<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1996.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________
TO _________.
Commission file number: 1-12619.
RALCORP HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Missouri 43-1766315
(State of Incorporation) (I.R.S. Employer
Identification No.)
800 Market Street, Suite 2900
St. Louis, MO 63101
(Address of principal (Zip Code)
executive offices)
(314) 877-7000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ ] No [X]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock Outstanding Shares at
par value $.01 per share February 12, 1997
33,011,317
<PAGE> 2
RALCORP HOLDINGS, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE
Consolidated Statement of Earnings 1
Condensed Consolidated Balance Sheet 2
Condensed Consolidated Statement of Cash Flows 3
Notes to Condensed Consolidated Financial Statements 4
Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
Unaudited Pro Forma Combined Financial Information 12
PART II. OTHER INFORMATION
Other Information 17
Exhibits and Reports on Form 8-K 17
(i)
<PAGE> 3
RALCORP HOLDINGS, INC.
CONSOLIDATED STATEMENT OF EARNINGS
(Dollars in millions except per share data)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
-----------------------
1996 1995
------- -------
<S> <C> <C>
Net Sales $ 292.9 $ 295.3
------- -------
Costs and Expenses
Cost of products sold 141.2 142.3
Selling, general and administrative 38.4 43.7
Advertising and promotion 80.3 77.4
Interest 6.9 7.0
Restructuring charge 4.6 0.9
------- -------
271.4 271.3
------- -------
Earnings before Income Taxes 21.5 24.0
Income Taxes 8.4 9.3
------- -------
Net Earnings $ 13.1 $ 14.7
======= =======
Earnings per Common Share $ .40 $ .44
======= =======
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
1
<PAGE> 4
RALCORP HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET
(Condensed)
(Dollars in millions)
<TABLE>
<CAPTION>
Dec. 31, Sept. 30,
1996 1996
-------- ---------
ASSETS
<S> <C> <C>
Current Assets
Cash
Receivables, less allowance for doubtful
accounts of $1.2 and $1.0, respectively $ 74.0 $ 75.5
Inventories -
Raw materials and supplies 26.6 26.5
Finished products 65.8 76.8
Prepaid expenses 14.5 14.2
------- -------
Total Current Assets 180.9 193.0
------- -------
Investments and Other Assets 105.6 88.1
------- -------
Deferred income taxes 22.6 23.4
------- -------
Property at Cost 530.3 537.0
Accumulated depreciation 222.9 214.4
------- -------
307.4 322.6
------- -------
Total $ 616.5 $ 627.1
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt $ .3 $ 1.8
Accounts payable 43.9 54.7
Income tax payable 1.0
Other current liabilities 73.3 45.9
------- -------
Total Current Liabilities 118.5 102.4
------- -------
Long-Term Debt 335.0 376.6
------- -------
Other Liabilities 42.3 40.7
------- -------
Shareholders' Equity
Common stock 0.3 0.3
Capital in excess of par value 130.7 130.9
Retained earnings (deficit) 12.9 (0.2)
Common stock in treasury, at cost (22.4) (22.7)
Unearned portion of restricted stock (.8) (.9)
------- -------
Total Shareholders' Equity 120.7 107.4
------- -------
Total $ 616.5 $ 627.1
======= =======
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
2
<PAGE> 5
RALCORP HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Condensed)
(Dollars in millions)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
------------------
1996 1995
------ ------
<S> <C> <C>
Cash Flow from Operations
Net earnings $ 13.1 $ 14.7
Non-cash items included in income 10.7 11.5
Restructuring charge 4.6 .9
Changes in assets and liabilities used in operations 25.1 13.3
Other, net 1.9 3.3
------ ------
Net cash flow from operations 55.4 43.7
------ ------
Cash Flow from Investing Activities
Property additions, net (11.0) (16.0)
Other, net (1.3) (0.6)
------ ------
Net cash used by investing activities (12.3) (16.6)
------ ------
Cash Flow from Financing Activities
Net cash flow used by debt (43.1) (21.3)
Treasury stock purchases - (5.8)
------ ------
Net cash used by financing activities (43.1) (27.1)
------ ------
Net Increase in Cash and Cash Equivalents - -
Cash and Cash Equivalents, Beginning of Year
------ ------
Cash and Cash Equivalents, End of Quarter $ - $ -
====== ======
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
3
<PAGE> 6
RALCORP HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Dollars in millions except per share data)
NOTE 1 - SUBSEQUENT EVENTS
On January 3, 1997, the United States Department of Justice gave final
approval to the sale of Ralcorp's ski resort holdings to Vail Resorts,
Inc. Effective on this date, the sale transaction, pending since first
announced in July 1996, was closed. The value of this transaction was
approximately $310 million, comprised of Vail assuming $165 million in
Ralcorp debt and the balance being realized through the Company's
approximate 22.7% ownership interest in the newly combined ski company,
after giving effect to Vail's public stock offering. Vail stock began
trading on the New York Stock Exchange on February 4, 1997.
On January 31, 1997, the original Ralcorp Holdings, Inc. (Old Ralcorp)
was merged with a subsidiary of General Mills, Inc. (the Merger).
Immediately prior to the Merger, Old Ralcorp spun-off its private label
cereal, branded baby food and private label cracker and cookie businesses
(the Spin-Off) by distributing one share of New Ralcorp Holdings, Inc.
Common Stock for each share of Old Ralcorp Common Stock owned as of the
close of business on January 31, 1997. Immediately prior to the
Spin-Off, New Ralcorp Holdings, Inc. (Ralcorp) changed its name to
Ralcorp Holdings, Inc. and in the Merger, Old Ralcorp changed its name to
General Mills Missouri, Inc. This completes the $570 transaction with
General Mills that was first announced in August 1996. The $570 value
was reached by General Mills assuming $215 in Ralcorp debt and funding
the remaining $355 through the distribution of General Mills stock to
Ralcorp shareholders of record on January 31, 1997.
For financial reporting purposes, Ralcorp is a "successor registrant" to
Old Ralcorp and, as such, the accompanying Ralcorp financial statements
represent the historical financial position and results of operations of
Old Ralcorp. Therefore, references to the "Company", for periods prior
to January 31, 1997, are references to Old Ralcorp, without giving effect
to the Merger or the Spin-Off.
NOTE 2 - PRESENTATION OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited historical financial statements of the Company
have been prepared in accordance with the instructions for Form 10-Q and
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments, consisting only of normal
recurring adjustments considered necessary for a fair presentation, have
been included. Operating results for any quarter are not necessarily
indicative of the results for any other quarter or for the full year.
These statements should be read in connection with the financial
statements and notes included in the Company's Annual Report on Form 10-K
for the year ended September 30, 1996.
NOTE 3 - RESTRUCTURING CHARGE
During the quarter ended December 31, 1996, the Company recorded a
pre-tax restructuring charge of $4.6 ($2.9 after taxes or $.09 per common
share) to cover expenses related to severance costs for certain employees
whose jobs were eliminated in recent downsizing initiatives.
In addition, during the fourth quarter of fiscal 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 well as its corporate
support groups.
The restructuring charges and their utilization are summarized in the
following table.
4
<PAGE> 7
RALCORP HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Dollars in millions except per share data)
<TABLE> 1st Qtr. Utilized in
<CAPTION>
FY 1996 Utilized in FY 1997 1st Qtr. Balance of
Charges FY 1996 Charges FY 1997 Reserve
-------- ----------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Salaries, severance and
benefits $ 8.0 $ (5.0) $4.6 $(1.8) $5.8
Asset writedowns 7.3 (7.3) - -
Other 1.2 (.5) - .7
----- ------ ---- ----- ----
Total restructuring charge $16.5 $(12.8) $4.6 $(1.8) $6.5
===== ====== ==== ===== ====
</TABLE>
NOTE 4 - EARNINGS PER SHARE
Earnings per common share for the quarters ended December 31, 1996 and
1995 are computed by using the weighted average number of shares of
Ralcorp Common Stock outstanding for the periods then ended. Earnings per
common share is computed independently for all of the periods presented,
therefore, the sum of earnings per common share amounts for the quarters
may not total the year-to-date. The weighted average numbers of common
shares used for all periods are as follows:
Quarter ended December 31, 1996................................32,883,000
Quarter ended December 31, 1995................................33,116,000
Actual outstanding shares of Ralcorp Common Stock at December 31, 1996
were 32,883,000.
NOTE 5 - INVESTMENTS AND OTHER ASSETS consists of the following:
<TABLE>
<CAPTION>
Dec. 31, Sept. 30,
1996 1996
----------- -----------
<S> <C> <C>
Intangible assets $42.8 $43.2
Property held for development 28.9 12.4
Investments in affiliated companies 30.5 29.1
Deferred charges and other assets 3.4 3.4
$105.6 $88.1
=========== ===========
</TABLE>
NOTE 6 - OTHER CURRENT LIABILITIES consists of the following:
<TABLE>
<CAPTION>
Dec. 31, Sept. 30,
1996 1996
----------- ------------
<S> <C> <C>
Accrued advertising and promotion $31.4 $ 9.6
Restructuring and shutdown reserves 9.5 7.6
Other items 32.4 28.7
$73.3 $45.9
=========== ============
</TABLE>
5
<PAGE> 8
RALCORP HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Dollars in millions except per share data)
NOTE 7 - LONG-TERM DEBT
The Company had 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 is $275
available under the Bank Credit Agreements, as amended in March 1996,
with a maturity date of March 12, 2001.
At December 31, 1996 and September 30, 1996, long-term debt associated
with the Company's businesses consisted of the following:
<TABLE>
<CAPTION>
Dec. 31, Sept. 30,
1996 1996
---------- ----------
<S> <C> <C>
8.75% Notes due 2004 $150.0 $150.0
Bank Credit Agreements 160.0 200.1
10.85% and 11.15% Notes due 9/30/97
and 9/30/98 3.0
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%-7.375% due 9/1/02 and 9/1/10 3.0 3.0
Other 1.9 1.9
------ ------
335.3 378.4
Less Current Portion (.3) (1.8)
------ ------
$335.0 $376.6
====== ======
</TABLE>
Included in the Bank Credit Agreements line item, at December 31, 1996
and 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.
Subsequent to December 31, 1996, as a result of completing the sale
transactions described in "Note 1 - Subsequent Events" of this Form 10-Q,
substantially all outstanding debt of the Company was assumed by Vail
Resorts, Inc. and General Mills, Inc. as determined by the terms of the
individual sale agreements.
6
<PAGE> 9
RALCORP HOLDINGS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
For financial reporting purposes, Ralcorp is a "successor registrant" to the
Ralcorp Holdings, Inc. that was acquired by General Mills, Inc. on January 31,
1997 (Old Ralcorp) and, as such, all financial information of Ralcorp included
in this discussion and the accompanying financial statements represent the
historical financial information of Old Ralcorp. Therefore, references to the
"Company", as they relate to financial information for periods prior to January
31, 1997, are references to Old Ralcorp.
HIGHLIGHTS
For the quarter ended December 31, 1996, sales and net earnings, excluding a
restructuring charge against earnings, were $292.9 million and $16.0 million
compared to $295.3 million and $15.3 million for the comparable prior year
period, which also excludes a restructuring charge. Earnings per share
excluding the charges in both periods were $.49 for the three months ended
December 31, 1996 compared to $.46 in the prior year quarter. In the quarter
ended December 31, 1996 the Company recorded a pre-tax restructuring charge of
$4.6 million ($2.9 million after-tax or $.09 per share) to cover expenses
related to severance costs for certain employees whose jobs were eliminated in
recent downsizing initiatives. The pre-tax charge of $.9 million ($.6 million
after-tax or $.02 per share) taken in the quarter ended December 31, 1995 was
to cover employee-related expenses including, severance payments and
out-placement costs related to the elimination of jobs at the Company's Cedar
Rapids, Iowa oats manufacturing facility. Including these charges in both
periods, net earnings and earnings per share for the first quarter of the
current fiscal year were reduced to $13.1 million and $.40, respectively,
compared to $14.7 million and $.44 for the same prior year period.
The Unaudited Pro Forma Combined Financial Information included elsewhere in
this document, reflects the pro forma results of operations and financial
position of the Ralcorp businesses assuming the sales of the Company's Branded
Business and Resort Operations were completed as of the beginning of the
periods presented, for combined statements of earnings purposes, and as of
December 31, 1996, for combined balance sheet purposes. The sale of Resort
Operations to Vail Resorts, Inc. was completed on January 3, 1997 and the sale
of the Branded Business to General Mills, Inc. was completed on January 31,
1997.
On a pro forma basis, excluding the above mentioned restructuring charges,
sales, net earnings and earnings per share for the quarter ended December 31,
1996 were $121.8 million, $1.8 million and $.06, respectively, compared to
sales of $124.5 million, a net loss of $3.3 million and a loss per share of
$.10 for the same period of the prior year. On a pro forma basis, including
the restructuring charges, operations for the quarter ended December 31, 1996
resulted in a net loss of $1.1 million, or $.03 per share, compared to a net
loss of $3.9 million, or $.12 per share for the prior year quarter ended
December 31, 1995. Since Ralcorp did not operate during the periods 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 Ralcorp and its related businesses occurred at the beginning of the periods
shown.
7
<PAGE> 10
<TABLE>
<CAPTION>
BUSINESS SEGMENT INFORMATION
THREE MONTHS ENDED DECEMBER 31
Sales Operating Profit
1996 1995 1996 1995
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Consumer Foods $263.7 $267.9 $36.2 * $33.2 **
Resort Operations 29.2 27.4 (1.3) .6
------ ------ ----- -----
$292.9 $295.3 $34.9 $33.8
====== ====== ===== =====
* Excludes $4.6 million pre-tax restructuring charge related to employee
severance.
** Excludes $.9 million pre-tax Cedar Rapids restructuring
charge.
</TABLE>
CONSUMER FOODS
Consumer Foods sales decreased 1.6% or $4.2 million when comparing the first
quarter of fiscal 1997 to the first quarter of fiscal 1996, primarily on lower
branded and private label cereal sales, partially offset by the continued
strong performance from the CHEX MIX snack product line and volume gains by the
Bremner private label cracker and cookie and Beech-Nut baby food businesses.
Although private label cereal volume declined approximately 4.5% in the current
year's first quarter, it faced a difficult comparison due to the favorable
volume performance in the same quarter of the prior year. A strong CHEX Winter
Party Mix promotion resulted in comparable quarter to quarter volume levels for
the mainline CHEX product line. The branded cereal volume decline again came
from the continued weakening of the smaller fractional share brands.
Consumer Foods operating profit, excluding restructuring charges in both
periods, increased $3.0 million in the current quarter over the same prior year
period due primarily to the performance improvements in the CHEX MIX snack
product line, partially offset by higher advertising and promotion spending and
volume declines in branded and private label cereals. Beech-Nut baby food
operating profit for the first quarter of fiscal 1997 was even with last year
as favorable volume increases were offset by similar rises in ingredient and
production costs. Operating profit of the Bremner cracker and cookie operation
increased slightly on a quarter to quarter comparison as improved volumes and a
favorable product mix were partially offset by higher costs.
RESORT OPERATIONS
Resort Operations recorded a first quarter fiscal 1997 operating loss of $1.3
million compared to an operating profit for the same period of the prior year
of $.6 million. The operating profit in the first quarter of fiscal 1996 was
the first time in its history Resort Operations recorded operating profit in
the three-month period ended December 31st. An increase in skier visits in the
current quarter resulted in a $1.8 million sales improvement, higher operating
costs and lower room nights, however, more than offset the sales gains. In
addition, bitterly cold temperatures over the important Christmas holiday and
the fact that Christmas fell mid-week, also hampered performance.
As mentioned earlier, the Company completed the sale of its Resort Operations
to Vail Resorts, Inc. on January 3, 1997. Following the sale, and after giving
effect to Vail's public stock offering, Ralcorp retained an approximate 22.7%
ownership interest in the newly formed ski company, which is now the largest in
North America. Vail stock began trading on the New York Stock Exchange on
February 4, 1997.
8
<PAGE> 11
RESULTS OF OPERATIONS
Cost of products sold as a percentage of sales for the quarters ended December
31, 1996 and 1995 were 48.2%. Selling, general and administrative expense as a
percent of sales declined to 13.1% in the first quarter of the current year
compared to 14.8% in the prior period. This decline is due to reduced systems
costs in the current quarter as the prior year's first quarter included
significant new system implementation costs. In addition, the first quarter of
fiscal 1997 benefited from reduced depreciation expense, a result of the fixed
asset impairment charge taken by the Company in the fourth quarter of fiscal
1996. See "Note 4 - Nonrecurring Charges" in the "Notes to Consolidated
Financial Statements" included in the Company's Annual Report on Form 10-K for
additional discussion of this impairment charge. Advertising and promotion
expenses increased to 27.4% of sales from 26.2% in the prior year period due to
increased spending to support the CHEX Winter Party Mix promotion and maintain
branded cereal volumes. Income taxes were 39.1% of earnings before income
taxes in the current quarter compared to 38.7% in the year ago period.
FINANCIAL CONDITION
The Company's primary source of liquidity is cash flow from operations, which
increased to $55.4 million for the three months ended December 31, 1996
compared to $43.7 million for the same period in the prior year, primarily due
to a current year decline in inventory balances and a less significant decline
in accounts payable. Net working capital, excluding cash and current
maturities of long-term debt, was $62.7 million at December 31, 1996 compared
to $92.4 million at September 30, 1996.
Property additions decreased to $11.0 million for the first quarter of fiscal
1997 compared to $16.0 million in the prior year quarter. During the first
quarter of fiscal 1996 the Company repurchased $5.8 million of its Common
Stock. The Company transacted no stock repurchases during the quarter ended
December 31, 1996. As a result of first quarter activity, total debt declined
by $43.1 million to $335.3 million compared to $378.4 million at September 30,
1996. As a percent of total capitalization, total debt improved in the quarter
to 73.5% compared to 77.9% at September 30, 1996.
OUTLOOK
Management expects that Ralcorp will be negatively affected by the competitive
environment that exists in the ready-to-eat cereal category. To be successful,
Ralcorp must achieve and maintain an effective price gap between its private
label products and those products of top branded cereal competitors. 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 Ralcorp's cereal operations will be under significant
pressure.
In light of the anticipated cost restructuring during the transition described
above, Ralcorp will take a restructuring charge in the second quarter of fiscal
1997, after completion of the Spin-Off 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
restructuring charge has not been recorded as of December 31, 1996 since the
Merger was subject to shareholder approval and any restructuring charge is
directly attributable to completion of the Merger. Accordingly, by attaining
the approval of shareholders through a special shareholder vote on January 31,
1997, the restructuring charge will be recorded in the second quarter of fiscal
1997.
The outlook for the remainder of Ralcorp's businesses is generally positive. In
baby foods, despite a declining birth rate in the United States, Beech-Nut has
been able to record operating profit increases by
9
<PAGE> 12
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. Based on its position in the baby food category,
however, Beech-Nut will continue to face significant competitive pressures,
principally from the baby food market leader, Gerber Products Company. The
Bremner cracker and cookie business has performed well over the last two full
fiscal years, recording improvements in both sales and operating profit. With
regard to the Bremner cracker and cookie business, management anticipates
continuing to improve earnings through new product introductions, adding new
customers and improving sales mix towards higher margin products. In addition,
a major capital project at the Bremner manufacturing plant completed during the
fourth quarter of fiscal 1996 has allowed the production and shipping of
private label shredded wheat cereals and crackers to begin during the first
quarter of fiscal 1997. Bremner does face significant competition, however,
from large branded and regional private label cracker and cookie manufacturers.
RALCORP LIQUIDITY
As a result of the sales of the Branded Business and Resort Operations, Ralcorp
has emerged as an essentially debt free company, which provides Ralcorp
financial flexibility. To meet its on-going working capital needs Ralcorp has
obtained a $50 million working capital credit facility. The proceeds of the
facility may be used to fund Ralcorp's working capital needs, capital
expenditures, and other general corporate purposes. Provisions of the $50
million credit facility require Ralcorp to maintain certain financial ratios
and a minimum level of shareholders' equity.
Management believes that Ralcorp will be able to generate positive operating
cash flows through its mix of businesses and expects that future liquidity
requirements will be met through a combination of existing cash balances,
operating cash flow and, as necessary, use of borrowings available under its
working capital credit facility.
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
Forward-looking statements, within the meaning of Section 21E of the Securities
Exchange Act of 1934, are made throughout this Management's Discussion and
Analysis. 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) If the Company is unable to maintain a meaningful price gap between
its private label cereal products and the branded products of its competitors,
then the Company's cereal business could continue incurring significant
operating losses;
(ii) If the Company's cereal business incurs losses more than offsetting
the combined profits of its other businesses, then the Company will be unable
to borrow under its credit facility and the repayment of outstanding
borrowings, if any, at that time could be accelerated by the lenders;
(iii) If the events in (ii) above occur, the Company would have to
renegotiate its credit facility or obtain alternate sources of financing on
terms significantly more restrictive (such as being secured) and expensive than
the Company's existing credit facility; and
(iv) The Company's businesses compete in mature segments with competitors
having large percentages of segment sales and profit growth depends largely on
the ability to successfully introduce new products and manage costs across all
parts of the Company.
10
<PAGE> 13
RALCORP HOLDINGS, INC.
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
Ralcorp was organized for the purpose of effecting the Spin-Off 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 Old Ralcorp. Because these historical financial statements are
the historical financial statements of Old Ralcorp, they also include the
results of operations and financial position of the branded cereal and snack
businesses (the Branded Business), which Ralcorp has agreed to sell to General
Mills and the Resort Operations, which Ralcorp has agreed to sell to Vail
Resorts, Inc. Therefore, the historical financial statements do not reflect
the combined results of operations or financial position that would have
existed had Ralcorp been an independent company. Since Ralcorp did not operate
during the periods 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 Ralcorp and its related
businesses occurred at the beginning of the periods shown.
The pro forma combined statement of earnings for the three months ended
December 31, 1996 presents the combined results of Ralcorp's operations
assuming that the sale of the Branded Business and the sale of the Resort
Operations had occurred as of October 1, 1996. The pro forma combined
statement of earnings for the year ended September 30, 1996 presents the
combined results of Ralcorp's operations assuming that both sale transactions
had occurred as of October 1, 1995. Both statements of earnings have been
prepared by adjusting the historical statements of earnings for the effect of
costs and expenses and the recapitalization which might have occurred had the
Spin-Off and the sale of the Resort Operations occurred at the beginning of
each respective period.
The pro forma combined balance sheet at December 31, 1996 presents the combined
financial position of Ralcorp assuming the Spin-Off 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 Spin-Off and
the sale of the Resort Operations occurred on December 31, 1996.
The "Branded Business" and "Resort Operations" columns in the pro forma
combined statements of earnings represent the combined historical results of
operations of the Branded Business and the consolidated historical results of
operations of the Resort Operations, respectively. The "Branded Business"
column in the pro forma combined balance sheet at December 31, 1996 represents
the specific assets and liabilities of the Branded Business that will be
acquired by General Mills. The "Resort Operations" column in the pro forma
combined balance sheet at December 31, 1996 represents the consolidated
financial position of the Resort Operations at December 31, 1996.
Please read the Notes to the Unaudited Pro Forma Combined Financial Information
for a discussion of adjustments made to the historical financial information in
order to calculate the Ralcorp pro forma financial information.
11
<PAGE> 14
RALCORP HOLDINGS, INC.
PRO FORMA COMBINED STATEMENT OF EARNINGS
(in millions except per share data)
Three Months Ended December 31, 1996
<TABLE>
<CAPTION>
Pro Forma
Adjustments
Ralcorp Branded Resort ------------------------- Pro Forma
Historical Business Operations Debit Credit Ralcorp
------------ --------- ---------- -------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $ 292.9 $ (141.9) $ (29.2) $ 121.8
------------ --------- ---------- -------- --------- --------
Costs and Expenses
Cost of products sold 141.2 (34.7) (25.7) 1.0 (a) 81.8
Selling, general and
administrative 38.4 (14.9) (3.4) 5.5 (a) 25.6
Advertising and promotion 80.3 (66.5) (1.4) 12.4
Equity earnings in
Vail Resorts 1.2 (b) (1.2)
Interest expense 6.9 (1.1) (2.8) 2.7 (c) 0.3
Restructuring charge 4.6 -- 4.6
------------ --------- ---------- -------- --------- --------
271.4 (117.2) (33.3) 6.5 3.9 123.5
------------ --------- ---------- -------- --------- --------
Earnings before
Income Taxes 21.5 (24.7) 4.1 (6.5) (3.9) (1.7)
Income Taxes 8.4 (9.5) 1.6 1.1 (d) (0.6)
------------ --------- ---------- -------- --------- --------
Net Earnings $ 13.1 $ (15.2) $ 2.5 $ (6.5) $ (5.0) $ (1.1)
============ ========= ========== ======== ========= ========
Earnings per common share (e) $ .40 $ (.03)
============ ========
Outstanding shares of common stock (e) 32.9 32.9
============ ========
</TABLE>
12
<PAGE> 15
RALCORP HOLDINGS, INC.
PRO FORMA COMBINED STATEMENT OF EARNINGS
(in millions except per share data)
Year Ended September 30, 1996
<TABLE>
<CAPTION>
Pro Forma
Adjustments
Ralcorp Branded Resort ------------------------ Pro Forma
Historical Business Operations Debit Credit Ralcorp
---------- -------- ---------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $ 1,027.4 $ (386.7) $ (135.4) $ 505.3
---------- -------- ---------- ------- ------- --------
Costs and Expenses
Cost of products sold 536.8 (114.1) (91.7) 5.7 (a) 336.7
Selling, general and
administrative 177.6 (52.5) (14.6) 15.3 (a) 125.8
Advertising and promotion 233.3 (162.5) (6.1) 64.7
Equity earnings in
Vail Resorts 4.5 (b) (4.5)
Interest expense 26.8 (4.2) (10.5) 11.1 (c) 1.0
Nonrecurring charge 109.5 109.5
Restructuring charge 16.5 (2.5) 14.0
---------- -------- ---------- ------- ------- --------
1,100.5 (335.8) (122.9) 21.0 15.6 647.2
---------- -------- ---------- ------- ------- --------
Earnings before
Income Taxes (73.1) (50.9) (12.5) (21.0) (15.6) (141.9)
Income Taxes (26.3) (19.3) (5.3) 2.1 (d) (53.0)
---------- -------- ---------- ------- ------- --------
Net Earnings $ (46.8) $ (31.6) $ (7.2) $ (21.0) $ (17.7) $ (88.9)
========== ======== ========== ======= ======= ========
Earnings per common share (e) $ (1.42) $ (2.69)
========== ========
Outstanding shares of common stock (e) 33.0 33.0
========== ========
</TABLE>
13
<PAGE> 16
RALCORP HOLDINGS, INC.
PRO FORMA COMBINED BALANCE SHEET
(in millions except shares)
December 31, 1996
<TABLE>
<CAPTION>
Pro Forma
Ralcorp Branded Resort Adjustments Pro Forma
Historical Business Operations Debit Credit Ralcorp
---------- -------- ---------- ----------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Assets D
Current assets:
Cash $ - $ - $ - $ 17.7 (f) $ 17.7 (g) $ -
Receivables, less allowance for
doubtful accounts 74.0 (7.8) 66.2
Inventories 92.4 (14.9) (5.5) 72.0
Prepaid expenses 14.5 (0.3) 0.7 (h) 13.5
-------- ------ ------- ------ ------ ------
Total current assets 180.9 (14.9) (13.6) 17.7 18.4 151.7
Equity investment in Vail Resorts 37.3 (i) 37.3
Deferred income taxes 22.6 12.3 2.8 (h) 37.7
Investments and other assets 105.6 (24.4) (95.2) 24.4 (f) 10.4
-------- ------ ------- ------ ------ ------
Property at cost 530.3 (85.8) (209.1) 235.4
Accumulated depreciation 222.9 (49.8) (74.6) 98.5
-------- ------ ------- ------ ------ ------
307.4 (36.0) (134.5) - - 136.9
-------- ------ ------- ------ ------ ------
Total assets $616.5 $(75.3) $(231.0) $ 82.2 $ 18.4 $374.0
======== ====== ======= ====== ====== ======
Liabilities and Shareholders' Equity
Current Liabilities:
Current maturities of
long-term debt $0.3 ($0.3) $0.0
Accounts payable and accrued
liabilities 118.2 (29.2) (26.7) 62.3
-------- ------ ------- ------ ------ ------
Total current liabilities 118.5 (29.2) (27.0) - - 62.3
Long-term debt 335.0 (164.7) $212.4 (j) 42.1 (f) -
Other liabilities 42.3 (4.2) (2.0) 36.1
Commitments and contingencies
General Mills common stock 357.6 (j) 357.6 (k) -
Equity:
Shareholders' equity:
Common stock -- $.01 par
value, issued shares
33,924,848, outstanding
shares 32,883,355 0.3 0.3
Capital in excess of
par value 130.7 22.4 (l) 108.3
Retained (deficit) earnings 12.9 4.7 (g) 516.4 (j) 167.0
357.6 (k)
Common stock in treasury, at
cost -- 989,742 shares (22.4) 22.4 (l) -
Unearned portion of restricted
stock awards (0.8) 0.8 (m) -
-------- ------ ------- ------ ------ ------
Total shareholders' equity 120.7 - - 384.7 539.6 275.6
-------- ------ ------- ------ ------ ------
Total liabilities and
shareholder's equity $616.5 $(33.4) $(193.7) $597.1 $581.7 $374.0
======== ====== ======= ====== ====== ======
</TABLE>
14
<PAGE> 17
RALCORP HOLDINGS, INC.
Notes to 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 Ralcorp upon completion of the sale of the Branded
Business.
(b) To reflect Ralcorp's equity earnings in Vail Resorts. The equity
earnings include $.5 million, for the three months ended December 31,
1996, and $1.9 million, for the fiscal year ended September 30, 1996, 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 Ralcorp's approximate 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 $212.4 million
of Ralcorp debt upon completion of the sale of the Branded Business.
Residual interest expense shown of $.3 million, for the three months ended
December 31, 1996, and $1.0 million, for the fiscal year ended September
30, 1996, 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 Ralcorp earnings
per share is based on the weighted average number of Ralcorp common shares
outstanding during the three months ended December 31, 1996 and during the
fiscal year ended September 30, 1996.
(f) To record $42.1 million of new indebtedness to be incurred by 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 $42.1
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 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 Ralcorp.
(j) To record the disposition of the Branded Business and the related gain on
sale. Proceeds of $570 million are comprised of approximately $357.6
million of General Mills common stock, received by Ralcorp shareholders,
and the assumption of approximately $212.4 million in debt and accrued
interest by General Mills. Following is the calculation of the gain on
sale to be recorded by Ralcorp (in millions):
<TABLE>
<S> <C>
Proceeds $570.0
Net assets of Branded Business (41.9) (n)
Current deferred tax assets (.7) (h)
Deferred tax liabilities 2.8 (h)
Transaction expenses (17.7) (g)
Cash settlement of stock options 4.7 (g)
Accelerated amortization of restricted stock awards (.8) (m)
----------
Gain on sale $516.4 (j)
==========
</TABLE>
(k) To reflect the deemed distribution of approximately $357.6 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.
15
<PAGE> 18
(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 of the Branded
Business will not be transferred to General Mills. The most significant
items not transferred are (i) the historical receivables associated with
the Branded Business, which are being retained by 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 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 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 "Branded Business" column because the transfer of
Ralcorp debt is separately reflected under the column "Pro Forma
Adjustments."
16
<PAGE> 19
PART II OTHER INFORMATION
There is no information to be reported under any items except indicated below.
Item 6 Exhibits and Reports on Form 8-K.
(a) Exhibits
3.1 Restated Articles of Incorporation of the Company
10.1 Credit Agreement dated as of January 31, 1997 among Ralcorp Holdings,
Inc., the Lenders named therein and the First National Bank of
Chicago, as Agent
10.2 Reorganization Agreement dated as of January 31, 1997 by and among
Ralcorp Holdings, Inc., New Ralcorp Holdings, Inc., Ralston Foods,
Inc., Chex, Inc. and General Mills, Inc.
10.3 Trademark Agreement dated as of January 31, 1997 by and among Ralcorp
Holdings, Inc., New Ralcorp Holdings, Inc. and Chex, Inc.
10.4 Technology Agreement dated as of January 31, 1997 by and among Ralcorp
Holdings, Inc., New Ralcorp Holdings, Inc. and Chex, Inc.
10.5 Tax Sharing Agreement dated as of January 31, 1997 between Ralcorp
Holdings, Inc. and New Ralcorp Holdings, Inc.
10.6 Transition Services - Supply Agreement dated as of January 31, 1997
between Chex, Inc. and New Ralcorp Holdings, Inc.
10.7 Second Amendment to Agreement and Plan of Merger dated January 29,
1997 by and among Ralcorp Holdings, Inc., General Mills, Inc. and
General Mills Missouri, Inc.
10.8 Third Amendment to Agreement and Plan of Merger dated January 31, 1997
by and among Ralcorp Holdings, Inc., General Mills, Inc. and General
Mills Missouri, Inc.
10.9 Shareholder Agreement dated as of January 3, 1997 among Vail Resorts
Inc., Ralston Foods, Inc. and Apollo Ski Partners L.P.
27 Financial Data Schedule
(b) Reports of Form 8-K
(i) On January 31, 1997, the Company filed a report on Form 8-K
announcing the completion of its spin-off and the change of
the Company's name from "New Ralcorp Holdings, Inc." to
"Ralcorp Holdings, Inc."
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RALCORP HOLDINGS, INC.
By: /s/ T. G. Granneman
----------------------------------
Duly Authorized Signatory, and
Chief Accounting Officer
February 13, 1997
17
<PAGE> 20
RALCORP HOLDINGS, INC.
FORM 10-Q
DECEMBER 31, 1996
EXHIBIT INDEX
3.1 Restated Articles of Incorporation of the Company
10.1 Credit Agreement dated as of January 31, 1997 among Ralcorp Holdings,
Inc., the Lenders named therein and the First National Bank of
Chicago, as Agent
10.2 Reorganization Agreement dated as of January 31, 1997 by and among
Ralcorp Holdings, Inc., New Ralcorp Holdings, Inc., Ralston Foods,
Inc., Chex, Inc. and General Mills, Inc.
10.3 Trademark Agreement dated as of January 31, 1997 by and among Ralcorp
Holdings, Inc., New Ralcorp Holdings, Inc. and Chex, Inc.
10.4 Technology Agreement dated as of January 31, 1997 by and among Ralcorp
Holdings, Inc., New Ralcorp Holdings, Inc. and Chex, Inc.
10.5 Tax Sharing Agreement dated as of January 31, 1997 between Ralcorp
Holdings, Inc. and New Ralcorp Holdings, Inc.
10.6 Transition Services - Supply Agreement dated as of January 31, 1997
between Chex, Inc. and New Ralcorp Holdings, Inc.
10.7 Second Amendment to Agreement and Plan of Merger dated January 29,
1997 by and among Ralcorp Holdings, Inc., General Mills, Inc. and
General Mills Missouri, Inc.
10.8 Third Amendment to Agreement and Plan of Merger dated January 31, 1997
by and among Ralcorp Holdings, Inc., General Mills, Inc. and General
Mills Missouri, Inc.
10.9 Shareholder Agreement dated as of January 3, 1997 among Vail Resorts
Inc., Ralston Foods, Inc. and Apollo Ski Partners L.P.
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 3.1
RESTATED ARTICLES OF INCORPORATION
OF RALCORP HOLDINGS, INC.
* * *
ARTICLE ONE - NAME
The name of the corporation is Ralcorp Holdings, Inc. (herein referred to
as the "Corporation").
ARTICLE TWO - OFFICE
The 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 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 Restated 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
<PAGE> 2
to the requirements of the GBCL and the provisions of these Restated 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 Restated 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;
(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.
2
<PAGE> 3
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 Board of Directors of the
Corporation shall be three. Hereafter, 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 Restated 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 Restated Articles of
Incorporation, the term "entire Board of Directors" means the total number of
directors fixed by, or in accordance with, these Restated 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-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.
3
<PAGE> 4
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
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
4
<PAGE> 5
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.
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
5
<PAGE> 6
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 (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
6
<PAGE> 7
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 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.
7
<PAGE> 8
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 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,
8
<PAGE> 9
executors and administrators of such a person. Notwithstanding any other
provision in these Restated 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
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 Restated 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 RESTATED ARTICLES OF INCORPORATION
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in these Restated 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.
9
<PAGE> 1
EXHIBIT 10.1
$50,000,000
CREDIT AGREEMENT
AMONG
RALCORP HOLDINGS, INC.
as Borrower,
THE LENDERS NAMED HEREIN
and
THE FIRST NATIONAL BANK OF CHICAGO,
as Agent
DATED AS OF
January 31, 1997
ARRANGED BY
FIRST CHICAGO CAPITAL MARKETS, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I DEFINITIONS 1
ARTICLE II THE FACILITY 17
2.1. The Facility 17
2.1.1. Description of Facility 17
2.1.2. Facility Amount 18
2.1.3. Availability of Facility 18
2.2. Ratable Advances 18
2.2.1. Ratable Advances 18
2.2.2 Ratable Advance Rate Options 18
2.2.3. Method of Selecting Types and Interest Periods for Ratable
Advances 19
2.2.4. Conversion and Continuation of Outstanding Ratable Advances 19
2.3. Competitive Bid Advances 20
2.3.1. Competitive Bid Option 20
2.3.2. Competitive Bid Quote Request 20
2.3.3. Invitation for Competitive Bid Quotes 21
2.3.4. Submission and Contents of Competitive Bid Quotes 21
2.3.5. Notice to Borrower 22
2.3.6. Acceptance and Notice by Borrower 22
2.3.7. Allocation by Agent 23
2.4. Swing Line Loans 23
2.5. Availability of Funds 25
2.6. Commitment Fee; Reductions in Aggregate Commitment 26
2.7. Minimum Amount of Each Ratable Advance 26
2.8. Optional Principal Payments 26
2.9. Changes in Interest Rate, etc. 26
2.10. Rates Applicable After Default 27
2.11. Method of Payment 27
2.12. Notes; Telephonic Notices 27
2.13. Interest Payment Dates; Interest and Fee Basis 27
2.14. Notification of Advances, Interest Rates, Prepayments, Commitment
Reductions and Issuance Requests 28
2.15. Lending Installations 28
2.16. Non-Receipt of Funds by the Agent 28
2.17. Taxes 29
2.18. Agent's Fees 30
2.19. Facility Letters of Credit 30
2.19.1. Issuance of Facility Letters of Credit 30
2.19.2 Participating Interests 30
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
2.19.3 Facility Letter of Credit Reimbursement Obligations 31
2.19.4 Procedure for Issuance 32
2.19.5 Nature of the Lenders' Obligations 33
2.19.6 Facility Letter of Credit Fees 33
2.20. Extension of Facility Termination Date 34
ARTICLE III CHANGE IN CIRCUMSTANCES 34
3.1. Yield Protection 34
3.2. Changes in Capital Adequacy Regulations 35
3.3. Availability of Types of Advances 35
3.4. Funding Indemnification 36
3.5. Lender Statements; Survival of Indemnity 36
ARTICLE IV CONDITIONS PRECEDENT 36
4.1. Initial Loans and Facility Letters of Credit 36
4.2. Each Future Advance and Facility Letter of Credit 38
ARTICLE V REPRESENTATIONS AND WARRANTIES 39
5.1. Corporate Existence and Standing 39
5.2. Authorization and Validity 39
5.3. Compliance with Laws and Contracts 39
5.4. Governmental Consents 40
5.5. Financial Statements 40
5.6. Material Adverse Change 40
5.7. Taxes 40
5.8. Litigation and Contingent Obligations 41
5.9. Subsidiaries and Capitalization 41
5.10. ERISA 41
5.11. Defaults 42
5.12. Federal Reserve Regulations 42
5.13. Investment Company; Public Utility Holding Company Act 42
5.14. Certain Fees 42
5.15. Solvency 42
5.16. Ownership of Properties 43
5.17. Indebtedness 43
5.18. Subordinated Indebtedness 43
5.19. Employee Controversies 43
5.20. Material Agreements 43
5.22. Environmental Laws 44
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
5.23. Insurance 44
5.24. Disclosure 44
ARTICLE VICOVENANTS 44
6.1. Financial Reporting 44
6.2. Use of Proceeds 46
6.3. Notice of Default. 46
6.4. Conduct of Business 46
6.5. Taxes 46
6.6. Insurance 46
6.7. Compliance with Laws 46
6.8. Maintenance of Properties 47
6.9. Inspection 47
6.10. Capital Stock and Dividends 47
6.11. Indebtedness 47
6.12. Merger 48
6.13. Sale of Assets 48
6.14. Sale of Accounts 48
6.15. Investments and Purchases 48
6.16. Contingent Obligations 49
6.17. Liens 49
6.18. Lease Rentals 50
6.19. Affiliates 50
6.20. Subordinated Indebtedness; Other Indebtedness 51
6.21. Environmental Matters 51
6.22. Change in Corporate Structure; Fiscal Year 51
6.23. Inconsistent Agreements 51
6.24. Financial Covenants 51
6.24.1. Adjusted Net Worth 51
6.24.2. Leverage Ratio 52
6.24.3. Interest Expense Coverage Ratio 52
6.25. ERISA Compliance 52
6.26. Material Subsidiaries 53
ARTICLE VII DEFAULTS 53
ARTICLE VIII ACCELERATION, WAIVERS, AMENDMENTS AND
REMEDIES 54
8.1. Acceleration 54
8.2. Amendments 55
8.3. Preservation of Rights 56
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<S> <C>
ARTICLE IX GENERAL PROVISIONS 56
9.1. Survival of Representations 56
9.2. Governmental Regulation 56
9.3. Taxes 56
9.4. Headings 56
9.5. Entire Agreement 56
9.6. Several Obligations; Benefits of this Agreement 57
9.7. Expenses; Indemnification 57
9.8. Numbers of Documents 57
9.9. Accounting 57
9.10. Severability of Provisions 57
9.11. Nonliability of Lenders 58
9.12. CHOICE OF LAW 58
9.13. CONSENT TO JURISDICTION 58
9.14. WAIVER OF JURY TRIAL 58
9.15. Disclosure 59
9.16. Counterparts 59
9.17. Confidentiality 59
ARTICLE X THE AGENT 59
10.1. Appointment 59
10.2. Powers 60
10.3. General Immunity 60
10.4. No Responsibility for Loans, Recitals, etc. 60
10.5. Action on Instructions of Lenders 60
10.6. Employment of Agents and Counsel 60
10.7. Reliance on Documents; Counsel 61
10.8. Agent's Reimbursement and Indemnification 61
10.9. Notice of Default 61
10.10. Rights as a Lender 61
10.11. Lender Credit Decision 61
10.12. Successor Agent 62
ARTICLE XI SETOFF; RATABLE PAYMENTS 62
11.1. Setoff 62
11.2. Ratable Payments 62
</TABLE>
-iv-
<PAGE> 6
ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS;
PARTICIPATIONS 63
12.1. Successors and Assigns 63
12.2. Participations. 63
12.2.1. Permitted Participants; Effect. 63
12.2.2. Voting Rights 64
12.2.3. Benefit of Setoff 64
12.3. Assignments 64
12.3.1. Permitted Assignments 64
12.3.2. Effect; Effective Date 64
12.4. Dissemination of Information 64
12.5. Tax Treatment 65
ARTICLE XIII NOTICES 65
13.1. Giving Notice 65
13.2. Change of Address 65
-v-
<PAGE> 7
EXHIBITS
Exhibit A - Note (Ratable Loan)
Exhibit B - Note (Competitive Bid Loan)
Exhibit C - Competitive Bid Quote Request
Exhibit D - Invitation for Competitive Bid Quotes
Exhibit E - Competitive Bid Quote
Exhibit F - Note (Swing Line Loan)
Exhibit G - Compliance Certificate
Exhibit H - Assignment Agreement
SCHEDULES
Schedule 5.5 - Borrower Consolidated Pro Forma
Schedule 5.8 - Material Contingent Obligations
Schedule 5.9 - Subsidiaries and Capitalization
Schedule 5.10 - ERISA
Schedule 5.14 - Brokers' Fees
Schedule 5.16 - Properties
Schedule 5.17 - Indebtedness
Schedule 6.15 - Investments
Schedule 6.17 - Liens
-vi-
<PAGE> 8
CREDIT AGREEMENT
This Credit Agreement, dated as of January 31, 1997, is among RALCORP
HOLDINGS, INC., a Missouri corporation, the Lenders and THE FIRST NATIONAL BANK
OF CHICAGO, individually and as Agent.
R E C I T A L S:
A. The Borrower has requested the Lenders to make financial accommodations to
it in the aggregate principal amount of $50,000,000, the proceeds of which the
Borrower will use for the general corporate needs of the Borrower and its
Subsidiaries.
A. The Lenders are willing to extend such financial accommodations on the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and undertakings
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower, the Lenders and the
Agent hereby agree as follows:
I. ARTICLE
DEFINITIONS
As used in this Agreement:
"Absolute Rate" means, with respect to an Absolute Rate Loan made by a
given Lender for the relevant Absolute Rate Interest Period, the rate of
interest per annum (rounded to the nearest 1/100 of 1%) offered by such Lender
and accepted by the Borrower.
"Absolute Rate Advance" means a borrowing hereunder consisting of the
aggregate amount of the several Absolute Rate Loans made by some or all of the
Lenders to the Borrower at the same time and for the same Interest Period.
"Absolute Rate Auction" means a solicitation of Competitive Bid Quotes
setting forth Absolute Rates pursuant to Section 2.3.
"Absolute Rate Interest Period" means, with respect to an Absolute Rate
Advance, a period of not less than 7 and not more than 180 days commencing on a
Business Day selected by the Borrower pursuant to this Agreement. If such
Absolute Rate Interest
-1-
<PAGE> 9
Period would end on a day which is not a Business Day, such Absolute Rate
Interest Period shall end on the next succeeding Business Day.
"Absolute Rate Loan" means a Loan which bears interest at the Absolute
Rate.
"Adjusted Net Income" means, for any computation period (a) Net Income for
such period, minus (plus) (b) earnings (losses) during such period attributable
to the equity investment by the Borrower and its Subsidiaries in Vail Resorts,
Inc. and included in the computation of Net Income for such period, plus (c) to
the extent not included in the computation of Net Income for such period, the
sum of all proceeds in excess of book value (net of related costs, expenses,
fees and taxes) received by the Borrower or any Subsidiary of the Borrower
during such period from the sale or other disposition of the capital stock of
Vail Resorts, Inc.
"Adjusted Net Worth" means at any date (a) Net Worth minus (b) the value
of the equity investment of the Borrower and its Subsidiaries in Vail Resorts,
Inc. included in the computation of Net Worth at such date.
"Advance" means a borrowing hereunder consisting of the aggregate amount
of the several Loans made by some or all of the Lenders to the Borrower on the
same Borrowing Date, of the same Type (or on the same interest basis in the
case of Competitive Bid Advances) and, when applicable, for the same Interest
Period and includes a Competitive Bid Advance and a Swing Line Loan.
"Affiliate" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person. A Person
shall be deemed to control another Person if the controlling Person owns 10% or
more of any class of voting securities (or other ownership interests) of the
controlled Person or possesses, directly or indirectly, the power to direct or
cause the direction of the management or policies of the controlled Person,
whether through ownership of stock, by contract or otherwise.
"Agent" means First Chicago in its capacity as agent for the Lenders
pursuant to Article X, and not in its individual capacity as a Lender, and any
successor Agent appointed pursuant to Article X.
"Aggregate Commitment" means the aggregate of the Commitments of all the
Lenders hereunder. The initial Aggregate Commitment is $50,000,000.
"Agreement" means this Credit Agreement, as it may be amended, modified
or restated and in effect from time to time.
"Agreement Accounting Principles" means generally accepted accounting
principles as in effect from time to time, applied in a manner consistent with
those used in preparing the Financial Statements; provided, however, that for
purposes of all computations required to be made with respect to compliance by
the Borrower with
-2-
<PAGE> 10
Section 6.24, such term shall mean generally accepted accounting principles as
in effect on the date hereof, applied in a manner consistent with those used in
preparing the Financial Statements.
"Alternate Base Rate" means, for any day, a rate of interest per annum
equal to the sum of (a) the higher of (i) the Corporate Base Rate for such day
and (ii) the sum of the Federal Funds Effective Rate for such day plus 1/2% per
annum plus (b) except in the case of Swing Line Loans, the Utilization Margin
for such day.
"Alternate Base Rate Advance" means a Ratable Advance which bears interest
at the Alternate Base Rate.
"Alternate Base Rate Loan" means a Ratable Loan which bears interest at
the Alternate Base Rate.
"Alternate Swing Line Rate" means a rate agreed upon from time to time by
the Borrower and the Swing Line Lender.
"Applicable Commitment Fee Percentage" means, subject to the last sentence
of this definition, for any period, the applicable of the following percentages
in effect with respect to such period as the Leverage Ratio shall fall within
the indicated ranges:
Leverage Ratio Applicable Commitment Fee
- ---------------------------------------------------------------------------
Percentage
- ----------
Greater than But less than or Equal to
- ------------ -------------------------
2.0:1.0 ------- .20%
1.0:1.0 2.0:1.0 .175%
.5:1.0 1.0:1.0 .15%
-- .5:1.0 .125%
The Leverage Ratio shall be calculated by the Borrower as of the end of each of
its Fiscal Quarters commencing June 30, 1997 and shall be reported to the Agent
pursuant to a certificate executed by the chief financial officer, treasurer or
controller of the Borrower and delivered in accordance with Section 6.1(d)
hereof. The Applicable Commitment Fee Percentage shall be adjusted, if
necessary, quarterly as of the tenth day after the required delivery date for
the certificate referenced above; provided, that if such certificate, together
with the financial statements to which such certificate relates, are not
delivered by such tenth day, then the Applicable Commitment Fee Percentage
shall be equal to .20% for the relevant quarter. Until adjusted as described
above after June 30, 1997 the Applicable Commitment Fee Percentage shall be
equal to .175%.
"Applicable Eurodollar Margin" means, subject to the last sentence of this
definition, for any period, the applicable of the following percentages in
effect with respect to such period as the Leverage Ratio shall fall within the
indicated ranges:
-3-
<PAGE> 11
Leverage Ratio Applicable Eurodollar Margin
---------------------------------------------------------------------------
Greater than But less than or Equal to
------------ -------------------------
2.0:1.0 ------- .625%
1.0:1.0 2.0:1.0 .50%
.5:1.0 1.0:1.0 .375%
-- .5:1.0 .25%
The Leverage Ratio shall be calculated by the Borrower as of the end of each of
its Fiscal Quarters commencing June 30, 1997 and shall be reported to the Agent
pursuant to a certificate executed by the chief financial officer, treasurer or
controller of the Borrower and delivered in accordance with Section 6.1(d)
hereof. The Applicable Eurodollar Margin shall be adjusted, if necessary,
quarterly as of the tenth day after the required delivery date for the
certificate referenced above; provided, that if such certificate, together with
the financial statements to which such certificate relates, are not delivered
by such tenth day, then the Applicable Eurodollar Margin shall be equal to
.625% for the relevant quarter. Until adjusted as described above after June
30, 1997, the Applicable Eurodollar Margin shall be equal to .50%.
"Arranger" means First Chicago Capital Markets, Inc. and its successors.
"Article" means an article of this Agreement unless another document is
specifically referenced.
"Asset Disposition" means any sale, transfer or other disposition of any
asset of the Borrower or any Subsidiary in a single transaction or in a series
of related transactions (other than the sale of inventory or unused or obsolete
equipment in the ordinary course).
"Authorized Officer" means any of the president, chief financial officer,
treasurer or controller of the Borrower, acting singly.
"Bankruptcy Code" means Title 11, United States Code, sections 1 et seq.,
as the same may be amended from time to time, and any successor thereto or
replacement therefor which may be hereafter enacted.
"Borrower" means Ralcorp Holdings, Inc., a Missouri corporation formerly
known as New Ralcorp Holdings, Inc., and its successors and assigns.
"Borrowing Date" means a date on which an Advance is made or a Facility
Letter of Credit is issued hereunder.
"Business Day" means (a) with respect to any borrowing, payment or rate
selection of Eurodollar Advances, a day (other than a Saturday or Sunday) on
which banks generally are open in Chicago for the conduct of substantially all
of their commercial lending activities and on which dealings in United States
dollars are carried
-4-
<PAGE> 12
on in the London interbank market, and (b) for all other purposes, a day (other
than a Saturday or Sunday) on which banks generally are open in Chicago for the
conduct of substantially all of their commercial lending activities.
"Capitalized Lease" of a Person means any lease of Property by such Person
as lessee which would be capitalized on a balance sheet of such Person prepared
in accordance with Agreement Accounting Principles.
"Capitalized Lease Obligations" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown as a
liability on a balance sheet of such Person prepared in accordance with
Agreement Accounting Principles.
"Change" is defined in Section 3.2.
"Change in Control" means (a) the acquisition by any Person, or two or
more Persons acting in concert, including without limitation any acquisition
effected by means of any transaction contemplated by Section 6.12, of
beneficial ownership (within the meaning of Rule 13d-3 of the Securities and
Exchange Commission under the Securities Exchange Act of 1934) of 20% or more
of the outstanding shares of voting stock of the Borrower, or (b) during any
period of 25 consecutive calendar months, commencing on the date of this
Agreement, the ceasing of those individuals (the "Continuing Directors") who
(i) were directors of the Borrower on the first day of each such period or (ii)
subsequently became directors of the Borrower and whose initial election or
initial nomination for election subsequent to that date was approved by a
majority of the Continuing Directors then on the board of directors of the
Borrower, to constitute a majority of the board of directors of the Borrower.
"Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"Commercial Letter of Credit" means a trade or commercial Facility Letter
of Credit issued by an Issuer pursuant to Section 2.19 hereof.
"Commitment" means, for each Lender, the obligation of such Lender to make
Loans (other than Swing Line Loans) and participate in Facility Letters of
Credit not exceeding the amount set forth opposite its signature below and as
set forth in any Notice of Assignment relating to any assignment which has
become effective pursuant to Section 12.3.2, as such amount may be modified
from time to time pursuant to the terms hereof.
"Competitive Bid Advance" means a borrowing hereunder consisting of the
aggregate amount of the several Competitive Bid Loans made by some or all of
the Lenders to the Borrower at the same time and for the same Interest Period.
"Competitive Bid Borrowing Notice" is defined in Section 2.3.6.
-5-
<PAGE> 13
"Competitive Bid Loan" means a Eurodollar Bid Rate Loan or an Absolute
Rate Loan, or both, as the case may be.
"Competitive Bid Margin" means the margin above or below the applicable
Eurodollar Base Rate offered for a Eurodollar Bid Rate Loan, expressed as a
percentage (rounded to the nearest 1/100 of 1%) to be added or subtracted from
such Eurodollar Base Rate.
"Competitive Bid Note" means a promissory note in substantially the form
of Exhibit B hereto, with appropriate insertions, duly executed and delivered
to the Agent by the Borrower for the account of a Lender and payable to the
order of such Lender, including any amendment, modification, renewal or
replacement of such promissory note.
"Competitive Bid Quote" means a Competitive Bid Quote substantially in the
form of Exhibit E hereto completed and delivered by a Lender to the Agent in
accordance with Section 2.3.4.
"Competitive Bid Quote Request" means a Competitive Bid Quote Request
substantially in the form of Exhibit C hereto completed and delivered by the
Borrower to the Agent in accordance with Section 2.3.2.
"Condemnation" is defined in Section 7.8.
"Consolidated" or "consolidated", when used in connection with any
calculation, means a calculation to be determined on a consolidated basis for
the Borrower and its Subsidiaries in accordance with Agreement Accounting
Principles.
"Consolidated Person" means, for the taxable year of reference, each
Person which is a member of the affiliated group of the Borrower if
Consolidated returns are or shall be filed for such affiliated group for
federal income tax purposes or any combined or unitary group of which the
Borrower is a member for state income tax purposes.
"Contingent Obligation" of a Person means any agreement, undertaking or
arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes or
is contingently liable upon, the obligation or liability of any other Person,
or agrees to maintain the net worth or working capital or other financial
condition of any other Person, or otherwise assures any creditor of such other
Person against loss, including, without limitation, any comfort letter,
operating agreement or take-or-pay contract or application for a Letter of
Credit.
"Controlled Group" means all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common control
which, together with the Borrower or any of its Subsidiaries, are treated as a
single employer under Section 414 of the Code.
-6-
<PAGE> 14
"Conversion/Continuation Notice" is defined in Section 2.9.
"Corporate Base Rate" means a rate per annum equal to the corporate base
rate of interest announced by First Chicago from time to time, changing when
and as said corporate base rate changes. The Corporate Base Rate is a
reference rate and does not necessarily represent the lowest or best rate of
interest actually charged to any customer. First Chicago may make commercial
loans or other loans at rates of interest at, above or below the Corporate Base
Rate.
"Default" means an event described in Article VII.
"Divestitures" means collectively, the sale by Old Ralcorp of its
brand-name cereal and snack food businesses to General Mills Missouri, Inc. and
the sale by the Borrower of stock of Ralston Resorts, Inc. to Vail Resorts,
Inc.
"EBIT" means, for any applicable computation period, the Borrower's and
Subsidiaries' Net Income on a consolidated basis, plus (a) Federal, state,
local and foreign income and franchise taxes paid or accrued during such period
and (b) interest expenses paid or accrued during such period.
"EBITDA" means, for any applicable computation period, the Borrower's and
Subsidiaries' Net Income on a consolidated basis, plus (a) Federal, state,
local and foreign income and franchise taxes paid or accrued during such
period, (b) interest expenses paid or accrued during such period, and (c)
amortization and depreciation deducted in determining Net Income for such
period.
"Environmental Claims" means all claims, investigations, litigation,
administrative proceedings, notices, requests for information, whether pending
or threatened, or judgements or orders, however asserted, by any Governmental
Authority or other Person alleging potential liability or responsibility for
any violation of any Environmental Laws, or for any Release or injury to the
environment.
"Environmental Laws" means all federal, state and local laws, statutes,
common law duties, rules, regulations, ordinances and codes, together with all
administrative orders, direct duties, requests, licenses, approvals,
certificates, decrees, standards, permits and other authorizations of, and
agreements with, any Governmental Authority, in each case relating to
environmental, health, safety and land use matters, including without
limitations, chemical substances, air emissions, effluent discharges and the
storage, treatment, transport and disposal of Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Eurodollar Advance" means a Eurodollar Bid Rate Advance or a Eurodollar
Ratable Advance, or both, as the case may be.
-7-
<PAGE> 15
"Eurodollar Auction" means a solicitation of Competitive Bid Quotes
setting forth Eurodollar Bid Rates pursuant to Section 2.3.
"Eurodollar Base Rate" means, with respect to a Eurodollar Advance for the
relevant Eurodollar Interest Period, the rate determined by the Agent to be the
rate at which deposits in U.S. dollars are offered by First Chicago to
first-class banks in the London interbank market at approximately 11 a.m.
(London time) two Business Days prior to the first day of such Eurodollar
Interest Period, in the approximate amount of First Chicago's relevant
Eurodollar Ratable Loan (or in the case of a Eurodollar Bid Rate Advance, in an
amount comparable to the amount of such Advance) and having a maturity
approximately equal to such Eurodollar Interest Period; provided, that the
Eurodollar Base Rate for a Eurodollar Ratable Advance having a seven day
Interest Period shall be determined by reference to a maturity of one month.
"Eurodollar Bid Rate" means, with respect to a Eurodollar Bid Rate Loan
made by a given Lender for the relevant Eurodollar Interest Period, the sum of
(a) the Eurodollar Base Rate and (b) the Competitive Bid Margin offered by such
Lender and accepted by the Borrower.
"Eurodollar Bid Rate Advance" means a Competitive Bid Advance which bears
interest at a Eurodollar Bid Rate.
"Eurodollar Bid Rate Loan" means a Loan which bears interest at the
Eurodollar Bid Rate.
"Eurodollar Interest Period" means, with respect to a Eurodollar Ratable
Advance or a Eurodollar Bid Rate Advance, a period of seven days or one, two,
three or six months commencing on a Business Day selected by the Borrower
pursuant to this Agreement. A Eurodollar Interest Period of one, two, three or
six months shall end on (but exclude) the day which corresponds numerically to
such date one, two, three or six months thereafter; provided, however, that if
there is no such numerically corresponding day in such next, second, third or
sixth succeeding month, such Eurodollar Interest Period shall end on the last
Business Day of such next, second, third or sixth succeeding month. If a
Eurodollar Interest Period would otherwise end on a day which is not a Business
Day, such Eurodollar Interest Period shall end on the next succeeding Business
Day; provided, however, that if, with respect to a Eurodollar Default Period of
one, two, three or six month, said next succeeding Business Day falls in a new
month, such Eurodollar Interest Period shall end on the immediately preceding
Business Day.
"Eurodollar Loan" means a Eurodollar Ratable Loan or Eurodollar Bid Rate
Loan, or both, as the case may be.
"Eurodollar Ratable Advance" means an Advance which bears interest at a
Eurodollar Rate requested by the Borrower pursuant to Section 2.2.3.
-8-
<PAGE> 16
"Eurodollar Ratable Loan" means a Loan requested by the Borrower pursuant
to Section 2.2.3 which bears interest at a Eurodollar Rate.
"Eurodollar Rate" means, with respect to a Eurodollar Ratable Advance for
the relevant Eurodollar Interest Period, the sum of (a) the quotient of (i) the
Eurodollar Base Rate applicable to such Eurodollar Interest Period, divided by
(ii) one minus the Reserve Requirement (expressed as a decimal) applicable to
such Eurodollar Interest Period, plus (b) the Applicable Eurodollar Margin plus
(c) the Utilization Margin plus (d) only in the case of Eurodollar Ratable
Advances having a seven day Interest Period, .125%. The Eurodollar Rate shall
be rounded to the next higher multiple of 1/16 of 1% if the rate is not such a
multiple.
"Facility Letter of Credit" means a Letter of Credit issued pursuant to
Section 2.19.
"Facility Letter of Credit Obligations" means as at the time of
determination thereof, the sum of (a) the Reimbursement Obligations then
outstanding and (b) the aggregate then undrawn face amount of the then
outstanding Facility Letters of Credit.
"Facility Letter of Credit Sublimit" means an aggregate amount of
$10,000,000.
"Facility Termination Date" means January 31, 2000, as such date may be
extended pursuant to Section 2.20.
"Federal Funds Effective Rate" means, for any day, an interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day
which is a Business Day, the average of the quotations at approximately 10 a.m.
(Chicago time) on such day on such transactions received by the Agent from
three Federal funds brokers of recognized standing selected by the Agent in its
sole discretion.
"Financial Statements" is defined in Section 5.5.
"First Chicago" means The First National Bank of Chicago in its individual
capacity, and its successors.
"Fiscal Quarter" means one of the four three-month accounting periods
comprising a Fiscal Year.
"Fiscal Year" means the twelve-month accounting period ending September 30
of each year.
-9-
<PAGE> 17
"Form 10" means the Registration Statement on Form 10 for Ralcorp
Holdings, Inc. dated December 27, 1996.
"Governmental Authority" means any government (foreign or domestic) or any
state or other political subdivision thereof or any governmental body, agency,
authority, department or commission (including without limitation any taxing
authority or political subdivision) or any instrumentality or officer thereof
(including without limitation any court or tribunal) exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government and any corporation, partnership or other entity directly or
indirectly owned or controlled by or subject to the control of any of the
foregoing.
"Guarantors" means Bremner, Inc., Beech-Nut Nutrition Corporation and each
other Material Subsidiary.
"Hazardous Materials" means any toxic or hazardous waste, substance or
chemical or any pollutant, contaminant, chemical or other substance defined or
regulated pursuant to any Environmental Laws, including, without limitation,
asbestos, petroleum or crude oil.
"Indebtedness" of a Person means such Person's (a) obligations for
borrowed money, (b) obligations representing the deferred purchase price of
Property or services (other than accounts payable arising in the ordinary
course of such Person's business payable on terms customary in the trade), (c)
obligations, whether or not assumed, secured by Liens or payable out of the
proceeds or production from Property now or hereafter owned or acquired by such
Person, (d) obligations which are evidenced by notes, acceptances, or similar
instruments, (e) Capitalized Lease Obligations, (f) Rate Hedging Obligations,
(g) Contingent Obligations, (h) obligations for which such Person is obligated
pursuant to or in respect of a Facility Letter of Credit and the face amount of
any other Letter of Credit, (i) obligations under so-called "synthetic leases"
and (j) repurchase obligations or liabilities of such Person with respect to
accounts or notes receivable sold by such Person.
"Interest Expense Coverage Ratio" means for any applicable computation
period of the Borrower, the ratio of EBIT to the Borrower's and its
Subsidiaries' gross interest expenses on a consolidated basis for such period,
all as determined in accordance with Agreement Accounting Principles.
"Interest Period" means a Eurodollar Interest Period or an Absolute Rate
Interest Period. Notwithstanding the foregoing, each Swing Line Loan bearing
interest at the Alternate Swing Line Rate shall be deemed to have an Interest
Period of from one to seven days as agreed upon between the Borrower and the
Swing Line Lender.
"Investment" of a Person means any loan, advance (other than commission,
travel and similar advances to officers and employees made in the ordinary
course of business), extension of credit (other than accounts receivable
arising in the ordinary course of
-10-
<PAGE> 18
business on terms customary in the trade), deposit account or contribution of
capital by such Person to any other Person or any investment in, or purchase or
other acquisition of, the stock, partnership interests, notes, debentures or
other securities of any other Person made by such Person.
"Invitation for Competitive Bid Quotes" means an Invitation for
Competitive Bid Quotes substantially in the form of Exhibit D hereto, completed
and delivered by the Agent to the Lenders in accordance with Section 2.3.3.
"Issuance Request" is defined in Section 2.19.4.
"Issuer" means First Chicago.
"Lenders" means the lending institutions listed on the signature pages of
this Agreement and their respective successors and assigns.
"Lending Installation" means, with respect to a Lender or the Agent, any
office, branch, subsidiary or affiliate of such Lender or the Agent.
"Letter of Credit" of a Person means a letter of credit or similar
instrument which is issued upon the application of such Person or upon which
such Person is an account party or for which such Person is in any way liable.
"Letter of Credit Cash Collateral Account" is defined in Section 8.1.
Such account and the related cash collateralization shall be subject to
documentation satisfactory to the Agent.
"Leverage Ratio" means, with respect to the Borrower on a consolidated
basis with its Subsidiaries, at the end of any Fiscal Quarter, the ratio of (a)
Total Debt at the end of such Fiscal Quarter to (b) EBITDA (i) for the two
months ending March 31, 1997 multiplied by 6 in the case of the Fiscal Quarter
ending on such date, (ii) for the five months ending June 30, 1997 multiplied
by 12/5 in the case of the Fiscal Quarter ending on such date, (iii) for the
eight months ending September 30, 1997 multiplied by 3/2 in the case of the
Fiscal Quarter ending on such date, (iv) for the eleven months ending December
31, 1997 multiplied by 12/11 in the case of the Fiscal Quarter ending on such
date and (v) for the four Fiscal Quarters then ending in the case of each
Fiscal Quarter ending thereafter.
"Lien" means any security interest, lien (statutory or other), mortgage,
pledge, hypothecation, assignment, deposit arrangement, encumbrance or
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever (including, without limitation, the interest of a
vendor or lessor under any conditional sale, Capitalized Lease or other title
retention agreement).
"Loan" means, with respect to a Lender, such Lender's portion of any
Advance and "Loans" means, with respect to the Lenders, the aggregate of all
Advances. The terms "Loan" and "Loans" shall also include any Swing Line
Loans.
-11-
<PAGE> 19
"Loan Documents" means this Agreement, the Notes, the Reimbursement
Agreements and the other documents and agreements contemplated hereby and
executed by the Borrower in favor of the Agent or any Lender.
"Margin Stock" has the meaning assigned to that term under Regulation U.
"Material Adverse Effect" means a material adverse effect on (a) the
business, Property, condition (financial or other) and results of operations of
the Borrower and its Subsidiaries taken as a whole, (b) the ability of the
Borrower to perform its obligations under the Loan Documents, or (c) the
validity or enforceability of any of the Loan Documents or the rights or
remedies of the Agent or the Lenders thereunder.
"Material Subsidiary" means a Subsidiary of the Borrower organized under
the laws of a jurisdiction located within the United States and at any time
having assets with a fair market value in excess of $10,000,000.
"Moody's" means Moody's Investor Services, Inc.
"Net Income" means, for any computation period, with respect to the
Borrower on a consolidated basis with its Subsidiaries (other than any
Subsidiary which is restricted from declaring or paying dividends or otherwise
advancing funds to its parent whether by contract or otherwise), cumulative net
income earned during such period as determined in accordance with Agreement
Accounting Principles, but excluding any non-cash charges or gains which are
unusual, non-recurring or extraordinary.
"Net Worth" means at any date the consolidated common stockholders' equity
of the Borrower and its consolidated Subsidiaries determined in accordance with
Agreement Accounting Principles.
"Notes" means, collectively, the Competitive Bid Notes, the Ratable Notes
and the Swing Line Note; and "Note" means any one of the Notes.
"Notice of Assignment" is defined in Section 12.3.2.
"Obligations" means all unpaid principal of and accrued and unpaid
interest on the Notes, the Facility Letter of Credit Obligations and all other
liabilities (if any), whether actual or contingent, of the Borrower with
respect to Facility Letters of Credit, all accrued and unpaid fees and all
expenses, reimbursements, indemnities and other obligations of the Borrower to
the Lenders or to any Lender, the Agent or any indemnified party hereunder
arising under any of the Loan Documents.
"Old Ralcorp" means the Missouri corporation named Ralcorp Holdings, Inc.,
which was merged with General Mills Missouri, Inc. on January 31, 1997.
"Participants" is defined in Section 12.2.1.
-12-
<PAGE> 20
"Payment Date" means the last day of each March, June, September and
December.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.
"Person" means any natural person, corporation, firm, joint venture,
partnership, association, enterprise, limited liability company, trust or other
entity or organization, or any government or political subdivision or any
agency, department or instrumentality thereof.
"Plan" means an employee pension benefit plan, as defined in Section 3(2)
of ERISA, as to which the Borrower or any member of the Controlled Group may
have any liability.
"Property" of a Person means any and all property, whether real, personal,
tangible, intangible, or mixed, of such Person, or other assets owned, leased
or operated by such Person.
"Pro Forma" is defined in Section 5.5.
"pro-rata" means, when used with respect to a Lender, and any described
aggregate or total amount, an amount equal to such Lender's pro-rata share or
portion based on its percentage of the Aggregate Commitment or if the Aggregate
Commitment has been terminated, its percentage of the aggregate principal
amount of outstanding Advances and Facility Letter of Credit Obligations.
"Purchase" means any transaction, or any series of related transactions,
consummated on or after the date of this Agreement, by which the Borrower or
any of its Subsidiaries (a) acquires any going business or all or substantially
all of the assets of any firm, corporation or division or line of business
thereof, whether through purchase of assets, merger or otherwise, or (b)
directly or indirectly acquires (in one transaction or as the most recent
transaction in a series of transactions) at least a majority (in number of
votes) of the securities of a corporation which have ordinary voting power for
the election of directors (other than securities having such power only by
reason of the happening of a contingency) or a majority (by percentage or
voting power) of the outstanding partnership interests of a partnership.
"Purchasers" is defined in Section 12.3.1.
"Ralston Obligations" means the indemnification obligations of the
Borrower existing on the date hereof in favor of Ralston Purina Company with
respect to its guaranty of the obligations of Ralston Resorts, Inc. under the
Sports Facilities Refunding Revenue Bonds identified on Schedule 5.8.
-13-
<PAGE> 21
"Ratable Advance" means a borrowing hereunder consisting of the aggregate
amount of the several Ratable Loans made by the Lenders to the Borrower at the
same time, of the same Type and for the same Interest Period.
"Ratable Borrowing Notice" is defined in Section 2.2.3.
"Ratable Loan" means a Loan made by a Lender pursuant to Section 2.2
hereof.
"Ratable Note" means a promissory note in substantially the form of
Exhibit A hereto, duly executed and delivered to the Agent by the Borrower for
the account of each Lender and payable to the order of a Lender in the amount
of its Commitment, including any amendment, modification, renewal or
replacement of such promissory note.
"Rate Hedging Obligations" of a Person means any and all obligations of
such Person, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (a) any and all
agreements, devices or arrangements designed to protect at least one of the
parties thereto from the fluctuations of interest rates, exchange rates or
forward rates applicable to such party's assets, liabilities or exchange
transactions, including, but not limited to, dollar-denominated or
cross-currency interest rate exchange agreements, forward currency exchange
agreements, interest rate cap or collar protection agreements, forward rate
currency or interest rate options, puts and warrants, and (b) any and all
cancellations, buybacks, reversals, terminations or assignments of any of the
foregoing.
"Regulation D" means Regulation D of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor thereto or
other regulation or official interpretation of said Board of Governors relating
to reserve requirements applicable to depositary institutions.
"Regulation G" means Regulation G of the Board of Governors of the Federal
Reserve System as from time to time in effect and shall include any successor
or other regulation or official interpretation of said Board of Governors
relating to the extension of credit by Persons other than banks, brokers and
dealers for the purpose of purchasing or carrying margin stocks applicable to
such Persons.
"Regulation T" means Regulation T of the Board of Governors of the Federal
Reserve System as from time to time in effect and shall include any successor
or other regulation or official interpretation of such Board of Governors
relating to the extension of credit by securities brokers and dealers for the
purpose of purchasing or carrying margin stocks applicable to such Persons.
"Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to
the extension of credit by banks for the purpose of purchasing or carrying
margin stocks applicable to such Persons.
-14-
<PAGE> 22
"Regulation X" means Regulation X of the Board of Governors of the Federal
Reserve System as from time to time in effect and shall include any successor
or other regulation or official interpretation of said Board of Governors
relating to the extension of credit by the specified lenders for the purpose of
purchasing or carrying margin stocks applicable to such Persons.
"Reimbursement Agreement" means a letter of credit application and
reimbursement agreement in such form as the Issuer may from time to time employ
in the ordinary course of business.
"Reimbursement Obligations" means, at any time, the aggregate (without
duplication) of the Obligations of the Borrower to the Lenders, the Issuer
and/or the Agent in respect of all unreimbursed payments or disbursements made
by the Lenders, the Issuer and/or the Agent under or in respect of draws made
under the Facility Letters of Credit.
"Release" is defined in the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, 42 U.S.C. 39601 et seq.
"Rentals" of a Person means the aggregate fixed amounts payable by such
Person under any operating lease of Property.
"Reportable Event" means a reportable event as defined in Section 4043 of
ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC has by regulation waived
the requirement of Section 4043(a) of ERISA that it be notified within 30 days
of the occurrence of such event; provided, that a failure to meet the minimum
funding standard of Section 412 of the Code and of Section 302 of ERISA shall
be a Reportable Event regardless of the issuance of any such waiver of the
notice requirement in accordance with either Section 4043(a) of ERISA or
Section 412(d) of the Code.
"Required Lenders" means Lenders in the aggregate having at least 66-2/3%
of the Aggregate Commitment or, if the Aggregate Commitment has been
terminated, 66-2/3% of the sum of (a) the aggregate unpaid principal amount of
the outstanding Loans plus (b) the aggregate amount of the outstanding Facility
Letter of Credit Obligations.
"Reserve Requirement" means, with respect to an Interest Period, the
maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves) which is imposed under Regulation D on
Eurocurrency liabilities.
"Risk-Based Capital Guidelines" is defined in Section 3.2.
"S&P" means Standard & Poor's Ratings Group, a division of the McGraw-Hill
Companies.
-15-
<PAGE> 23
"Section" means a numbered section of this Agreement, unless another
document is specifically referenced.
"Single Employer Plan" means a Plan subject to Title IV of ERISA
maintained by the Borrower or any member of the Controlled Group for employees
of the Borrower or any member of the Controlled Group, other than a
Multiemployer Plan.
"Solvent" means, when used with respect to a Person, that (a) the fair
saleable value of the assets of such Person is in excess of the total amount of
the present value of its liabilities (including for purposes of this definition
all liabilities (including loss reserves as determined by such Person), whether
or not reflected on a balance sheet prepared in accordance with Agreement
Accounting Principles and whether direct or indirect, fixed or contingent,
secured or unsecured, disputed or undisputed), (b) such Person is able to pay
its debts or obligations in the ordinary course as they mature and (c) such
Person does not have unreasonably small capital to carry out its business as
conducted and as proposed to be conducted. "Solvency" shall have a correlative
meaning.
"Standby Letter of Credit" means a Facility Letter of Credit which is not
a Commercial Letter of Credit.
"Subordinated Indebtedness" of a Person means any Indebtedness of such
Person the payment of which is subordinated to payment of the Obligations to
the written satisfaction of the Agent.
"Subsidiary" of a Person means (a) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or
more of its Subsidiaries or by such Person and one or more of its Subsidiaries,
or (b) any partnership, association, joint venture, limited liability company
or similar business organization more than 50% of the ownership interests
having ordinary voting power of which shall at the time be so owned or
controlled. Unless otherwise expressly provided, all references herein to a
"Subsidiary" shall mean a Subsidiary of the Borrower.
"Subsidiary Guaranty" means that certain Guaranty, dated as of the date
hereof, duly executed and delivered by the Guarantors in favor of the Agent, on
behalf of the Lenders, as the same may be amended, supplemented or otherwise
modified from time to time.
"Substantial Portion" means, with respect to the Property of the Borrower
and its Subsidiaries, Property which (a) represents more than 15% of the
consolidated tangible assets of the Borrower and its Subsidiaries, as would be
shown in the consolidated financial statements of the Borrower and its
Subsidiaries as at the end of the Fiscal Quarter next preceding the date on
which such determination is made, or (b) is responsible for more than 5% of the
consolidated Net Income from continuing operations of the Borrower and its
Subsidiaries for the 12-month period ending as of the end of the Fiscal Quarter
next preceding the date of determination.
-16-
<PAGE> 24
"Swing Line Lender" means First Chicago or any other Lender as a successor
Swing Line Lender.
"Swing Line Commitment" means the obligation of the Swing Line Lender to
make Swing Line Loans hereunder in an aggregate amount at any one time
outstanding not to exceed $5,000,000. The Swing Line Commitment will
automatically and permanently terminate on the Facility Termination Date.
"Swing Line Loan" means a Loan made by the Swing Line Lender pursuant to
Section 2.4.
"Swing Line Note" means a promissory note substantially in the form of
Exhibit F hereto, duly executed and delivered to the Administrative Agent by
the Borrower and payable to the order of the Swing Line Lender in the amount of
its Swing Line Commitment, including any amendment, modification, renewal or
replacement of such promissory note.
"Termination Event" means, with respect to a Plan which is subject to
Title IV of ERISA, (a) a Reportable Event, (b) the withdrawal of the Borrower
or any other member of the Controlled Group from such Plan during a plan year
in which the Borrower or any other member of the Controlled Group was a
"substantial employer" as defined in Section 4001(a)(2) of ERISA or was deemed
such under Section 4068(f) of ERISA, (c) the termination of such Plan, the
filing of a notice of intent to terminate such Plan or the treatment of an
amendment of such Plan as a termination under Section 4041 of ERISA, (d) the
institution by the PBGC of proceedings to terminate such Plan or (e) any event
or condition which might constitute grounds under Section 4042 of ERISA for the
termination of, or appointment of a trustee to administer, such Plan.
"Thomson" means Thomson BankWatch Inc.
"Total Debt" means (a) all Indebtedness of the Borrower and its
Subsidiaries, on a consolidated basis, reflected on a balance sheet prepared in
accordance with Agreement Accounting Principles, plus, without duplication (b)
the face amount of all outstanding Letters of Credit in respect of which the
Borrower or any Subsidiary has any reimbursement obligation and the principal
amount of all Contingent Obligations of the Borrower and its Subsidiaries minus
(c) to the extent included in clause (b) above, (i) up to $15,000,000 in
aggregate face or principal amount of surety bonds and Letters of Credit
relating to workers' compensation and similar benefits and (ii) the Ralston
Obligations.
"Transferee" is defined in Section 12.4.
"Type" means, with respect to any Advance, its nature as an Alternate Base
Rate Advance, Eurodollar Advance or Absolute Rate Advance.
-17-
<PAGE> 25
"UCC" means the Illinois Uniform Commercial Code as amended or modified
and in effect from time to time.
"Unfunded Liability" means the amount (if any) by which the present value
of all vested and unvested accrued benefits under a Single Employer Plan
exceeds the fair market value of assets allocable to such benefits, all
determined as of the then most recent valuation date for such Plans using PBGC
actuarial assumptions for single employer plan terminations.
"Unmatured Default" means an event which but for the lapse of time or the
giving of notice, or both, would constitute a Default.
"Utilization Margin" means (a) .05% at all times when the sum of the
aggregate principal amount of all outstanding Loans and the aggregate amount of
Facility Letter of Credit Obligations equals or exceeds 50% of the Aggregate
Commitment and (b) 0% at all other times.
"Wholly-Owned Subsidiary" of a Person means (a) any Subsidiary all of the
outstanding voting securities of which shall at the time be owned or
controlled, directly or indirectly, by such Person or one or more Wholly-Owned
Subsidiaries of such Person, or by such Person and one or more Wholly-Owned
Subsidiaries of such Person, or (b) any partnership, association, joint
venture, limited liability company or similar business organization 100% of the
ownership interests having ordinary voting power of which shall at the time be
so owned or controlled.
"Unrefunded Swing Line Loans" is defined in Section 2.4(d).
The foregoing definitions shall be equally applicable to both the singular
and plural forms of the defined terms.
I. ARTICLE
THE FACILITY
A. The Facility.
2.1.1. Description of Facility. The Lenders hereby establish in favor of
the Borrower a revolving credit facility pursuant to which, and upon the terms
and subject to the conditions herein set out:
1. each Lender severally agrees to make Ratable Loans to the Borrower in
accordance with Section 2.2 in amounts not to exceed in the aggregate at
any one time outstanding the amount of its Commitment less (i) the amount
of such Lender's pro-rata share of the outstanding principal amount of
all Competitive Bid Advances (regardless of which Lender or Lenders made
such
-18-
<PAGE> 26
Competitive Bid Advances) exclusive of Competitive Bid Advances being
repaid substantially contemporaneously with the making of any such
Ratable Loans plus (ii) the amount of such Lender's pro-rata share of the
outstanding principal amount of all Swing Line Loans exclusive of Swing
Line Loans being repaid substantially contemporaneously with the making
of any such Ratable Loans;
1. each Lender may, in its sole discretion, make bids to make Competitive
Bid Loans to the Borrower, and make such Loans, in accordance with
Section 2.3; and
(c) the Swing Line Lender agrees to make Swing Line Loans to the
Borrower in accordance with Section 2.4.
2.1.2. Facility Amount. In no event may the sum of (a) the aggregate
principal amount of all outstanding Advances (including the Ratable Advances,
the Competitive Bid Advances and the Swing Line Loans) plus (b) the outstanding
amount of Facility Letter of Credit Obligations at any time exceed the
Aggregate Commitment. If at any time the aggregate amount of the sum of the
Loans and the Facility letter of Credit Obligations exceeds the Aggregate
Commitment, the Borrower shall repay immediately its then outstanding Loans
(first Swing Line Loans, then Ratable Loans and then Competitive Bid Loans) in
such amount as may be necessary to eliminate such excess; provided, that if an
excess remains after repayment of all outstanding Loans, then the Borrower
shall cash collateralize the Facility Letter of Credit Obligations by
depositing into the Letter of Credit Cash Collateral Account such amount as may
be necessary to eliminate such excess.
2.1.3. Availability of Facility. Subject to the terms of this Agreement,
from and including the date hereof to, but not including the Facility
Termination Date the Borrower may borrow, repay and reborrow Advances
hereunder. All outstanding Loans and Advances and all other unpaid Obligations
shall be due and payable in full by the Borrower on the Facility Termination
Date.
A. Ratable Advances.
2.2.1. Ratable Advances. Each Ratable Advance hereunder shall consist of
borrowings made from the several Lenders ratably in proportion to the amounts
of their respective Commitments. The Borrower's obligation to pay the
principal of, and interest on, the Ratable Advances shall be evidenced by the
Ratable Notes. Although the Ratable Notes shall be dated the date of the
initial Advance, interest in respect thereof shall be payable only for the
periods during which the Loans evidenced thereby are outstanding and, although
the stated amount of each Ratable Note shall be equal to the applicable
Lender's Commitment, each Ratable Note shall be enforceable, with respect to
the Borrower's obligation to pay the principal amount thereof, only to the
extent of the unpaid principal amount of the Ratable Loans at the time
evidenced thereby.
-19-
<PAGE> 27
2.2.2 Ratable Advance Rate Options. The Ratable Advances may be Alternate
Base Rate Advances or Eurodollar Ratable Advances, or a combination thereof,
selected by the Borrower in accordance with Section 2.2.3 or 2.2.4. No Ratable
Advance may mature after, or have an Interest Period which extends beyond, the
Facility Termination Date.
2.2.3. Method of Selecting Types and Interest Periods for Ratable
Advances. The Borrower shall select the Type of each Ratable Advance and, in
the case of each Eurodollar Ratable Advance, the Eurodollar Interest Period
applicable to such Ratable Advance from time to time. The Borrower shall give
the Agent irrevocable notice (a "Ratable Borrowing Notice") not later than
10:00 a.m. (Chicago time) on the Borrowing Date of each Alternate Base Rate
Advance and three Business Days before the Borrowing Date for each Eurodollar
Ratable Advance. Notwithstanding the foregoing, a Ratable Borrowing Notice for
an Alternate Base Rate Advance may be given not later than 30 minutes after the
time which the Borrower is required to reject one or more bids offered in
connection with an Absolute Rate Auction pursuant to Section 2.3.6 and a
Ratable Borrowing Notice for a Eurodollar Ratable Advance may be given not
later than 30 minutes after the time the Borrower is required to reject one or
more bids offered in connection with a Eurodollar Auction pursuant to Section
2.3.6. A Ratable Borrowing Notice shall specify:
1. the Borrowing Date, which shall be a Business Day, of such Ratable
Advance;
1. the aggregate amount of such Ratable Advance, which, when added to all
outstanding Ratable Advances, Swing Line Loans and Competitive Bid
Advances and after giving effect to the repayment of any such outstanding
Advances or Loans out of the proceeds of the requested Ratable Advance,
shall not exceed the Aggregate Commitment;
1. the Type of Advance selected; and
1. in the case of each Eurodollar Ratable Advance, the Eurodollar
Interest Period applicable thereto (which may not end after the Facility
Termination Date).
2.2.4. Conversion and Continuation of Outstanding Ratable Advances.
Alternate Base Rate Advances shall continue as Alternate Base Rate Advances
unless and until such Alternate Base Rate Advances are converted into
Eurodollar Ratable Advances. Each Eurodollar Ratable Advance shall continue as
a Eurodollar Ratable Advance until the end of the then applicable Eurodollar
Interest Period therefor, at which time such Eurodollar Ratable Advance shall
be automatically converted into an Alternate Base Rate Advance unless the
Borrower shall have given the Agent a Conversion/Continuation Notice requesting
that, at the end of such Eurodollar Interest Period, such Eurodollar Ratable
Advance continue as a Eurodollar Ratable Advance for the same or another
Eurodollar Interest Period. Subject to the terms of Section 2.7, the
-20-
<PAGE> 28
Borrower may elect from time to time to convert all or any part of a Ratable
Advance of any Type into any other Type or Types of Ratable Advances; provided
that any conversion of any Eurodollar Ratable Advance shall be made on, and
only on, the last day of the Eurodollar Interest Period applicable thereto.
The Borrower shall give the Agent irrevocable notice (a
"Conversion/Continuation Notice") of each conversion of a Ratable Advance or
continuation of a Eurodollar Ratable Advance not later than 10:00 a.m. (Chicago
time) at least one Business Day, in the case of a conversion into an Alternate
Base Rate Advance, or at least three Business Days, in the case of a conversion
into or continuation of a Eurodollar Ratable Advance, prior to the date of the
requested conversion or continuation, specifying:
1. the requested date, which shall be a Business Day, of such conversion
or continuation;
1. the aggregate amount and Type of Ratable Advance which is to be
converted or continued; and
1. the amount and Type(s) of Ratable Advance(s) into which such Ratable
Advance is to be converted or continued and, in the case of a
conversion into or continuation of an Eurodollar Ratable
Advance, the duration of the Eurodollar Interest Period applicable
thereto.
A. Competitive Bid Advances.
2.3.1. Competitive Bid Option. In addition to Ratable Advances pursuant
to Section 2.2, but subject to the terms and conditions of this Agreement
(including, without limitation, the limitation set forth in Section 2.1.2 as to
the maximum aggregate principal amount of all outstanding Advances and Facility
Letter of Credit Obligations hereunder), prior to the Facility Termination Date
the Borrower may, as set forth in this Section 2.3, request the Lenders to make
offers to make Competitive Bid Advances to the Borrower. Each Lender may, but
shall have no obligation to, make such offers and the Borrower may, but shall
have no obligation to, accept any such offers in the manner set forth in this
Section 2.3. The Borrower's obligation to pay the principal of, and interest
on, the Competitive Bid Advances shall be evidenced by the Competitive Bid
Notes. Although the Competitive Bid Notes shall be dated the date of the
initial Advance, interest in respect thereof shall be payable only for the
periods during which the Loans evidenced thereby are outstanding. Each
Competitive Bid Loan shall be repaid in full by the Borrower on the last day of
the Interest Period applicable thereto.
2.3.2. Competitive Bid Quote Request. When the Borrower wishes to request
offers to make Competitive Bid Loans under this Section 2.3, it shall transmit
to the Agent by telecopy a Competitive Bid Quote Request substantially in the
form of Exhibit C hereto so as to be received no later than (a) 10:00 a.m.
(Chicago time) at least five Business Days prior to the Borrowing Date proposed
therein, in the case of a Eurodollar Auction or (b) 9:00 a.m. (Chicago time) at
least one Business Day prior to the Borrowing Date proposed therein, in the
case of an Absolute Rate Auction specifying:
-21-
<PAGE> 29
1. the proposed Borrowing Date, which shall be a Business Day, for the
proposed Competitive Bid Advance;
1. the aggregate principal amount of such Competitive Bid Advance;
1. whether the Competitive Bid Quotes requested are to set forth a
Eurodollar Bid Rate, an Absolute Rate, or both; and
2. the Interest Period applicable thereto (which may not end after the
Facility Termination Date).
The Borrower may request offers to make Competitive Bid Loans for more than one
Interest Period in a single Competitive Bid Quote Request. No Competitive Bid
Quote Request shall be given within 5 Business Days (or such other number of
days as the Borrower and the Agent may agree) of any other Competitive Bid
Quote Request. A Competitive Bid Quote Request that does not conform
substantially to the format of Exhibit C hereto shall be rejected, and the
Agent shall promptly notify the Borrower of such rejection by telecopy.
2.3.3. Invitation for Competitive Bid Quotes. Promptly and in any event
before the close of business on the same Business Day of receipt of a
Competitive Bid Quote Request that is not rejected pursuant to Section 2.3.2,
the Agent shall send to each of the Lenders by telex or telecopy an Invitation
for Competitive Bid Quotes substantially in the form of Exhibit D hereto, which
shall constitute an invitation by the Borrower to each Lender to submit
Competitive Bid Quotes offering to make the Competitive Bid Loans to which such
Competitive Bid Quote Request relates in accordance with this Section 2.3.
-22-
<PAGE> 30
2.3.4. Submission and Contents of Competitive Bid Quotes.
1. Each Lender may, in its sole discretion, submit a Competitive Bid
Quote containing an offer or offers to make Competitive Bid Loans in
response to any Invitation for Competitive Bid Quotes. Each Competitive
Bid Quote must comply with the requirements of this Section 2.3.4 and
must be submitted to the Agent by telex or telecopy at its offices
specified in or pursuant to Article XIII not later than (i) 9:00 a.m.
(Chicago time) at least four Business Days prior to the proposed
Borrowing Date, in the case of a Eurodollar Auction or (ii) 9:00 a.m.
(Chicago time) on the proposed Borrowing Date, in the case of an Absolute
Rate Auction (or, in either case upon reasonable prior notice to the
Lenders, such other time and date as the Borrower and the Agent may
agree); provided that Competitive Bid Quotes submitted by First Chicago
may only be submitted if the Agent or First Chicago notifies the Borrower
of the terms of the offer or offers contained therein not later than 15
minutes prior to the latest time at which the relevant Competitive Bid
Quotes must be submitted by the other Lenders. Subject to Articles IV
and VIII, any Competitive Bid Quote so made shall be irrevocable except
with the written consent of the Agent given on the instructions of the
Borrower.
1. Each Competitive Bid Quote shall be in substantially the form of
Exhibit E hereto and shall in any case specify:
a) the proposed Borrowing Date, which shall be the same as that
set forth in the applicable Invitation for Competitive Bid Quotes;
(a) the principal amount of the Competitive Bid Loan for which
each such offer is being made, which principal amount may be
greater than, less than or equal to the Commitment of the quoting
Lender, must be at least $5,000,000 and an integral multiple of
$1,000,000, and may not exceed the principal amount of
Competitive Bid Loans for which offers were requested;
a) in the case of a Eurodollar Auction, the Competitive Bid Margin
offered for each such Competitive Bid Loan;
a) the minimum amount, if any, of the Competitive Bid Loan which
may be accepted by the Borrower;
a) in the case of an Absolute Rate Auction, the Absolute Rate
offered for each such Competitive Bid Loan; and
a) the identity of the quoting Lender.
-23-
<PAGE> 31
1. The Agent shall reject any Competitive Bid Quote that:
a) is not substantially in the form of Exhibit E hereto or does
not specify all of the information required by Section 2.3.4(b);
a) contains qualifying, conditional or similar language, other
than any such language contained in Exhibit E hereto;
a) proposes terms other than or in addition to those set forth in
the applicable Invitation for Competitive Bid Quotes; or
a) arrives after the time set forth in Section 2.3.4(a).
If any Competitive Bid Quote shall be rejected pursuant to this Section
2.3.4(c), then the Agent shall promptly notify the relevant Lender of such
rejection.
2.3.5. Notice to Borrower. The Agent shall promptly notify the Borrower
of the terms (a) of any Competitive Bid Quote submitted by a Lender that is in
accordance with Section 2.3.4 and (b) of any Competitive Bid Quote that amends,
modifies or is otherwise inconsistent with a previous Competitive Bid Quote
submitted by such Lender with respect to the same Competitive Bid Quote
Request. Any such subsequent Competitive Bid Quote shall be disregarded by the
Agent unless such subsequent Competitive Bid Quote specifically states that it
is submitted solely to correct a manifest error in such former Competitive Bid
Quote. The Agent's notice to the Borrower shall specify the aggregate
principal amount of Competitive Bid Loans for which offers have been received
for each Interest Period specified in the related Competitive Bid Quote Request
and the respective principal amounts and Eurodollar Bid Rates or Absolute
Rates, as the case may be, so offered.
2.3.6. Acceptance and Notice by Borrower. Not later than (a) 10:00 a.m.
(Chicago time) at least three Business Days prior to the proposed Borrowing
Date, in the case of a Eurodollar Auction or (b) 10:00 a.m. (Chicago time) on
the proposed Borrowing Date, in the case of an Absolute Rate Auction (or, in
either case upon reasonable prior notice to the Lenders, such other time and
date as the Borrower and the Agent may agree), the Borrower shall notify the
Agent of its acceptance or rejection of the offers so notified to it pursuant
to Section 2.3.5; provided, however, that the failure by the Borrower to give
such notice to the Agent shall be deemed to be a rejection of all such offers.
In the case of acceptance, such notice (a "Competitive Bid Borrowing Notice")
shall specify the aggregate principal amount of offers for each Interest Period
that are accepted. The Borrower may accept any Competitive Bid Quote in whole
or in part (subject to the terms of Section 2.3.4(b)(iv)); provided that:
-24-
<PAGE> 32
1. the aggregate principal amount of each Competitive Bid Advance may not
exceed the applicable amount set forth in the related Competitive Bid
Quote Request,
1. acceptance of offers may only be made on the basis of ascending
Eurodollar Bid Rates or Absolute Rates, as the case may be, and
1. the Borrower may not accept any offer that is described in Section
2.3.4(c) or that otherwise fails to comply with the requirements of this
Agreement.
2.3.7. Allocation by Agent. If offers are made by two or more Lenders
with the same Eurodollar Bid Rates or Absolute Rates, as the case may be, for a
greater aggregate principal amount than the amount in respect of which offers
are accepted for the related Interest Period, the principal amount of
Competitive Bid Loans in respect of which such offers are accepted shall be
allocated by the Agent among such Lenders as nearly as possible (in such
multiples, not greater than $1,000,000, as the Agent may deem appropriate) in
proportion to the aggregate principal amount of such offers; provided, however,
that no Lender shall be allocated a portion of any Competitive Bid Advance
which is less than the minimum amount which such Lender has indicated that it
is willing to accept. Allocations by the Agent of the amounts of Competitive
Bid Loans shall be conclusive in the absence of manifest error. The Agent
shall promptly, but in any event on the same Business Day, notify each Lender
of its receipt of a Competitive Bid Borrowing Notice and the aggregate
principal amount of such Competitive Bid Advance allocated to each
participating Lender.
A. Swing Line Loans.
1. On the terms and subject to the conditions and relying upon the
representations and warranties herein set forth, the Swing Line Lender agrees
at any time and from time to time from and including the date hereof to but
excluding the earlier of the Facility Termination Date and the termination of
the Commitments or the Swing Line Commitment, in accordance with the terms
hereof, to make Swing Line Loans to the Borrower in an aggregate principal
amount at any time outstanding not to exceed the lesser of (i) the amount of
its Swing Line Commitment at such time and (ii) an amount equal to (A) the
Aggregate Commitment at such time minus (B) the sum of the aggregate principal
amounts of all Ratable Loans, Competitive Bid Loans and Swing Line Loans
outstanding at such time. The Swing Line Loans shall be made by the Swing Line
Lender, at the option of the Borrower, either at the Alternate Base Rate or at
the Alternate Swing Line Rate. All Swing Line Loans shall be in a minimum
amount of $1,000,000 and in any integral multiple of $100,000 if in excess
thereof. In no event shall any Swing Line Loan be made hereunder if (i) the
Agent and the Swing Line Lender shall have received notice from the Required
Lenders prior to any such Swing Line Loan that a condition specified in Section
4.1 or 4.2 has not been satisfied and (ii) such condition shall not have been
subsequently waived in compliance with Section 8.2.
-25-
<PAGE> 33
1. The Borrower shall give the Swing Line Lender (with a copy to the Agent)
telephonic, written or telecopy notice (in the case of telephonic notice, such
notice shall be promptly confirmed in writing or by telecopy) not later than
noon, Chicago time, on the day of a proposed Swing Line Loan. Such notice
shall be delivered on a Business Day, shall be irrevocable and shall refer to
this Agreement and shall specify the requested Borrowing Date (which shall be a
Business Day) and amount of such Swing Line Loan.
1. The Swing Line Lender shall by 2:00 p.m., Chicago time, on the requested
Borrowing Date, make the requested Swing Line Loan by crediting the principal
amount thereof, in immediately available funds, to the account of the Borrower
maintained with the Swing Line Lender or to such other account as may be
designated by the Borrower and be acceptable to the Swing Line Lender.
1. The Swing Line Loans shall be evidenced by the Swing Line Note and each
Swing Line Loan shall be paid in full by the Borrower on the earlier of the
Facility Termination Date and the date five Business Days after the making of
such Swing Line Loan.
1. Notwithstanding the occurrence of any Default or Unmatured Default or
noncompliance with the conditions precedent set forth in Article IV, if (i) by
10:00 a.m. Chicago time on the fourth Business Day following the Borrowing Date
of any Swing Line Loan the Agent shall not have received a Ratable Borrowing
Notice delivered by the Borrower pursuant to Section 2.2.3 requesting that
Ratable Loans be made pursuant to Section 2.2 on the immediately succeeding
Business Day in an amount at least equal to the aggregate principal amount of
such Swing Line Loan or (ii) on any date the Swing Line Lender in its sole
discretion shall so request with respect to the outstanding Swing Line Loans,
the Agent shall be deemed to have received a Ratable Borrowing Notice from the
Borrower pursuant to Section 2.2.3 requesting that a Ratable Advance of
Alternate Base Rate Loans be made pursuant to Section 2.2 on such immediately
succeeding Business Day in an amount equal to the aggregate amount of such
Swing Line Loans, and the procedures set forth in Section 2.5 shall be followed
in making such Alternate Base Rate Loans. The proceeds of such Alternate Base
Rate Loans (or other Loans described in Section 2.4(e)(i), if requested)
received by the Agent shall be immediately delivered to the Swing Line Lender
and applied to the direct repayment of such Swing Line Loans to the extent
thereof. Effective on the day such Ratable Loans are made, the portion of the
Swing Line Loans so paid shall no longer be outstanding as Swing Line Loans and
shall be outstanding as Ratable Loans of the Lenders bearing interest at a rate
determined by reference to the Alternate Base Rate, in accordance with the
provisions of this Article II. The Borrower authorizes the Agent and the Swing
Line Lender to charge the Borrower's account maintained with the Swing Line
Lender (up to the amount available in such account) in order to immediately pay
the amount of the Swing Line Loans to the extent amounts received from the
Lenders are not sufficient to repay in full such Swing Line Loans. If any
portion of any such amount paid (or deemed paid) to the Swing Line Lender
should be recovered by or on behalf of the Borrower from the Swing Line Lender
in the event of the bankruptcy or reorganization of
-26-
<PAGE> 34
the Borrower or otherwise, the loss of the amount so recovered shall be ratably
shared among all Lenders in the manner contemplated by Section 11.2.
1. If, for any reason (including, without limitation, the occurrence of a
Default described in Section 7.6 or 7.7 of Article VII), Alternate Base Rate
Loans may not be, or are not, made pursuant to paragraph (e) of this Section
2.4 to repay Swing Line Loans as required by such paragraph, effective on the
date such Alternate Base Rate Loans would otherwise have been made, (i) each
Lender severally, unconditionally and irrevocably agrees that it shall, without
regard to the occurrence of any Unmatured Default or Default, purchase a
participating interest in such Swing Line Loans ("Unrefunded Swing Line Loans")
in an amount equal to the amount of Alternate Base Rate Loans which would
otherwise have been made by such Lender pursuant to paragraph (e) of this
Section 2.4 and (ii) each Unrefunded Swing Line Loan previously bearing
interest at the Alternate Swing Line Rate shall commence accruing interest at
the Alternate Base Rate. Each Lender will immediately transfer to the Agent,
in immediately available funds, the amount of its participation, and the
proceeds of such participation shall be distributed by the Agent to the Swing
Line Lender in such amount as will reduce the amount of the participating
interest retained by the Swing Line Lender in the Swing Line Loans to the
amount of the Alternate Base Rate Loans which were to have been made by the
Swing Line Lender pursuant to paragraph (e) of this Section 2.4. In the event
a Lender fails to make available to the Swing Line Lender the amount of such
Lender's participation as provided in this paragraph (f), the Swing Line Lender
shall be entitled to recover such amount on demand from such Lender together
with interest at the customary rate set by the Swing Line Lender for correction
of errors among banks for one Business Day and thereafter at the Alternate Base
Rate then in effect. All payments in respect of Unrefunded Swing Line Loans
and participations therein shall be made in accordance with Section 2.12.
1. Each Lender's obligation to make Ratable Loans pursuant to paragraph (e) of
this Section 2.4 and to purchase participating interests pursuant to paragraph
(f) of this Section 2.4 shall be absolute and unconditional and shall not be
affected by any circumstance, including, without limitation, (i) any setoff,
counterclaim, recoupment, defense or other right which such Lender or the
Borrower may have against the Swing Line Lender, the Borrower or any other
Person, as the case may be, for any reason whatsoever; (ii) the occurrence or
continuance of a Default or Unmatured Default; (iii) any adverse change in the
condition (financial or otherwise) of the Borrower or any of its Subsidiaries;
(iv) any breach of this Agreement by the Borrower, any of its Subsidiaries or
any Lender; or (v) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing.
A. Availability of Funds. Not later than noon (Chicago time) on each Borrowing
Date, each Lender (or in the case of a Competitive Bid Advance, each Lender
making a portion of such Advance) shall make available its Loan or Loans (other
than Swing Line Loans), in funds immediately available in Chicago to the Agent
at its address specified pursuant to Article XIII. The Agent will make the
funds so received from the Lenders available to the Borrower at the Agent's
aforesaid address.
-27-
<PAGE> 35
A. Commitment Fee; Reductions in Aggregate Commitment.
1. The Borrower agrees to pay to the Agent for the ratable account of each
Lender a commitment fee equal to the Applicable Commitment Fee Percentage per
annum on the daily unborrowed portion of such Lender's Commitment (without
giving effect to any outstanding Swing Line Loans or Competitive Bid Loans)
from the date hereof to and including the Facility Termination Date applicable
to such Lender, payable in arrears on each Payment Date hereafter and on the
Facility Termination Date.
1. The Borrower may permanently reduce the Aggregate Commitment in whole, or in
part ratably among the Lenders, in a minimum amount of $5,000,000 or any
integral multiple of $1,000,000 in excess thereof, upon at least three Business
Days' written notice to the Agent, which notice shall specify the amount of any
such reduction; provided, however, that the amount of the Aggregate Commitment
may not be reduced below the sum of (i) the aggregate principal amount of the
outstanding Loans, plus (ii) the aggregate amount of the outstanding Facility
Letter of Credit Obligations. All accrued commitment fees shall be payable on
the effective date of any termination of the obligations of the Lenders to make
Loans hereunder.
A. Minimum Amount of Each Ratable Advance. Each Ratable Advance shall be in
the minimum amount of $5,000,000 (and in integral multiples of $1,000,000 if in
excess thereof); provided, however, that (a) any Alternate Base Rate Advance
may be in the amount of the unused Aggregate Commitment or in an amount
borrowed pursuant to Section 2.4(e) and (b) in no event shall more than six (6)
Eurodollar Advances be permitted to be outstanding at any time.
A. Optional Principal Payments. The Borrower may from time to time pay, without
penalty or premium, all outstanding Advances (other than Competitive Bid
Advances, which may not be voluntarily prepaid), or, in a minimum aggregate
amount of $5,000,000 or any integral multiple of $1,000,000 in excess thereof,
any portion of the outstanding Advances (other than Competitive Bid Advances)
upon one Business Day's prior notice to the Agent in the case of an Alternate
Base Rate Advance or three Business Days' prior notice to the Agent in the case
of a Eurodollar Advance. Any prepayment of a Eurodollar Advance prior to the
last day of the applicable Eurodollar Interest Period shall be subject to the
indemnity provisions of Section 3.4.
A. Changes in Interest Rate, etc. Each Alternate Base Rate Advance shall bear
interest at the Alternate Base Rate from and including the date of such Advance
or the date on which such Advance was converted into an Alternate Base Rate
Advance to (but not including) the date on which such Alternate Base Rate
Advance is paid or converted to a Eurodollar Ratable Advance. Changes in the
rate of interest on that portion of any Advance maintained as an Alternate Base
Rate Advance will take effect simultaneously with each change in the Alternate
Base Rate. Each Eurodollar Advance, Absolute Rate Advance and Swing Line Loan
shall bear interest from and including the
-28-
<PAGE> 36
first day of the Interest Period applicable thereto to, but not including, the
last day of such Interest Period at the interest rate determined as applicable
to such Eurodollar Advance, Absolute Rate Advance or Swing Line Loan. No
Interest Period may end after the Facility Termination Date.
A. Rates Applicable After Default. Notwithstanding anything to the contrary
contained in Section 2.2.3 and 2.2.4, no Advance may be made as, converted into
or continued as a Eurodollar Ratable Advance (except with the consent of the
Agent and the Required Lenders) when any Default or Unmatured Default has
occurred and is continuing. During the continuance of a Default the Required
Lenders may, at their option, by notice to the Borrower (which notice may be
revoked at the option of the Required Lenders notwithstanding any provision of
Section 8.2 requiring unanimous consent of the Lenders to changes in interest
rates), declare that each Eurodollar Advance, Alternate Base Rate Advance and
Swing Line Loan shall bear interest (for the remainder of the applicable
Interest Period in the case of Eurodollar Advances and Absolute Rate Advances)
at a rate per annum equal to the rate otherwise applicable plus two percent
(2%) per annum; provided, however, that such increased rate shall automatically
and without action of any kind by the Lenders become and remain applicable
until revoked by the Required Lenders in the event of a Default described in
Section 7.6 or 7.7.
A. Method of Payment. All payments of the Obligations hereunder shall be made,
without setoff, deduction or counterclaim, in immediately available funds to
the Agent at the Agent's address specified pursuant to Article XIII, or at any
other Lending Installation of the Agent specified in writing by the Agent to
the Borrower, by noon (Chicago time) on the date when due and shall be applied
ratably by the Agent among the Lenders. Each payment delivered to the Agent
for the account of any Lender shall be delivered promptly by the Agent to such
Lender in the same type of funds that the Agent received at its address
specified pursuant to Article XIII or at any Lending Installation specified in
a notice received by the Agent from such Lender. The Agent is hereby
authorized to charge the account of the Borrower maintained with First Chicago
for each payment of principal, interest and fees as it becomes due hereunder,
if the Agent has provided the Borrower with notice of each such payment at
least one day prior to its becoming due hereunder.
A. Notes; Telephonic Notices. Each Lender is hereby authorized to record the
principal amount of each of its Loans and each repayment on the schedule
attached to its Note; provided, however, that neither the failure to so record
nor any error in such recordation shall affect the Borrower's obligations under
such Note. The Borrower hereby authorizes the Lenders and the Agent to extend,
convert or continue Advances, effect selections of Types of Advances, submit
Competitive Bid Quotes and to transfer funds based on telephonic notices made
by any person or persons the Agent or any Lender in good faith believes to be
acting on behalf of the Borrower. The Borrower agrees to deliver promptly to
the Agent a written confirmation, if such confirmation is requested by the
Agent or any Lender, of each telephonic notice signed by an Authorized Officer
or another management level employee designated in writing by an Authorized
Officer to the Agent. If the written confirmation differs in any material
respect from the
-29-
<PAGE> 37
action taken by the Agent and the Lenders, the records of the Agent and the
Lenders shall govern absent manifest error.
A. Interest Payment Dates; Interest and Fee Basis. Interest accrued on each
Alternate Base Rate Advance shall be payable on each Payment Date, commencing
with the first such date to occur after the date hereof, on any date on which
an Alternate Base Rate Advance is prepaid, whether due to acceleration or
otherwise, and at maturity. Interest upon each Swing Line Loan shall be
payable upon the date such Swing Line Loan is repaid and at its maturity.
Interest accrued on each Eurodollar Advance or Absolute Rate Advance shall be
payable on the last day of its applicable Interest Period, on any date on which
the Eurodollar Advance or Absolute Rate Advance is prepaid, whether by
acceleration or otherwise, and at maturity. Interest accrued on each
Eurodollar Advance or Absolute Rate Advance having an Interest Period longer
than three months shall also be payable on the last day of each three-month
interval during such Interest Period. Interest and commitment fees shall be
calculated for actual days elapsed on the basis of a 360-day year. Interest
shall be payable for the day an Advance is made but not for the day of any
payment on the amount paid if payment is received prior to noon (Chicago time)
at the place of payment. If any payment of principal of or interest on an
Advance shall become due on a day which is not a Business Day, such payment
shall be made on the next succeeding Business Day and, in the case of a
principal payment, such extension of time shall be included in computing
interest in connection with such payment.
A. Notification of Advances, Interest Rates, Prepayments, Commitment Reductions
and Issuance Requests. Promptly after receipt thereof, the Agent will notify
each Lender of the contents of each Aggregate Commitment reduction notice,
Ratable Borrowing Notice, Conversion/Continuation Notice, Invitation for
Competitive Quotes, Issuance Request and repayment notice received by it
hereunder. The Agent will notify each Lender of the interest rate applicable
to each Eurodollar Advance promptly upon determination of such interest rate
and will give each Lender prompt notice of each change in the Alternate Base
Rate.
A. Lending Installations. Each Lender may book its Loans at any Lending
Installation selected by such Lender and may change its Lending Installation
from time to time. All terms of this Agreement shall apply to any such Lending
Installation and the Notes shall be deemed held by each Lender for the benefit
of such Lending Installation. Each Lender may, by written or telex notice to
the Agent and the Borrower, designate a Lending Installation through which
Loans will be made by it and for whose account Loan payments are to be made.
A. Non-Receipt of Funds by the Agent. Unless the Borrower or a Lender, as the
case may be, notifies the Agent prior to the date on which it is scheduled to
make payment to the Agent of (a) in the case of a Lender, the proceeds of a
Loan, or (b) in the case of the Borrower, a payment of principal, interest or
fees to the Agent for the account of the Lenders, that it does not intend to
make such payment, the Agent may assume that such payment has been made. The
Agent may, but shall not be obligated to,
-30-
<PAGE> 38
make the amount of such payment available to the intended recipient in reliance
upon such assumption. If the Borrower has not in fact made such payment to the
Agent, the Lenders shall, on demand by the Agent, repay to the Agent the amount
so made available together with interest thereon in respect of each day during
the period commencing on the date such amount was so made available by the
Agent until the date the Agent recovers such amount at a rate per annum equal
to the Federal Funds Effective Rate for such day. If any Lender has not in
fact made such payment to the Agent, such Lender or the Borrower shall, on
demand by the Agent, repay to the Agent the amount so made available together
with interest thereon in respect of each day during the period commencing on
the date such amount was so made available by the Agent until the date the
Agent recovers such amount at a rate per annum equal to (a) in the case of
payment by a Lender, the Federal Funds Effective Rate for such day, or (b) in
the case of payment by the Borrower, the interest rate applicable to the
relevant Loan.
A. Taxes.
1. Any payments made by the Borrower under this Agreement shall be made free
and clear of, and without deduction or withholding for or on account of, any
present or future income, stamp or other taxes, levies, imposts, duties,
charges, fees, deductions or withholdings, now or hereafter imposed, levied,
collected, withheld or assessed by any Governmental Authority, excluding net
income taxes and franchise taxes or any other tax based upon any income imposed
on the Agent or any Lender by the jurisdiction in which the Agent or such
Lender is incorporated or has its principal place of business. If any such
non-excluded taxes, levies, imposts, duties, charges, fees, deductions or
withholdings ("Non-Excluded Taxes") are required to be withheld from any
amounts payable to the Agent or any Lender hereunder, the amounts so payable to
the Agent or such Lender shall be increased to the extent necessary to yield to
the Agent or such Lender (after payment of all Non-Excluded Taxes) interest or
any such other amounts payable hereunder at the rates or in the amounts
specified in or pursuant to this Agreement; provided, however, that the
Borrower shall not be required to increase any such amounts payable to any
Lender that is not organized under the laws of the U.S. or a state thereof if
such Lender fails to comply with the requirements of paragraph (b) of this
Section 2.17. Whenever any Non-Excluded Taxes are payable by the Borrower, as
promptly as practicable thereafter the Borrower shall send to the Agent for its
own account or for the account of such Lender, as the case may be, a certified
copy of an original official receipt received by the Borrower showing payment
thereof. If the Borrower fails to pay any Non-Excluded Taxes when due to the
appropriate taxing authority or fails to remit to the Agent the required
receipts or other required documentary evidence, the Borrower shall indemnify
the Agent and the Lenders for any incremental taxes, interest or penalties that
may become payable by any Agent or any Lender as a result of any such failure.
The agreements in this Section 2.17 shall survive the termination of this
Agreement and the payment of all other amounts payable hereunder.
1. At least five Business Days prior to the first date on which interest or
fees are payable hereunder for the account of any Lender, each Lender that is
-31-
<PAGE> 39
not incorporated under the laws of the United States of America, or a state
thereof, agrees that it will deliver to each of the Borrower and the Agent two
duly completed copies of United States Internal Revenue Service Form 1001 or
4224, certifying in either case that such Lender is entitled to receive
payments under this Agreement and the Notes without deduction or withholding of
any United States federal income taxes. Each Lender which so delivers a Form
1001 or 4224 further undertakes to deliver to each of the Borrower and the
Agent two additional copies of such form (or a successor form) on or before the
date that such form expires (currently, three successive calendar years for
Form 1001 and one calendar year for Form 4224) or becomes obsolete or after the
occurrence of any event requiring a change in the most recent forms so
delivered by it, and such amendments thereto or extensions or renewals thereof
as may be reasonably requested by the Borrower or the Agent, in each case
certifying that such Lender is entitled to receive payments under this
Agreement and the Notes without deduction or withholding of any United States
federal income taxes, unless an event (including, without limitation, any
change in treaty, law or regulation) has occurred prior to the date on which
any such delivery would otherwise be required which renders all such forms
inapplicable or which would prevent such Lender from duly completing and
delivering any such form with respect to it and such Lender advises the
Borrower and the Agent that it is not capable of receiving payments without any
deduction or withholding of United States federal income tax.
B. Agent's Fees. The Borrower shall pay to the Agent those fees, in addition
to the commitment fees referenced in Section 2.6(a), in the amounts and at the
times separately agreed to between the Agent and the Borrower.
A. Facility Letters of Credit.
2.19.1. Issuance of Facility Letters of Credit. (a) From and after
the date hereof, the Issuer agrees, upon the terms and conditions set
forth in this Agreement, to issue at the request and for the account of
the Borrower, one or more Facility Letters of Credit; provided, however,
that the Issuer shall not be under any obligation to issue, and shall not
issue, any Facility Letter of Credit if (i) any order, judgment or decree
of any governmental authority or other regulatory body with jurisdiction
over the Issuer shall purport by its terms to enjoin or restrain such
Issuer from issuing such Facility Letter of Credit, or any law or
governmental rule, regulation, policy, guideline or directive (whether or
not having the force of law) from any governmental authority or other
regulatory body with jurisdiction over the Issuer shall prohibit, or
request that the Issuer refrain from, the issuance of Facility Letters of
Credit in particular or shall impose upon the Issuer with respect to any
Facility Letter of Credit any restriction or reserve or capital
requirement (for which the Issuer is not otherwise compensated) or any
unreimbursed loss, cost or expense which was not applicable, in effect
and known to the Issuer as of the date of this Agreement and which the
Issuer in good faith deems material to it; (ii) one or more of the
conditions to such issuance contained in Section 4.2 is not then
satisfied; or (iii) after giving effect to such issuance, the aggregate
outstanding amount of the Facility Letter of Credit Obligations would
exceed the Facility Letter of Credit Sublimit.
-32-
<PAGE> 40
(b) In no event shall: (i) the aggregate amount of the Facility
Letter of Credit Obligations at any time exceed the Facility Letter of
Credit Sublimit; (ii) the sum at any time of (A) the aggregate amount of
Facility Letter of Credit Obligations and (B) the aggregate principal
balance of outstanding Advances exceed the amount of the Aggregate
Commitment; or (iii) the expiration date of any Facility Letter of Credit
(including, without limitation, Facility Letters of Credit issued with an
automatic "evergreen" provision providing for renewal absent advance
notice by the Borrower or the Issuer), or the date for payment of any
draft presented thereunder and accepted by the Issuer, be later than the
date five (5) Business Days before the Facility Termination Date.
2.19.2 Participating Interests. Immediately upon the issuance by
the Issuer of a Facility Letter of Credit in accordance with Section
2.19.4, each Lender shall be deemed to have irrevocably and
unconditionally purchased and received from the Issuer, without recourse,
representation or warranty, an undivided participation interest equal to
its pro-rata share of the Aggregate Commitment of the face amount of such
Facility Letter of Credit and each draw paid by the Issuer thereunder.
Each Lender's obligation to pay its proportionate share of all draws
under the Facility Letters of Credit, absent gross negligence or willful
misconduct by the Issuer in honoring any such draw, shall be absolute,
unconditional and irrevocable and in each case shall be made without
counterclaim or set-off by such Lender.
-33-
<PAGE> 41
2.19.3 Facility Letter of Credit Reimbursement Obligations. (a) The
Borrower agrees to pay to the Issuer of a Facility Letter of Credit (i)
on each date that any amount is drawn under each Facility Letter of
Credit a sum (and interest on such sum as provided in clause (ii) below)
equal to the amount so drawn plus all other charges and expenses with
respect thereto specified in Section 2.19.6 or in the applicable
Reimbursement Agreement and (ii) interest on any and all amounts
remaining unpaid under this Section 2.19.3 until payment in full at the
Alternate Base Rate plus the margin specified in Section 2.10. The
Borrower agrees to pay to the Issuer the amount of all Facility Letter of
Credit Reimbursement Obligations owing in respect of any Facility Letter
of Credit immediately when due, under all circumstances, including,
without limitation, any of the following circumstances: (w) any lack of
validity or enforceability of this Agreement or any of the other Loan
Documents; (x) the existence of any claim, set-off, defense or other
right which the Borrower may have at any time against a beneficiary named
in a Facility Letter of Credit, any transferee of any Facility Letter of
Credit (or any Person for whom any such transferee may be acting), any
Lender or any other Person, whether in connection with this Agreement,
any Facility Letter of Credit, the transactions contemplated herein or
any unrelated transactions (including any underlying transaction between
the Borrower and the beneficiary named in any Facility Letter of Credit);
(y) the validity, sufficiency or genuineness of any document which the
Issuer has determined in good faith complies on its face with the terms
of the applicable Facility Letter of Credit, even if such document should
later prove to have been forged, fraudulent, invalid or insufficient in
any respect or any statement therein shall have been untrue or inaccurate
in any respect; or (z) the surrender or impairment of any security for
the performance or observance of any of the terms hereof.
(b) Notwithstanding any provisions to the contrary in any
Reimbursement Agreement, the Borrower agrees to reimburse the Issuer for
amounts which the Issuer pays under such Facility Letter of Credit no
later than the time specified in this Agreement. If the Borrower does
not pay any such Facility Letter of Credit Reimbursement Obligations when
due, the Borrower shall be deemed to have immediately requested that the
Lenders make an Alternate Base Rate Advance under this Agreement in a
principal amount equal to such unreimbursed Facility Letter of Credit
Reimbursement Obligations. The Agent shall promptly notify the Lenders
of such deemed request and, without the necessity of compliance with the
requirements of Sections 2.2.3 and 4.2, each Lender shall make available
to the Agent its Loan in the manner prescribed for Alternate Base Rate
Advances. The proceeds of such Loans shall be paid over by the Agent to
the Issuer for the account of the Borrower in satisfaction of such
unreimbursed Facility Letter of Credit Reimbursement Obligations, which
shall thereupon be deemed satisfied by the proceeds of, and replaced by,
such Alternate Base Rate Advance.
(c) If the Issuer makes a payment on account of any Facility Letter
of Credit and is not concurrently reimbursed therefor by the Borrower and
if for any
-34-
<PAGE> 42
reason an Alternate Base Rate Advance may not be made pursuant to
paragraph (b) above, then as promptly as practical during normal banking
hours on the date of its receipt of such notice or, if not practicable on
such date, not later than noon (Chicago time) on the Business Day
immediately succeeding such date of notification, each Lender shall
deliver to the Agent for the account of the Issuer, in immediately
available funds, the purchase price for such Lender's interest in such
unreimbursed Facility Letter of Credit Obligations, which shall be an
amount equal to such Lender's pro-rata share of such payment. Each
Lender shall, upon demand by the Issuer, pay the Issuer interest on such
Lender's pro-rata share of such draw from the date of payment by the
Issuer on account of such Facility Letter of Credit until the date of
delivery of such funds to the Issuer by such Lender at a rate per annum,
computed for actual days elapsed based on a 360-day year, equal to the
Federal Funds Effective Rate for such period; provided, that such
payments shall be made by the Lenders only in the event and to the extent
that the Issuer is not reimbursed in full by the Borrower for interest on
the amount of any draw on the Facility Letters of Credit.
(d) At any time after the Issuer has made a payment on account of
any Facility Letter of Credit and has received from any other Lender such
Lender's pro-rata share of such payment, such Issuer shall, forthwith
upon its receipt of any reimbursement (in whole or in part) by the
Borrower for such payment, or of any other amount from the Borrower or
any other Person in respect of such payment (including, without
limitation, any payment of interest or penalty fees and any payment under
any collateral account agreement of the Borrower or any Loan Document but
excluding any transfer of funds from any other Lender pursuant to Section
2.19.3(b)), transfer to such other Lender such other Lender's ratable
share of such reimbursement or other amount; provided, that interest
shall accrue for the benefit of such Lender from the time such Issuer has
made a payment on account of any Facility Letter of Credit; provided,
further, that in the event that the receipt by the Issuer of such
reimbursement or other amount is found to have been a transfer in fraud
of creditors or a preferential payment under the United States Bankruptcy
Code or is otherwise required to be returned, such Lender shall promptly
return to the Issuer any portion thereof previously transferred by the
Issuer to such Lender, but without interest to the extent that interest
is not payable by the Issuer in connection therewith.
2.19.4 Procedure for Issuance. Prior to the issuance of each
Facility Letter of Credit, and as a condition of such issuance, the
Borrower shall deliver to the Issuer (with a copy to the Agent) a
Reimbursement Agreement signed by the Borrower, together with such other
documents or items as may be required pursuant to the terms thereof, and
the proposed form and content of such Facility Letter of Credit shall be
reasonably satisfactory to the Issuer. Each Facility Letter of Credit
shall be issued no earlier than two (2) Business Days after delivery of
the foregoing documents, which delivery may be by the Borrower to the
Issuer by telecopy, telex or other electronic means followed by delivery
of executed originals within five (5) days thereafter. The documents so
delivered shall be in
-35-
<PAGE> 43
compliance with the requirements set forth in Section 2.19.1(b), and
shall specify therein (i) the stated amount of the Facility Letter of
Credit requested, (ii) the effective date of issuance of such requested
Facility Letter of Credit, which shall be a Business Day, (iii) the date
on which such requested Facility Letter of Credit is to expire, which
shall be a Business Day prior to the date five (5) Business Days prior to
the Facility Termination Date, (iv) the entity for whose benefit the
requested Facility Letter of Credit is to be issued, which shall be the
Borrower or a Subsidiary, and (v) the aggregate amount of Facility Letter
of Credit Obligations which are outstanding and which will be outstanding
after giving effect to the requested Facility Letter of Credit issuance.
The delivery of the foregoing documents and information shall constitute
an "Issuance Request" for purposes of this Agreement. Subject to the
terms and conditions of Section 2.19.1 and provided that the applicable
conditions set forth in Section 4.2 hereof have been satisfied, the
Issuer shall, on the requested date, issue a Facility Letter of Credit on
behalf of the Borrower in accordance with the Issuer's usual and
customary business practices. In addition, any amendment of an existing
Facility Letter of Credit shall be deemed to be an issuance of a new
Facility Letter of Credit and shall be subject to the requirements set
forth above. The Issuer shall give the Agent prompt written notice of
the issuance of any Facility Letter of Credit.
2.19.5 Nature of the Lenders' Obligations. (a) As between the
Borrower and the Lenders, the Borrower assumes all risks of the acts and
omissions of, or misuse of the Facility Letters of Credit by, the
respective beneficiaries of the Facility Letters of Credit. In
furtherance and not in limitation of the foregoing, the Lenders shall not
be responsible for (i) the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document submitted by any party in
connection with the application for an issuance of a Facility Letter of
Credit, even if it should in fact prove to be in any or all respects
invalid, insufficient, inaccurate, fraudulent or forged; (ii) the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign a Facility Letter of Credit or the
rights or benefits thereunder or proceeds thereof, in whole or in part,
which may prove to be invalid or ineffective for any reason; (iii) the
failure of the beneficiary of a Facility Letter of Credit to comply fully
with conditions required to be satisfied by any Person other than the
Issuer in order to draw upon such Facility Letter of Credit; (iv) errors,
omissions, interruptions or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex or otherwise; (v) errors in
the interpretation of technical terms; (vi) the misapplication by the
beneficiary of a Facility Letter of Credit of the proceeds of any drawing
under such Facility Letter of Credit; or (vii) any consequences arising
from causes beyond control of the Issuer.
(b) In furtherance and extension and not in limitation of the
specific provisions hereinabove set forth, any action taken or omitted by
the Issuer under or in connection with the Facility Letters of Credit or
any related certificates, if taken or omitted in good faith, shall not
put the Agent or any Lender under any
-36-
<PAGE> 44
resulting liability to the Borrower or relieve the Borrower of any of its
obligations hereunder to the Issuer or any such Person.
2.19.6 Facility Letter of Credit Fees. The Borrower hereby agrees
to pay to the Agent for the account of the Issuer or the Lenders, as
applicable, letter of credit fees with respect to each Facility Letter of
Credit from and including the date of issuance thereof until the date
such Facility Letter of Credit is fully drawn, cancelled or expired, (a)
for the account of the Issuer, computed at such rate as may be agreed
upon between the Issuer and the Borrower, on the aggregate initial face
amount of such Facility Letter of Credit payable on the date of issuance,
and (b) for the ratable account of the Lenders, equal to (i) in the case
of Commercial Letters of Credit, 50% of the Applicable Eurodollar Margin
times the aggregate initial face amount of such Commercial Letter of
Credit, payable upon the date of issuance thereof, and (ii) in the case
of Standby Letters of Credit, the Applicable Eurodollar Margin times the
aggregate amount from time to time available to be drawn on such Standby
Facility Letter of Credit, calculated with respect to actual days elapsed
on the basis of a 360-day year and payable quarterly in arrears on each
Payment Date in each year and upon the expiration, cancellation or
utilization in full of such Facility Letter of Credit. In addition to
the foregoing, the Borrower agrees to pay the Issuer any other fees
customarily charged by it in respect of Letters of Credit issued by it.
A. Extension of Facility Termination Date. The Borrower may request an
extension of the Facility Termination Date by submitting a request for an
extension to the Agent (an "Extension Request") no more than 60 days but no
less than 40 days prior to the then effective Facility Termination Date. The
Extension Request must specify the new Facility Termination Date requested by
the Borrower and the date (which must be at least 30 days after the Extension
Request is delivered to the Agent) as of which the Lenders must respond to the
Extension Request (the "Extension Date"). The new Facility Termination Date
shall be no more than 364 days after the Extension Date, including the
Extension Date as one of the days in the calculation of the days elapsed.
Promptly upon receipt of an Extension Request, the Agent shall notify each
Lender of the contents thereof and shall request each Lender to approve the
Extension Request. Each Lender may, in its sole discretion, elect to approve
or deny such Extension Request. Failure of a Lender to respond to an Extension
Request by the Extension Date shall be deemed a refusal to approve such
Extension Request. Each Lender approving the Extension Request shall deliver
its written consent no later than the Extension Date. Any consent delivered by
a Lender to the Agent prior to the Extension Date may be revoked prior to the
Extension Date by the Lender giving written notice of such revocation to the
Agent before the Extension Date. If the consent of each of the Lenders is
received by the Agent and remains in effect on the Extension Date, the Facility
Termination Date specified in the Extension Request shall become effective on
the Extension Date and the Agent shall promptly notify the Borrower and each
Lender of the new Facility Termination Date. Otherwise, the then effective
Facility Termination Date shall be unchanged. In no event shall the Borrower
be entitled to seek or obtain more than two extensions pursuant to this Section
2.20.
-37-
<PAGE> 45
I. ARTICLE
CHANGE IN CIRCUMSTANCES
A. Yield Protection. If, after the date hereof, the adoption of or any change
in any law or any governmental or quasi-governmental rule, regulation, policy,
guideline or directive (whether or not having the force of law), or any
interpretation thereof, or the compliance of any Lender therewith,
1. subjects any Lender or any applicable Lending Installation to any tax, duty,
charge or withholding on or from payments due from the Borrower (excluding
taxation of the overall net income of any Lender or applicable Lending
Installation imposed by the jurisdiction in which such Lender or Lending
Installation is incorporated or has its principal place of business), or
changes (excluding increases in the income tax rates imposed by the
jurisdiction in which the applicable Lender or Lending Installation is
incorporated or has its principal place of business) the basis of taxation of
principal, interest or any other payments to any Lender or Lending Installation
in respect of its Loans, its interest in the Facility Letters of Credit or
other amounts due it hereunder, or
1. imposes or increases or deems applicable any reserve, assessment, insurance
charge, special deposit or similar requirement against assets of, deposits with
or for the account of, or credit extended by, any Lender or any applicable
Lending Installation (other than reserves and assessments taken into account in
determining the interest rate applicable to Eurodollar Advances), or
1. imposes any other condition the result of which is to increase the cost to
any Lender or any applicable Lending Installation of making, funding or
maintaining Loans or issuing Facility Letters of Credit or reduces any amount
receivable by any Lender or any applicable Lending Installation in connection
with any Loans or Facility Letters of Credit, or requires any Lender or any
applicable Lending Installation to make any payment calculated by reference to
the amount of Loans held, Facility Letters of Credit issued or participated in
or interest received by it, by an amount deemed material by such Lender,
then, within 15 days of demand by such Lender, the Borrower shall pay such
Lender that portion of such increased expense incurred or resulting in an
amount received which such Lender determines is attributable to making, funding
and maintaining its Loans, its interest in the Facility Letters of Credit and
its Commitment.
A. Changes in Capital Adequacy Regulations. If a Lender determines the amount
of capital required or expected to be maintained by such Lender, any Lending
Installation of such Lender or any corporation controlling such Lender is
increased as a result of a Change, then, within 15 days of demand by such
Lender, the Borrower shall
-38-
<PAGE> 46
pay such Lender the amount necessary to compensate for any shortfall in the
rate of return on the portion of such increased capital which such Lender
determines is attributable to this Agreement, its Loans, its interest in the
Facility Letters of Credit or its obligation to make Loans or participate in or
issue Facility Letters of Credit hereunder (after taking into account such
Lender's policies as to capital adequacy). "Change" means (a) any change after
the date of this Agreement in the Risk-Based Capital Guidelines, or (b) any
adoption of or change in any other law, governmental or quasi-governmental
rule, regulation, policy, guideline, interpretation, or directive (whether or
not having the force of law) after the date of this Agreement which affects the
amount of capital required or expected to be maintained by any Lender or any
Lending Installation or any corporation controlling any Lender. "Risk-Based
Capital Guidelines" means (a) the risk-based capital guidelines in effect in
the United States on the date of this Agreement and (b) the corresponding
capital regulations promulgated by regulatory authorities outside the United
States implementing the July 1988 report of the Basle Committee on Banking
Regulation and Supervisory Practices entitled "International Convergence of
Capital Measurements and Capital Standards" and any amendments to such
regulations adopted prior to the date of this Agreement.
A. Availability of Types of Advances. If any Lender determines that
maintenance of its Eurodollar Loans at a suitable Lending Installation would
violate any applicable law, rule, regulation, or directive, whether or not
having the force of law, or if the Required Lenders determine that (a) deposits
of a type and maturity appropriate to match fund Eurodollar Advances are not
available, or (b) the interest rate applicable to a Type of Advance does not
accurately or fairly reflect the cost of making or maintaining such Advance,
then the Agent shall suspend the availability of the affected Type of Advance
until such circumstance no longer exists and require any Eurodollar Advances of
the affected Type to be repaid.
A. Funding Indemnification. If any payment of a Eurodollar Advance or Swing
Line Advance bearing interest at the Alternate Swing Line Rate occurs on a date
which is not the last day of the applicable Interest Period, whether because of
acceleration, prepayment or otherwise, or any such Advance is not made on the
date specified by the Borrower for any reason other than default by the
Lenders, the Borrower will indemnify the Agent and each Lender for any loss or
cost incurred by it resulting therefrom, including, without limitation, any
loss or cost in liquidating or employing deposits acquired to fund or maintain
such Advance.
A. Lender Statements; Survival of Indemnity. To the extent reasonably possible,
each Lender shall designate an alternate Lending Installation with respect to
its Eurodollar Loans to reduce any liability of the Borrower to such Lender
under Sections 3.1 and 3.2 or to avoid the unavailability of a Type of Advance
under Section 3.3, so long as such designation is not disadvantageous to such
Lender. Each Lender shall deliver a written statement of such Lender to the
Borrower (with a copy to the Agent) as to the amount due, if any, under Section
3.1, 3.2 or 3.4. Such written statement shall set forth in reasonable detail
the calculations upon which such Lender determined such amount and shall be
final, conclusive and binding on the Borrower in the
-39-
<PAGE> 47
absence of manifest error. Determination of amounts payable under such
Sections in connection with a Eurodollar Loan shall be calculated as though
each Lender funded its Eurodollar Loan through the purchase of a deposit of the
type and maturity corresponding to the deposit used as a reference in
determining the Eurodollar Rate applicable to such Loan, whether in fact that
is the case or not. Unless otherwise provided herein, the amount specified in
the written statement of any Lender shall be payable on demand after receipt by
the Borrower of the written statement. The obligations of the Borrower under
Sections 3.1, 3.2 and 3.4 shall survive payment of the Obligations and
termination of this Agreement.
I. ARTICLE
CONDITIONS PRECEDENT
A. Initial Loans and Facility Letters of Credit. The Lenders shall not be
required to make the initial Advance hereunder and the Issuer shall not be
required to issue any Facility Letter of Credit hereunder unless the Borrower
has furnished the following to the Agent with sufficient copies for the Lenders
and the other conditions set forth below have been satisfied, in each case on
or before March 3, 1997:
1. Charter Documents; Good Standing Certificates. Copies of the certificate of
incorporation of the Borrower, together with all amendments and other
modifications thereto (including the Borrower's name change from New Ralcorp
Holdings, Inc.), certified by the appropriate governmental officer in its
jurisdiction of incorporation, together with a good standing certificate issued
by the Secretary of State of the jurisdiction of its incorporation and such
other jurisdictions as shall be requested by the Agent.
1. By-Laws and Resolutions. Copies, certified by the Secretary or Assistant
Secretary of the Borrower, of its by-laws and of its Board of Directors'
resolutions authorizing the execution, delivery and performance of the Loan
Documents to which the Borrower is a party.
1. Secretary's Certificate. An incumbency certificate, executed by the
Secretary or Assistant Secretary of the Borrower, which shall identify by name
and title and bear the signature of the officers of the Borrower authorized to
sign the Loan Documents and to make borrowings hereunder, upon which
certificate the Agent and the Lenders shall be entitled to rely until informed
of any change in writing by the Borrower.
1. Officer's Certificate. A certificate, dated the date hereof, signed by an
Authorized Officer of the Borrower, in form and substance satisfactory to the
Agent, to the effect that: (i) on the initial Borrowing Date (both before and
after giving effect to the making of any Loans (or issuance of any Facility
Letters of Credit hereunder) no Default or Unmatured Default has occurred and
is continuing; (ii) no
-40-
<PAGE> 48
injunction or temporary restraining order which would prohibit the making of
any Loans (or issuance of any Facility Letters of Credit) or other litigation
which could reasonably be expected to have a Material Adverse Effect is pending
or, to the best of such Person's knowledge, threatened; (iii) the Divestitures
have been consummated on terms satisfactory to the Lenders; (iv) each of the
representations and warranties set forth in Article V of this Agreement is true
and correct on and as of the initial Borrowing Date; and (viii) since December
31, 1996, no event or change has occurred that has caused or evidences a
Material Adverse Effect.
1. Legal Opinions. A written opinion of R. W. Lockwood, General Counsel for
the Borrower and the Guarantors, addressed to the Agent and the Lenders in form
and substance acceptable to the Agent and its counsel.
1. Notes. Notes payable to the order of each of the Lenders duly executed by
the Borrower.
1. Loan Documents. Executed originals of this Agreement and each of the Loan
Documents, which shall be in full force and effect, together with all
schedules, exhibits, certificates, instruments, opinions, documents and
financial statements required to be delivered pursuant hereto and thereto.
1. Letters of Direction. Written money transfer instructions with respect to
Advances in form and substance acceptable to the Agent and its counsel
addressed to the Agent and signed by an Authorized Officer, together with such
other related money transfer authorizations as the Agent may have reasonably
requested.
1. Financial Statements. The Agent and the Required Lenders shall have
received (i) the Pro Forma which must not be materially less favorable, in the
Agent's and Required Lenders' reasonable judgment, than the projections
previously provided to them and which must demonstrate, in their reasonable
judgment, together with all other information then available to the Agent and
the Required Lenders, that the Borrower and its Subsidiaries can repay their
debts and satisfy their respective other obligations as and when due, and can
comply with the financial covenants set forth herein and (ii) such information
as the Agent and the Required Lenders could reasonably request to confirm the
tax, legal and business assumptions made in the Pro Forma.
1. Guarantor Charter Documents; Good Standing Certificates. Copies of the
articles or certificates of incorporation of each Guarantor, together with all
amendments thereto, both certified by the Secretary or Assistant Secretary of
such Guarantor, together with a good standing certificate issued by the
Secretary of State of the jurisdiction of its incorporation and such other
jurisdictions as shall be requested by the Agent.
1. Guarantor By-Laws and Resolutions. Copies, certified by the Secretary or
Assistant Secretary of each Guarantor, of its by-laws and Board of Directors'
resolutions of such Guarantor (and resolutions of other bodies, if any are
-41-
<PAGE> 49
deemed necessary by counsel for the Agent) authorizing the execution, delivery
and performance of the Loan Documents to which each such Guarantor is a party.
1. Guarantor Secretary's Certificate. An incumbency certificate, executed by
the Secretary or Assistant Secretary of each Guarantor, which shall identify by
name and title and bear the signature of the officers of such Guarantor
authorized to sign the Loan Documents upon which certificate the Agent and the
Lenders shall be entitled to rely until informed of any change in writing by
the Borrower.
1. Lien Searches. Copies of searches of financing statements filed under the
Uniform Commercial Code, together with tax lien and judgment searches with
respect to the assets of the Borrower and the Guarantors, in both cases in such
jurisdictions as the Agent may request.
1. Other. Such other documents as the Agent, any Lender or their counsel may
have reasonably requested.
A. Each Future Advance and Facility Letter of Credit. The Lenders shall not be
required to make any Advance and the Issuer shall not be obligated to issue any
future Facility Letter of Credit unless on the applicable Borrowing Date:
1. There exists no Default or Unmatured Default and none would result from such
Advance or issuance of such Facility Letter of Credit;
1. The representations and warranties contained in Article V are true and
correct as of such Borrowing Date;
1. A Borrowing Notice or Issuance Request, as applicable, shall have been
properly submitted; and
1. All legal matters incident to the making of such Advance or issuance of such
Facility Letter of Credit shall be satisfactory to the Lenders and their
counsel.
Each Ratable Borrowing Notice and Competitive Bid Quote Request with
respect to each such Advance and each Issuance Request with respect to each
such Facility Letter of Credit shall constitute a representation and warranty
by the Borrower that the conditions contained in Section 4.2 have been
satisfied. Any Lender may require a duly completed compliance certificate in
substantially the form of Exhibit G hereto as a condition to making an Advance
or issuing a Facility Letter of Credit.
-42-
<PAGE> 50
I. ARTICLE
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Agent and the Lenders that:
A. Corporate Existence and Standing. Each of the Borrower and each Material
Subsidiary is a corporation duly incorporated, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation and is
duly qualified and in good standing as a foreign corporation and is duly
authorized to conduct its business in each jurisdiction in which its business
is conducted or proposed to be conducted except where the failure to be so
qualified or authorized could not reasonably be expected to have a Material
Adverse Effect.
A. Authorization and Validity. The Borrower and each Guarantor have all
requisite power and authority (corporate and otherwise) and legal right to
execute and deliver (or file, as the case may be) each of the Loan Documents to
which it is a party and to perform its obligations thereunder. The execution
and delivery (or filing, as the case may be) by the Borrower and each Guarantor
of the Loan Documents to which it is a party and the performance of their
respective obligations thereunder have been duly authorized by proper corporate
proceedings and the Loan Documents constitute legal, valid and binding
obligations of the Borrower or such Guarantor, as applicable, enforceable
against the Borrower or such Guarantor, as applicable, in accordance with their
terms, except as enforceability may be limited by bankruptcy, insolvency or
similar laws affecting the enforcement of creditors' rights generally or by
general principles of equity.
A. Compliance with Laws and Contracts. The Borrower and its Subsidiaries have
complied in all material respects with all applicable statutes, rules,
regulations, orders and restrictions of any domestic or foreign government or
any instrumentality or agency thereof, having jurisdiction over the conduct of
their respective businesses or the ownership of their respective properties,
except where the failure to so comply could not reasonably be expected to have
a Material Adverse Effect. Neither the execution and delivery by the Borrower
or any Guarantor of the Loan Documents to which it is a party, the application
of the proceeds of the Loans and the Facility Letters of Credit, the
consummation of any transaction contemplated in the Loan Documents, nor
compliance with the provisions of the Loan Documents will, or at the relevant
time did, (a) violate any law, rule, regulation (including Regulations G, T, U
and X), order, writ, judgment, injunction, decree or award binding on the
Borrower or any Subsidiary or the Borrower's or any Subsidiary's charter,
articles or certificate of incorporation or by-laws, (b) violate the provisions
of or require the approval or consent of any party to any indenture, instrument
or agreement to which the Borrower or any Subsidiary is a party or is subject,
or by which it, or its property, is bound, or conflict with or constitute a
default thereunder, or result in the creation or imposition of any Lien (other
than Liens permitted by, the Loan Documents) in, of or on the property of the
Borrower or any Subsidiary
-43-
<PAGE> 51
pursuant to the terms of any such indenture, instrument or agreement, or (c)
require any consent of the stockholders of any Person.
A. Governmental Consents. No order, consent, approval, qualification, license,
authorization, or validation of, or filing, recording or registration with, or
exemption by, or other action in respect of, Governmental Authority, or any
subdivision thereof, any securities exchange or other Person is or at the
relevant time was required to authorize, or is or at the relevant time was
required in connection with the execution, delivery, consummation or
performance of, or the legality, validity, binding effect or enforceability of,
any of the Loan Documents, the application of the proceeds of the Loans or the
Facility Letters of Credit or any other transaction contemplated in the Loan
Documents.
A. Financial Statements. The Borrower has heretofore furnished to each of the
Lenders (a) the September 30, 1996 audited consolidated financial statements of
Old Ralcorp and its Subsidiaries, and (b) the unaudited consolidated financial
statements of Old Ralcorp and its Subsidiaries through December 31, 1996
(collectively, the "Financial Statements"). The pro forma balance sheet and
related profit and loss statement (the "Pro Forma") of the Borrower and its
Subsidiaries on a consolidated basis as of December 31, 1996 is attached hereto
as Schedule 5.5. As of the date of this Agreement, the Pro Forma is complete
and accurate and fairly represents in all material respects the Borrower's and
the Subsidiaries' assets, liabilities, financial condition and results of
operations on a consolidated basis in accordance with Agreement Accounting
Principles, consistently applied, and taking into account the Divestitures.
Each of the Financial Statements was prepared in accordance with Agreement
Accounting Principles and fairly presents the consolidated financial condition
and operations of the Borrower and its Subsidiaries at such dates and the
consolidated results of their operations for the respective periods then ended
(except, in the case of such unaudited statements, for normal year-end audit
adjustments).
A. Material Adverse Change. Since December 31, 1996, there has been no change
from that reflected in the Pro Forma in the business, Property, condition
(financial or otherwise) or results of operations of the Borrower and its
Subsidiaries taken as a whole which could reasonably be expected to have a
Material Adverse Effect.
A. Taxes. The Borrower and its Subsidiaries have filed or caused to be filed
in correct form all United States federal and applicable foreign, state and
local tax returns and all other tax returns which are required to be filed and
have paid all taxes due pursuant to said returns or pursuant to any assessment
received by the Borrower or any Subsidiary, except such taxes, if any, as are
being contested in good faith and as to which adequate reserves have been
provided in accordance with Agreement Accounting Principles and as to which no
Lien exists. No tax liens have been filed and no claims are being asserted
with respect to any such taxes which could reasonably be expected to have a
Material Adverse Effect. The charges, accruals and reserves on the books of
the Borrower and its Subsidiaries in respect of any taxes or other governmental
charges are in accordance with Agreement Accounting Principles.
-44-
<PAGE> 52
A. Litigation and Contingent Obligations. There is no litigation, arbitration,
proceeding, inquiry or governmental investigation (including, without
limitation, by the Federal Trade Commission) pending or, to the knowledge of
any of their officers, threatened against or affecting the Borrower or any
Subsidiary or any of their respective Properties which could reasonably be
expected to have a Material Adverse Effect or to prevent, enjoin or unduly
delay the making of the Loans or the issuance of Facility Letters of Credit
under this Agreement. Neither the Borrower nor any Subsidiary has any material
Contingent Obligations except as set forth on Schedule 5.8.
A. Subsidiaries and Capitalization. Schedule 5.9 hereto contains an accurate
list of all of the existing Subsidiaries as of the date of this Agreement after
giving effect to the Divestitures, setting forth their respective jurisdictions
of incorporation and the percentage of their capital stock owned by the
Borrower or other Subsidiaries. All of the issued and outstanding shares of
capital stock of each Subsidiary have been duly authorized and validly issued,
are fully paid and non-assessable, and are free and clear of all Liens, other
than the Liens created by the Loan Documents. No authorized but unissued or
treasury shares of capital stock of or any Subsidiary are subject to any
option, warrant, right to call or commitment of any kind or character. Except
as set forth on Schedule 5.9, neither the Borrower nor any Subsidiary has any
outstanding stock or securities convertible into or exchangeable for any shares
of its capital stock, or any right issued to any Person (either preemptive or
other) to subscribe for or to purchase, or any options for the purchase of, or
any agreements providing for the issuance (contingent or otherwise) of, or any
calls, commitments or claims of any character relating to any of its capital
stock or any stock or securities convertible into or exchangeable for any of
its capital stock other than as expressly set forth in the certificate or
articles of incorporation of the Borrower or such Subsidiary. Neither the
Borrower nor any Subsidiary is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of its
capital stock or any convertible securities, rights or options of the type
described in the preceding sentence except as otherwise set forth on Schedule
5.9. Except as set forth on Schedule 5.9, as of the date hereof the Borrower
does not own or hold, directly or indirectly, any capital stock or equity
security of, or any equity or partnership interest in any Person other than
such Subsidiaries and Vail Resorts, Inc.
A. ERISA. Except as disclosed on Schedule 5.10, neither the Borrower nor any
other member of the Controlled Group maintains any Single Employer Plans, and
no Single Employer Plan has any Unfunded Liability. Neither the Borrower nor
any other member of the Controlled Group maintains, or is obligated to
contribute to, any Multiemployer Plan or has incurred, or is reasonably
expected to incur, any withdrawal liability to any Multiemployer Plan. Each
Plan complies in all respects with all applicable requirements of law and
regulations, except where the failure to so comply could not reasonably be
expected to cause the relevant Plan to become disqualified under the Code.
Neither the Borrower nor any member of the Controlled Group has, with respect
to any Plan, failed to make any contribution or pay any amount required under
-45-
<PAGE> 53
Section 412 of the Code or Section 302 of ERISA or the terms of such Plan.
There are no pending or, to the knowledge of the Borrower, threatened claims,
actions, investigations or lawsuits against any Plan, any fiduciary thereof, or
the Borrower or any member of the Controlled Group with respect to a Plan which
could reasonably be expected to have a Material Adverse Effect. Neither the
Borrower nor any member of the Controlled Group has engaged in any prohibited
transaction (as defined in Section 4975 of the Code or Section 406 of ERISA) in
connection with any Plan which would subject such Person to any material
liability. Within the last five years neither the Borrower nor any member of
the Controlled Group has engaged in a transaction which resulted in a Single
Employer Plan with an Unfunded Liability being transferred out of the
Controlled Group. No Termination Event has occurred or is reasonably expected
to occur with respect to any Plan which is subject to Title IV of ERISA.
A. Defaults. No Default or Unmatured Default has occurred and is continuing.
A. Federal Reserve Regulations. Neither the Borrower nor any Subsidiary is
engaged, directly or indirectly, principally, or as one of its important
activities, in the business of extending, or arranging for the extension of,
credit for the purpose of purchasing or carrying Margin Stock. Neither the
making of any Advance or issuance of any Facility Letters of Credit hereunder,
the use of the proceeds thereof, will violate or be inconsistent with the
provisions of Regulation G, Regulation T, Regulation U or Regulation X.
Following the application of the proceeds of the Loans, less than 25% of the
value (as determined by any reasonable method) of the assets of the Borrower
and its Subsidiaries which are subject to any limitation on sale, pledge, or
other restriction hereunder taken as a whole have been, and will continue to
be, represented by Margin Stock.
A. Investment Company; Public Utility Holding Company Act. Neither the
Borrower nor any Subsidiary is, or after giving effect to any Advance will be,
an "investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended. Neither
the Borrower nor any Subsidiary is a "holding company" or a "subsidiary
company" of a "holding company", or an "affiliate" of a "holding company" or of
a "subsidiary company" of a "holding company", within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
A. Certain Fees. Other than as disclosed on Schedule 5.14, no broker's or
finder's fee or commission was, is or will be payable by the Borrower or any
Subsidiary with respect to the Divestitures or any of the transactions
contemplated by this Agreement. The Borrower hereby agrees to indemnify the
Agent and the Lenders against and agrees that it will hold each of them
harmless from any claim, demand or liability for broker's or finder's fees or
commissions alleged to have been incurred by the Borrower in connection with
any of the transactions contemplated by this Agreement and any expenses
(including, without limitation, attorneys' fees and time charges of attorneys
for the Agent or any Lender, which attorneys may be employees of the Agent or
any Lender)
-46-
<PAGE> 54
arising in connection with any such claim, demand or liability. No other
similar fee or commissions will be payable by the Borrower or any Subsidiary
for any other services rendered to the Borrower or any Subsidiary ancillary to
the Divestitures or any of the transactions.
A. Solvency. As of the date hereof, after giving effect to the consummation of
the transactions contemplated by the Loan Documents and the Divestitures and
the payment of all fees, costs and expenses payable by the Borrower or its
Subsidiaries with respect to the transactions contemplated by the Loan
Documents and the Transaction Documents, each of the Borrower and each
Guarantor is Solvent.
A. Ownership of Properties. Except as set forth on Schedule 5.16 hereto, the
Borrower and its Subsidiaries have a subsisting leasehold interest in, or good
and marketable title, free of all Liens, other than those permitted by Section
6.17 or by any of the other Loan Documents, to all of the properties and assets
reflected in the Financial Statements as being owned by it, except for assets
sold, transferred or otherwise disposed of in the Divestitures or in the
ordinary course of business since the date thereof. To the knowledge of the
Borrower, there are no actual, threatened or alleged defaults with respect to
any leases of real property under which the Borrower or any Subsidiary is
lessee or lessor which could reasonably be expected to have a Material Adverse
Effect. The Borrower and its Subsidiaries own or possess rights to use all
material licenses, patents, patent applications, copyrights, service marks,
trademarks and trade names necessary to continue to conduct their business as
heretofore conducted, and no such license, patent or trademark has been
declared invalid, been limited by order of any court or by agreement or is the
subject of any infringement, interference or similar proceeding or challenge,
except for proceedings and challenges which could not reasonably be expected to
have a Material Adverse Effect.
A. Indebtedness. Attached hereto as Schedule 5.17 is a complete and correct
list of all Indebtedness of the Borrower and its Subsidiaries outstanding on
the date of this Agreement (other than Indebtedness in a principal amount not
exceeding $100,000 for a single item of Indebtedness and $500,000 in the
aggregate for all such Indebtedness listed), showing the aggregate principal
amount which was outstanding on such date.
A. Subordinated Indebtedness. The principal of and interest on the Notes and
all other Obligations will constitute "senior debt" as that or any similar term
is or may be used in any other instrument evidencing or applicable to any
Subordinated Indebtedness of the Borrower.
A. Employee Controversies. There are no strikes, work stoppages or
controversies pending or threatened between the Borrower or any Subsidiary and
any of its employees, other than strikes, work stoppages or controversies
arising in the ordinary course of business, which, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
-47-
<PAGE> 55
A. Material Agreements. Neither the Borrower nor any Subsidiary is a party to
any agreement or instrument or subject to any charter or other corporate
restriction which could reasonably be expected to have a Material Adverse
Effect or which restricts or imposes conditions upon the ability of the
Borrower or any Subsidiary to (a) pay dividends or make other distributions on
its capital stock (b) make loans or advances to the Borrower, (c) repay loans
or advances from Borrower or (d) grant Liens to the Agent to secure the
Obligations. Neither the Borrower nor any Subsidiary is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any agreement to which it is a party, which default
could reasonably be expected to have a Material Adverse Effect.
A. Divestiture Documents. The Borrower has delivered to each of the Lenders
true, complete and correct copies of the documents pursuant to which the
Divestitures were consummated (including all schedules, exhibits, annexes,
amendments, supplements, modifications, and all other material documents
delivered pursuant thereto or in connection therewith). Each of the
representations and warranties of the Borrower and its Subsidiaries therein is
true and correct in all material aspects as of the date of the closing of the
Divestitures. The Divestitures were consummated in accordance with applicable
laws and regulations.
A. Environmental Laws. The Borrower and its Material Subsidiaries each conduct
in the ordinary course of business a review of the effects of then existing
Environmental Laws and then existing Environmental Claims on its business,
condition (financial and other), results of operations and Property, and as a
result thereof the Borrower and its Material Subsidiaries have reasonably
concluded that the application of such Environmental Laws and the existence of
such Environmental Claims, in the aggregate, could not reasonably be expected
to have a Material Adverse Effect.
A. Insurance. The Borrower and its Subsidiaries maintain with financially
sound and reputable insurance companies insurance on their Property in such
amounts and covering such risks as is consistent with sound business practice.
A. Disclosure. None of the (a) information, exhibits or reports furnished or
to be furnished by the Borrower or any Subsidiary to the Agent or to any Lender
in connection with the negotiation of the Loan Documents, or (b)
representations or warranties of the Borrower or any Subsidiary contained in
this Agreement, the other Loan Documents or any certificate or other written
information furnished to the Agent or the Lenders by or on behalf of the
Borrower or any Subsidiary pursuant to a request from the Agent or the Lenders
permitted hereunder and for use in connection with the transactions
contemplated by this Agreement, contained, contains or will contain any untrue
statement of a material fact or omitted, omits or will omit to state a material
fact necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances in which the same were made. The pro
forma financial information contained in such materials is based upon good
faith estimates and assumptions believed by the Borrower to be reasonable at
the time made. There is no fact known to the Borrower (other than matters of a
general economic nature) that has had or
-48-
<PAGE> 56
could reasonably be expected to have a Material Adverse Effect and that has not
been disclosed herein or in such other documents, certificates and other
written information furnished to the Lenders for use in connection with the
transactions contemplated by this Agreement or the Form 10.
I. ARTICLE
COVENANTS
During the term of this Agreement, unless the Required Lenders shall
otherwise consent in writing:
A. Financial Reporting. The Borrower will maintain, for itself and each
Subsidiary, a system of accounting established and administered in accordance
with generally accepted accounting principles, consistently applied, and
furnish to the Lenders:
1. As soon as practicable and in any event within 95 days after the close of
each of its Fiscal Years, an unqualified audit report certified by independent
certified public accountants, acceptable to the Lenders, prepared in accordance
with Agreement Accounting Principles on a consolidated and consolidating basis
(consolidating statements need not be certified by such accountants) for itself
and its Subsidiaries, including balance sheets as of the end of such period and
related statements of income, retained earnings and cash flows accompanied by a
certificate of said accountants that, in the course of the examination
necessary for their certification of the foregoing, they have obtained no
knowledge of any Default or Unmatured Default, or if, in the opinion of such
accountants, any Default or Unmatured Default shall exist, stating the nature
and status thereof.
1. As soon as practicable and in any event within 50 days after the close of
the first three Fiscal Quarters of each of its Fiscal Years, for itself and its
Subsidiaries, consolidated and consolidating unaudited balance sheets as at the
close of each such period and consolidated and consolidating statements of
income, retained earnings and cash flows for the period from the beginning of
such Fiscal Year to the end of such quarter, all certified by its chief
financial officer, controller or treasurer.
1. As soon as available, but in any event not later than the last Business Day
in November of each year, a copy of the plan and forecast (including a
projected consolidated and consolidating balance sheet, income statement and
funds flow statement) of the Borrower and its Subsidiaries for the next Fiscal
Year.
1. Together with the financial statements required by clauses (a) and (b)
above, a compliance certificate in substantially the form of Exhibit G hereto
signed by its chief financial officer, controller or treasurer showing the
calculations necessary to determine compliance with this Agreement and stating
that no Default or Unmatured Default exists, or if any Default or Unmatured
Default exists, stating the nature and status thereof.
-49-
<PAGE> 57
1. Within 270 days after the close of each Fiscal Year, a statement of the
Unfunded Liabilities of each Single Employer Plan, certified as correct by an
actuary enrolled under ERISA.
1. As soon as possible and in any event within 10 days after the Borrower knows
that any Termination Event has occurred with respect to any Plan, a statement,
signed by the chief financial officer, treasurer or controller of the Borrower,
describing said Termination Event and the action which the Borrower proposes to
take with respect thereto.
1. As soon as possible and in any event within 10 days after the Borrower
learns thereof, notice of the assertion or commencement of any claims, action,
suit or proceeding against or affecting the Company or any Subsidiary which
could reasonably be expected to have a Material Adverse Effect.
1. Promptly upon the furnishing thereof to the shareholders of the Borrower,
copies of all financial statements, reports and proxy statements so furnished.
1. Promptly upon the filing thereof, copies of all registration statements and
annual, quarterly, monthly or other regular reports which the Borrower or any
of its Subsidiaries files with the Securities and Exchange Commission.
1. Such other information (including non-financial information) as the Agent or
any Lender may from time to time reasonably request.
A. Use of Proceeds. The Borrower will, and will cause each Subsidiary to, use
the proceeds of the Advances to meet the general corporate needs of the
Borrower and its Subsidiaries, including the making of Investments and
Purchases permitted hereunder; provided, however, that in no event may more
than $10,000,000 in the aggregate of Loan Proceeds be used to make stock
redemptions or repurchases. The Borrower will not, nor will it permit any
Subsidiary to, use any of the proceeds of the Advances or any Facility Letter
of Credit to purchase or carry any "margin stock" (as defined in Regulation U)
or to finance the Purchase of any Person which has not been approved and
recommended by the board of directors (or functional equivalent thereof) of
such Person.
A. Notice of Default. The Borrower will give prompt notice in writing to the
Lenders of the occurrence of (a) any Default or Unmatured Default and (b) of
any other event or development, financial or other, relating specifically to
the Borrower or any of its Subsidiaries (and not of a general economic or
political nature) which could reasonably be expected to have a Material Adverse
Effect.
A. Conduct of Business. The Borrower will, and will cause each Subsidiary to,
carry on and conduct its business in substantially the same manner and in
-50-
<PAGE> 58
substantially the same fields of enterprise as it is presently conducted and to
do all things necessary to remain duly incorporated, validly existing and in
good standing as a domestic corporation in its jurisdiction of incorporation
and maintain all requisite authority to conduct its business in each
jurisdiction in which its business is conducted, except where the failure to
maintain such authority could not reasonably be expected to have a Material
Adverse Effect.
A. Taxes. The Borrower will, and will cause each Subsidiary to, timely file
complete and correct United States federal and applicable foreign, state and
local tax returns required by applicable law and pay when due all material
taxes, assessments and governmental charges and levies upon it or its income,
profits or Property, except those which are being contested in good faith by
appropriate proceedings and with respect to which adequate reserves have been
set aside.
A. Insurance. The Borrower will, and will cause each Subsidiary to, maintain
with financially sound and reputable insurance companies insurance on all their
Property in such amounts and covering such risks as is consistent with sound
business practice for similarly situated businesses in the industries in which
the Borrower and its Subsidiaries operate, and the Borrower will furnish to the
Agent and any Lender upon request full information as to the insurance carried.
A. Compliance with Laws. The Borrower will, and will cause each Subsidiary to,
comply with all laws, rules, regulations, orders, writs, judgments,
injunctions, decrees or awards to which it may be subject, the failure to
comply with which could reasonably be expected to have a Material Adverse
Effect.
A. Maintenance of Properties. The Borrower will, and will cause each
Subsidiary to, do all things necessary to maintain, preserve, protect and keep
its Property in good repair, working order and condition, and make all
necessary and proper repairs, renewals and replacements so that its business
carried on in connection therewith may be properly conducted at all times,
except where the failure to do so could not reasonably be expected to have a
Material Adverse Effect.
A. Inspection. The Borrower will, and will cause each Subsidiary to, permit
the Agent and the Lenders, by their respective representatives and agents, to
inspect any of the Property, corporate books and financial records of the
Borrower and each Subsidiary, to examine and make copies of the books of
accounts and other financial records of the Borrower and each Subsidiary, and
to discuss the affairs, finances and accounts of the Borrower and each
Subsidiary with, and to be advised as to the same by, their respective officers
at such reasonable times and intervals as the Lenders may designate. The
Borrower will keep or cause to be kept, and cause each Subsidiary to keep or
cause to be kept, appropriate records and books of account in which complete
entries are to be made reflecting its and their business and financial
transactions, such entries to be made in accordance with Agreement Accounting
Principles consistently applied.
-51-
<PAGE> 59
A. Capital Stock and Dividends. The Borrower will not, nor will it permit any
Subsidiary to, (a) issue or have outstanding any preferred stock, other than
preferred stock not having mandatory redemption, retirement and other
repurchase dates commencing less than 91 days after the Facility Termination
Date then in effect or (b) declare or pay any dividends or make any
distributions on its capital stock (other than dividends payable in its own
capital stock) or redeem, repurchase or otherwise acquire or retire any of its
capital stock or any options or other rights in respect thereof at any time
outstanding, except that (i) any Subsidiary may declare and pay dividends or
make distributions to the Borrower or to a Guarantor and (ii) so long as no
Default or Unmatured Default exists before or after giving effect to the
declaration or payment of such dividends or repurchase or redemption of such
stock, the Borrower may repurchase or redeem its capital stock or declare and,
within 45 days thereafter, pay dividends on its capital stock in an amount
which, when added to the amount of all prior dividends and stock repurchases or
redemptions does not exceed 10% of Net Worth at such time (before giving effect
to such dividend, repurchase or redemption).
A. Indebtedness. The Borrower will not, nor will it permit any Subsidiary to,
create, incur or suffer to exist any Indebtedness, except:
1. the Loans;
1. Indebtedness existing on the date hereof and described in Schedule 5.17;
1. Contingent Obligations permitted by Section 6.16;
1. outstanding borrowings under working capital facilities (other than pursuant
to this Agreement) having individual maturities of not more than 30 days, which
Indebtedness, when considered together with the Obligations outstanding
hereunder, at no time exceeds $50,000,000 in aggregate principal amount;
1. Rate-Hedging Obligations incurred in the ordinary course of business;
1. other Indebtedness at no time exceeding $10,000,000 in aggregate principal
amount.
A. Merger. The Borrower will not, nor will it permit any Subsidiary to, merge
or consolidate with or into any other Person, except that (a) a Wholly-Owned
Subsidiary may merge into the Borrower or any Wholly-Owned Subsidiary of the
Borrower, (b) the Borrower or any Subsidiary may merge or consolidate with any
other Person so long as the Borrower or such Subsidiary is the continuing or
surviving corporation and, prior to and after giving effect to such merger or
consolidation, no Default or Unmatured Default shall exist, and (c) any
Subsidiary may enter into a merger or consolidation as a means of effecting a
disposition permitted by Section 6.13.
-52-
<PAGE> 60
A. Sale of Assets. The Borrower will not, nor will it permit any Subsidiary
to, lease, sell, transfer or otherwise dispose of its Property to any other
Person except for (a) sales of inventory or unused or obsolete equipment in the
ordinary course of business, and (b) leases, sales, transfers or other
dispositions of its Property that, together with all other Property of the
Borrower and its Subsidiaries previously leased, sold, transferred or otherwise
disposed of (other than inventory or unused or obsolete equipment sold in the
ordinary course of business) as permitted by this Section 6.13 since the date
hereof, do not constitute a Substantial Portion of the Property of Borrower
and its Subsidiaries.
A. Sale of Accounts. The Borrower will not, nor will it permit any Subsidiary
to, sell or otherwise dispose of any notes receivable or accounts receivable,
with or without recourse.
A. Investments and Purchases. The Borrower will not, nor will it permit any
Subsidiary to, make or suffer to exist any Investments (including, without
limitation, loans and advances to, and other Investments in, Subsidiaries), or
commitments therefor, or to create any Subsidiary or to become or remain a
partner in any partnership or joint venture, or to make any Purchases, except:
1. Short-term obligations of, or fully guaranteed by, the United States of
America;
1. Commercial paper rated A-1 or better by S&P or P-1 or better by Moody's;
1. Demand deposit and money market bank accounts maintained in the ordinary
course of business with commercial banks which are members of the Federal
Deposit Insurance Corporation;
1. Certificates of deposit issued by and time deposits with commercial banks
(whether domestic or foreign) rated B or better by Thomson, A or better by S&P
or A2 or better by Moody's;
1. Repurchase agreements with commercial banks (whether domestic or foreign)
rated B or better by Thomson, A or better by S&P or A2 or better by Moody's, so
long at least 102% of the principal amount of each repurchase agreement is
collateralized by obligations of, or fully guaranteed by, the United States of
America or by commercial paper rated A-1 or better by S&P or P-1 or better by
Moody's;
1. Loan participations and master notes with corporations rated A-1 or better
by S&P or P-1 or better by Moody's and with commercial banks rated B or better
by Thomson, A or better by S&P or A2 or better by Moody's;
1. Money market preferred stock accounts in corporations rated A or better by
S&P or A2 or better by Moody's or in other corporations so long as
-53-
<PAGE> 61
such Investments are secured by Letters of Credit issued by commercial banks
rated B or better by Thomson, A or better by S&P or A2 or better by Moody's;
1. Existing Investments in Subsidiaries and additional Investments in
Guarantors;
1. Other Investments in existence on the date hereof and described in Schedule
6.15 hereto;
1. Additional equity Investments in Vail Resorts, Inc. necessary to permit the
Borrower to retain equity accounting treatment for such Investment; and
1. Purchases not exceeding $50,000,000 in the case of any single Purchase or
series of related Purchases provided that there shall exist no Default or
Unmatured Default either immediately before or immediately after giving effect
to any such Purchase.
A. Contingent Obligations. The Borrower will not, nor will it permit any
Subsidiary to, make or suffer to exist any Contingent Obligation (including,
without limitation, any Contingent Obligation with respect to the obligations
of a Subsidiary), except (a) by endorsement of instruments for deposit or
collection in the ordinary course of business, (b) the Subsidiary Guaranty and
(c) the Ralston Obligations.
A. Liens. The Borrower will not, nor will it permit any Subsidiary to, create,
incur, or suffer to exist any Lien in, of or on the Property of the Borrower or
any of its Subsidiaries, except:
1. Liens for taxes, assessments or governmental charges or levies on its
Property if the same shall not at the time be delinquent or thereafter can be
paid without penalty, or are being contested in good faith and by appropriate
proceedings and for which adequate reserves in accordance with generally
accepted principles of accounting shall have been set aside on its books;
2. Liens imposed by law, such as carriers', warehousemen's and mechanics' liens
and other similar liens arising in the ordinary course of business which secure
the payment of obligations not more than 60 days past due or which are being
contested in good faith by appropriate proceedings and for which adequate
reserves shall have been set aside on its books;
1. Liens arising out of pledges or deposits under worker's compensation laws,
unemployment insurance, old age pensions, or other social security or
retirement benefits, or similar legislation;
1. Liens arising out of good faith deposits in connection with or to secure
performance of statutory obligations, surety and appeal bonds, government
-54-
<PAGE> 62
contracts, leases otherwise permitted hereunder, performance and return of
money bonds and other similar obligations incurred in the ordinary course of
business;
1. Easements, minor defects or irregularities in title, building restrictions
and such other encumbrances or charges against real property, all of which as
are of a nature generally existing with respect to properties of a similar
character and which do not in any material way affect the marketability of the
same or interfere with the use thereof in the business of the Borrower or the
Subsidiaries;
1. Liens existing on the date hereof and described in Schedule 6.17 hereto,
including extensions, renewals and replacements thereof in whole or in part, so
long as the principal amount of the Indebtedness secured thereby at the time of
such extension, renewal or replacement is limited to all or any part of the
Property (including improvements thereon) securing the Lien so extended,
renewed or replaced;
1. Liens on the Property of a Subsidiary of the Borrower and exclusively
securing Indebtedness of such Subsidiary to the Borrower or any Guarantor; and
1. Other Liens securing aggregate principal Indebtedness at no time exceeding
$10,000,000.
A. Lease Rentals. The Borrower will not, nor will it permit any Subsidiary to,
create, incur or suffer to exist obligations for Rentals in excess of
$10,000,000 during any one Fiscal Year on a non-cumulative basis in the
aggregate for the Borrower and its Subsidiaries.
A. Affiliates. The Borrower will not, and will not permit any Subsidiary to,
enter into any transaction (including, without limitation, the purchase or sale
of any Property or service) with, or make any payment or transfer to, any
Affiliate except (a) in the ordinary course of business and pursuant to the
reasonable requirements of the Borrower's or such Subsidiary's business and
upon fair and reasonable terms no less favorable to the Borrower or such
Subsidiary than the Borrower or such Subsidiary would obtain in a comparable
arms-length transaction and (b) transactions among the Borrower and Guarantors.
A. Subordinated Indebtedness; Other Indebtedness. The Borrower will not, and
will not permit any Subsidiary to, make any amendment or modification to the
indenture, note or other agreement evidencing or governing any Subordinated
Indebtedness, or directly or indirectly voluntarily prepay, defease or in
substance defease, purchase, redeem, retire or otherwise acquire, any
Subordinated Indebtedness.
A. Environmental Matters. The Borrower shall and shall cause each of its
Material Subsidiaries to conduct in the ordinary course of its business reviews
of the effects of then existing Environmental Laws and then existing
Environmental Claims on its business, condition (financial and other), results
of operations and Property and to
-55-
<PAGE> 63
take all actions required by such Environmental Laws and in respect of such
Environmental Claims, except where the failure to so act could not reasonably
be expected to have a Material Adverse Effect.
A. Change in Corporate Structure; Fiscal Year. The Borrower shall not, nor
shall it permit any Subsidiary to, (a) permit any amendment or modification to
be made to its certificate or articles of incorporation or by-laws which is
materially adverse to the interests of the Lenders (provided that the Borrower
shall notify the Agent of any other amendment or modification thereto as soon
as practicable thereafter) or (b) change its Fiscal Year to end on any date
other than September 30 of each year.
A. Inconsistent Agreements. The Borrower shall not, nor shall it permit any
Subsidiary to, enter into any indenture, agreement, instrument or other
arrangement which, (a) directly or indirectly prohibits or restrains, or has
the effect of prohibiting or restraining, or imposes materially adverse
conditions upon, the incurrence of the Obligations, the granting of Liens to
secure the Obligations, the provision of the Subsidiary Guaranty, the amending
of the Loan Documents or the ability of any Subsidiary to (i) pay dividends or
make other distributions on its capital stock, (ii) make loans or advances to
the Borrower or (iii) repay loans or advances from the Borrower or (b) contains
any provision which would be violated or breached by the making of Advances, by
the issuance of Facility Letters of Credit or by the performance by the
Borrower or any Subsidiary of any of its obligations under any Loan Document.
A. Financial Covenants. The Borrower on a consolidated basis with its
Subsidiaries shall:
6.24.1. Adjusted Net Worth. At all times after the date hereof, maintain
a minimum Adjusted Net Worth at least equal to the sum of (a) (i) at all times
prior to 10 days after receipt of the financial information described in
subclause (B) below, $214,500,000 and (ii) at all other times, the greater of
(A) $169,500,000 and (B) 90% of Adjusted Net Worth determined for the Borrower
and its Subsidiaries on a pro forma basis as of January 31, 1997 based on
financial information received by the Agent from the Borrower within 90 days
from the date hereof in form and substance acceptable to the Required Lenders,
plus (b) the sum of all proceeds (net of related costs, expenses, fees and
taxes) received by the Borrower or any Subsidiary of the Borrower from the
issuance of its capital stock, plus (c) for each Fiscal Quarter ending after
the date hereof and prior to the time of determination, 50% of the Borrower's
positive Adjusted Net Income for such Fiscal Quarter.
6.24.2. Leverage Ratio. As of the end of each Fiscal Quarter, maintain a
Leverage Ratio of not more than 2.5:1.0.
6.24.3. Interest Expense Coverage Ratio. As of the end of each Fiscal
Quarter, maintain an Interest Expense Coverage Ratio for the period indicated
of not less than the following:
-56-
<PAGE> 64
Period
------
Ratio
- -----
For the two months ending March 31, 1997..............2.50:1.00
For the five months ending June 30, 1997..............2.50:1.00
For the eight months ending September 30, 1997........2.50:1.00
For the eleven months ending December 31, 1997........2.75:1.00
For the four Fiscal Quarters ending each of
March 31, 1998, June 30, 1998 and September 30, 1998..2.75:1.00
For each four Fiscal Quarters ending thereafter.......3.00:1.00
A. ERISA Compliance.
With respect to any Plan, neither the Borrower nor any Subsidiary shall:
1. engage in any "prohibited transaction" (as such term is defined in Section
406 of ERISA or Section 4975 of the Code) for which a civil penalty pursuant to
Section 502(i) of ERISA or a tax pursuant to Section 4975 of the Code in excess
of $1,000,000 could be imposed;
1. incur any "accumulated funding deficiency" (as such term is defined in
Section 302 of ERISA) in excess of $1,000,000, whether or not waived, or permit
any Unfunded Liability to exceed $1,000,000;
1. permit the occurrence of any Termination Event which could result in a
liability to the Borrower or any other member of the Controlled Group in excess
of $1,000,000;
1. be an "employer" (as such term is defined in Section 3(5) of ERISA) required
to contribute to any Multiemployer Plan or a "substantial employer" (as such
term in defined in Section 4001(a)(2) of ERISA) required to contribute to any
Multiple Employer Plan; or
1. permit the establishment or amendment of any Plan or fail to comply with the
applicable provisions of ERISA and the Code with respect to any Plan
-57-
<PAGE> 65
which could result in liability to the Borrower or any other member of the
Controlled Group which, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.
A. Material Subsidiaries. The Borrower shall cause each of its Subsidiaries
which becomes a Material Subsidiary on or after the date hereof to join the
Subsidiary Guaranty as a Guarantor pursuant to a joinder agreement in the form
attached to the Subsidiary Guaranty within thirty (30) days of such Person
becoming a Material Subsidiary.
I. ARTICLE
DEFAULTS
The occurrence of any one or more of the following events shall constitute
a Default:
A. Any representation or warranty made or deemed made by or on behalf of the
Borrower or any of its Subsidiaries to the Lenders or the Agent under or in
connection with this Agreement, any other Loan Document, any Loan, any Facility
Letter of Credit or any certificate or information delivered in connection with
this Agreement or any other Loan Document shall be false in any material
respect on the date as of which made or deemed made.
A. Nonpayment of (a) any principal of any Note or any Reimbursement Obligation
when due, or (b) any interest upon any Note or any commitment fee or other fee
or obligations under any of the Loan Documents within five days after the same
becomes due.
A. The breach by the Borrower of any of the terms or provisions of Section
6.2, Section 6.3(a) or Sections 6.10 through 6.24.
A. The breach by the Borrower (other than a breach which constitutes a Default
under Section 7.1, 7.2 or 7.3) of any of the terms or provisions of this
Agreement which is not remedied within thirty (30) days after written notice
from the Agent or any Lender.
A. Failure of the Borrower or any of its Subsidiaries to pay any Indebtedness
aggregating in excess of $10,000,000 when due; or the default by the Borrower
or any of its Subsidiaries in the performance of any term, provision or
condition contained in any agreement or agreements under which any such
Indebtedness was created or is governed, or the occurrence of any other event
or existence of any other condition, the effect of any of which is to cause, or
to permit the holder or holders of such Indebtedness to cause, such
Indebtedness to become due prior to its stated maturity; or any such
Indebtedness of the Borrower or any of its Subsidiaries shall be declared to be
-58-
<PAGE> 66
due and payable or required to be prepaid (other than by a regularly scheduled
payment) prior to the stated maturity thereof.
A. The Borrower or any of its Subsidiaries shall (a) have an order for relief
entered with respect to it under the Federal bankruptcy laws as now or
hereafter in effect, (b) make an assignment for the benefit of creditors, (c)
apply for, seek, consent to, or acquiesce in, the appointment of a receiver,
custodian, trustee, examiner, liquidator or similar official for it or any
Substantial Portion of its Property, (d) institute any proceeding seeking an
order for relief under the Federal bankruptcy laws as now or hereafter in
effect or seeking to adjudicate it a bankrupt or insolvent, or seeking
dissolution, winding up, liquidation, reorganization, arrangement, adjustment
or composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors or fail to file an answer or
other pleading denying the material allegations of any such proceeding filed
against it, (e) take any corporate action to authorize or effect any of the
foregoing actions set forth in this Section 7.6, (f) fail to contest in good
faith any appointment or proceeding described in Section 7.7 or (g) become
unable to pay, not pay, or admit in writing its inability to pay, its debts
generally as they become due.
A. Without the application, approval or consent of the Borrower or any of its
Subsidiaries, a receiver, trustee, examiner, liquidator or similar official
shall be appointed for the Borrower or any of its Subsidiaries or any
Substantial Portion of its Property, or a proceeding described in Section
7.6(d) shall be instituted against the Borrower or any of its Subsidiaries and
such appointment continues undischarged or such proceeding continues
undismissed or unstayed for a period of thirty consecutive days.
A. Any court, government or governmental agency shall condemn, seize or
otherwise appropriate, or take custody or control of (each a "Condemnation"),
all or any portion of the Property of the Borrower and its Subsidiaries which,
when taken together with all other Property of the Borrower and its
Subsidiaries so condemned, seized, appropriated, or taken custody or control
of, during the twelve-month period ending with the month in which any such
Condemnation occurs, constitutes a Substantial Portion.
A. The Borrower or any of its Subsidiaries shall fail within thirty days to
pay, bond or otherwise discharge any judgments or orders for the payment of an
aggregate amount in excess of $10,000,000, which is not covered by undisputed
insurance or stayed on appeal or otherwise being appropriately contested in
good faith and as to which no enforcement actions have been commenced.
A. Any Change in Control shall occur.
A. The Subsidiary Guaranty shall fail to remain in full force or effect or any
action shall be taken to discontinue or to assert the invalidity or
unenforceability of the Subsidiary Guaranty, or any Guarantor shall fail to
comply with any of the terms or
-59-
<PAGE> 67
provisions of the Subsidiary Guaranty, or any Guarantor denies that it has any
further liability under the Subsidiary Guaranty, or gives notice to such
effect.
I. ARTICLE
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
A. Acceleration. If any Default described in Section 7.6 or 7.7 occurs with
respect to the Borrower, the obligations of the Lenders to make Loans or issue
Facility Letters of Credit hereunder shall automatically terminate and the
Obligations shall immediately become due and payable without any election or
action on the part of the Agent or any Lender. If any other Default occurs,
the Required Lenders (or the Agent with the consent of the Required Lenders)
may terminate or suspend the obligations of the Lenders to make Loans or issue
Facility Letters of Credit hereunder, or declare the Obligations to be due and
payable, or both, whereupon the Obligations shall become immediately due and
payable, without presentment, demand, protest or notice of any kind, all of
which the Borrower hereby expressly waives. In addition to the foregoing,
following the occurrence and during the continuance of a Default, so long as
any Facility Letter of Credit has not been fully drawn and has not been
cancelled or expired by its terms, upon demand by the Agent, the Borrower shall
deposit in an account (the "Letter of Credit Cash Collateral Account")
maintained with First Chicago in the name of the Agent, for the ratable benefit
of the Lenders and the Agent, cash in an amount equal to the aggregate undrawn
face amount of all outstanding Facility Letters of Credit and all fees and
other amounts due or which may become due with respect thereto. The Borrower
shall have no control over funds in the Letter of Credit Cash Collateral
Account, which funds shall be invested by the Agent from time to time in its
discretion in certificates of deposit of First Chicago having a maturity not
exceeding thirty days. Such funds shall be promptly applied by the Agent to
reimburse the Issuer for drafts drawn from time to time under the Facility
Letters of Credit. Such funds, if any, remaining in the Letter of Credit Cash
Collateral Account following the payment of all Obligations in full or the
earlier termination of all Defaults shall, unless the Agent is otherwise
directed by a court of competent jurisdiction, be promptly paid over to the
Borrower.
If, within ten Business Days after acceleration of the maturity of the
Obligations or termination of the obligations of the Lenders to make Loans
hereunder as a result of any Default (other than any Default as described in
Section 7.6 or 7.7 with respect to the Borrower) and before any judgment or
decree for the payment of the Obligations due shall have been obtained or
entered, the Required Lenders (in their sole discretion) shall so direct, the
Agent shall, by notice to the Borrower, rescind and annul such acceleration
and/or termination.
A. Amendments. Subject to the provisions of this Article VIII, the Required
Lenders (or the Agent with the consent in writing of the Required Lenders) and
the Borrower may enter into agreements supplemental hereto for the purpose of
adding or modifying any provisions to the Loan Documents or changing in any
manner the rights of
-60-
<PAGE> 68
the Lenders or the Borrower hereunder or waiving any Default hereunder;
provided, however, that no such supplemental agreement shall, without the
consent of each Lender:
1. Extend the final maturity of any Loan or Note or reduce the principal amount
thereof, or reduce the rate or extend the time of payment of interest or fees
thereon;
1. Reduce the percentage specified in the definition of Required Lenders;
1. Reduce the amount of or extend the date for the mandatory payments required
under Section 2.1.2, or increase the amount of the Commitment of any Lender
hereunder;
1. Subject to Section 2.20, extend the Facility Termination Date or permit any
Facility Letter of Credit to have an expiry date beyond the Facility
Termination Date then in effect;
1. Amend this Section 8.2;
1. Release any Guarantor from the Subsidiary Guaranty; or
1. Permit any assignment by the Borrower of its Obligations or its rights
hereunder.
No amendment of any provision of this Agreement relating to (i) the Agent shall
be effective without the written consent of the Agent (ii) the Issuer or the
Facility Letters of Credit shall be effective without the consent of the Issuer
or (iii) Swing Line Loans shall be effective without the consent of the Swing
Line Lender. The Agent may waive payment of the fee required under Section
12.3.2 without obtaining the consent of any other party to this Agreement.
A. Preservation of Rights. No delay or omission of the Lenders or the Agent to
exercise any right under the Loan Documents shall impair such right or be
construed to be a waiver of any Default or an acquiescence therein, and the
making of a Loan notwithstanding the existence of a Default or the inability of
the Borrower to satisfy the conditions precedent to such Loan shall not
constitute any waiver or acquiescence. Any single or partial exercise of any
such right shall not preclude other or further exercise thereof or the exercise
of any other right, and no waiver, amendment or other variation of the terms,
conditions or provisions of the Loan Documents whatsoever shall be valid unless
in writing signed by the Lenders required pursuant to Section 8.2, and then
only to the extent in such writing specifically set forth. All remedies
contained in the Loan Documents or by law afforded shall be cumulative and all
shall be available to the Agent and the Lenders until the Obligations have been
paid in full.
-61-
<PAGE> 69
I. ARTICLE
GENERAL PROVISIONS
A. Survival of Representations. All representations and warranties of the
Borrower contained in this Agreement or of the Borrower or any Subsidiary
contained in any Loan Document shall survive delivery of the Notes and the
making of the Loans herein contemplated.
A. Governmental Regulation. Anything contained in this Agreement to the
contrary notwithstanding, no Lender shall be obligated to extend credit to the
Borrower in violation of any limitation or prohibition provided by any
applicable statute or regulation.
A. Taxes. Any stamp, documentary or similar taxes, assessments or charges
payable or ruled payable by any governmental authority in respect of the Loan
Documents shall be paid by the Borrower, together with interest and penalties,
if any.
A. Headings. Section headings in the Loan Documents are for convenience of
reference only, and shall not govern the interpretation of any of the
provisions of the Loan Documents.
A. Entire Agreement. The Loan Documents embody the entire agreement and
understanding among the Borrower, the Agent and the Lenders and supersede all
prior agreements and understandings among the Borrower, the Agent and the
Lenders relating to the subject matter thereof other than the fee letter dated
January 23, 1997 in favor of First Chicago.
A. Several Obligations; Benefits of this Agreement. The respective obligations
of the Lenders hereunder are several and not joint and no Lender shall be the
partner or agent of any other (except to the extent to which the Agent is
authorized to act as such). The failure of any Lender to perform any of its
obligations hereunder shall not relieve any other Lender from any of its
obligations hereunder. This Agreement shall not be construed so as to confer
any right or benefit upon any Person other than the parties to this Agreement
and their respective successors and assigns.
A. Expenses; Indemnification. The Borrower shall reimburse the Agent and the
Arranger for any costs, internal charges and out-of-pocket expenses (including
attorneys' fees and time charges of attorneys for the Agent and the Arranger,
which attorneys may be employees of the Agent or the Arranger) paid or incurred
by the Agent or the Arranger in connection with the preparation, negotiation,
execution, delivery, review, amendment, modification, syndication and
administration of the Loan Documents. The Borrower also agrees to reimburse
the Agent, the Arranger and the Lenders for any costs, internal charges and
out-of-pocket expenses (including attorneys'
-62-
<PAGE> 70
fees and time charges of attorneys for the Agent, the Arranger and the Lenders,
which attorneys may be employees of the Agent, the Arranger or the Lenders)
paid or incurred by the Agent, the Arranger or any Lender in connection with
the collection and enforcement of the Loan Documents. The Borrower further
agrees to indemnify the Agent, the Arranger and each Lender, its directors,
officers and employees against all losses, claims, damages, penalties,
judgments, liabilities and expenses (including, without limitation, all
expenses of litigation or preparation therefor whether or not the Agent, the
Arranger or any Lender is a party thereto) which any of them may pay or incur
arising out of or relating to this Agreement, the other Loan Documents or the
Transaction Documents, the transactions contemplated hereby or thereby or the
direct or indirect application or proposed application of the proceeds of any
Loan hereunder or the use or intended use of any Facility Letter of Credit,
except to the extent that they arise out of the gross negligence or willful
misconduct of the party seeking indemnification. The obligations of the
Borrower under this Section shall survive the termination of this Agreement.
A. Numbers of Documents. All statements, notices, closing documents, and
requests hereunder shall be furnished to the Agent with sufficient counterparts
so that the Agent may furnish one to each of the Lenders.
A. Accounting. Except as provided to the contrary herein, all accounting
terms used herein shall be interpreted and all accounting determinations
hereunder shall be made in accordance with Agreement Accounting Principles.
A. Severability of Provisions. Any provision in any Loan Document that is
held to be inoperative, unenforceable, or invalid in any jurisdiction shall,
as to that jurisdiction, be inoperative, unenforceable, or invalid without
affecting the remaining provisions in that jurisdiction or the operation,
enforceability, or validity of that provision in any other jurisdiction, and to
this end the provisions of all Loan Documents are declared to be severable.
A. Nonliability of Lenders. The relationship between the Borrower and the
Lenders and the Agent shall be solely that of borrower and lender. Neither the
Agent nor any Lender shall have any fiduciary responsibilities to the Borrower.
Neither the Agent nor any Lender undertakes any responsibility to the Borrower
to review or inform the Borrower of any matter in connection with any phase of
the Borrower's business or operations. The Borrower shall rely entirely upon
its own judgment with respect to its business, and any review, inspection or
supervision of, or information supplied to the Borrower by the Agent or the
Lenders is for the protection of the Agent and the Lenders and neither the
Borrower nor any other Person is entitled to rely thereon. The Borrower agrees
that neither the Agent nor any Lender shall have any liability with respect to,
and the Borrower hereby waives, releases and agrees not to sue for, any
punitive, special, indirect or consequential damages suffered by the Borrower
in connection with, arising out of, or in any way related to the Loan Documents
or the transactions contemplated thereby or the relationship established by the
Loan Documents, or any act, omission or event occurring in connection
therewith.
-63-
<PAGE> 71
B. CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A CONTRARY
EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS, WITHOUT REGARD TO CONFLICT OF LAWS PROVISIONS, OF THE STATE OF
ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
A. CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE COURT
SITTING IN CHICAGO IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
ANY LOAN DOCUMENTS AND THE BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS
IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO
THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR
THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT
OF THE AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE
COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE BORROWER
AGAINST THE AGENT OR ANY LENDER OR ANY AFFILIATE OF THE AGENT OR ANY LENDER
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF,
RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A
COURT IN CHICAGO, ILLINOIS; PROVIDED, THAT SUCH PROCEEDINGS MAY BE BROUGHT IN
OTHER COURTS IF JURISDICTION MAY NOT BE OBTAINED IN A COURT IN CHICAGO,
ILLINOIS.
A. WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT AND EACH LENDER HEREBY WAIVE
TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT
OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP
ESTABLISHED THEREUNDER.
B. Disclosure. The Borrower and each Lender hereby (a) acknowledge and agree
that First Chicago and/or its Affiliates from time to time may hold other
investments in, make other loans to or have other relationships with the
Borrower, including, without limitation, in connection with any interest rate
hedging instruments or agreements or swap transactions, and (b) waive any
liability of First Chicago or such Affiliate to the Borrower or any Lender,
respectively, arising out of or resulting from such investments, loans or
relationships other than liabilities arising out of the gross negligence or
willful misconduct of First Chicago or its Affiliates.
A. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one
agreement, and any of the parties hereto may execute this Agreement by signing
any such counterpart. This
-64-
<PAGE> 72
Agreement shall be effective when it has been executed by the Borrower, the
Agent and the Lenders and each party has notified the Agent that it has taken
such action.
A. Confidentiality. Each Lender agrees to take normal and reasonable
precautions and exercise due care to maintain the confidentiality of all
information provided to it by the Borrower, or by the Agent on the Borrower's
behalf, in connection with this Agreement or any other Loan Document, and no
Lender shall use any such information for any purpose or in any manner other
than pursuant to the terms contemplated by this Agreement, except to the extent
such information (a) was or becomes generally available to the public other
than as a result of a disclosure by such Lender, or (b) was or becomes
available on a non-confidential basis from a source other than the Borrower,
provided that such source is not bound by a confidentiality agreement with the
Borrower or its agents known to such Lender; provided, further, however, that
any Lender may disclose such information (i) after being advised by counsel
(including internal counsel), at the request or pursuant to any requirement of
any governmental or regulatory authority to which such Lender is subject or in
connection with an examination of such Lender by any such authority; (ii)
pursuant to subpoena or other court process, provided that, if it is lawful to
do so, such Lender shall give prompt notice to the Borrower of service thereof
so that the Borrower may seek a protective order or other appropriate remedy or
waive compliance with the provisions of this Section 9.17; (iii) after being
advised by counsel (including internal counsel), when required to do so in
accordance with the provisions of any applicable requirement of law; (iv) to
the extent reasonably required in connection with any litigation or proceeding
involving the Borrower or any of its Subsidiaries to which the Agent, any
Lender or their respective Affiliates may be party, (v) to the extent
reasonably required in connection with the exercise of any remedy hereunder or
under any other Loan Document, and (vi) to such Lender's independent auditors
and other professional advisors as to which such information has been
identified as confidential.
I. ARTICLE
THE AGENT
A. Appointment. First Chicago is hereby appointed Agent hereunder and under
each other Loan Document, and each of the Lenders authorizes the Agent to act
as the agent of such Lender. The Agent agrees to act as such upon the express
conditions contained in this Article X. The Agent shall not have a fiduciary
relationship in respect of the Borrower or any Lender by reason of this
Agreement.
A. Powers. The Agent shall have and may exercise such powers under the Loan
Documents as are specifically delegated to the Agent by the terms of each
thereof, together with such powers as are reasonably incidental thereto. The
Agent shall have no implied duties to the Lenders, or any obligation to the
Lenders to take any action thereunder, except any action specifically provided
by the Loan Documents to be taken by the Agent.
-65-
<PAGE> 73
A. General Immunity. Neither the Agent nor any of its directors, officers,
agents or employees shall be liable to the Borrower or any Lender for any
action taken or omitted to be taken by it or them hereunder or under any other
Loan Document or in connection herewith or therewith except for its or their
own gross negligence or willful misconduct.
A. No Responsibility for Loans, Recitals, etc. Neither the Agent nor any of
its directors, officers, agents or employees shall be responsible for or have
any duty to ascertain, inquire into, or verify (a) any statement, warranty or
representation made in connection with any Loan Document or any borrowing
hereunder, (b) the performance or observance of any of the covenants or
agreements of any obligor under any Loan Document, including, without
limitation, any agreement by an obligor to furnish information directly to each
Lender; (c) the satisfaction of any condition specified in Article IV, except
receipt of items required to be delivered to the Agent and not waived at
closing, or (d) the validity, effectiveness, sufficiency, enforceability or
genuineness of any Loan Document or any other instrument or writing furnished
in connection therewith. The Agent shall have no duty to disclose to the
Lenders information that is not required to be furnished by the Borrower to the
Agent at such time, but is voluntarily furnished by the Borrower to the Agent
(either in its capacity as Agent or in its individual capacity).
A. Action on Instructions of Lenders. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, hereunder and under any
other Loan Document in accordance with written instructions signed by the
Required Lenders (or, to the extent required by Section 8.2, all Lenders), and
such instructions and any action taken or failure to act pursuant thereto shall
be binding on all of the Lenders and on all holders of Notes. The Agent shall
be fully justified in failing or refusing to take any action hereunder and
under any other Loan Document unless it shall first be indemnified to its
satisfaction by the Lenders pro rata against any and all liability, cost and
expense that it may incur by reason of taking or continuing to take any such
action.
A. Employment of Agents and Counsel. The Agent may execute any of its duties
as Agent hereunder and under any other Loan Document by or through employees,
agents and attorneys-in-fact and shall not be answerable to the Lenders, except
as to money or securities received by it or its authorized agents, for the
default or misconduct of any such agents or attorneys-in-fact selected by it
with reasonable care. The Agent shall be entitled to advice of counsel
concerning all matters pertaining to the agency hereby created and its duties
hereunder and under any other Loan Document.
A. Reliance on Documents; Counsel. The Agent shall be entitled to rely upon
any Note, notice, consent, certificate, affidavit, letter, telegram, statement,
paper or document believed by it to be genuine and correct and to have been
signed or sent by the proper person or persons, and, in respect to legal
matters, upon the opinion of counsel selected by the Agent, which counsel may
be employees of the Agent.
-66-
<PAGE> 74
A. Agent's Reimbursement and Indemnification. The Lenders agree to reimburse
and indemnify the Agent ratably in proportion to their respective Commitments
(or, if the Commitments have been terminated, in proportion to their
Commitments immediately prior to such termination) (a) for any amounts not
reimbursed by the Borrower for which the Agent is entitled to reimbursement by
the Borrower under the Loan Documents, (b) for any other expenses incurred by
the Agent on behalf of the Lenders, in connection with the preparation,
execution, delivery, administration and enforcement of the Loan Documents, and
(c) for any liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind and nature
whatsoever which may be imposed on, incurred by or asserted against the Agent
in any way relating to or arising out of the Loan Documents or any other
document delivered in connection therewith or the transactions contemplated
thereby, or the enforcement of any of the terms thereof or of any such other
documents; provided, that no Lender shall be liable for any of the foregoing to
the extent they arise from the gross negligence or willful misconduct of the
Agent. The obligations of the Lenders under this Section 10.8 shall survive
payment of the Obligations and termination of this Agreement.
A. Notice of Default. The Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Unmatured Default hereunder unless
the Agent has received written notice from a Lender or the Borrower referring
to this Agreement describing such Default or Unmatured Default and stating that
such notice is a "notice of default". In the event that the Agent receives
such a notice, the Agent shall give prompt notice thereof to the Lenders.
A. Rights as a Lender. In the event the Agent is a Lender, the Agent shall
have the same rights and powers hereunder and under any other Loan Document as
any Lender and may exercise the same as though it were not the Agent, and the
term "Lender" or "Lenders" shall, at any time when the Agent is a Lender,
unless the context otherwise indicates, include the Agent in its individual
capacity. The Agent may accept deposits from, lend money to, and generally
engage in any kind of trust, debt, equity or other transaction, in addition to
those contemplated by this Agreement or any other Loan Document, with the
Borrower or any of its Subsidiaries in which the Borrower or such Subsidiary is
not restricted hereby from engaging with any other Person. The Agent, in its
individual capacity, is not obligated to remain a Lender.
A. Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon the Agent or any other Lender and
based on the financial statements prepared by the Borrower and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and the other Loan
Documents. Each Lender also acknowledges that it will, independently and
without reliance upon the Agent or any other Lender and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Agreement and
the other Loan Documents.
-67-
<PAGE> 75
A. Successor Agent. The Agent may resign at any time by giving written notice
thereof to the Lenders and the Borrower, such resignation to be effective upon
the appointment of a successor Agent or, if no successor Agent has been
appointed, forty-five days after the retiring Agent gives notice of its
intention to resign. Upon any such resignation, the Required Lenders shall
have the right to appoint, on behalf of the Lenders, a successor Agent. If no
successor Agent shall have been so appointed by the Required Lenders and shall
have accepted such appointment within thirty days after the resigning Agent's
giving notice of its intention to resign, then the resigning Agent may appoint,
on behalf of the Borrower and the Lenders, a successor Agent. If the Agent has
resigned and no successor Agent has been appointed, the Lenders may perform all
the duties of the Agent hereunder and the Borrower shall make all payments in
respect of the Obligations to the applicable Lender and for all other purposes
shall deal directly with the Lenders. No successor Agent shall be deemed to be
appointed hereunder until such successor Agent has accepted the appointment.
Any such successor Agent shall be a commercial bank having capital and retained
earnings of at least $50,000,000. Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the resigning Agent. Upon the effectiveness of the resignation of the
Agent, the resigning Agent shall be discharged from its duties and obligations
hereunder and under the Loan Documents. After the effectiveness of the
resignation of an Agent, the provisions of this Article X shall continue in
effect for its benefit in respect of any actions taken or omitted to be taken
by it while it was acting as the Agent hereunder and under the other Loan
Documents.
I. ARTICLE
SETOFF; RATABLE PAYMENTS
A. Setoff. In addition to, and without limitation of, any rights of the
Lenders under applicable law, if the Borrower becomes insolvent, however
evidenced, or any Default or Unmatured Default occurs, any and all deposits
(including all account balances, whether provisional or final and whether or
not collected or available) and any other Indebtedness at any time held or
owing by any Lender to or for the credit or account of the Borrower may be
offset and applied toward the payment of the Obligations owing to such Lender,
whether or not the Obligations, or any part hereof, shall then be due.
A. Ratable Payments. If any Lender, whether by setoff or otherwise, has
payment made to it upon its Loans (other than payments received pursuant to
Section 3.1, 3.2 or 3.4) in a greater proportion than its pro-rata share of
such Loans, such Lender agrees, promptly upon demand, to purchase a portion of
the Loans held by the other Lenders so that after such purchase each Lender
will hold its ratable proportion of Loans. If any Lender, whether in
connection with setoff or amounts which might be subject to setoff or
otherwise, receives collateral or other protection for its Obligations or such
amounts which may be subject to setoff, such Lender agrees, promptly upon
demand, to take such action necessary such that all Lenders share in the
benefits of such collateral
-68-
<PAGE> 76
ratably in proportion to their Loans. In case any such payment is disturbed by
legal process, or otherwise, appropriate further adjustments shall be made. If
an amount to be setoff is to be applied to Indebtedness of the Borrower to a
Lender, other than Indebtedness evidenced by any of the Notes held by such
Lender, such amount shall be applied ratably to such other Indebtedness and to
the Indebtedness evidenced by such Notes.
I. ARTICLE
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
A. Successors and Assigns. The terms and provisions of the Loan Documents
shall be binding upon and inure to the benefit of the Borrower and the Lenders
and their respective successors and assigns, except that (a) the Borrower shall
not have the right to assign its rights or obligations under the Loan
Documents, and (b) any assignment by any Lender must be made in compliance with
Section 12.3. Notwithstanding clause (b) of this Section, any Lender may at
any time, without the consent of the Borrower or the Agent, assign all or any
portion of its rights under this Agreement and its Notes to a Federal Reserve
Bank; provided, however, that no such assignment to a Federal Reserve Bank
shall release the transferor Lender from its obligations hereunder. The Agent
may treat the payee of any Note as the owner thereof for all purposes hereof
unless and until such payee complies with Section 12.3 in the case of an
assignment thereof or, in the case of any other transfer, a written notice of
the transfer is filed with the Agent. Any assignee or transferee of a Note
agrees by acceptance thereof to be bound by all the terms and provisions of the
Loan Documents. Any request, authority or consent of any Person, who at the
time of making such request or giving such authority or consent is the holder
of any Note, shall be conclusive and binding on any subsequent holder,
transferee or assignee of such Note or of any Note or Notes issued in exchange
therefor.
-69-
<PAGE> 77
A. Participations.
12.2.1. Permitted Participants; Effect. Any Lender may, in the ordinary
course of its business and in accordance with applicable law, at any time sell
to one or more banks or other entities ("Participants") participating interests
in any Loan owing to such Lender, any Note held by such Lender, any Lender's
interest in any Facility Letter of Credit Obligation, any Commitment of such
Lender or any other interest of such Lender under the Loan Documents. In the
event of any such sale by a Lender of participating interests to a Participant,
such Lender's obligations under the Loan Documents shall remain unchanged, such
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations, such Lender shall remain the holder of any
such Note for all purposes under the Loan Documents, all amounts payable by the
Borrower under this Agreement shall be determined as if such Lender had not
sold such participating interests, and the Borrower and the Agent shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under the Loan Documents.
12.2.2. Voting Rights. Each Lender shall retain the sole right to
approve, without the consent of any Participant, any amendment, modification or
waiver of any provision of the Loan Documents other than any amendment,
modification or waiver which effects any of the modifications referenced in
clauses (a) through (g) of Section 8.2.
12.2.3. Benefit of Setoff. The Borrower agrees that each Participant
shall be deemed to have the right of setoff provided in Section 11.1 in respect
of its participating interest in amounts owing under the Loan Documents to the
same extent as if the amount of its participating interest were owing directly
to it as a Lender under the Loan Documents; provided, that each Lender shall
retain the right of setoff provided in Section 11.1 with respect to the amount
of participating interests sold to each Participant. The Lenders agree to
share with each Participant, and each Participant, by exercising the right of
setoff provided in Section 11.1, agrees to share with each Lender, any amount
received pursuant to the exercise of its right of setoff, such amounts to be
shared in accordance with Section 11.2 as if each Participant were a Lender.
A. Assignments.
12.3.1. Permitted Assignments. Any Lender may, in the ordinary course of
its business and in accordance with applicable law, at any time assign to one
or more banks or other entities ("Purchasers") all or any part of its rights
and obligations under the Loan Documents; provided, however, that in the case
of an assignment to an entity which is not a Lender or an Affiliate of a
lender, such assignment shall be in a minimum amount of $5,000,000. Such
assignment shall be substantially in the form of Exhibit H hereto or in such
other form as may be agreed to by the parties thereto. The consent of the
Agent and, so long as no Default is continuing, the Borrower shall be required
prior to an assignment becoming effective with respect to a Purchaser which is
not a Lender or an Affiliate thereof. Such consent shall not be unreasonably
withheld.
-70-
<PAGE> 78
12.3.2. Effect; Effective Date. Upon (a) delivery to the Agent of a
notice of assignment, substantially in the form attached as Exhibit I to
Exhibit H hereto (a "Notice of Assignment"), together with any consents
required by Section 12.3.1, and (b) payment of a $3,500 fee to the Agent for
processing such assignment, such assignment shall become effective on the
effective date specified in such Notice of Assignment. On and after the
effective date of such assignment, (a) such Purchaser shall for all purposes be
a Lender party to this Agreement and any other Loan Document executed by the
Lenders and shall have all the rights and obligations of a Lender under the
Loan Documents, to the same extent as if it were an original party hereto, and
(b) the transferor Lender shall be released with respect to the percentage of
the Aggregate Commitment and Loans assigned to such Purchaser without any
further consent or action by the Borrower, the Lenders or the Agent. Upon the
consummation of any assignment to a Purchaser pursuant to this Section 12.3.2,
the transferor Lender, the Agent and the Borrower shall make appropriate
arrangements so that replacement Notes are issued to such transferor Lender and
new Notes or, as appropriate, replacement Notes, are issued to such Purchaser,
in each case, to the extent applicable, in principal amounts reflecting their
Commitment, as adjusted pursuant to such assignment.
A. Dissemination of Information. The Borrower authorizes each Lender to
disclose to any Participant or Purchaser or any other Person acquiring an
interest in the Loan Documents by operation of law (each a "Transferee") and
any prospective Transferee any and all information in such Lender's possession
concerning the creditworthiness of the Borrower and its Subsidiaries.
A. Tax Treatment. If any interest in any Loan Document is transferred to any
Transferee which is organized under the laws of any jurisdiction other than the
United States or any State thereof, the transferor Lender shall cause such
Transferee, concurrently with the effectiveness of such transfer, to comply
with the provisions of Section 2.17.
I. ARTICLE
NOTICES
A. Giving Notice. Except as otherwise permitted by Section 2.12 with respect
to borrowing notices, all notices and other communications provided to any
party hereto under this Agreement or any other Loan Document shall be in
writing, by facsimile, first class U.S. mail or overnight courier and addressed
or delivered to such party at its address set forth below its signature hereto
or at such other address as may be designated by such party in a notice to the
other parties. Any notice, if mailed and properly addressed with first class
postage prepaid, return receipt requested, shall be deemed given three (3)
Business Days after deposit in the U.S. mail; any notice, if transmitted by
facsimile, shall be deemed given when transmitted; and any notice given by
overnight courier shall be deemed given when received by the addressee.
-71-
<PAGE> 79
A. Change of Address. The Borrower, the Agent and any Lender may each change
the address for service of notice upon it by a notice in writing to the other
parties hereto.
[signature pages to follow]
-72-
<PAGE> 80
IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent have executed
this Agreement as of the date first above written.
RALCORP HOLDINGS, INC.
By:
Print Name:
Title:
Address: 800 Market Street
St. Louis, Missouri 63101
Attn: Daniel J. Sescleifer
Telecopy: (314) 877-7729
Telephone: (314) 877-7113
Commitment $50,000,000 THE FIRST NATIONAL BANK OF CHICAGO,
Individually and as Agent
By:
Print Name:
Title:
Address: One First National Plaza
Chicago, Illinois 60670
Attn: William J. Oleferchik
Telecopy: (312) 732-5296
Telephone: (312) 732-2947
Initial Aggregate
Commitment $50,000,000
===========
-73-
<PAGE> 1
EXHIBIT 10.2
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 from time to
time, 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.
<PAGE> 2
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
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
<PAGE> 3
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.
BRANDED ASSETS: all of the Assets listed on Schedule 1.1(a).
<PAGE> 4
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.
<PAGE> 5
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.
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: the close of business 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.
<PAGE> 6
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.
<PAGE> 7
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.
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.
<PAGE> 8
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.
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.
<PAGE> 9
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
<PAGE> 10
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 Time,
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 Time, Ralcorp shall take all
steps necessary so that immediately prior to the Distribution Time 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.
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
<PAGE> 11
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 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
<PAGE> 12
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:
<PAGE> 13
(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 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.
<PAGE> 14
(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").
(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).
<PAGE> 15
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
<PAGE> 16
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, 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.
<PAGE> 17
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.
<PAGE> 18
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 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 who, on the Distribution Date, were participants
in the Ralcorp Retirement Plan for service through the Distribution Date and
to provide benefits thereunder for all Branded Employees who were covered by
a collective bargaining agreement and who, on the Distribution Date, were
participating thereunder for service after the Distribution Date. 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 not covered by a collective
bargaining agreement and were participants in the Ralcorp Retirement Plan,
for service after the Distribution Date. 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 through
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 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
<PAGE> 19
determined according to the following formula, with respect to all Branded
Employees 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 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 in effect with respect to the 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 the New
Retirement Plan transfer, the receipt of a favorable IRS determination
letter with respect to the qualification of the New Retirement Plan 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
<PAGE> 20
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 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 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
prior to the Distribution Date. Acquiror shall take, or cause to be taken,
all action necessary and appropriate to cause either (i)
<PAGE> 21
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 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.
<PAGE> 22
(a) 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 ISP (the "Ralcorp Options") which are outstanding at the
Distribution Date, whether or not then exercisable, shall be waived by such
employees.
(b) 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. 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.
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
<PAGE> 23
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
<PAGE> 24
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 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
<PAGE> 25
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).
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;
<PAGE> 26
(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
<PAGE> 27
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 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.
<PAGE> 28
(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 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
<PAGE> 29
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
<PAGE> 30
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 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.
<PAGE> 31
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 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.
<PAGE> 32
(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
<PAGE> 33
Chief Financial Officer of New Ralcorp certifying New Ralcorp's continuing
compliance with the foregoing covenants.
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
<PAGE> 34
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 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
<PAGE> 35
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) 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
<PAGE> 36
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.
<PAGE> 37
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.
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.
<PAGE> 38
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: /s/ J. R. Micheletto
-----------------------------------
Name: J. R. Micheletto
Title: Chief Executive Officer
and President
NEW RALCORP HOLDINGS, INC.
By: /s/ J. R. Micheletto
-----------------------------------
Name: J. R. Micheletto
Title: Chief Executive Officer
and President
RALSTON FOODS, INC.
By: /s/ J. R. Micheletto
-----------------------------------
Name: J. R. Micheletto
Title: Chief Executive Officer
CHEX INC.
By: /s/ Robert W. Lockwood
-----------------------------------
Name: Robert W. Lockwood
Title: President
GENERAL MILLS, INC.
By: /s/ T. J. Brown
-----------------------------------
Name: T. J. Brown
Title: Vice President
<PAGE> 1
EXHIBIT 10.3
TRADEMARK AGREEMENT
THIS TRADEMARK AGREEMENT dated as of the 31st day of January,
1997, is by and among Ralcorp Holdings, Inc., a Missouri corporation
("Ralcorp"), New Ralcorp Holdings, Inc., a Missouri corporation wholly owned by
Ralcorp ("New Ralcorp"), and Chex Inc., 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
from time to time, 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 in connection with such
trademarks; provided, however, that this term shall not
include the hexagonally
<PAGE> 2
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 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
2
<PAGE> 3
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 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:
3
<PAGE> 4
(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 (x)
that any CHEX-type ready to eat cereal Designated
Products were produced at any time prior to the
Distribution Date or (y) 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 (x) or (y), by Ralston Purina Company
("RP Co.") or Foods 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 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
4
<PAGE> 5
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 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
5
<PAGE> 6
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
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
6
<PAGE> 7
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.
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.
7
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this Trademark
Agreement as of the date first above written.
RALCORP HOLDINGS, INC.
By: /s/ J. R. Micheletto
-----------------------------------
Name: J. R. Micheletto
Title: Chief Executive Officer and
President
NEW RALCORP HOLDINGS, INC.
By: /s/ J. R. Micheletto
-----------------------------------
Name: J. R. Micheletto
Title: Chief Executive Officer and
President
CHEX INC.
By: /s/ R. W. Lockwood
-----------------------------------
Name: R. W. Lockwood
Title: President
8
<PAGE> 1
EXHIBIT 10.4
TECHNOLOGY AGREEMENT
This Technology Agreement (hereinafter "Agreement") dated as
of January 31, 1997 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
from time to time, 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 Branded
Subsidiary 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, 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
4
<PAGE> 5
hereof, commencing five (5) years after the Distribution Date,
worldwide, for any third parties.
(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 right to
5
<PAGE> 6
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 Branded
Subsidiary):
(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 sales made to
third
6
<PAGE> 7
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 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
7
<PAGE> 8
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 business 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
8
<PAGE> 9
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 Branded Subsidiary 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.
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.
9
<PAGE> 10
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: /s/ J. R. Micheletto
-----------------------------------
Name: J. R. Micheletto
Title: Chief Executive Officer and
President
CHEX INC.
By: /s/ R. W. Lockwood
-----------------------------------
Name: R. W. Lockwood
Title: President
NEW RALCORP HOLDINGS, INC.
By: /s/ J. R. Micheletto
-----------------------------------
Name: J. R. Micheletto
Title: Chief Executive Officer and
President
10
<PAGE> 11
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.
11
<PAGE> 12
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
12
<PAGE> 1
EXHIBIT 10.5
TAX SHARING AGREEMENT
BETWEEN
RALCORP HOLDINGS, INC.
AND
NEW RALCORP HOLDINGS, INC.
THIS AGREEMENT (the "Agreement") dated as of January 31, 1997, 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 January 31, 1997,
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).
"Straddle Period" means any taxable period that includes (but
does not end on) the Distribution Date.
2
<PAGE> 3
"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 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
3
<PAGE> 4
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 September 30, 1997, 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, 1996, and ending with the Distribution Date and the portion of the
fiscal year beginning the day after the Distribution Date and ending September
30, 1997. 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;
(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
4
<PAGE> 5
(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.
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
5
<PAGE> 6
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, 1996 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 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
6
<PAGE> 7
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.
(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.
7
<PAGE> 8
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.
(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
8
<PAGE> 9
(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
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
9
<PAGE> 10
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.
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
10
<PAGE> 11
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.
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):
11
<PAGE> 12
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 Street, Suite 2900_
St. Louis, Missouri 63101_
Attention: Robert W. Lockwood_
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.
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.
12
<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the date first above written.
NEW RALCORP HOLDINGS, INC. BREMNER, INC.
BY /s/ J. R. MICHELETTO BY /s/ J. R. MICHELETTO
------------------------------------ ------------------------------------
[NAME] J. R. MICHELETTO [NAME] J. R. MICHELETTO
[TITLE] CHIEF EXECUTIVE OFFICER [TITLE] CHIEF EXECUTIVE OFFICER
AND PRESIDENT
RALCORP HOLDINGS, INC. BEECH-NUT NUTRITION CORPORATION
BY /s/ J. R. MICHELETTO BY /s/ J. R. MICHELETTO
------------------------------------ ------------------------------------
[NAME] J. R. MICHELETTO [NAME] J. R. MICHELETTO
[TITLE] CHIEF EXECUTIVE OFFICER [TITLE] CHIEF EXECUTIVE OFFICER
AND PRESIDENT
BREMNER FINANCE, INC. NATIONAL OATS COMPANY
BY /s/ J. R. MICHELETTO BY /s/ J. R. MICHELETTO
------------------------------------ ------------------------------------
[NAME] J. R. MICHELETTO [NAME] J. R. MICHELETTO
[TITLE] AUTHORIZED SIGNATORY [TITLE] CHIEF EXECUTIVE OFFICER
13
<PAGE> 1
EXHIBIT 10.6
TRANSITION SERVICES - SUPPLY AGREEMENT
BETWEEN
CHEX 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 10
SECTION 13 INSURANCE 11
SECTION 14 INDEMNIFICATION 12
SECTION 15 CONFIDENTIAL INFORMATION 14
SECTION 16 INTELLECTUAL PROPERTY 15
SECTION 17 BREACH 15
SECTION 18 TERMINATION 16
SECTION 19 BRANDED SUBSIDIARY PRICING 16
SECTION 20 RIGHTS RESERVED TO BRANDED SUBSIDIARY 17
SECTION 21 ASSIGNMENT 17
SECTION 22 INTERPRETATIONS 17
SECTION 23 DISCRIMINATION 17
-i-
<PAGE> 3
TABLE OF CONTENTS (CONT.)
TRANSITION SERVICES - SUPPLY AGREEMENT
SECTION 24 ENTIRE AGREEMENT 17
SECTION 25 FORCE MAJEURE 18
SECTION 26 GOVERNING LAW 18
SECTION 27 INDEPENDENT CONTRACTOR 18
SECTION 28 NOTICE 18
SECTION 29 REGULATORY NOTICE 19
SECTION 30 SUCCESSORS AND ASSIGNS 19
SECTION 31 WAIVER 19
SECTION 32 AUTHORIZATION; VALIDITY 20
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
January 31, 1997, is between CHEX INC., a Delaware corporation ("Branded
Subsidiary"), and NEW RALCORP HOLDINGS, INC., a Missouri corporation
("Supplier") on behalf of itself, its subsidiaries and Affiliates.
WHEREAS, Branded Subsidiary and Supplier possess certain Technical
Information for the manufacture of ready-to-eat (RTE) cereals; and,
WHEREAS, Branded Subsidiary wishes Supplier to produce certain of such
products on behalf of Branded Subsidiary and to provide certain other
transition services to Branded Subsidiary; 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.
-1-
<PAGE> 5
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
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 Branded Subsidiary or its
Affiliates to Supplier or its Affiliates, or provided to
Supplier by Branded Subsidiary or which may hereafter be
developed by Branded Subsidiary and provided to Supplier by
Branded Subsidiary, 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 Branded Subsidiary, 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.
-2-
<PAGE> 6
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 (the "Reorganization Agreement")
dated as of the date hereof, by and among Supplier, Branded
Subsidiary, Ralston Foods, Inc. ("Foods"), General Mills, Inc.
("General Mills"), General Mills Missouri, Inc. ("General
Mills Missouri") and Ralcorp Holdings, Inc. ("Ralcorp").
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, the "Merger Agreement").
This agreement shall expire, with respect to COOKIE CRISP, eighteen
months after the Closing Date; provided that Branded Subsidiary 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 Branded Subsidiary's behalf ("Materials"), shall
be in accordance with the terms of this Agreement, including,
without limitation, the Specifications. Branded Subsidiary
-3-
<PAGE> 7
reserves the right at any time to modify, delete or add to the
Specifications provided that Branded Subsidiary 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
its reasonable discretion, that it will be unable, exercising
reasonable efforts, to consistently meet such revised
Specifications, and notifies Branded Subsidiary 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
Branded Subsidiary 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 Branded Subsidiary of all such nonconforming
Material(s) when such Material(s) were supplied by Branded
Subsidiary or purchased on Supplier's behalf by Branded
Subsidiary. The parties shall provide Materials in accordance
with the terms set forth in Schedule 1.
-4-
<PAGE> 8
B. Products. Supplier shall sample and test the Products in
accordance with the Specifications. Supplier shall also
segregate for testing by Branded Subsidiary such quantities of
packaged Products and Materials as Branded Subsidiary may from
time to time reasonably request and Supplier shall, at Branded
Subsidiary's expense, ship such packages and Materials to such
destinations as specified by Branded Subsidiary.
C. Protection. Supplier shall exercise reasonable care in
handling, storing and protecting the Products and Materials
intended for use in the Products.
SECTION 7 STORAGE
Supplier shall provide suitable Branded Subsidiary approved storage
and warehousing space ("space") in accordance with Schedule 1.
SECTION 8 REJECTION
A. Supplier shall not knowingly ship any Nonconforming Products
to Branded Subsidiary.
B. Nothing contained in this Agreement shall be deemed to
obligate Branded Subsidiary to inspect any products purchased
hereunder.
C. Without limiting any other rights available to Branded
Subsidiary 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 Branded Subsidiary (including any additional freight
costs incurred), except to the extent such nonconformance was
as the result of Branded Subsidiary's actions, including but
not limited to if such nonconformance was attributable to
Materials supplied by Branded Subsidiary or purchased on
Supplier's behalf by Branded Subsidiary. Replacement of
Nonconforming Products by Supplier at no cost to Branded
Subsidiary shall be Branded Subsidiary'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 Branded Subsidiary. Such disposal shall be at the
-5-
<PAGE> 9
expense of Supplier, except to the extent such nonconformance
was as the result of Branded Subsidiary's actions, including
but not limited to if such nonconformance was attributable to
Materials supplied by Branded Subsidiary or purchased on
Supplier's behalf by Branded Subsidiary. In no event shall
Supplier sell, distribute or ship any Nonconforming Products
in violation of Branded Subsidiary's instructions.
Notwithstanding the above, Supplier may, subject to Branded
Subsidiary'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.
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 Branded
Subsidiary. Upon written notice to Supplier from Branded
Subsidiary, Supplier shall permit Branded Subsidiary 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 Branded Subsidiary.
B. Inventories. Supplier shall provide Branded Subsidiary 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, Branded
Subsidiary may inspect, at Branded Subsidiary'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
Branded Subsidiary 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
-6-
<PAGE> 10
Branded Subsidiary 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 Branded
Subsidiary'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 Branded
Subsidiary of any sanitation audits, the results of which
indicate the presence of any food pathogens in the Plant or
possible adulteration of the Products.
SECTION 10 SUPPLY; QUANTITIES
A. To ensure that Branded Subsidiary 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 Branded
Subsidiary renews this Agreement in accordance with Section
2), Branded Subsidiary 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 Branded Subsidiary and Ralston Purina
Company, based upon total quantities ordered after Supplier
first meets Branded Subsidiary'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
Branded Subsidiary'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
-7-
<PAGE> 11
COOKIE CRISP trademarks or any other trademarks or trade dress
owned by Branded Subsidiary or its Affiliates except as
otherwise agreed in writing by Branded Subsidiary. 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 Branded Subsidiary
hereunder shall not exceed Supplier's capacity as set forth in
Schedule 1. Branded Subsidiary may order and Supplier shall
produce for Branded Subsidiary Products ordered in accordance
with firm orders as set out in Schedule 1. Branded Subsidiary
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). Branded Subsidiary agrees that in
any month during the term in which Branded Subsidiary orders
Rice Chex cereal, Branded Subsidiary 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 Branded Subsidiary 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 Branded Subsidiary.
SECTION 11 PAYMENT
A. Product Price. Subject to the provisions of Sections 3B and
11B, Branded Subsidiary 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. Branded Subsidiary shall pay Supplier an amount
equal to actual costs for all Materials provided by Supplier
in connection with COOKIE CRISP
-8-
<PAGE> 12
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, Branded
Subsidiary 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.
Branded Subsidiary 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, Branded Subsidiary 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
Supplier's Plant location at Battle Creek, Michigan,
other than such Products produced by Supplier for
Branded Subsidiary, 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
-9-
<PAGE> 13
Branded Subsidiary 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 Branded Subsidiary in accordance
with this Agreement.
Product will be shipped F.O.B. Plant. Supplier will invoice
Branded Subsidiary 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:
1. Except to the extent arising out of the actions of
Branded Subsidiary or from Materials provided by
Branded Subsidiary or purchased on Supplier's behalf by
Branded Subsidiary, 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 Branded Subsidiary's request;
-10-
<PAGE> 14
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. Branded Subsidiary'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. Branded Subsidiary represents and warrants that compliance
with the Specifications of this Agreement, to the extent
modified per Branded Subsidiary'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 Branded Subsidiary. 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;
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.
-11-
<PAGE> 15
Each such policy shall provide that it may not expire or be canceled
except upon thirty (30) days' prior written notice to Branded
Subsidiary. Upon the execution of this Agreement, and upon every
insurance renewal during the term of this Agreement, Supplier shall
deliver to Branded Subsidiary (i) a certificate of insurance
evidencing such insurance, (ii) if requested by Branded Subsidiary, a
true and complete copy of the policy as then in effect, and (iii)
proof of payment of premiums. Notwithstanding the foregoing Branded
Subsidiary shall not be under a duty to examine such policy.
Branded Subsidiary 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 Branded Subsidiary and forever
holds Branded Subsidiary (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 Branded Subsidiary 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 Branded Subsidiary
pursuant to this Agreement, to the extent arising out of the
condition of such Product(s) as of the date of shipment to
Branded Subsidiary (except to the extent attributable to
Materials supplied by Branded Subsidiary or purchased on
Supplier's behalf by Branded Subsidiary), (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 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 Branded Subsidiary pursuant to this Agreement
-12-
<PAGE> 16
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 Branded
Subsidiary, Branded Subsidiary shall notify Supplier of such
claim promptly upon a representative of Branded Subsidiary
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 Branded Subsidiary pursuant to this Section 14A,
using counsel of its own choice. Notwithstanding anything in
this Section 14 to the contrary, Supplier shall not, without
Branded Subsidiary'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 Branded
Subsidiary. Supplier may, without Branded Subsidiary'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 Branded Subsidiary
and its Affiliates by the plaintiff from all liability in
respect of such Claim. Branded Subsidiary 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. Branded Subsidiary 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 Branded Subsidiary'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
Branded Subsidiary to the extent such injuries or damages are
attributable to Materials or premiums supplied by Branded
Subsidiary or purchased on Supplier's behalf by Branded
Subsidiary, or from conditions which arise after Products were
made available for shipment to Branded Subsidiary; (iii)
fines, penalties or any other actions or claims arising out of
alleged violations of any laws or regulations, including Laws,
as a result of any Product claims
-13-
<PAGE> 17
made by Branded Subsidiary (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 Branded Subsidiary's behest after the Closing
in connection with the manufacture of Products for Branded
Subsidiary 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 Branded Subsidiary and all
other confidential information of Branded Subsidiary 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,
Branded Subsidiary shall not use any confidential information
of Supplier that Branded Subsidiary 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 Branded Subsidiary 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:
-14-
<PAGE> 18
(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
Branded Subsidiary 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 Branded Subsidiary 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 Branded Subsidiary under the
Bankruptcy Code, or if a petition is filed seeking any such
equivalent or similar relief against Supplier or Branded
Subsidiary under any other federal or state law in effect at
the time relating to bankruptcy;
B. If Supplier or Branded Subsidiary makes a general assignment
for the benefit of creditors;
C. If Supplier or Branded Subsidiary admits in writing an
inability to pay its debts generally as they become due;
D. If Supplier or Branded Subsidiary has appointed (voluntarily
or involuntarily) a trustee, receiver, custodian or agent
under applicable law or under contract, whose appointment
-15-
<PAGE> 19
or authority to take charge of property of Supplier or Branded
Subsidiary for the purpose of general administration of such
property for the benefit of Supplier's or Branded Subsidiary's
creditors, respectively; or
E. If Supplier or Branded Subsidiary 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 Branded Subsidiary with all Products
and other Materials owned or provided by Branded Subsidiary
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 Branded Subsidiary and
promptly deliver to Branded Subsidiary all Products
manufactured hereunder along with all Specifications,
Technical Information belonging to Branded Subsidiary,
artwork, premiums, and packaging materials purchased by
Branded Subsidiary and all other Materials and supplies
provided by Branded Subsidiary. Branded Subsidiary 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 Branded
Subsidiary.
D. Upon any change of control of Supplier, Branded Subsidiary may
terminate this Agreement effective immediately upon written
notice to Supplier.
SECTION 19 BRANDED SUBSIDIARY PRICING
Branded Subsidiary shall independently determine its prices of the
Products to its customers.
-16-
<PAGE> 20
SECTION 20 RIGHTS RESERVED TO BRANDED SUBSIDIARY
Except to the extent otherwise provided herein, Branded Subsidiary
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).
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.
-17-
<PAGE> 21
SECTION 25 FORCE MAJEURE
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 Branded Subsidiary 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 Branded Subsidiary, to: Chex Inc.
Number One General Mills Boulevard
Minneapolis, MN 55426
Attention: Bruce A. Barquist
Facsimile: (612) 540-4995
-18-
<PAGE> 22
Telephone: (612) 540-2374
If to Supplier, to: New Ralcorp Holdings, Inc.
800 Market Street, Suite 2900
St. Louis, Missouri 63102
Attention: Ronald D. Wilkinson
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 Branded Subsidiary copies of all reports
pertaining to the Plants (to the extent relevant to Products produced
by Supplier for Branded Subsidiary 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.
-19-
<PAGE> 23
SECTION 32 AUTHORIZATION; VALIDITY
The persons executing this Agreement on behalf of the Supplier and
Branded Subsidiary each acknowledge that they are duly authorized to
execute this Agreement on behalf of and bind Supplier or Branded
Subsidiary, as the case may be, to the terms hereof.
PART II.
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 Branded Subsidiary 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, Branded Subsidiary 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 Branded Subsidiary. Branded Subsidiary 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
Branded Subsidiary shall, through their respective information systems
departments, work together to the extent reasonably necessary to facilitate the
transfer of knowledge and data to Branded Subsidiary 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. Branded Subsidiary 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 Branded Subsidiary 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 Branded Subsidiary, 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 Branded Subsidiary as it would use in
providing such services for its own
-20-
<PAGE> 24
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
Branded Subsidiary's data to Branded Subsidiary or any alternate supplier of
administrative services. Except for Supplier's gross negligence or willful
misconduct, the sole remedy of Branded Subsidiary 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) Branded Subsidiary 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") related to, arising from,
asserted against or associated with Supplier furnishing or failing to furnish
to Branded Subsidiary any of the Services described herein. Upon the
termination of any of the Services, Branded Subsidiary 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 Branded Subsidiary'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,
Branded Subsidiary 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 Branded
Subsidiary to seek damages or other rights of redress against Supplier for
breach of the provisions of this part of the Agreement.
4. Claims. Branded Subsidiary'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 Branded Subsidiary gives
Supplier notice of claim within thirty (30) days after such receipt; no claim
by Branded Subsidiary 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 Branded Subsidiary for any incidental or
consequential damages, whether or not caused by or resulting from gross
negligence or willful misconduct or breach of obligations hereunder.
-21-
<PAGE> 25
5. Additional Services. If Branded Subsidiary wants Supplier to
provide any service other than the Services provided for in the Schedule 2,
Branded Subsidiary 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. Branded Subsidiary 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. 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 Branded Subsidiary
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 Branded Subsidiary to pay any bill within thirty (30) days of receipt shall
result in Branded Subsidiary 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 Branded Subsidiary. 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.
-22-
<PAGE> 26
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
CHEX INC. NEW RALCORP HOLDINGS, INC.
By /s/ Robert W. Lockwood By /s/ J. R. Micheletto
------------------------------ ------------------------------
Title President Title Chief Executive Officer and
President
-23-
<PAGE> 1
EXHIBIT 10.7
SECOND AMENDMENT TO
AGREEMENT AND PLAN OF MERGER
BY AND AMONG RALCORP HOLDINGS, INC.,
GENERAL MILLS, INC. AND GENERAL MILLS MISSOURI, INC.
This Second Amendment to Agreement and Plan of Merger is dated
as of January 29, 1997 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, as amended by that certain
Amendment to Agreement and Plan of Merger dated as of October 25, 1996 (the
"Merger Agreement");
WHEREAS, pursuant and subject to the terms and conditions of
the Merger Agreement, the Company has agreed to take all necessary action to
redeem the common stock purchase rights ("Rights") associated with the Company
Common Stock (as defined in the Merger Agreement) prior to the Effective Time
(as defined in the Merger Agreement);
WHEREAS, in order to avoid certain unnecessary administrative
burdens in connection with the redemption of the Rights, the parties desire to
amend the Merger Agreement to reflect that New Ralcorp Holdings, Inc., a
Missouri corporation and a wholly owned subsidiary of the Company ("New
Ralcorp") shall, prior to the Distribution (as defined in the Merger
Agreement), assume the obligation of the Company to pay 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");
WHEREAS, the parties also desire to clarify the sequential
order in which the transactions contemplated by the Merger Agreement and the
Reorganization Agreement (as defined in the Merger Agreement) shall occur on
the Closing Date (as defined in the Merger Agreement); and
WHEREAS, the parties also desire to amend Schedule 2.3 to the
Merger Agreement in the manner set forth hereinbelow.
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained in the Merger Agreement and this
Second Amendment, the parties hereto agree as follows:
1. Prior to the Distribution, New Ralcorp shall assume the
obligation of the Company to make the Rights Payment to the holders of the
Rights entitled to receive payment therefor.
<PAGE> 2
2. The parties acknowledge and agree that, upon such
assumption by New Ralcorp and notwithstanding the provisions of Section 2.1(b)
of the Merger Agreement to the contrary, the Rights Payment shall not be
deducted from the amount of $570,000,000 in arriving at the Conversion Number
(as defined in the Merger Agreement).
3. The parties also acknowledge and agree that the Rights
Payment shall in no way affect the calculation of the Closing Date Net Asset
Value (as defined in the Merger Agreement); it being hereby understood that the
Closing Date Balance Sheet (as defined in the Merger Agreement) shall not
include any accrual related to the Rights Payment.
4. The parties further acknowledge and agree that the
transactions contemplated by the Merger Agreement and the Reorganization
Agreement shall occur in the following sequential order on the Closing Date:
(i). Internal Merger (as defined in the Merger
Agreement); then
(ii). Branded Contribution (as defined in the
Merger Agreement); then
(iii). Internal Spinoff (as defined in the Merger
Agreement); then
(iv). Distribution; then
(v). Redemption of Rights; and then
(vi). Merger (as defined in the Merger Agreement).
5. Schedule 2.3 to the Merger Agreement is hereby amended in
its entirety to read as set forth on Exhibit A attached
hereto.
6. Except as expressly amended hereby, the Merger Agreement
shall remain in full force and effect.
2
<PAGE> 3
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
3
<PAGE> 1
EXHIBIT 10.8
THIRD AMENDMENT TO
AGREEMENT AND PLAN OF MERGER
BY AND AMONG RALCORP HOLDINGS, INC.,
GENERAL MILLS, INC. AND GENERAL MILLS MISSOURI, INC.
This Third Amendment to Agreement and Plan of Merger is dated
as of January 31, 1997 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, as amended by that certain
Amendment to Agreement and Plan of Merger dated as of October 25, 1996 and as
amended by that certain Second Amendment to Agreement and Plan of Merger dated
as of January 29, 1997 (the "Merger Agreement");
WHEREAS, the parties desire to amend the Merger Agreement as
hereinafter set forth.
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained in the Merger Agreement and this
Second Amendment, the parties hereto agree as follows:
1. Section 1.5(a) of the Merger Agreement is hereby amended
by deleting the words "Merger Sub" and substituting therefor the word
"Company."
2. The parties hereto agree that at the Effective Time the
1,000 shares of common stock of Merger Sub owned by Acquiror (being all of the
issued and outstanding shares of Merger Sub) shall be cancelled and the
Surviving Corporation shall issue to Acquiror 1,000 shares of common stock in
replacement thereof.
3. Acquiror hereby agrees to make all appropriate filings to
evidence the reduction in the stated capital of the Surviving Corporation as a
result of the Merger.
<PAGE> 2
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/ Robert W. Lockwood
--------------------------------------
Name: Robert W. Lockwood
Title: Vice President, General Counsel
and Secretary
2
<PAGE> 1
EXHIBIT 10.9
SHAREHOLDER AGREEMENT
Among
VAIL RESORTS, INC.
RALSTON FOODS, INC.
AND
APOLLO SKI PARTNERS, L.P.
January 3, 1997
<PAGE> 2
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
-i-
<PAGE> 3
Page
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
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
-ii-
<PAGE> 4
Page
Section 12.18. Fiduciary Accounts ................. 36
-iii-
<PAGE> 5
SHAREHOLDER AGREEMENT
THIS SHAREHOLDER AGREEMENT, dated January 3, 1997 (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 July 22,
1996, as amended (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 3,777,203
shares of Common Stock, par value $.01 per share, of Vail ("Vail Stock"); and
WHEREAS, Apollo owns 1,325,669 shares of Vail Stock and 5,958,874 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:
I
DEFINITIONS
As used in this Agreement, and unless the context requires a different
meaning, the following terms (whether used
<PAGE> 6
-2-
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.
"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
<PAGE> 7
-3-
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.
"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.
<PAGE> 8
-4-
"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.
"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
<PAGE> 9
-5-
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.
"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
<PAGE> 10
-6-
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 Association of Securities Dealers,
<PAGE> 11
-7-
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.
II
STANDSTILL AND VOTING PROVISIONS
II.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;
<PAGE> 12
-8-
(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 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
<PAGE> 13
-9-
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 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.
II.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
<PAGE> 14
-10-
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 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.
II.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
<PAGE> 15
-11-
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 meetings of shareholders and execution of actions by written
consent.
II.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
<PAGE> 16
-12-
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.
III
TRANSFER OF VAIL EQUITY
III.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.
III.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 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;
<PAGE> 17
-13-
(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.
III.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
<PAGE> 18
-14-
agent of Vail to give any effect to such attempted Transfer in its stock
records.
III.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
<PAGE> 19
-15-
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.
(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.
IV
RIGHT OF FIRST OFFER
IV.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
<PAGE> 20
-16-
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 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
<PAGE> 21
-17-
terms and conditions of this Agreement (unless the Transfer is pursuant to
Rule 144 under the Securities Act).
V
REGISTRATION
V.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").
(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
<PAGE> 22
-18-
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 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
<PAGE> 23
-19-
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.
V.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.
<PAGE> 24
-20-
V.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
<PAGE> 25
-21-
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.
(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.
V.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.
V.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
<PAGE> 26
-22-
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
offering) beginning on the effective date of, such registration statement.
V.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.
VI
<PAGE> 27
-23-
REGISTRATION EXPENSES
VI.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;
(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
<PAGE> 28
-24-
(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.
VII
REGISTRATION PROCEDURE
VII.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 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.
<PAGE> 29
-25-
VII.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.
VII.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.
VII.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
<PAGE> 30
-26-
(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.
VII.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).
VII.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.
<PAGE> 31
-27-
VIII
INDEMNIFICATION AND CONTRIBUTION
VIII.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
<PAGE> 32
-28-
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.
(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
<PAGE> 33
-29-
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 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
<PAGE> 34
-30-
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, 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
<PAGE> 35
-31-
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 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
<PAGE> 36
-32-
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.
VIII.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.
(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
<PAGE> 37
-33-
Person who is not found to be guilty of such fraudulent misrepresentation.
<PAGE> 38
-34-
IX
TAKE-ALONG RIGHTS
<PAGE> 39
-35-
IX.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.
(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
<PAGE> 40
-36-
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
X.1 IPO Commitment. Vail and Apollo hereby agree to use reasonable
efforts to consummate the IPO as soon as possible following the Closing.
X.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.
<PAGE> 41
-37-
X.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.
XI
ADDITIONAL COVENANTS
<PAGE> 42
-38-
XI.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.
XI.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 lone as Foods owns at least 10% of the outstanding Vail
Securities, 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.
XI.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.
XI.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 XI.33 Limitations on Holdings of Foods Associates. Foods shall
use its best efforts to cause its
<PAGE> 43
-39-
Associates and Associates of its Affiliates not to own, in the aggregate, 2% or
more of the outstanding Vail Securities.
XII
MISCELLANEOUS
XII.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.
XII.2 Headings and Captions. All headings and captions used in this
Agreement are for convenience only, and will not be construed to either limit
or broaden the language of this Agreement or any particular section.
XII.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.
XII.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.
XII.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
<PAGE> 44
-40-
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 mail)
137 Benchmark Road
Avon, Colorado 81620
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:
<PAGE> 45
-41-
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 XII.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.
XII.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.
XII.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 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.
XII.9 Severability. The invalidity or unenforceability of any provision
hereof in any jurisdiction will not affect the validity or enforceability of
this Agreement,
<PAGE> 46
-42-
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.
XII.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 XII.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.
XII.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.
XII.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
any successor or assign of Vail (whether by merger, consolidation, sale of
assets
<PAGE> 47
-43-
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.
XII.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.
XII.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.
XII.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
<PAGE> 48
-44-
will be construed as prohibiting any party from pursuing any other remedies
available to that party for a breach hereunder, including recovery of damages.
XII.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.
XII.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> 49
-45-
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
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXCLUDED FROM THE BELOW COST/EXPENSE INFORMATION ARE RESTRUCTURING CHARGES OF
$5.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 75
<ALLOWANCES> 1
<INVENTORY> 92
<CURRENT-ASSETS> 181
<PP&E> 530
<DEPRECIATION> 223
<TOTAL-ASSETS> 617
<CURRENT-LIABILITIES> 119
<BONDS> 335
0
0
<COMMON> 0
<OTHER-SE> 121
<TOTAL-LIABILITY-AND-EQUITY> 617
<SALES> 293
<TOTAL-REVENUES> 293
<CGS> 141
<TOTAL-COSTS> 141
<OTHER-EXPENSES> 119
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7
<INCOME-PRETAX> 21
<INCOME-TAX> 8
<INCOME-CONTINUING> 13
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13
<EPS-PRIMARY> .40
<EPS-DILUTED> .40
</TABLE>
