal instruments for its own
account immediately after Closing.
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9.4 Business Relationships. Within five (5) Business Days after the
Closing, Vail or Ralston shall notify all banking institutions used by Ralston
that Ralston has been acquired by Vail. In addition, Vail or Ralston and Foods
shall notify, in writing or by publication, the customers and suppliers of
Ralston that Ralston has been acquired by Vail, and that the payment of any
account receivable shall be paid directly to Ralston.
9.5 Insurance Proceeds.
(a) In the event Foods receives any amount of insurance proceeds (other
than self-insurance and insurance related to Employee Benefit Plans, lost
profits or business interruptions) in connection with any insurance policy
providing coverage for the properties and assets of Ralston for claims arising
after the date hereof, Foods shall promptly notify Vail of the receipt of such
proceeds, and with respect to amounts received prior to the Closing, shall
retain and deliver the aggregate amount of such insurance proceeds, net of any
amount of such proceeds used to replace or repair any properties or assets or
claims paid by Foods prior to the Closing, to Vail at the Closing, and shall
promptly deliver to Vail any such additional proceeds received after the
Closing.
(b) In the event Foods, subsequent to the Closing, receives any amount of
insurance proceeds (other than self-insurance and insurance related to Employee
Benefit Plans, lost profits or business interruption) in connection with any
insurance policy providing coverage for the properties and assets of Ralston
(including any proceeds received under any general liability, workers'
compensation or excess coverage policy), then Foods shall promptly deliver all
of such proceeds to Vail, without any set-off, reduction or hold back
whatsoever.
9.6 Further Action. Subsequent to the Closing, Foods, Vail and Ralston
shall each take such further action as may be reasonably requested by the other
in order to carry out the terms of this Agreement, and such other agreements,
instruments and documents required to be executed in connection herewith, and
consummate the transactions contemplated herein and therein. The parties shall,
on request, cooperate with one another by furnishing any additional information,
executing and delivering any additional documents and instruments, including
contract assignments, bills of sale and third party consents, and doing any and
all such other things as may be reasonably required by the parties or their
counsel.
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9.7 Records. Subsequent to the Closing, Vail and Foods shall provide, or
cause to be provided, to each other and each other's representatives, reasonable
access (for the purpose of examining and copying during normal business hours)
to the books and records of Ralston and Foods (insofar as they relate to
Ralston), including, but not limited to, accounting and Tax records and Tax
Returns, sales and purchase documents, notes, memoranda, test records and any
other electronic or written data ("Records") pertaining to periods or
occurrences prior to the Closing. Unless otherwise consented to in writing by
the other, the parties shall not, for a period of seven (7) years following the
Closing, destroy, alter or otherwise dispose of any of the books and records of
Ralston or Foods (insofar as they relate to Ralston) pertaining or relating to
periods prior to the Closing and, notwithstanding any other provision of this
Section 9.7, no party to this Agreement shall destroy, alter or otherwise
dispose of any tax or accounting records of Ralston or Foods (insofar as they
relate to Ralston) without the written consent of all other parties to this
Agreement.
9.8 Employee Benefit Plan Matters.
(a) Vail's Obligations. Effective on the Closing Date, Vail, Ralston or
one of their subsidiaries shall become the employer of Ralston Employees
excluding those Ralston Employees whose employment has terminated prior to the
Closing Date and excluding those Ralston Employees on leave due to, or in a
waiting period prior to, a finding of total or long-term disability pursuant to
any Ralston Employee Benefit Plan that provides disability benefits (for
purposes hereof, Ralston Employees, other than those excluded in this Section
9.8, shall be referred to as "Active Ralston Employee(s)").
(b) Retention of Retirement Plans. As between the parties hereto, Ralcorp
shall retain the assets and sponsorship of the Ralcorp Holdings, Inc. Savings
Investment Plan, the Ralston Resorts, Inc. Savings Investment Plan (together the
"Savings Plans"), and the Ralcorp Holdings, Inc. Retirement Plan (the
"Retirement Plan") as applicable to employees or former employees of Ralston and
its subsidiaries, and shall retain the obligations for providing any benefits
accrued by such employees or former employees under such plans. Ralcorp shall
take such actions as may be necessary to cause the Savings Plans and the
Retirement Plan to provide that benefits accrued under such plans on or prior to
the Closing Date by the Active Ralston Employees shall be fully vested as of the
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Closing Date. Effective on the Closing Date, Ralston and its
subsidiaries shall no longer participate in the Savings Plans or
the Retirement Plan.
(c) Defined Contribution Plans. The parties agree that pursuant to the
terms of the Savings Plans, whichever is applicable, Ralston will distribute to
the Active Ralston Employees or retain in the Savings Plans vested benefits
accrued by the Active Ralston Employees in the Savings Plans. If requested by
Vail, Ralcorp shall distribute cash and participant loans from the Savings Plans
to participants who are Active Ralston Employees in "direct rollover
distributions" (as described in Section 401(a)(31) of the Code).
(d) Defined Benefit Plan. For purposes of determining the amount of
benefits payable under the Retirement Plan, (i) the compensation of each Active
Ralston Employee shall only include compensation considered compensation
pursuant to the Retirement Plan and paid or payable to such Active Ralston
Employees by Ralston or Foods or their affiliates for services prior to and
including the Closing Date and shall not include compensation paid or payable to
Active Ralston Employees by Vail for services after the Closing Date; and (ii)
the period of service shall be determined pursuant to the Retirement Plan and
shall only include the time prior to and including the Closing Date during which
such Active Ralston Employee provided services to Ralston or Foods or their
affiliates and shall not include any period of time after the Closing Date
during which services were provided by such Active Ralston Employee to Vail.
Whether Active Ralston Employees shall be fully vested in benefits they have
accrued as of the Closing shall be determined pursuant to the Retirement Plan
provisions regarding vesting.
(e) Severance. With respect to Active Ralston Employees who are
terminated by Vail or Ralston on or after the Closing Date, Vail shall be
responsible for severance benefits payable pursuant to severance plans, policies
and practices applicable to Active Ralston Employees at the time of their
termination; provided, that Vail shall not be responsible for, and Foods shall
indemnify and hold harmless Vail from, any severance claims or obligations due
to any Active Ralston Employee under any contractual or other agreement other
than the severance benefits payable under Ralston's general severance benefits
program set forth in Schedule 3.29(g)(2). Vail further agrees to provide any
required notice under the WARN Act for any termination of Active Ralston
Employees by Vail on or after the Closing Date.
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(f) Vacation. Vail agrees, after the Closing Date, to credit each Active
Ralston Employee with vacation benefits which accrued but have not yet been
taken, provided, however, that requested or scheduled vacations are subject to
Vail's business needs; provided further, however, that Vail shall be required to
credit vacation carried forward from previous periods only to the extent
reflected on the Ralston balance sheet as of the Closing Date.
(g) Employee Related Obligations. (1) Except as may be provided in this
Section (g), Ralston shall retain all liabilities for all obligations to the
employees or former employees of Ralston and its subsidiaries derived from
Employee Benefit Plans offered to such employees or former employees by Ralston
or Foods or its affiliates which arise (medical and dental expenses arise when
the employee is provided with medical and dental care) at any time out of their
employment by Ralston on or immediately before the Closing Date.
(2) Except as otherwise specifically provided herein, Vail is not
obligated to provide any particular benefits to the Active Ralston Employees
after closing, and may change any benefit program in the future, including plans
and programs applicable to the Active Ralston Employees. Further, no agreement
between the parties hereto nor any action by Vail or Foods or its affiliates
shall be deemed to create any third-party beneficiary rights in any employees of
Vail or Foods or any affiliate of either. Prior to the Closing, Vail will
provide Foods with evidence, reasonably satisfactory to Foods, that Vail has in
place, effective as of the Closing, a health benefit program for Active Ralston
Employees that provides substantially comparable benefits to the health benefit
program provided by Foods or its affiliates, and which does not exclude
preexisting conditions. After the Closing, Vail shall be responsible for such
coverage.
(h) On and after the Closing Date, Vail shall be responsible for
employee-related liabilities and obligations, with respect to the Active Ralston
Employees, under any employee benefit plan and any other plans, practice and
programs of Vail which may be offered to Active Ralston Employees.
9.9 Confidentiality Agreement. The Confidentiality Agreement shall remain
in full force and effect until the Closing and (x) if the Closing occurs, only
the Confidentiality and Exclusivity Agreement dated May 16, 1996 between Ralcorp
Holdings, Inc. and Apollo Advisors, L.P. shall remain in full force
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and effect other than paragraphs 7, 8, or 9 of such agreement,
and (y) if the Closing does not occur and this Agreement is
terminated pursuant to Article XI, the Confidentiality Agreement
shall continue in accordance with its terms.
9.10 Tax Election. Vail shall not make a Section 338(h)(10) election
under Section 338 of the Code with respect to the acquisition of the Ralston
Stock or the operations of Ralston.
9.11 Resale of Ralston Stock. Foods shall not offer, sell or distribute
the shares of Vail Stock received in this transaction except in accordance with
the terms and conditions of the Shareholder Agreement.
9.12 Non-Competition.
(a) For a period beginning on the date hereof and ending five (5) years
hereafter, Foods agrees that it will not, and it will cause any entity that
Foods through one or more intermediaries, directly or indirectly controls or is
controlled by ("Foods Affiliates"), not to, within North America, directly or
indirectly, individually or as a member of any business organization, engage in
the ownership or operation of any ski resort business or facility or have any
interest in any entity engaged in the ownership or operation of any ski resort
business or facility; provided, that nothing set forth in this paragraph shall
prevent Foods or a Foods Affiliate from at any time owning shares issued by a
publicly traded corporation, including without limitation one that engages in
some or all of the activities described in this paragraph (in which activities
Foods or such Foods Affiliate will not participate); provided, further, that at
no time will Foods' or a Foods Affiliate's ownership in any such corporation
exceed five percent (5%) of the voting stock (other than the capital stock of
Vail if such ownership is in accordance with the terms of the Shareholder
Agreement) as may from time to time be issued by and outstanding from each such
publicly traded corporation.
(b) Foods agrees that any breach of the covenants contained in this
Section 9.12 would cause irreparable harm to Vail and Ralston and, therefore,
notwithstanding any right of Vail and Ralston to recover monetary damages with
respect to any such breach as set forth in this Section 9.12 or at law, Vail and
Ralston will be entitled to equitable relief to enjoin any threatened or
continuing breach hereof. If the scope of any restriction contained in this
Section 9.12 is too broad to
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permit enforcement to its full extent, then such restriction shall be enforced
to the maximum extent permitted by law. Nothing herein stated shall be construed
as prohibiting any party from pursuing any other remedies available to that
party for a breach hereunder, including recovery of damages.
ARTICLE X
INDEMNIFICATION
10.1 Indemnification of Vail. Foods shall indemnify and hereby hold
harmless Vail and, after the Closing, Ralston and their nominees, affiliates,
officers, directors, employees and agents against any Loss, in full as such Loss
is incurred, suffered as a result of: (a) any breach of any representation or
warranty made by Foods in this Agreement or in any other document, instrument or
agreement entered into in connection herewith; (b) any breach of any covenant
made by Foods, Ralston or Ralcorp in this Agreement or in any other document,
instrument or agreement entered into in connection herewith; and (c) any breach
of the Confidentiality Agreement made by Foods in favor of Vail; provided, that
such indemnification obligation shall only arise with respect to Losses
suffered or incurred as a result of any breach of any representation or warranty
to the extent such Losses (which, individually, must be at least $25,000) in the
aggregate exceed $1,000,000.
10.2 Indemnification of Foods. Vail and, after the Closing, Ralston,
jointly and severally, shall indemnify and hold Foods, and its nominees,
affiliates, officers, directors, employees and agents, harmless against any
Loss, in full as such Loss is incurred, suffered as a result of: (a) any breach
of any representation or warranty made by Vail in this Agreement; (b) any breach
of any covenant made by Vail or, after the Closing, Ralston in this Agreement;
(c) any breach of the Confidentiality Agreement made by Apollo Advisors L.P. in
favor of Foods; and (d) Ralston or Vail failing to pay when due any and all
amounts due arising under Indebtedness of Ralston or its subsidiaries existing
at the Closing Date and for which Foods or any of its Affiliates remains liable
for (as guarantor or otherwise) after the Closing; provided, that such
indemnification obligation shall only arise with respect to Losses suffered or
incurred as a result of any breach of any representation or warranty to the
extent such Losses (which,
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individually, must be at least $25,000) in the aggregate exceed $1,000,000.
10.3 Indemnification Procedure. Upon obtaining knowledge of a Loss which
shall entitle an injured party to indemnification hereunder, the injured party
shall deliver a Notice of Claim to the indemnifying party. The Notice of Claim
shall state in reasonable detail the nature and estimated amount of any such
Loss giving rise to the right of indemnification hereunder. The indemnifying
party shall have thirty (30) Business Days after receipt of the Notice of Claim
to indemnify the injured party, whether or not it disputes its liability or the
amount thereof, and to set forth the basis for any objection. If the
indemnifying party fails to respond to the injured party within such thirty (30)
Business Days, the indemnifying party shall be deemed to have acknowledged its
responsibility for such Loss, and in such event, or if the indemnifying party
does not dispute its liability, then the indemnifying party shall pay and
discharge any such Loss which is not contested within sixty (60) days after
receipt of the Notice of Claim.
10.4 Third Party Claims. If any party believes it may suffer a Loss that
should entitle such party to indemnification under this Agreement because of a
lawsuit, claim or other action by a third party, such injured party shall
deliver a Notice of Claim to the party required to indemnify. Within thirty (30)
days after receiving a Notice of Claim, the indemnifying party may: (a)
acknowledge its liability and elect to assume the defense of the third party
claim at its sole cost and expense; or (b) dispute its liability in the Notice
of Claim. Any contest of a third party claim in which the indemnifying party
assumes such defense shall be conducted by attorneys employed by the
indemnifying party; provided that the injured party shall have the right to
participate with its own attorneys and at its own cost and expense. Such
indemnifying party may agree to any settlement it deems in its best interest,
but shall not settle any action where the settlement includes an injunction or
other order affecting the injured party without the prior approval of the
injured party, which shall not be unreasonably withheld. If the indemnifying
party does not assume the defense of the third party claim as provided for
herein, the injured party shall have the right to defend such claim and
effectuate any settlement thereof it deems appropriate, and within fifteen (15)
Business Days of any final resolution, the indemnifying party shall pay the
injured party any Loss the injured party suffered. If the indemnifying
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party is defending any third party action in good faith, its obligation to pay
the indemnified party with respect to the defended matter shall be suspended
until the matter has been finally adjudicated or settled.
10.5 Tax Indemnification.
(a) Notwithstanding any other provisions of this Agreement to the
contrary, Foods shall be liable for and shall indemnify Vail and its affiliates
and hold them harmless for, from and against (i) all liability for Taxes of
Ralston and any of its subsidiaries (except as provided in Section 10.5(d) and
the immediately following paragraph) for all taxable periods ending on or before
the Closing Date and the portion of any Straddle Period ending on and including
the Closing Date (the "Pre-Closing Tax Periods"), including, without limitation,
any liability for Taxes imposed upon Ralston pursuant to Treasury Regulation "
1.1502-6 (and any comparable provision under applicable state or local law) as a
result of being a member of any Affiliated Group or any combined or unitary
group, and (ii) any liability for Taxes attributable to a breach by Foods of its
obligations under this Agreement.
(b) Vail shall indemnify Foods and its affiliates and hold them harmless
for, from and against all liability for Taxes of Ralston for any taxable period
ending after the Closing Date (except to the extent such taxable period began
before the Closing Date, in which case Vail's indemnity will, other than for
Taxes described in Section 10.5(a)(ii), cover only that portion of any such
Taxes that are not for the Pre-Closing Tax Period).
(c) In the case of any taxable period that includes (but does not end on)
the Closing Date (a "Straddle Period"), the Taxes of Ralston for the Pre-Closing
Tax Period shall be computed as if such taxable period ended on and included the
Closing Date.
(d) Foods shall not be liable for and shall not indemnify Vail and its
affiliates for, from and against all liability for Taxes, other than Income
Taxes, for the Pre-Closing Period (i) payment of which on a timely basis would
be made with an original Tax Return filed by Ralston after the Closing Date and
(ii) computation thereof is made in a manner consistent with the prior and
customary accounting practice of Ralston.
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10.6 Limitation of Indemnification.
(a) The aggregate amount of all claims subject to indemnification under
Sections 10.1(a), (b) and (c) with respect to indemnification of Vail shall be
$185,000,000 and Sections 10.2(a), (b) and (c) with respect to indemnification
of Foods shall be $185,000,000 except (x) in the case of any Loss caused by the
indemnifying party's violation of law, bad faith, fraud or intentional
misconduct, for which liability shall not be subject to such limit and (y) in
the case of clause (d) of Section 10.2, for which there shall be no limit.
(b) The sole remedy of the parties hereto for any Loss against them or
their directors, officers, employees, agents, representatives, affiliates,
shareholders or subsidiaries related to or arising from in whatsoever manner
this Agreement and the other documents executed in contemplation of this
Agreement is the indemnification and other remedies specifically provided herein
(and therein with respect to such other documents). Therefore, no directors,
officers, employees, agents, representatives, affiliates, shareholders or
subsidiaries shall incur individual liability for matters arising hereunder
except to the extent that an Affiliate of Foods becomes a guarantor pursuant to
Section 5.14.
(c) An indemnifying party shall not be liable under Section 10.1 or 10.2,
as the case may be, for a loss resulting from any event relating to the other
party's breach, falsity, inaccuracy, incompleteness, misrepresentation or
nonfulfillment of a representation.
10.7 Procedures Relating to Indemnification of Tax Claims.
(a) If any taxing authority provides written notice of any claim, demand
or circumstance which, if successful, might result in any indemnity payment
pursuant to Section 10.5, the party seeking indemnification (the "Tax
Indemnified Party") shall promptly notify the other party (the "Tax Indemnifying
Party") in writing of such claim (the "Tax Claim"). If notice of a Tax Claim
("Tax Notice") is not given to the Tax Indemnifying Party within a reasonably
sufficient period of time to allow such Tax Indemnifying Party effectively to
contest such Tax Claim, such Tax Indemnifying Party shall not be liable to the
Tax Indemnified Party or any of its affiliates to the extent that such Tax
Indemnifying Party's position is actually prejudiced as a result thereof.
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(b) With respect to any Tax Claim for any taxable period ending on or
prior to the Closing Date which might result in an indemnity payment to Vail
pursuant to Section 10.5, Foods, within 30 days of receiving written notice of
such Tax Claim, may in its sole discretion elect to control all proceedings
taken in connection with such Tax Claim and, without limiting the foregoing, may
in its sole discretion and at its sole expense pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with any taxing
authority with respect thereto, and may, in its sole discretion, either pay the
Tax claimed and sue for a refund where applicable law permits such refund suits
or contest such Tax Claim in any permissible manner and in any forum permitted
by law. In the event that Foods fails to provide Vail with written notice of
Foods' election to contest such Tax Claim within such 30 day period, Foods shall
forfeit any right to control the contest of such Tax Claim. In no case shall
Vail or Ralston settle or otherwise compromise any Tax Claim referred to in the
immediately preceding sentence without Foods' prior written consent, which
consent shall not be unreasonably withheld. Vail, Ralston and each of their
affiliates shall cooperate with Foods in contesting any Tax Claim that Foods
elects to contest, which cooperation shall include, without limitation, the
reasonable retention and (upon Foods' request) the provision to Foods of records
and information which are reasonably relevant to such Tax Claim, for which Foods
shall reimburse Vail and Ralston for their out-of-pocket expenses incurred in
connection therewith.
(c) The contest of any Tax Claim that relates to (i) taxable periods
ending after the Closing Date and (ii) any Tax Claim that Foods does not elect
to control pursuant to Section 10.7(b), shall be controlled by Vail, and Foods
agrees and agrees to cause its affiliates to cooperate with Vail and its
affiliates in pursuing such contest.
(d) Notwithstanding the provisions of Section 10.7(b) above, with respect
to any Tax Claim that Foods elects to control, Foods may not settle, compromise
or otherwise dispose of the Tax Claim without first notifying Vail of Foods'
proposal for settling, compromising or disposing of the Tax Claim; provided,
however, that this Section 10.7(d) shall apply only if such settlement,
compromise or other disposition could adversely affect the tax liability of Vail
or Ralston. After Foods has provided Vail with such written notice, Foods and
Vail shall cooperate as to how the Tax Claim will be handled, answered,
defended, compromised or settled, and Foods shall not
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settle, compromise or otherwise dispose of the Tax Claim until Foods and Vail
have mutually agreed to the manner of such settlement, compromise or
disposition.
10.8 Survival of Representations and Warranties. The representations and
warranties by Foods in Article III (with the exception of those representations
and warranties by Foods in Section 3.28 of this Agreement), and by Vail in
Article IV (with the exception of those representations and warranties by Vail
in Section 4.25 of this Agreement), and in any other document, certificate,
instrument or agreement executed in connection hereunder unless explicitly
provided otherwise in such document, certificate, instrument or agreement, shall
survive for a period of two (2) years following Closing and thereafter to the
extent a claim is made prior to such expiration. The representations and
warranties by Foods in Section 3.28 of this Agreement and by Vail in Section
4.25 of this Agreement shall survive as to any Tax covered by such
representations and warranties for so long as any statute of limitations for
such Tax remains open, in whole or in part, including, without limitation, by
reason of waiver of such statute of limitations. No party shall be entitled to
indemnification for breach of any representation and warranty set forth in
Articles III and IV of this Agreement and in any other document, certificate,
instrument or agreement executed in connection hereunder unless explicitly
provided otherwise in such document, certificate, instrument or agreement unless
a Notice of Claim for such breach has been given to the breaching party or
parties prior to the termination of the period of survival of such
representation and warranty as set forth herein.
10.9 Survival of Indemnities. The obligations of each party to indemnify
another party for a Loss arising under this Agreement shall survive the sale or
other transfer by a party of any asset or liability transferred, assumed or
retained pursuant to this Agreement.
10.10 Transfer Taxes. Notwithstanding any other provisions of this
Agreement to the contrary, Vail and Foods shall equally pay all sales, use,
stock transfer, stamp, duties, recording, real property transfer, gains and
similar taxes, if any, required to be paid in connection with the transactions
contemplated by this Agreement, it being agreed that none of such payments shall
be borne directly or indirectly by Ralston or Vail.
<PAGE> 100
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10.11 Return Filings, Refunds and Credits.
(a) Except as noted in the immediately following
sentence, Ralcorp shall prepare or cause to be prepared and file
or cause to be filed on a timely basis (in each case, at its own
cost and expense and in a manner consistent with past practice)
all Tax Returns with respect to Ralston and with respect to an
Affiliated Group for taxable periods ending on or prior to the
Closing Date. Ralcorp agrees that Ralston shall sign and file
all Tax Returns prepared solely on behalf of Ralston and its
subsidiaries. For purposes of this Section 10.11(a), Affiliated
Group shall mean only such group of which Ralcorp is the common
parent. Ralcorp shall provide Vail with copies of all Returns
that Ralcorp prepares or causes to be prepared and filed and with
originals of all Returns that Ralston will sign and file.
Ralcorp shall pay or cause to be paid all Taxes shown on all such
Tax Returns, whether filed by Ralcorp or by Ralston. Ralcorp
further agrees that Vail shall have a reasonable opportunity to
review and comment upon any Tax Return prior to Ralcorp's filing
of such Tax Return that could affect the Tax liability of Vail or
Ralston.
(b) Vail shall prepare or cause to be prepared and
shall file or cause to be filed on a timely basis all other Tax
Returns with respect to Ralston. In connection therewith, Foods
shall be responsible for and shall pay any Taxes for which Foods
has agreed to indemnify Vail pursuant to Section 10.5. Vail
shall provide Foods with copies of any such Tax Returns covering
the Taxes described in Section 10.5 at least ten days prior to
the due date thereof (giving effect to any extensions thereto),
accompanied by a statement calculating Foods' indemnification
obligation pursuant to Section 10.5. Foods shall pay to Vail the
amount of Foods' indemnification obligation at least two business
days prior to the due date thereof (giving effect to any
extensions thereto) unless the parties are unable to agree on the
amount of Foods' indemnification obligation hereunder, in which
case Foods shall promptly pay the portion of the indemnification
that is not in dispute and the disputed portion shall be resolved
by independent accountants acceptable to both parties whose fees
and expenses shall be paid by Vail and Foods in proportion to
each party's respective liability for Taxes as determined by such
accountants, and Foods shall pay the amount determined by such
accountants within two days of such determination, together with
interest thereon from the original due date thereof to the date
of payment at a rate equal to 10% per annum.
<PAGE> 101
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(c) Foods and Vail shall reasonably cooperate, and shall cause their
respective affiliates, officers, employees, agents, auditors and representatives
reasonably to cooperate, in preparing and filing all Tax Returns (including
amendments thereto and claims for refund), including maintaining and making
available to each other all records necessary in connection with Taxes and in
resolving all disputes and audits with respect to all taxable periods relating
to Taxes.
(d) Any refunds or credits of Taxes of Ralston for any taxable period
ending on or before the Closing Date, except as described in Section 10.12,
shall be for the account of Foods and shall be paid by Vail to Foods within ten
days after Vail receives such refund. Any refunds or credits of Taxes of
Ralston for any taxable period beginning after the Closing Date shall be for the
account of Vail and shall be paid by Foods to Vail within ten days after Foods
receives such refund. Any refunds or credits of Taxes of Ralston for any
Straddle Period shall be allocated between Foods and Vail on the basis of an
"interim closing of the books."
10.12 Refunds from Carrybacks. If Ralcorp becomes entitled to a refund or
credit of Taxes for any period for which Foods is liable under Section 10.5(a)
to indemnify Vail and such Taxes are attributable solely to the carryback of
losses, credits of similar items from a taxable year or period that begins after
the Closing Date and attributable to Ralston, Foods shall cause Ralcorp to pay
to Vail within ten days after Ralcorp receives such refund or credit the amount
of such refund or credit together with any interest received thereon.
10.13 Termination of Tax Sharing Agreements. Foods hereby agrees and
covenants that any obligation of Ralston pursuant to any agreements or
arrangements relating to the allocation or sharing of Taxes (the "Tax Sharing
Agreements") shall be terminated on or before the Closing Date, and no payments
pursuant to any such Tax Sharing Agreement shall be made after such termination.
10.14 Payments. Unless otherwise required by law, the parties shall treat
any payments made pursuant to this Article X as an adjustment to the amount of
the purchase price paid to Foods pursuant to Section 2.2 for federal, state and
local income tax purposes.
<PAGE> 102
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ARTICLE XI
TERMINATION
11.1 Mutual Consent. This Agreement may be terminated at any time before
the Closing by the mutual consent of Foods and Vail.
11.2 Obligation To Close. This Agreement may be terminated by any party
upon giving written notice to the other parties, if a condition to the notifying
party's obligation to close pursuant to Article VI of this Agreement becomes
incapable of satisfaction other than as a result of the notifying party's breach
of its obligations hereunder.
11.3 Final Closing Date. This Agreement will terminate if the Closing has
not taken place on or before Decem- ber 31, 1996.
11.4 Obligations After Termination. Upon any termination of this
Agreement, the parties shall be released from all obligations or liabilities
arising hereunder except for: (i) liabilities arising from or out of
pre-termination breaches hereunder; (ii) liabilities arising out of the failure
or refusal of a party to consummate the Closing if all conditions precedent have
been met or waived; and (iii) obligations arising out of Sections 9.1, 9.2 and
9.9 of this Agreement.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 Entire Agreement. This Agreement, including the attached Schedules
and Exhibits, constitutes the entire agreement between the parties hereto
relative to the subject matter hereof, and supersedes all prior written or oral
understandings, agreements, conditions, representations or warranties.
12.2 Effect of Supplemental Information. Pursuant to Section 5.9 hereof,
the parties have the obligation to supplement their respective Schedules with
additional information which is discovered between the date hereof and the
Closing which should have been disclosed on the Schedules hereto.
<PAGE> 103
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Neither the supplementation of the Schedules pursuant to such obligation nor any
disclosure after the date hereof of the untruth of any representation and
warranty made in this Agreement shall operate as a cure of any breach involving
(a) the failure to disclose the information or (b) any untrue representation or
warranty made herein. Notwithstanding the foregoing, if such supplementation
(i) is consented to in writing by both parties, (ii) with respect to a
supplementation by Vail, discloses any fact or set of facts which, either singly
or in the aggregate with other facts disclosed in the Schedules, does not, or is
not reasonably likely to, result in a Material Adverse Change of Vail or (iii)
with respect to a supplementation by Foods, does not, or is not reasonably
likely to, result in additional liability for Vail in an amount in excess of
$100,000 in the aggregate with all other supplemental information, such
supplementation shall be deemed to cure any such untrue representation or
warranty, and such representation or warranty, as supplemented, shall be deemed
to have been amended accordingly.
12.3 Choice of Law. This Agreement shall be construed under and in
accordance with the laws of the State of Colorado without giving effect to the
conflict of laws provisions thereof.
12.4 Venue. Any action or legal proceedings to enforce this Agreement or
any of its terms, or for indemnification and the recovery of any Loss by a
party, shall be brought and prosecuted exclusively in such court or courts
located in the State of Colorado as provided by law, and the parties to this
Agreement consent to the jurisdiction of said court or courts and to service of
process by registered mail, return receipt requested, or in any other manner
provided by Colorado law.
12.5 Notices. Any notice or other communication required or permitted
hereunder shall be deemed sufficiently given if sent by registered or certified
mail, return receipt requested, and addressed as follows (the address for any
party may be changed by giving notice thereof to the other parties):
<PAGE> 104
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If to Foods:
Ralston Foods, Inc.
800 Market Street
Suite 2900
St. Louis, Missouri 63101
Attn.: Robert Lockwood, Esq.
Facsimile No.: (314) 877-7748
If to Ralston (prior to Closing):
Ralston Foods, Inc.
800 Market Street
Suite 2900
St. Louis, Missouri 63101
Attn.: Robert Lockwood, Esq.
Facsimile No.: (314) 877-7748
If to Vail or Ralston (after the Closing):
Vail Resorts, Inc. (Delivery other than by
mail)
137 Benchmark Road
Avon, Colorado 81620
or
Vail Resorts, Inc. (Mail Delivery)
P.O. Box 7
Vail, Colorado 81658
Attn.: James S. Mandel, Esq.
Facsimile No.: (970) 845-2521
With a copy to:
James J. Clark, Esq.
Cahill Gordon & Reindel
80 Pine Street
New York, NY 10005
Facsimile No.: (212) 269-5420
12.6 Effective Date of Notice. Any notice or communication shall be
deemed to have been given on the next
<PAGE> 105
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Business Day if sent by Federal Express or a similar overnight delivery service,
or on the third Business Day if sent by ordinary U.S. mail service.
12.7 Amendments. No changes, modifications, amendments or additions shall
be valid unless made in writing and signed by or on behalf of each party.
12.8 Gender and Number. Where appropriate in this Agreement, the
masculine pronoun shall include the feminine or neuter, and the singular shall
include the plural.
12.9 Assignments. No party hereto may assign this Agreement or any rights
or obligations hereunder except to the extent that written authorization for
such assignment is given by the other parties prior to such assignment.
12.10 Headings and Captions. All headings and captions used in the Table
of Contents and all section, Schedule and Exhibit headings and captions used in
this Agreement are for convenience only, and shall not be construed to either
limit or broaden the language of this Agreement or any particular section.
12.11 Schedules and Exhibits. The inclusion of any information in any
Schedule or Exhibit attached hereto shall not be deemed to be an admission or
acknowledgment that such information is material to the transaction, or
represents matters that are outside the ordinary course of business. The
Schedules and Exhibits attached hereto are incorporated herein by reference and
are made a part hereof for all purposes.
12.12 Severability. The invalidity or unenforceability of any provision
hereof in any jurisdiction shall not affect the validity or enforceability of
the remainder hereof in that jurisdiction or the validity or enforceability of
this Agreement, including that provision, in any other jurisdiction. To the
extent permitted by applicable law, each party waives any provision of law that
renders any provision hereof prohibited or unenforceable in any respect. If any
provision of this Agreement is held to be unenforceable for any reason, it shall
be adjusted rather than voided, if possible, in order to achieve the intent of
the parties to the extent possible.
12.13 Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall
<PAGE> 106
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constitute a single agreement, and it shall not be necessary in making proof of
this Agreement to produce or account for more than one such counterpart.
12.14 Remedies. Any forbearance or failure or delay in exercising any
remedy hereunder shall not be deemed to be a waiver of any other remedy a party
may be entitled to under this Agreement.
12.15 Third-Party Beneficiaries. This Agreement is not intended to confer
upon any non-party any rights or remedies hereunder. Any representation or
warranty made by Foods in this Agreement is made to Vail alone, and solely for
the purposes of selling the Ralston Stock, and Foods has not made and makes no
representation or warranty to any person other than Vail. Any representation or
warranty made by Vail in this Agreement is made to Foods alone, and solely for
the purpose of purchasing the Ralston Stock, and Vail has not made and makes no
representation or warranty to any person other than Foods.
12.16 Binding Agreement. This Agreement shall be deemed effective and
legally binding upon the parties when it has been executed and delivered by all
parties hereto. This Agreement shall inure to the benefit of the parties hereto
and their respective successors and assignees.
<PAGE> 107
IN WITNESS WHEREOF, the parties have executed this
Agreement by an officer thereunto duly authorized, all as of the
day and year first above written.
RALSTON FOODS, INC.
By: /s/ J.R. Micheletto
-----------------------------------
Name: J.R. Micheletto
Title: Vice President and Chief
Financial Officer
RALSTON RESORTS, INC.
By: /s/ J.R. Micheletto
-----------------------------------
Name: J.R. Micheletto
Title: President
VAIL RESORTS, INC.
By: /s/ Andrew P. Daly
-----------------------------------
Name: Andrew P. Daly
Title: President
RALCORP HOLDINGS, INC. (as to
Sections 9.8, 10.11 and 10.12
only)
By: /s/ J.R. Micheletto
-----------------------------------
Name: J.R. Micheletto
Title: Chief Executive Officer and
Chief Financial Officer
<PAGE> 108
EXHIBIT A
SHAREHOLDER AGREEMENT
Among
VAIL RESORTS, INC.
RALSTON FOODS, INC.
AND
APOLLO SKI PARTNERS, L.P.
----------, 1996
<PAGE> 109
TABLE OF CONTENTS
Page
----
ARTICLE I - DEFINITIONS. . . . . . . . . . . . . . . . . . . 1
ARTICLE II - STANDSTILL AND VOTING PROVISIONS . . . . . . . 6
Section 2.1. Standstill Covenants . . . . . . . . . . . 6
Section 2.2. Acquisition of Vail Securities . . . . . . 8
Section 2.3. Voting of Vail Equity . . . . . . . . . . 9
Section 2.4. Restrictions on Certain Transactions
Prior to IPO . . . . . . . . . . . . . . . . . . 10
ARTICLE III - TRANSFER OF VAIL EQUITY . . . . . . . . . . . 10
Section 3.1. Restrictions on Transfer . . . . . . . . . 10
Section 3.2. Exceptions to Restrictions . . . . . . . . 10
Section 3.3. Improper Transfer . . . . . . . . . . . . 11
Section 3.4. Restrictive Legend . . . . . . . . . . . . 12
ARTICLE IV - RIGHT OF FIRST OFFER . . . . . . . . . . . . . 13
Section 4.1. Sales by Foods . . . . . . . . . . . . . . 13
ARTICLE V - REGISTRATION . . . . . . . . . . . . . . . . . . 14
Section 5.1. Demand Registration . . . . . . . . . . . 14
Section 5.2. Delay of Demand Registration . . . . . . . 16
Section 5.3. Piggyback Registration . . . . . . . . . . 17
Section 5.4. Delay of Piggyback Registration . . . . . 18
Section 5.5. Holdback Agreements . . . . . . . . . . . 18
Section 5.6. Right to Purchase in Lieu of
Registration . . . . . . . . . . . . . . . 19
ARTICLE VI - REGISTRATION EXPENSES . . . . . . . . . . . . . 19
Section 6.1. Registration Expenses . . . . . . . . . . 19
ARTICLE VII - REGISTRATION PROCEDURE . . . . . . . . . . . . 20
Section 7.1. Shareholder Information . . . . . . . . . 20
Section 7.2. Compliance . . . . . . . . . . . . . . . . 21
Section 7.3. Provision of Prospectuses . . . . . . . . 21
Section 7.4. Blue Sky Compliance . . . . . . . . . . . 22
Section 7.5. Listing of Vail Equity . . . . . . . . . . 22
Section 7.6. Stop Orders . . . . . . . . . . . . . . . 22
ARTICLE VIII - INDEMNIFICATION AND CONTRIBUTION . . . . . . 23
Section 8.1. Indemnification . . . . . . . . . . . . . 23
Section 8.2. Contribution . . . . . . . . . . . . . . . 27
ARTICLE IX - TAKE-ALONG RIGHTS . . . . . . . . . . . . . . . 28
Section 9.1. Take-Along Rights . . . . . . . . . . . . 28
-i-
<PAGE> 110
Page
----
ARTICLE X - INITIAL PUBLIC OFFERING . . . . . . . . . . . . 29
Section 10.1. IPO Commitment . . . . . . . . . . . . . . 29
Section 10.2. Co-Manager . . . . . . . . . . . . . . . . 29
Section 10.3. Foods Initiated IPO . . . . . . . . . . . 30
ARTICLE XI - ADDITIONAL COVENANTS . . . . . . . . . . . . . 30
Section 11.1. Maintain Listing or Quotation . . . . . . 30
Section 11.2. Board of Directors . . . . . . . . . . . . 31
Section 11.3. No Inconsistent Agreements . . . . . . . . 31
Section 11.4. Rules 144 and 144A . . . . . . . . . . . . 31
Section 11.5. Limitations on Holdings of Foods
Associates . . . . . . . . . . . . . . . . 31
ARTICLE XII - MISCELLANEOUS . . . . . . . . . . . . . . . . 31
Section 12.1. Entire Agreement . . . . . . . . . . . . . 31
Section 12.2. Headings and Captions . . . . . . . . . . 31
Section 12.3. Choice of Law . . . . . . . . . . . . . . 32
Section 12.4. Venue . . . . . . . . . . . . . . . . . . 32
Section 12.5. Notices . . . . . . . . . . . . . . . . . 32
Section 12.6. Amendments . . . . . . . . . . . . . . . . 33
Section 12.7. Extended Meanings . . . . . . . . . . . . 33
Section 12.8. Successors and Assigns . . . . . . . . . . 33
Section 12.9. Severability . . . . . . . . . . . . . . . 34
Section 12.10. Counterparts . . . . . . . . . . . . . . . 34
Section 12.11. Remedies Cumulative . . . . . . . . . . . 34
Section 12.12. Binding Agreement . . . . . . . . . . . . 34
Section 12.13. Recapitalizations, Exchanges, Etc.,
Affecting Vail Securities . . . . . . . . 34
Section 12.14. Other Agreements . . . . . . . . . . . . . 35
Section 12.15. Termination . . . . . . . . . . . . . . . 35
Section 12.16. Enforcement . . . . . . . . . . . . . . . 35
Section 12.17. Confidentiality . . . . . . . . . . . . . 36
Section 12.18. Fiduciary Accounts . . . . . . . . . . . . 36
-ii-
<PAGE> 111
SHAREHOLDER AGREEMENT
THIS SHAREHOLDER AGREEMENT, dated ___________, 1996 (the "Agreement"), is
among Vail Resorts, Inc., a Delaware corporation ("Vail"), Ralston Foods, Inc.,
a Nevada corporation ("Foods"), and Apollo Ski Partners, L.P., a Delaware
limited partnership ("Apollo") (Foods and Apollo and their respective legal
representatives, successors and assigns are referred to herein individually as a
"Shareholder" and collectively as the "Shareholders").
WHEREAS, pursuant to the Stock Purchase Agreement dated as of __________,
1996 (the "Purchase Agreement") by and among Vail, Foods and Ralston Resorts,
Inc., a Colorado corporation ("Ralston"), Vail acquired all of the outstanding
shares of capital stock of Ralston in exchange for [ ] shares of Common
Stock, par value $.01 per share, of Vail ("Vail Stock"); and
WHEREAS, Apollo owns [ ] shares of Vail Stock and [ ] shares of
Class A Common Stock, par value $.01 per share, of Vail ("Vail Class A Stock");
and
WHEREAS, the parties hereto desire to enter into this Agreement to provide
for certain rights and restrictions with respect to the shares of Vail Equity
(as hereinafter defined).
NOW, THEREFORE, in consideration of the mutual covenants and obligations
set forth herein, each of Vail and Foods agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, and unless the context requires a different
meaning, the following terms (whether used in the singular or plural) have the
meanings indicated herein. Any term used and not defined herein has the meaning
set forth in the Purchase Agreement.
"Affiliate" of a Person means any other Person that directly or indirectly
through one or more intermediaries Controls, is Controlled by or is under common
Control with such Person.
<PAGE> 112
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"Apollo" has the meaning set forth above in the recitals to this Agreement.
"Apollo Option Period" has the meaning set forth in Section 4.1(c) of this
Agreement.
"Associate" of a Person means any of such Person's directors, officers,
shareholders, representatives, trustees, employees, attorneys, advisors or
agents.
"Business Day" means any day other than a Saturday, Sunday or legal holiday
for commercial banks in New York City.
"Change of Control" means any "person" or "group" (as such terms are used
in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended),
other than Apollo or one or more Affiliates of Appollo, becomes the beneficial
owner of (i) more than 50% of the total outstanding Vail Securities or (ii) such
number of Vail Securities which would allow such person or group to elect a
majority of the Board of Directors of Vail.
"Closing" means the closing of the transactions contemplated by the
Purchase Agreement.
"Control" (including the terms "Controlling," "Controlled by" and "under
common Control with") means the possession of the power, directly or indirectly,
(a) to elect a majority of the board of directors (or equivalent governing body)
of the entity in question; or (b) to direct or cause the direction of the
management and policies of or with respect to the entity or assets in question,
whether through ownership of securities, by contract or otherwise.
"Demand Notice" has the meaning set forth in Section 5.1(a) of this
Agreement.
"Demand Registration" has the meaning set forth in Section 5.1(a) of this
Agreement.
"Discussion Period" has the meaning set forth in Section 10.3(b) of this
Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder.
<PAGE> 113
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"First Option" has the meaning set forth in Section 4.1(b) of this
Agreement.
"Foods" has the meaning set forth above in the recitals to this Agreement.
"Foods Initiated IPO" has the meaning set forth in Section 10.3(b) of this
Agreement.
"Foods Notice" has the meaning set forth in Section 10.3(b) of this
Agreement.
"GAAP" means accounting principles which are (a) consistent with the
principles promulgated or adopted by the Financial Accounting Standards Board
and its predecessors in effect from time to time and (b) applied on a basis
consistent with prior periods.
"Group" means any group of Persons within the meaning of Section 13(d)(3)
of the Exchange Act.
"IPO" means the consummation of an initial public offering of Vail Stock
pursuant to a registration statement filed with the Securities and Exchange
Commission.
"Loss" has the meaning set forth in Section 8.1(a)(i) of this Agreement.
"Marketable Number" has the meaning set forth in Section 5.1(e) of this
Agreement.
"Non-Qualified Transferee" has the meaning set forth in Section 9.1 of this
Agreement.
"Non-Requesting Shareholder" has the meaning set forth in Section 5.1(e) of
this Agreement.
"Person" means an individual, corporation, partnership, trust, incorporated
or unincorporated association, joint venture, joint stock company, limited
liability company, government (or an agency or political subdivision thereof) or
other entity of any kind.
"Piggyback Notice" has the meaning set forth in Section 5.3(a) of this
Agreement.
<PAGE> 114
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"Piggyback Registration" has the meaning set forth in Section 5.3(a) of
this Agreement.
"Piggyback Shareholder" has the meaning set forth in Section 5.3(a) of this
Agreement.
"Private Sale" has the meaning set forth in Section 2.2 of this Agreement.
"Purchase Agreement" has the meaning set forth above in the recitals to
this Agreement.
"Ralston" has the meaning set forth above in the recitals to this
Agreement.
"Registration Statement" means any registration statement or comparable
document under Section 5 of the Securities Act through which a public sale or
disposition of Vail Securities may be registered other than a registration
statement (a) relating to an Employee Benefit Plan or similar plan or a business
combination or (b) on any form that is not available for a secondary offering.
"Requesting Shareholder" has the meaning set forth in Section 5.1(d) of
this Agreement.
"SEC" means the Securities and Exchange Commission or other federal agency
at the time administering the Securities Act, the Exchange Act or any successor
acts thereto.
"Second Option" has the meaning set forth in Section 4.1(c) of this
Agreement.
"Section 4.1 Shares" has the meaning set forth in Section 4.1(a) of this
Agreement.
"Section 5.6 Shares" has the meaning set forth in Section 5.6 of this
Agreement.
"Section 9.1 Shares" has the meaning set forth in Section 9.1 of this
Agreement.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Shareholder" means Apollo or Foods and its permitted successors and
assigns.
<PAGE> 115
-5-
"Shareholder Indemnified Party" has the meaning set forth in Section 8.1(c)
of this Agreement.
"Transfer" with respect to all or any part of the Vail Equity means to
directly or indirectly (whether or not through an underwriter) sell, convey,
distribute, transfer (by merger or otherwise), assign, devise, exchange,
encumber, gift, pledge, hypothecate or otherwise dispose of such Vail Equity
(including without limitation the sale or disposition of an entity the primary
asset of which is Vail Equity).
"Transfer Notice" has the meaning set forth in Section 4.1(a) of this
Agreement.
"Trigger Date" has the meaning set forth in Section 10.3(a) of this
Agreement.
"Vail" has the meaning set forth above in the recitals to this Agreement.
"Vail Class A Stock" means the Class A Common Stock of Vail, par value $.01
per share.
"Vail Equity" means (i) shares of Vail Stock acquired by Foods at the
Closing and any other Vail Securities owned, beneficially or of record, by Foods
or any of its Affiliates at any time during the term of this Agreement and (ii)
shares of Vail Stock, Vail Class A Stock and any other Vail Securities owned,
beneficially or of record, by Apollo or any of its Affiliates at any time during
the term of this Agreement.
"Vail Indemnified Party" has the meaning set forth in Section 8.1(a) of
this Agreement.
"Vail Market Price" means the average of the closing sale prices of the
Vail Stock being valued on the New York Stock Exchange or, if the Vail Stock is
not listed or admitted to trading on the New York Stock Exchange, as reported in
the principal consolidated transaction reporting system of the principal
national securities exchange on which the Vail Stock is listed or admitted to
trading, for the twenty (20) trading days which end on the day immediately prior
to the date of the Demand Notice. If the Vail Stock is not listed or admitted
to trading on any national securities exchange, "Vail Market Price" means the
last quoted sale price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by the National
<PAGE> 116
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Association of Securities Dealers, Inc. Automated Quotation System or such other
system then in use, for the twenty (20) trading days which end on the day
immediately prior to such date or, if on any such trading day the Vail Stock is
not quoted by any such organization, the average of the closing bid and asked
prices as furnished by two professional market makers making a market in the
Vail Stock, one selected in good faith by the board of directors of Vail and the
other selected in good faith by Foods. If the Vail Stock is not publicly held
or so listed or publicly traded, "Vail Market Price" means the cash price at
which a willing seller would sell and a willing buyer would buy such securities
in an arm's-length negotiated transaction without undue time restraints, as
determined in good faith by an investment banking firm selected by agreement
between Vail and Foods.
"Vail Option Period" has the meaning set forth in Section 4.1(b) of this
Agreement.
"Vail Securities" means the Vail Stock, Vail Class A Stock and any other
voting securities of Vail or its Affiliates, including any securities
convertible into or exercisable or exchangeable for any voting securities of
Vail.
"Vail Stock" has the meaning set forth above in the recitals to this
Agreement.
ARTICLE II
STANDSTILL AND VOTING PROVISIONS
Section 2.1 Standstill Covenants. Unless otherwise permitted in this
Agreement, Foods agrees that during the term of this Agreement, it will not,
directly or indirectly:
(a) acquire, offer to acquire, or agree to acquire by purchase or
otherwise, any Vail Securities except as a result of a stock split, stock
dividend or similar recapitalization by Vail;
(b) except in the ordinary course of business, acquire, offer to acquire,
or agree to acquire by purchase or otherwise, any assets of Vail;
(c) initiate, solicit, propose, seek to effect or negotiate, alone or with
any other Person, (i) any form of business combination transaction involving
Vail or any
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Affiliate thereof, or (ii) any restructuring, recapitalization or similar
transaction with respect to Vail or any Affiliate thereof;
(d) initiate, solicit, propose, seek to effect, negotiate, or announce an
intent to make, alone or with any other Person, any tender offer, exchange
offer, merger, consolidation or share exchange for any Vail Securities, or
disclose an intent, purpose, plan or proposal with respect to Vail, any of its
Affiliates or any Vail Securities inconsistent with the provisions of this
Agreement;
(e) make, or in any way participate in, any "solicitation" of "proxies"
(as such terms are defined or used in Regulation 14A under the Exchange Act)
with respect to Vail or any of its Affiliates or become a "participant" in any
"election contest" (as such terms are defined or used in Rule 14a-11 under the
Exchange Act) involving Vail or any of its Affiliates;
(f) initiate, solicit or propose the approval of one or more shareholder
proposals with respect to Vail or any of its Affiliates or induce or attempt to
induce any other Person to initiate any such shareholder proposal;
(g) form, join or in any way participate in a Group with respect to the
Vail Securities;
(h) except as expressly provided herein, seek election to or seek to place
a representative on the board of directors of Vail or any of its Affiliates or
seek the removal of any member of the board of directors of Vail or any of its
Affiliates;
(i) except for participation on the board of directors of Vail, act in
concert with any other Person to seek to affect the management or board of
directors of Vail or any of its Affiliates or the business, operations or
affairs of Vail or any of its Affiliates;
(j) call or seek to have called any meeting of the shareholders of Vail or
any of its Affiliates;
(k) disclose to any third party or in any filing with any governmental
authority any intention, plan or arrangement inconsistent with any of the
foregoing or with
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the restrictions on transfer set forth in this Agreement; or
(l) enter into any discussions, negotiations, arrangements or
understandings with any third party with respect to any of the foregoing, or
advise, assist, encourage or influence any other Person to take any action with
respect to any of the foregoing.
Section 2.2 Acquisition of Vail Securities. Notwithstanding Section 2.1
hereof, Foods may purchase in one or more open market transactions or otherwise
(including the IPO) that number of shares of Vail Securities necessary for Foods
to continue to account for its investment in Vail under the equity accounting
method under GAAP; provided, that in no event shall any such purchase result in
the ownership by Foods and its Affiliates of Vail Securities exceeding 23.5% of
the total outstanding Vail Securities. In the event that Vail proposes to
register or otherwise offer any Vail Securities for sale for its own account
(including the IPO) under the Securities Act (other than a registration of
securities in connection with a merger, an acquisition, an exchange offer or an
employee benefit plan maintained by Vail or its Affiliates or on Form S-4 or S-8
or any successor or similar form or by means of a shelf registration pursuant to
Rule 415 under the Securities Act) or in a transaction exempt from registration
under the Securities Act (a "Private Sale"), Vail will give written notice to
Foods of its intention to do so and of Foods' rights under this Section 2.2, at
least twenty (20) calendar days prior to the anticipated filing date of a
Registration Statement relating to such registration (or if such transaction is
a Private Sale a comparable period of time). Foods will have the right, but not
the obligation, to elect to purchase shares in such offering (including the
IPO), at the same price Vail is to receive for the shares to be sold for its
account provided that if such offering is not the IPO Foods shall only have such
purchase right if Apollo is purchasing Vail Securities in such offering, in
which case the number of Vail Securities that Foods may purchase in such
offering shall be equal to the number of shares proposed to be purchased by
Apollo multiplied by a fraction, the numerator of which is the total number or
shares of Vail Equity owned by Foods at such time and the denominator of which
is the sum of the total number of shares of Vail Equity owned by Apollo and
Foods at such time. In the event that the size of such offering is increased
after Foods has received notice of such offering, Foods will have the right, but
not the obligation, to proportionately increase its purchase of shares in
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such offering. Foods may exercise its purchase rights under this Section 2.2 by
notifying Vail of its election to purchase shares (which election shall be
irrevocable) in such offering within ten days of receiving notice from Vail
(failure by Foods to give such notice within such ten-business-day period shall
be deemed an election by Foods not to purchase Vail Securities in such
offering). Any purchase by Foods of Vail Securities pursuant to this Section
2.2 may not result in Foods and its Affiliates' ownership exceeding 23.5% of the
total outstanding Vail Securities. Foods shall not be entitled to a Piggyback
Registration with respect to any offering if it has elected to purchase Vail
Securities in such offering.
Section 2.3 Voting of Vail Equity. Foods agrees that during the term of
this Agreement, with respect to the election of directors of Vail, each class of
Vail Equity owned by Foods and its Affiliates shall be voted (i) "for" the
nominees recommended by the Board of Directors of Vail, provided Vail and Apollo
are in compliance with the terms of Section 11.2 of this Agreement, (ii) in
accordance with the recommendation of the Board of Directors of Vail on each
proposal of a security holder pursuant to Rule 14a-8 under the Exchange Act, so
long as the subject matter of such proposal does not fall within the proviso
hereto, and (iii) with respect to all other matters requiring a vote of the Vail
Equity, "for" any proposal in the same proportion as the votes cast "for" such
proposal by the holders of the Vail Securities of the same class (excluding the
Vail Equity owned by Foods), and "against" any proposal in the same proportion
as the votes cast "against" such proposal by the holders of each such class of
Vail Securities (excluding the Vail Equity owned by Foods) and that with respect
to broker non-votes and abstentions, each class of Vail Equity owned by Foods
will be voted in the same proportion as votes deemed "for," "against" or
"abstain," giving effect to broker non-votes and abstentions as required under
the laws and rules then applicable; provided, however, that Foods shall retain
the right to vote its Vail Equity in any manner it sees fit with respect to any
proposals for (1) the merger, consolidation or other business combination of
Vail or any subsidiary of Vail with or into any other corporation, (2) the sale,
lease, exchange, transfer or other disposition of all or substantially all of
the assets of Vail and all of its subsidiaries taken together as a single
business, (3) the creation of any other class of stock with voting rights and
(4) changes to the Certificate of Incorporation or Bylaws of Vail that adversely
affect Foods' rights under this Agreement. The provisions of this Section 2.3
shall apply to both the casting of votes at
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meetings of shareholders and execution of actions by written consent.
Section 2.4 Restrictions on Certain Transactions Prior to IPO. Prior to
the IPO, Vail shall not, without the prior written approval of Foods, (1) enter
into transactions with Apollo or its Affiliates that are not on an arm's-length
basis (other than the continuation or extension of contracts or arrangements
between Vail and Apollo and its Affiliates that are in existence as of the date
of this Agreement and have heretofore been disclosed to Foods), (2) permit (a)
the merger of Vail with or into any other corporation (other than a subsidiary
of Vail), (b) the sale, lease, exchange, transfer or other disposition of all or
substantially all of the assets of Vail and all of its subsidiaries taken
together as a single business, (c) the creation of any other class of stock with
voting rights that materially adversely affects Foods' rights under this
Agreement or (d) changes to the Certificate of Incorporation or Bylaws of Vail
that adversely affect Foods' rights under this Agreement, or (3) enter into any
material business not currently conducted by Vail that is not related to the
operation of ski resorts, real estate or the vacation, leisure and entertainment
industries.
ARTICLE III
TRANSFER OF VAIL EQUITY
Section 3.1 Restrictions on Transfer. During the term of this Agreement,
Foods agrees that it will not, and it will cause each of its Affiliates who
acquire Vail Equity not to, Transfer any Vail Equity, except as permitted by or
in accordance with this Agreement.
Section 3.2 Exceptions to Restrictions. Subject to all applicable laws,
the restrictions on Transfer set forth in Section 3.1 hereof shall not apply to
any of the following:
(a) a Transfer of some or all of the Vail Equity pro rata to all of the
holders of common stock of Foods as a dividend or distribution, in redemption of
the Foods Stock or pursuant to a similar transaction;
(b) a Transfer of some or all of the Vail Equity to an Affiliate of Foods,
provided that such Affiliate (i) shall agree to be bound by and subject to the
provisions of this Agreement, (ii) Foods shall remain liable
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for the performance by such Affiliate of its obligations under this Agreement
and (iii) such Affiliate shall have executed and delivered to Vail the guaranty
required by Section 5.14 of the Purchase Agreement;
(c) a Transfer of some or all of the Vail Equity in accordance with
Section 5.1 or 5.3 of this Agreement;
(d) a Transfer of some or all of the Vail Equity in any tender offer,
self-tender, exchange offer, going private transaction or other transaction
involving a Transfer which is recommended to shareholders of Vail by at least a
majority of the Board of Directors of Vail;
(e) subject to Section 4.1, a Transfer of some or all of the Vail Equity
with the prior written consent of a majority of the Board of Directors of Vail;
(f) subject to Section 4.1, a Transfer of some or all of the Vail Equity
pursuant to Rule 144 of the Securities Act if an IPO has not been consummated by
December 31, 1998;
(g) subject to Section 4.1, a Transfer of some or all of the Vail Equity
if an IPO has not been consummated by December 31, 1998 and such transferee
agrees to be bound by the terms of this Agreement; and
(h) subject to Section 4.1, a Transfer of some or all of the Vail Equity
on or after the date which is 18 months after the date of this Agreement,
provided that (i) the transferee agrees to be bound by and subject to the
provisions of this Agreement, (ii) after giving effect to such Transfer, the
transferee will not own, directly or indirectly, more than 10% of the then
outstanding Vail Securities and (iii) such transferee agrees with Vail and
Apollo not to thereafter purchase or otherwise acquire, directly or indirectly,
any additional Vail Securities if it would result in such transferee owning,
directly or indirectly, more than 10% of the then outstanding Vail Securities.
Section 3.3 Improper Transfer. Any attempt to Transfer any shares of Vail
Equity not in accordance with this Agreement will be null and void and Vail will
not give nor permit the transfer agent of Vail to give any effect to such
attempted Transfer in its stock records.
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Section 3.4 Restrictive Legend.
(a) A copy of this Agreement will be filed with the Secretary of Vail and
kept with the records of Vail. All certificates representing shares of Vail
Equity hereafter issued to or acquired by Foods or its successors or permitted
assigns, will bear the following legend (until such time as such shares are sold
pursuant to an effective registration statement or pursuant to Rule 144 under
the Securities Act) noted conspicuously on such certificates:
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
ONLY, AND MAY NOT BE OFFERED, SOLD, TRANSFERRED (BY MERGER OR OTHERWISE),
ASSIGNED, DEVISED, EXCHANGED, GIFTED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF UNLESS AND UNTIL REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), AND ANY APPLICABLE STATE SECURITIES LAWS OR UNLESS
SUCH TRANSFER IS EXEMPT FROM REGISTRATION, AND AN ACCEPTABLE OPINION OF
COUNSEL IS DELIVERED TO VAIL RESORTS, INC. WITH REGARD TO SUCH EXEMPTION,
OR IS OTHERWISE IN COMPLIANCE WITH THE ACT AND SUCH STATE SECURITIES LAWS.
THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO THE RESTRICTIONS ON
TRANSFER SET FORTH IN THE SHAREHOLDER AGREEMENT, DATED , 1996.
NO TRANSFER OF THESE SHARES WILL BE EFFECTIVE UNLESS AND UNTIL THE TERMS
AND CONDITIONS OF SUCH SHAREHOLDER AGREEMENT HAVE BEEN COMPLIED WITH IN
FULL AND NO PERSON MAY REQUEST VAIL RESORTS, INC. TO RECORD THE TRANSFER OF
ANY SHARES IF SUCH TRANSFER IS IN VIOLATION OF SUCH SHAREHOLDER AGREEMENT.
A COPY OF THE SHAREHOLDER AGREEMENT IS ON FILE AT THE EXECUTIVE OFFICES OF
VAIL RESORTS, INC. AND WILL BE FURNISHED WITHOUT CHARGE TO THE HOLDER OF
SUCH SHARES UPON WRITTEN REQUEST. THE SHARES EVIDENCED BY THIS CERTIFICATE
ARE SUBJECT TO RESTRICTIONS ON VOTING PROVIDED FOR IN THE SHAREHOLDER
AGREEMENT AND NO VOTE OF SUCH SHARES THAT CONTRAVENES THE SHAREHOLDER
AGREEMENT SHALL BE EFFECTIVE.
(b) Until such time as the Vail Equity has been registered pursuant to a
registration statement under the Securities Act or sold pursuant to Rule 144 of
the Securities Act, the certificates representing Vail Equity (including,
without limitation, all certificates issued upon Transfer or in exchange or
substitution therefor) will also bear any legend required under any other
applicable laws, including state securities or blue sky laws.
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(c) Vail may make a notation on its records or give stop-transfer
instructions to any transfer agents or registrars for the Vail Equity in order
to implement the restrictions set forth in this Article III.
(d) In the event Foods acquires any other or additional Vail Securities,
Foods will submit all certificates representing such Vail Securities to Vail so
that any appropriate legend or legends required by this Section 3.4 may be
placed thereon.
ARTICLE IV
RIGHT OF FIRST OFFER
Section 4.1 Sales by Foods.
(a) Prior to any Transfer pursuant to Section 3.2(e), (f), (g) and (h),
Foods must first give written notice of its intent to make such Transfer (a
"Transfer Notice") to Vail and Apollo setting forth the number of shares of Vail
Equity (the "Section 4.1 Shares") that Foods desires to Transfer and the cash
price that Foods proposes to be paid for such Section 4.1 Shares and the other
terms and conditions of such proposed Transfer.
(b) Vail shall have the right, but not the obligation, to purchase the
Section 4.1 Shares (the "First Option") on the same terms and conditions as set
forth in such notice, which option shall be exercised by delivering to Foods
irrevocable written notice of its commitment to purchase the Section 4.1 Shares
within ten business days after receipt of the Transfer Notice (the "Vail Option
Period"). Failure by Vail to give such notice within such ten-business-day
period shall be deemed an election by Vail not to purchase the Section 4.1
Shares.
(c) In the event that Vail decides not to purchase the Section 4.1 Shares
pursuant to Section 4.1(b), then Apollo will have the right, but not the
obligation, to purchase the Section 4.1 Shares (the "Second Option") on the same
terms and conditions as set forth in the Transfer Notice, which option shall be
exercised by delivering to Foods irrevocable written notice of its commitment
to purchase the Section 4.1 Shares within five business days after the
termination of the Vail Option Period (the "Apollo Option Period"). Failure by
Apollo to give such notice within such five-business-day period shall
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be deemed an election by Apollo not to purchase the Section 4.1 Shares.
(d) Delivery of written notice by Vail or Apollo accepting the First
Option or the Second Option, as the case may be, shall constitute a contract
between Vail or Apollo, on the one hand, and Foods, on the other hand, for the
purchase and sale of the Section 4.1 Shares on the terms and conditions set
forth in the Transfer Notice. The purchase of any shares pursuant to the
exercise of the First Option or the Second Option, as the case may be, shall be
completed not later than 30 days following delivery of the Transfer Notice with
respect to the Section 4.1 Shares, subject to receipt of any required material
third-party or governmental approvals, compliance with applicable laws and the
absence of any injunction or similar legal order preventing such transaction. In
the event that neither the First Option nor the Second Option is exercised,
Foods shall have the right for a period of 45 days after the termination of the
Apollo Option Period to Transfer the Section 4.1 Shares at a price not less than
90% of the price contained in, and on terms and conditions no less favorable to
Foods than those set forth in, the Transfer Notice; provided that the Transferee
agrees to be bound by the terms and conditions of this Agreement (unless the
Transfer is pursuant to Rule 144 under the Securities Act).
ARTICLE V
REGISTRATION
Section 5.1 Demand Registration.
(a) After the consummation of an IPO or at such time prior to the
consummation of an IPO as is permitted by Section 10.3 with respect to a given
Shareholder, upon a Shareholder's written request specifying the intended manner
of disposition (including the number of shares of Vail Equity to be sold) (a
"Demand Notice"), Vail will use its best efforts to prepare and file with the
SEC, as expeditiously as possible, a Registration Statement on an available form
for which Vail then qualifies (but not including by means of a shelf
registration pursuant to Rule 415 under the Securities Act), which legal counsel
for Vail deems appropriate and which is available for the sale of Vail Equity
to permit an underwritten public offering of some or all of the shares of Vail
Equity then held by such Shareholder and use its best efforts to cause such
registration statement to become effective (a "Demand Registration").
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(b) A Demand Registration will not be deemed to have occurred until it has
become effective under the Securities Act (unless a Shareholder delivers a
Demand Notice and subsequently withdraws the Demand Notice, in which case such
Demand Registration will be deemed to have occurred unless such Shareholder
agrees to pay all reasonable out-of-pocket expenses associated with such
registration actually incurred by Vail); provided, however, that if, after a
Demand Registration has become effective, the offering of Vail Equity pursuant
to such Demand Registration is prohibited by any stop order, injunction or other
order or requirement of the SEC or other governmental agency or a court, such
Demand Registration will be deemed not to have occurred (unless such prohibition
on the sale of the Vail Equity is based on actions or omissions of such
Shareholder, in which case such Demand Registration will be deemed to have
occurred unless such Shareholder agrees to pay all reasonable out-of-pocket
expenses associated with such registration actually incurred by Vail).
(c) Vail shall only be obligated to effect one Demand Registration per
Shareholder in any twelve month period under this Section 5.1; provided,
however, that Vail will not be required to register the Vail Equity pursuant to
a Demand Notice under this Section 5.1 if at such time (i) the shares of Vail
Equity which a Shareholder is requesting to be registered pursuant to this
Section 5.1 constitute less than 6.0% (or, if less, all of the shares of Vail
Equity owned by such Shareholder) of the outstanding Vail Securities so
requested to be registered or (ii) such Demand Notice is given within six (6)
months after the effective date of any other registration of any Vail Securities
under the Securities Act.
(d) The managing underwriter will be selected by the Shareholder
requesting registration pursuant to this Section 5.1 (the "Requesting
Shareholder"); provided, however, that such underwriter shall be subject to the
approval of Vail, which approval shall not be unreasonably withheld. In the
event there is one or more co-managers, the first such co-manager shall be
selected by Vail, provided that such co-manager shall be subject to the approval
of the Requesting Shareholder, which approval shall not be unreasonably withheld
or delayed, and all other co- managers will be selected by the Requesting
Shareholder.
(e) In connection with a Demand Registration, both the Shareholder not
requesting the Demand Registration (the "Non- Requesting Shareholder") and Vail
may elect to include
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additional shares of Vail Securities in such offering on the same terms and
conditions as the Vail Equity to be sold by the Requesting Shareholder;
provided, however, that if the managing underwriter(s) advises the Requesting
Shareholder, the Non- Requesting Shareholder and Vail that, in its judgment, the
number of shares proposed to be included in such offering exceeds the largest
number of Vail Securities which can be sold without having an adverse effect on
such offering, including the price at which such securities can be sold (the
"Marketable Number"), then the total number of shares to be included in such
offering shall be limited as follows: (i) first, all the shares of Vail Equity
that the Requesting Shareholder and the Non-Requesting Shareholder propose to
sell up to the Marketable Number, allocated pro rata between the Requesting
Shareholder and the Non-Requesting Shareholder on the basis of the relative
number of Vail Securities that the Requesting Shareholder and the Non-Requesting
Shareholder have proposed to be included in such registration, and (ii) second,
all the shares of Vail Securities that Vail proposes to sell, which does not
exceed the difference, if any, between the Marketable Number and that number of
shares which the Requesting Shareholder and the Non-Requesting Shareholder have
included pursuant to clauses (i) and (ii) above.
Section 5.2 Delay of Demand Registration. Notwithstanding anything to the
contrary in Article V hereof, in the event that Vail determines in its
reasonable judgment that it may be advisable to delay filing a Registration
Statement described in Section 5.1 hereof or to withdraw such Registration
Statement if such Registration Statement has already been filed, Vail may delay
filing such, or withdraw such previously filed, Registration Statement for a
period of not more than ninety (90) days from the date of receipt of the request
for the Demand Registration if Vail furnishes to the Requesting Shareholder a
certificate signed by an executive officer of Vail stating that Vail has
reasonably determined that (i) such a filing would adversely affect any proposed
financing or acquisition by Vail or (ii) such a filing would otherwise represent
an undue hardship for Vail; provided, however, that Vail will, at the request of
the Requesting Shareholder, file or refile, as the case may be, such
Registration Statement promptly after Vail, in its reasonable judgment,
determines that it is no longer advisable to delay filing or to continue the
withdrawal of such Registration Statement but in no event shall the filing or
re-filing of such Registration Statement be delayed more than the aforementioned
ninety (90) days.
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Section 5.3 Piggyback Registration.
(a) Right To Include Vail Equity.
(i) If Vail or any other Person (other than a Shareholder) at any time
proposes to register any Vail Securities under the Securities Act (other than a
registration of securities in connection with a merger, an acquisition, an
exchange offer or an employee benefit plan maintained by Vail or its Affiliates
or on Form S-4 or S-8 or any successor or similar form or by means of a shelf
registration pursuant to Rule 415 under the Securities Act to permit sales of
Vail Securities by employees, officers and directors of Vail), whether or not
for sale for its own account, in a manner which would permit registration of the
Vail Equity for sale to the public under the Securities Act, it will give
written notice to each Shareholder of its intention to do so and of such
Shareholder's rights under this Section 5.3(a)(i), at least twenty (20) calendar
days prior to the anticipated filing date of a Registration Statement relating
to such registration (a "Piggyback Notice"). Such Piggyback Notice will offer
each Shareholder the opportunity to include in such Registration Statement that
number of shares of Vail Equity as such Shareholder may request. Upon the
written request (the "Piggyback Registration") (which request will specify the
number of shares of Vail Equity intended to be disposed of by each Shareholder
pursuant to such Registration Statement) of each Shareholder (the "Piggyback
Shareholder") made within ten (10) calendar days after the receipt of the
Piggyback Notice, Vail will use its best efforts to effect the registration
under the Securities Act of all shares of Vail Equity which Vail has been so
requested to register; provided, however, that each Shareholder must sell its
Vail Equity requested to be included in such registration to the underwriter(s)
selected by Vail on the same terms and conditions as apply to other Persons,
including Vail, and if, at any time after receiving a reply from each
Shareholder to a Piggyback Notice and prior to the effective date of the
Registration Statement filed in connection with such registration, Vail decides
for any reason not to register any shares of Vail Securities, Vail will notify
each Shareholder and thereupon be relieved of its obligation to register any
Vail Equity in connection with such registration.
(ii) No registration, whether or not effected under this Section 5.3(a),
will relieve Vail of its obligations to effect Demand Registrations under
Section 5.1 hereof.
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(b) Priority in Piggyback Registrations. If the managing underwriter
advises Vail in writing that, in its opinion, the Marketable Number is less than
that intended to be included in a Registration Statement, Vail will include in
such Registration Statement (i) first, all of the Vail Securities Vail proposes
to sell for its own account, and (ii) second, the Vail Securities requested to
be included by the Shareholders and other Persons pursuant to Section 5.3(a)
hereof shall be allocated pro rata among the Shareholders on the basis of the
relative number of Vail Securities each Shareholder and such other Persons has
requested to be included in such registration.
Section 5.4 Delay of Piggyback Registration. Notwithstanding anything to
the contrary in this Article V, in the event that Vail determines in its
reasonable judgment that it may be advisable to delay filing a Registration
Statement described in Section 5.3 hereof or to withdraw such Registration
Statement if such Registration Statement has already been filed, Vail may delay
filing such, or withdraw such previously filed, Registration Statement in
accordance with the provisions of Section 5.2 hereof.
Section 5.5 Holdback Agreements.
(a) Whenever Vail effects an underwritten public offering of Vail Equity
pursuant to a registration statement (including the IPO), each Shareholder
agrees not to effect any public sale or distribution, including any sale
pursuant to Rule 144 under the Securities Act, of any Vail Securities (other
than as part of such registration) during the 15 days prior to, and during the
180-day period (or such shorter period as may be requested by the lead
underwriter for such offering) beginning on, the effective date of such
registration statement.
(b) In connection with underwritten public offering of Vail Equity
pursuant to a registration statement under this Agreement, Vail agrees not to
effect any public sale or distribution of any Vail Securities (other than as
part of such registration or in connection with any employee stock option or
other benefit plan or any private issuance of Vail Equity where the recipient
also agrees to be bound by the hold back arrangements applicable to Vail under
this Section 5.5) during the 15 days prior to, and during the 90-day period (or
such shorter period as may be requested by the lead underwriter for such
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offering) beginning on the effective date of, such registration statement.
Section 5.6 Right to Purchase in Lieu of Registration.
(a) Any time Vail receives a request for a Demand Registration or a
Piggyback Registration from Foods, Vail shall have the option to purchase all
but not less than all of the Vail Equity proposed to be disposed of in such
request (the "Section 5.6 Shares") at the Vail Market Price by delivering to
Foods, a notice of Vail's election to purchase the Section 5.6 Shares within
seven (7) days of receipt by Vail of the request for the Demand Registration or
Piggyback Registration, as the case may be, pursuant to Section 5.1 or Section
5.3(a), as the case may be.
(b) In the event that Vail decides not to purchase the Section 5.6 Shares
pursuant to Section 5.6(a), then Apollo will have the right, but not the
obligation, to purchase the Section 5.6 Shares at the Vail Market Price by
delivering to Foods a notice of Apollo's election to purchase the Section 5.6
Shares within seven (7) days of Vail deciding not to purchase the Section 5.6
Shares.
ARTICLE VI
REGISTRATION EXPENSES
Section 6.1 Registration Expenses.
(a) Subject to Section 5.1(b) of this Agreement, all expenses incident to
Vail's performance of or compliance with Articles V and VII of this Agreement to
effect Demand Registrations and Piggyback Registrations will be borne by Vail,
including, without limitation:
(i) all federal registration and filing fees;
(ii) subject to Section 7.4, fees and expenses of compliance with
securities or blue sky laws; provided, however, that Vail will in no event be
obligated to pay the fees and disbursements of counsel for the underwriters or
the Shareholders in connection with blue sky qualifications of the Vail Equity
under the laws of such jurisdictions as the managing underwriter(s) may
designate;
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(iii) printing, messenger, telephone and delivery expenses;
(iv) fees and disbursements of legal counsel for Vail;
(v) fees and disbursements of all independent certified public accountants
of Vail;
(vi) NASD fees and disbursements of the underwriters; provided, however,
that in all cases a Shareholder will pay all costs of discounts, commissions,
spreads or fees of underwriters, selling brokers, dealer managers or similar
securities industry professionals relating to the distribution of the Vail
Equity being sold by such Shareholder;
(vii) fees and expenses of other Persons retained by Vail; and
(viii) listing or quotation fees and expenses required to be made pursuant
to Section 7.5 hereof in connection with the Registration Statement.
(b) Each of Vail and the Shareholders will pay its own respective internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the fees and
expenses of any Person, including special experts, retained by Vail or the
Shareholders, respectively.
ARTICLE VII
REGISTRATION PROCEDURE
Section 7.1 Shareholder Information. Each Shareholder will provide Vail
with such information about such Shareholder and the intended manner of
distribution of Vail Equity and otherwise cooperate with Vail and the
underwriter(s) as may be necessary in the reasonable opinion of Vail to satisfy
any obligation of Vail under this Agreement to register the Vail Equity under
federal or state securities laws and otherwise take actions related thereto. In
the event of the failure of a Shareholder to comply with the requirements of the
preceding sentence Vail may delay filing such, and withdraw such previously
filed, Registration Statement. Vail will file or refile, as the case may be,
such Registration Statement
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promptly following compliance with such requirements by a Shareholder; provided,
however, that a Shareholder will be responsible for any reasonable out-of-pocket
costs which arise out of such non-compliance. A Shareholder will immediately
notify Vail upon discovery that any information provided by such Shareholder
which is included in the prospectus that is included in a Registration
Statement, as then in effect, is untrue in any material respect, or omits to
state any material fact required to be stated therein or to make the information
stated therein not misleading in the light of the circumstances under which it
is presented.
Section 7.2 Compliance. Each Shareholder and Vail will comply with all
rules and regulations of the SEC and applicable state securities or blue sky
laws governing the manner of sale of securities in connection with the Transfer
of any of the Vail Equity pursuant to any Registration Statement.
Section 7.3 Provision of Prospectuses.
(a) Vail will furnish to each Shareholder such number of copies of a
summary prospectus or other prospectus, including a prospectus subject to
completion in conformity with the requirements of the Securities Act, and such
other documents as such Shareholder may reasonably request in writing, in order
to facilitate the public sale or other disposition of the Vail Equity of each
Shareholder included in a Registration Statement.
(b) At any time when a sale or other disposition of Vail Equity pursuant
to a Registration Statement is subject to a prospectus delivery requirement,
Vail will notify each Shareholder of the occurrence of any event that causes the
prospectus included in such Registration Statement, as then in effect, to
include an untrue statement of a material fact or to omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing and Vail will use
its best efforts, as expeditiously as possible, to either amend the prospectus
or otherwise take any actions so that use of the previous prospectus may be
legally resumed. Upon receipt of such a notice, each Shareholder will
immediately discontinue all sales or other dispositions of Vail Equity pursuant
to the Registration Statement. Each Shareholder may resume such sales or
dispositions only upon receipt of an amended prospectus or after such
Shareholder is advised by Vail that the use of the previous prospectus may be
legally resumed.
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Section 7.4 Blue Sky Compliance. Vail will use its best efforts to (a)
register or qualify the Vail Equity included in a Registration Statement under
the securities or blue sky laws of such jurisdictions as each Shareholder
reasonably requests and (b) do any and all other acts that may be reasonably
necessary or advisable to enable each Shareholder to consummate the public sale
or disposition of such securities in such jurisdictions; provided, however, that
Vail is not required to consent to, or take any action that would subject it to,
general service of process or taxation in any jurisdiction where it is not then
so subject, nor qualify to do business in any jurisdiction where it is not then
so qualified.
Section 7.5 Listing of Vail Equity. Vail will use its best efforts to
cause the Vail Equity when issued to be listed on all securities exchanges on
which any securities issued by Vail are then listed, or quoted on all automated
quotation systems on which any such securities of Vail are then quoted,
including, without limitation, entering into appropriate customary agreements
(including a listing application and indemnification agreement in customary
form).
Section 7.6 Stop Orders. Vail will promptly notify each Shareholder of
(a) the receipt by Vail of any notification with respect to the issuance by the
SEC of any stop order or order suspending the effectiveness of any Registration
Statement covering any Vail Equity or the initiation of any proceedings for that
purpose or (b) the receipt by Vail of any notification with respect to the
limitation, restriction or suspension of the offer or sale of Vail Equity in any
jurisdiction in which the Vail Equity was qualified to be sold, or the
initiation of any proceedings for such purpose. In the event that Vail notifies
each Shareholder of any such event, each Shareholder will immediately
discontinue all sales or other dispositions of Vail Equity pursuant to the
Registration Statement until such time that Vail notifies each Shareholder of
the lifting of such stop order or similar order; provided, however, that such a
stop order or similar order issued by a state securities or blue sky
administrator will apply only to offers and sales in such state, unless each
Shareholder is advised otherwise by Vail. Vail, with the cooperation of each
Shareholder, will use its best efforts to contest any such proceedings and to
obtain the withdrawal of any such order at the earliest possible date.
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ARTICLE VIII
INDEMNIFICATION AND CONTRIBUTION
Section 8.1 Indemnification.
(a) Indemnification by Foods.
(i) Foods agrees to indemnify and hold harmless Vail and its Affiliates
and Associates (each such Person being hereinafter referred to as a "Vail
Indemnified Party") from and against all losses, claims, damages, liabilities
and expenses (including reasonable costs of investigation and legal expenses)
(each a "Loss") arising out of or based upon any untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement or
preliminary, final or summary prospectus covering the Vail Equity, or in any
amendment or supplement thereto, or in any document incorporated by reference
into any of the foregoing or arising out of or based upon any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, but only if, and
only to the extent, such statement or alleged statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to Vail or its representatives by or on behalf of Foods for use in the
preparation of such Registration Statement, preliminary, final or summary
prospectus or such amendment or supplement thereto, or such document
incorporated by reference. This indemnity will be in addition to any liability
which Foods may otherwise have. Foods will also indemnify the underwriter(s),
selling broker(s), dealer manager(s) and similar securities industry
professionals participating in the distribution, their officers and directors
and each Person who Controls such Persons to the same extent as provided above
with respect to the indemnification of a Vail Indemnified Party.
(ii) Foods also agrees to indemnify and hold harmless any Vail Indemnified
Party to the same extent as provided in clause (i) above from and against all
Losses arising out of any action or proceeding brought against any Vail
Indemnified Party in connection with the distribution or proposed distribution
of Vail Equity to the holders of Foods Stock; provided, however, that this
Section 8.1(a)(ii) shall not apply to any Losses for which Vail is responsible
as provided in Section 8.1(c) of this Agreement.
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(iii) If any action or proceeding (including any governmental
investigation or inquiry) is brought or asserted against a Vail Indemnified
Party in respect of which indemnity may be sought from Foods, such Vail
Indemnified Party will promptly notify Foods in writing of the commencement of
such action and Foods shall assume the defense thereof and have primary control
over any related suit or proceeding, including the employment of legal counsel
and the payment of all expenses in connection therewith; provided, however, that
the failure of any Vail Indemnified Party to give notice as provided herein
shall not relieve Foods of its obligations under this Section 8.1(a) except to
the extent that Foods is actually materially prejudiced by such failure to give
notice. A Vail Indemnified Party shall have the right to participate in and
jointly with Foods, to the extent that it may wish, and employ separate counsel
reasonably satisfactory to such Vail Indemnified Party, provided, however, that
Foods will not be liable to such Vail Indemnified Party for any legal or other
expenses incurred by such Vail Indemnified Party in connection therewith, unless
such Vail Indemnified Party shall have been advised by counsel that a conflict
of interest between such Vail Indemnified Party and Foods is likely to exist in
respect of such claim.
(b) Indemnification by Apollo.
(i) Apollo agrees to indemnify and hold harmless each Vail Indemnified
Party from and against all Losses arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement or preliminary, final or summary prospectus covering the
Vail Equity, or in any amendment or supplement thereto, or in any document
incorporated by reference into any of the foregoing or arising out of or based
upon any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
but only if, and only to the extent, such statement or alleged statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to Vail or its representatives by or on behalf of
Apollo for use in the preparation of such Registration Statement, preliminary,
final or summary prospectus or such amendment or supplement thereto, or such
document incorporated by reference. This indemnity will be in addition to any
liability which Apollo may otherwise have. Apollo will also indemnify the
underwriter(s), selling broker(s), dealer manager(s) and similar securities
industry professionals
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participating in the distribution, their officers and directors and each Person
who Controls such Persons to the same extent as provided above with respect to
the indemnification of a Vail Indemnified Party.
(ii) Apollo also agrees to indemnify and hold harmless any Vail
Indemnified Party to the same extent as provided in clause (i) above from and
against all Losses arising out of any action or proceeding brought against any
Vail Indemnified Party in connection with the distribution or proposed
distribution of Vail Equity to the holders of Apollo Stock; provided, however,
that this Section 8.1(b)(ii) shall not apply to any Losses for which Vail is
responsible as provided in Section 8.1(c) of this Agreement.
(iii) If any action or proceeding (including any governmental
investigation or inquiry) is brought or asserted against a Vail Indemnified
Party in respect of which indemnity may be sought from Apollo, such Vail
Indemnified Party will promptly notify Apollo in writing of the commencement of
such action and Apollo shall assume the defense thereof and have primary control
over any related suit or proceeding, including the employment of legal counsel
and the payment of all expenses in connection therewith; provided, however, that
the failure of any Vail Indemnified Party to give notice as provided herein
shall not relieve Apollo of its obligations under this Section 8.1(b) except to
the extent that Apollo is actually materially prejudiced by such failure to give
notice. A Vail Indemnified Party shall have the right to participate in and
jointly with Apollo, to the extent that it may wish, and employ separate counsel
reasonably satisfactory to such Vail Indemnified Party, provided, however, that
Apollo will not be liable to such Vail Indemnified Party for any legal or other
expenses incurred by such Vail Indemnified Party in connection therewith, unless
such Vail Indemnified Party shall have been advised by counsel that a conflict
of interest between such Vail Indemnified Party and Apollo is likely to exist
in respect of such claim.
(c) Indemnification by Vail.
(i) Vail agrees to indemnify and hold harmless each Shareholder and its
Affiliates and Associates (each such person being hereinafter referred to as a
"Shareholder Indemnified Party") from and against all Losses arising out of or
based upon any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement,
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preliminary, final or summary prospectus covering the Vail Equity, or in any
amendment or supplement thereto, or in any document incorporated by reference
into any of the foregoing or arising out of or based upon any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statement therein not misleading, except insofar as
such Losses arise out of or are based solely upon any such untrue statement or
omission or allegation thereof based upon written information provided by or on
behalf of a Shareholder for inclusion in such Registration Statement,
preliminary, final or summary prospectus, or such amendment or supplement
thereto, or such document incorporated by reference; provided, however, that
Vail will not be liable in any such case to the extent that any such Loss arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in any preliminary prospectus if (A) such
Shareholder failed to send or deliver a copy of the final prospectus with or
prior to the delivery of written confirmation of the sale of the Vail Equity
covered by the Registration Statement to the Person asserting such Loss, and (B)
the final prospectus corrected such untrue statement or omission; and provided,
further, that Vail will not be liable in any such case to the extent that any
such Loss arises out of or is based upon an untrue statement or omission in the
final prospectus, if such untrue statement or omission is corrected in an
amendment or supplement to the final prospectus and if, having previously been
furnished by or on behalf of Vail with copies of the final prospectus as so
amended or supplemented, such Shareholder thereafter fails to deliver such
prospectus as so amended or supplemented, prior to or concurrently with the sale
of the Vail Equity to the Person asserting such Loss who purchased such Vail
Equity which is the subject thereof. This indemnity will be in addition to any
liability which Vail may otherwise have. Vail will also indemnify the
underwriter(s), selling broker(s), dealer manager(s) and similar securities
industry professionals participating in the distribution, their officers and
directors and each Person who Controls such Persons to the same extent as
provided above with respect to the indemnification of a Shareholder Indemnified
Party.
(ii) If any action or proceeding is brought against a Shareholder
Indemnified Party in respect of which indemnity may be sought against such
Shareholder Indemnified Party, such Shareholder Indemnified Party will promptly
notify Vail in writing of the commencement of such action and Vail will assume
the defense thereof and have primary control over any
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related suit or proceeding, including the employment of legal counsel and the
payment of all expenses in connection therewith; provided, however, that the
failure of any Shareholder Indemnified Party to give notice as provided herein
shall not relieve Vail of its obligations under this Section 8.1(c) except to
the extent that Vail is actually materially prejudiced by such failure to give
notice. A Shareholder Indemnified Party shall have the right to participate in
and jointly with Vail, to the extent that it may wish, and employ separate
counsel reasonably satisfactory to such Shareholder Indemnified Party, provided,
however, that Vail will not be liable to such Shareholder Indemnified Party for
any legal or other expenses incurred by such Shareholder Indemnified Party in
connection therewith, unless such Shareholder Indemnified Party shall have been
advised by counsel that a conflict of interest between such Shareholder
Indemnified Party and Vail is likely to exist in respect of such claim.
Section 8.2 Contribution.
(a) If the Indemnification provided for in Section 8.1 hereof is
unavailable to a Vail Indemnified Party or Shareholder Indemnified Party under
Section 8.1(a), 8.1(b) or Section 8.1(c) hereof (other than by reason of the
exceptions provided in Sections 8.1(a), 8.1(b) and 8.1(c)) in respect of any
Losses referred to therein, then such indemnifying party, in lieu of
indemnifying such indemnified party, will contribute to the amount paid or
payable by such indemnified party as a result of such Losses in such proportion
as is appropriate to reflect the relative fault of the indemnifying party, on
the one hand, and the indemnified party, on the other hand, in connection with
the statements or omissions which resulted in such Losses, as well as any other
relevant equitable considerations. The relative fault of the indemnifying
party, on the one hand, and the indemnified party, on the other hand, shall be
determined by reference to, among other things, whether the untrue statement or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by such indemnified
party and each parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid
or payable by each party as a result of the Losses referred to above will be
deemed to include, subject to the limitations set forth in Sections 8.1(a),
8.1(b) and 8.1(c) hereof, any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or claim.
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(b) Notwithstanding the provisions of Section 8.2(a) hereof, no Person
found to be guilty of fraudulent misrepresentation shall be entitled to
contribution from any Person who is not found to be guilty of such fraudulent
misrepresentation.
ARTICLE IX
TAKE-ALONG RIGHTS
Section 9.1 Take-Along Rights. Apollo may not effect a Transfer (or a
series of related Transfers) of Vail Equity to one person or a related group of
persons if such Transfer would result in a Change of Control of Vail (other than
Transfers effected by sales of Vail Equity through underwriters in a public
offering or in the securities markets generally) (the "Section 9.1 Shares")
without first complying with this Section 9.1. If Apollo desires to Transfer
the Section 9.1 Shares, Apollo shall give written notice (the "Take-Along
Notice") to Foods stating (i) the name and address of the transferee (the
"Non-Qualified Transferee") and (ii) the price and terms upon which the
Non-Qualified Transferee proposes to purchase the Section 9.1 Shares. Foods
shall have the irrevocable option, but not the obligation (the "Take-Along
Option"), to sell to the Non-Qualified Transferee, up to a number of shares of
Vail Equity (the "Included Shares") determined in accordance with Section
9.1(a), at the price and on the terms set forth in the Take-Along Notice. The
Take-Along Option shall be exercised by Foods by giving written notice to
Apollo, within ten business days of receipt of the Take-Along Notice, indicating
its election to exercise the Take-Along Option. Failure by Foods to give such
notice within the ten business day period shall be deemed an election by Foods
not to sell its shares of Vail Equity pursuant to that Take-Along Notice. The
closing with respect to any sale to a Non-Qualified Transferee pursuant to this
Section 9.1 shall be held at the time and place specified in the Take-Along
Notice but in any event within 30 days of the date the Take-Along Notice is
given; provided that if through the exercise of reasonable efforts
Apollo is unable to cause such transaction to close within 30 days, such period
may be extended for such reasonable period of time as may be necessary to close
such transaction. Consummation of the sale of the Section 9.1 Shares by Apollo
to a Non-Qualified Transferee shall be conditioned upon consummation of the sale
by Foods to such Non-Qualified Transferee of the Included Shares, if any.
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(a) The number of Included Shares purchased from Foods shall be determined
by multiplying the number of Shares proposed to be purchased from Apollo by a
Non-Qualified Transferee by a fraction, the numerator of which is the total
number of shares of Vail Equity owned by Foods and the denominator of which is
the sum of the total number of shares of Vail Equity owned by Apollo and Foods.
(b) Apollo shall arrange for payment directly by the Non-Qualified
Transferee to Foods, upon delivery of the certificate or certificates
representing the Included Shares duly endorsed for transfer, together with such
other documents as the Non-Qualified Transferee may reasonably request. The
reasonable costs and expenses incurred by Apollo and Foods in connection with a
sale of shares of Vail Equity subject to this Section 9.1 shall be allocated pro
rata based upon the number of shares of Vail Equity sold by each Shareholder to
a Non-Qualified Transferee.
(c) If, at end of 30 days following the date on which a Take-Along Notice
was given, the sale of shares of Vail Equity by Apollo and the sale of the
Included Shares, if any, have not been completed in accordance with the terms of
the Non-Qualified Transferee's offer, all certificates representing the Included
Shares shall be returned to Foods, and all the restrictions on Transfer
contained in this Agreement with respect to shares of Vail Equity owned by
Apollo shall again be in effect.
ARTICLE X
INITIAL PUBLIC OFFERING
Section 10.1 IPO Commitment. Vail and Apollo hereby agree to use
reasonable efforts to consummate the IPO as soon as possible following the
Closing.
Section 10.2 Co-Manager. In connection with the IPO (unless the IPO is
effected by means of a Demand Registration by Foods), Foods shall select one of
the co-managers (other than the lead manager); provided, however, that such
co-manager shall be subject to the approval of Vail, which approval shall not be
unreasonably withheld.
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Section 10.3 Foods Initiated IPO.
(a) If the IPO has not been consummated on the later of (i) September 30,
1997 or (ii) nine months after the Closing (the "Trigger Date"), Apollo, Vail
and Foods agree to abide by the procedures of this Section 10.3.
(b) Following the Trigger Date, Apollo and Foods agree to discuss in good
faith for a period of 30 days (the "Discussion Period") the timing of the IPO.
At the conclusion of the Discussion Period, Foods may deliver a notice to Vail
within 30 days (the "Foods Notice") stating that it will request a Demand
Registration unless Vail consummates the IPO within three months from the date
of the Foods Notice. If at the conclusion of such three-month period the IPO
has not been consummated, during the next six months Foods shall have the right
to request a Demand Registration and consummate the IPO by means of such Demand
Registration. If at the conclusion of such six-month period the IPO has not
been consummated, Foods' right to request a Demand Registration to effect the
IPO shall be suspended for a twelve- month period. If at the conclusion of such
twelve-month period the IPO has not otherwise been consummated, during the next
six months Foods shall again have the right to request a Demand Registration and
consummate the IPO by means of such Demand Registration. If the IPO is
consummated by means of a Demand Registration by Foods (the "Foods Initiated
IPO"), then Foods shall select the lead manager for the Foods Initiated IPO;
provided, however, that such lead manager shall be subject to the approval of
Vail, which approval shall not be unreasonably withheld or delayed. Vail may
select one co-manager in connection with a Foods Initiated IPO, subject to the
approval of the lead manager for the Foods Initiated IPO, which approval shall
not be unreasonably withheld or delayed.
ARTICLE XI
ADDITIONAL COVENANTS
Section 11.1 Maintain Listing or Quotation. Vail hereby covenants and
agrees that it shall use its best efforts to maintain its listing of Vail
Securities on any securities exchanges on which Vail Securities are listed in
the future pursuant to Section 7.5 hereof and to maintain its quotation of Vail
Securities on any automated quotation systems on which Vail Securities are
quoted in the future pursuant to Section 7.5 hereto.
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Section 11.2 Board of Directors. Vail and the Shareholders agree to take
all actions necessary to cause the Board of Directors to consist of no more than
twenty directors. As long as Foods owns at least 10% of the outstanding Vail
Securities, Vail and the Shareholders agree to take all actions necessary for
Foods to be able to nominate and appoint two directors to the Board of Directors
of Vail, including without limitation Apollo nominating and electing such
directors as Class 1 directors elected by the holders of the Vail Class A Stock.
Section 11.3 No Inconsistent Agreements. Vail hereby covenants and agrees
that it shall not enter into any agreements governing the transfer or
registration of shares of Vail Securities which would materially adversely
affect Foods' rights under this Agreement without Foods' prior written consent.
Section 11.4 Rules 144 and 144A. Vail hereby covenants and agrees that it
will use its reasonable best efforts to file any reports required to be filed by
it under the Securities Act and the Exchange Act and it will take such further
action as Foods may reasonably request, all to the extent required from time to
time to enable Foods to sell its Vail Equity (subject to the terms hereof)
without registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144 or 144A under the Securities Act, as such
Rules may be amended from time to time, or (b) any similar rule or regulation
hereafter adopted by the SEC.
Section 11.5 Limitations on Holdings of Foods Associates. Foods shall use
its best efforts to cause its Associates and Associates of its Affiliates not to
own, in the aggregate, 2% or more of the outstanding Vail Securities.
ARTICLE XII
MISCELLANEOUS
Section 12.1 Entire Agreement. This Agreement constitutes the entire
agreement among the parties hereto relative to the subject matter hereof, and
supersedes all prior written or oral understandings, agreements, conditions or
representations.
Section 12.2 Headings and Captions. All headings and captions used in
this Agreement are for convenience only,
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and will not be construed to either limit or broaden the language of
this Agreement or any particular section.
Section 12.3 Choice of Law. This Agreement will be governed by and
construed under and in accordance with the laws of the State of New York,
without giving effect to the conflict of laws provisions thereof, except that
all matters relating to the internal affairs of Vail shall be governed by and
construed under and in accordance with the General Corporation Law of the State
of Delaware.
Section 12.4 Venue. Any action or legal proceedings to enforce this
Agreement or any of its terms, or for indemnification and the recovery of losses
as provided for in this Agreement by a party, may be brought and prosecuted in
such court or courts located in the State of New York as provided by law, and
the parties to this Agreement consent to the jurisdiction of said court or
courts and to service of process by registered mail, return receipt requested,
or by any other manner provided by New York law.
Section 12.5 Notices. Any notice or other communication required or
permitted hereunder is deemed delivered when delivered in person, when
transmitted by telecopier (which will also be sent concurrently by certified or
registered mail), on the next Business Day when sent by Federal Express or a
similar overnight delivery service, or on the third Business Day when sent by
registered or certified U.S. mail service as follows:
If to Foods:
Ralston Foods, Inc.
800 Market Street
Suite 2900
St. Louis, Missouri 63101
Attn.: Robert W. Lockwood, Esq.
Facsimile No.: (314) 877-7748
If to Vail:
Vail Resorts, Inc. (Delivery other than
137 Benchmark Road mail)
Avon, Colorado 81620
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Vail Resorts, Inc. (Mail Delivery)
Post Office Box 7
Vail, Colorado 81658
Attn.: James S. Mandel, Esq.
Facsimile No.: (970) 845-2912
If to Apollo:
1301 Avenue of the Americas
New York, New York 10019
Attn.: Marc Rowan
Facsimile No.: (212) 261-4071
With a copy to:
James J. Clark, Esq.
Cahill Gordon & Reindel
80 Pine Street
New York, NY 10005
Facsimile No.: (212) 269-5420
The parties to this Agreement will promptly notify each other in
the manner provided in this Section 12.5 of any change in their
respective addresses. A notice of change of address will not be
deemed to have been given until received by the addressee.
Section 12.6 Amendments. No changes, modifications, amendments or
additions will be valid unless such be made in writing and signed by or on
behalf of each party.
Section 12.7 Extended Meanings. Words importing the singular number
include the plural and vice versa, and words importing the masculine gender
include the feminine and neuter genders.
Section 12.8 Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns; provided each of Foods and Vail shall have the
right to assign its rights and obligations under this Agreement as a whole (i)
in a transaction pursuant to Section 3.2(b), (g) or (h) or (ii) to the surviving
entity in a merger, consolidation, combination or other corporate transaction
involving it if the surviving entity agrees in writing to be bound by the terms
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hereof, and Apollo shall have the right to assign its rights and obligations
under this Agreement to any of its Affiliates or in a bona fide distribution of
its assets following dissolution or liquidation, provided each of the
distributees agrees in writing to be bound by the terms hereof.
Section 12.9 Severability. The invalidity or unenforceability of any
provision hereof in any jurisdiction will not affect the validity or
enforceability of this Agreement, including that provision, in any other
jurisdiction. To the extent permitted by applicable law, each party waives any
provision of law that renders any provision hereof prohibited or unenforceable
in any respect. If any term, provision, covenant or restriction in this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the parties hereto will use their best efforts to find and employ
an alternative means to achieve the same or substantially the same result as
that contemplated by such term, provision, covenant or restriction and the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect, in order to achieve the intent of the
parties to the extent possible.
Section 12.10 Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, each of which is deemed an original, but all of
which together constitute a single agreement, and it is not necessary in making
proof of this Agreement to produce or account for more than one such
counterpart.
Section 12.11 Remedies Cumulative. Except as otherwise expressly limited
herein, the remedies given to any party by this Agreement are in addition to all
remedies under any statute or rule of law. Any forbearance or failure or delay
in exercising any remedy hereunder is not deemed to be a waiver of any other
remedy a party may have under this Agreement.
Section 12.12 Binding Agreement. This Agreement will be deemed effective
and legally binding upon the parties when it has been executed and delivered by
all parties hereto. This Agreement will inure to the benefit of the parties
hereto and their successors and permitted assignees.
Section 12.13 Recapitalizations, Exchanges, Etc., Affecting Vail
Securities. The provisions of this Agreement apply to the full extent set forth
herein with respect to the Vail Equity, to any and all shares of capital stock
of Vail or
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any successor or assign of Vail (whether by merger,
consolidation, sale of assets or otherwise) which may be issued
in respect of or in exchange or substitution for Vail Equity and
will be appropriately adjusted for any stock dividends, splits,
reverse splits, combinations, recapitalizations and the like
occurring after the date hereof.
Section 12.14 Other Agreements. Nothing contained in this Agreement will
be deemed to be a waiver of, or release from, any obligations any party hereto
may have under any other agreement, including, without limitation, the Purchase
Agreement.
Section 12.15 Termination. This Agreement, and all rights and obligations
of each party hereto, shall terminate (i) upon agreement of each of the
Shareholders, (ii) upon the voluntary or involuntary dissolution of Vail, (iii)
upon the sale of all or substantially all of the assets of Vail or upon a Change
of Control of Vail, (iv) when Apollo and its Affiliates own less than 10% of the
shares of Vail Equity owned by Apollo on the date of this Agreement (adjusted
accordingly for any stock splits, stock dividends or similar recapitalizations
by Vail after the date hereof) or (v) when Foods and its Affiliates own less
than 10% of the outstanding Vail Securities. The provisions of Article VIII
hereof shall survive the termination of this Agreement.
Section 12.16 Enforcement. Each of Vail, Apollo and Foods agree that any
breach of the provisions contained in this Agreement by Vail, Apollo and/or
Foods would cause irreparable harm to the other and its Affiliates and
therefore, notwithstanding any right of Vail, Apollo and/or Foods to recover
monetary damages with respect to any such breach (a) as set forth in this
Agreement or (b) at law, Vail, Apollo and Foods will each be entitled to
equitable relief to enjoin any threatened or continuing breach of the other
hereof and, in the event of any action for specific performance, each party
shall waive the defense that a remedy at law would be adequate. If the scope of
any restriction contained in this Agreement is too broad to permit enforcement
to its fullest extent, then such restriction will be enforced to the maximum
extent permitted by law in the manner provided in Section 12.9 hereof. Nothing
herein stated will be construed as prohibiting any party from pursuing any other
remedies available to that party for a breach hereunder, including recovery of
damages.
<PAGE> 146
-36-
Section 12.17 Confidentiality. Each of Foods, Apollo and Vail
acknowledges that the other would be irreparably damaged if confidential
knowledge of its business and affairs were disclosed or utilized on behalf of
any Person. Each of Vail, Apollo and Foods covenants and agrees not to disclose
or use any such confidential information of the other unless such information
has been made available to the public generally (other than in violation of this
Section 12.17) or Vail, Apollo and/or Foods is required to disclose such
information by a governmental body or regulatory agency or by law in connection
with a transaction that is not otherwise prohibited hereby.
Section 12.18 Fiduciary Accounts. Vail, Apollo and Foods each acknowledge
and agree that this Agreement shall apply only to the Vail Securities owned by
Foods and Apollo for its own respective account and does not apply to any Vail
Securities which may be deemed to be beneficially owned or controlled by Foods
or their respective Affiliates and which shares are held in fiduciary accounts
in connection with any pension plans, profit sharing plans or other employee
benefit plans or held in any other fiduciary accounts.
<PAGE> 147
IN WITNESS WHEREOF, the parties have executed this
Agreement by an officer thereunto duly authorized, all as of the
day and year first above written.
VAIL RESORTS, INC.
By:
----------------------------
Name:
Title:
RALSTON FOODS, INC.
By:
----------------------------
Name:
Title:
APOLLO SKI PARTNERS, L.P.
By:
----------------------------
Name:
Authorized Signatory
<PAGE> 1
EXHIBIT 21.
LIST OF NEW RALCORP SUBSIDIARIES
Beech-Nut Nutrition Corporation
State of Incorporation: Nevada
Bremner Finance, Inc.
State of Incorporation: Delaware
Bremner, Inc.
State of Incorporation: Nevada
Keystone Conference Services, Inc.
State of Incorporation: Colorado
Keystone Development Sales, Inc.
State of Incorporation: Colorado
Keystone Food & Beverage Company
State of Incorporation: Colorado
Keystone Resort Property Management Company
State of Incorporation: Colorado
National Oats Company
State of Incorporation: Nevada
Ralston Food Sales, Inc.
State of Incorporation: Nevada
Ralston Foods, Inc.
State of Incorporation: Nevada
Ralston Resorts, Inc.
State of Incorporation: Colorado
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Excluded from the below cost/expense information are nonrecurring and
restructuring charges of $110 and $17, respectively.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 77
<ALLOWANCES> 1
<INVENTORY> 103
<CURRENT-ASSETS> 193
<PP&E> 537
<DEPRECIATION> 214
<TOTAL-ASSETS> 627
<CURRENT-LIABILITIES> 102
<BONDS> 377
0
0
<COMMON> 0
<OTHER-SE> 107
<TOTAL-LIABILITY-AND-EQUITY> 627
<SALES> 1,027
<TOTAL-REVENUES> 1,027
<CGS> 537
<TOTAL-COSTS> 537
<OTHER-EXPENSES> 411
<LOSS-PROVISION> 1
<INTEREST-EXPENSE> 27
<INCOME-PRETAX> (73)
<INCOME-TAX> (26)
<INCOME-CONTINUING> (47)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (47)
<EPS-PRIMARY> (1.42)
<EPS-DILUTED> (1.42)
</TABLE>
