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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 27, 1996
REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
GENERAL MILLS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 2043 41-0274440
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
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NUMBER ONE GENERAL MILLS BOULEVARD
(MAIL: P.O. BOX 1113)
MINNEAPOLIS, MINNESOTA 55426 (MAIL: 55440)
(612) 540-2311
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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SIRI S. MARSHALL, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
GENERAL MILLS, INC.
NUMBER ONE GENERAL MILLS BOULEVARD
MINNEAPOLIS, MINNESOTA 55426
(612) 540-2311
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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WITH COPIES TO
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STEVEN A. ROSENBLUM, ESQ. WILLIAM F. SEABAUGH, ESQ.
WACHTELL, LIPTON, ROSEN & KATZ BRYAN CAVE LLP
51 WEST 52ND STREET ONE METROPOLITAN SQUARE
NEW YORK, NY 10019-6150 211 NORTH BROADWAY
(212) 403-1000 ST. LOUIS, MISSOURI 63102
(314) 259-2000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of the Registration Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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TITLE OF EACH PROPOSED MAXIMUM PROPOSED MAXIMUM
CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED SHARE(2) PRICE(2) REGISTRATION FEE
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Common Stock, $0.10 par
value(1)................. 5,480,494 shares $65.6875 $360,000,000 $109,090.91
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(1) Includes one attached Preference Share Purchase Right per share.
(2) Estimated solely for the purpose of calculating the registration fee
required by Section 6(b) of the Securities Act of 1933, as amended, as
follows: 1/33 of one percent of $360,000,000, the aggregate value of Common
Stock, par value $0.10 per share of General Mills, Inc. ("General Mills
Common Stock") to be issued pursuant to the merger of a wholly owned
subsidiary of General Mills, Inc. into Ralcorp Holdings, Inc. (5,480,494
shares of General Mills Common Stock times $65.6875, the average high and
low prices of General Mills Common Stock represented on the New York Stock
Exchange, Inc. as of December 24, 1996).
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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[RALCORP HOLDINGS, INC. LETTERHEAD]
December 27, 1996
Dear Shareholder:
We have agreed to sell our brand-name cereal and snack food businesses to
General Mills, Inc., if our shareholders approve the sale. In exchange for these
businesses, General Mills has agreed to assume part of our debt and give our
shareholders General Mills common stock -- an exchange that is valued at $570
million in total. We believe this is an attractive price.
After this exchange, we can sharpen our focus on our remaining private
label food businesses, where we hold leading positions, and our regional
Beech-Nut baby food operation.
To accomplish this exchange, we propose taking the following steps:
1. CREATE NEW RALCORP HOLDINGS, INC. TO HOLD OUR REMAINING BUSINESSES, AND
SPIN OFF NEW RALCORP TO OUR SHAREHOLDERS.
First, we will create New Ralcorp Holdings, Inc., and transfer to New
Ralcorp the businesses we are not selling. Then, in a tax-free
distribution, we will spin off to you, our shareholders, shares in New
Ralcorp. These shares will represent your ownership in the businesses
we are keeping. For each share of Ralcorp stock you own at the time of
the spinoff you will receive one share of the New Ralcorp stock.
2. MERGE OUR BRAND-NAME CEREAL AND SNACK FOOD BUSINESSES WITH GENERAL
MILLS.
Right after the spinoff, we will merge the brand-name cereal and snack
food businesses with General Mills. General Mills will pay for these
businesses by issuing shares of General Mills common stock directly to
our shareholders, in exchange for your old Ralcorp shares, and by
assuming Ralcorp debt. In our tax counsel's opinion, you will not pay
federal income tax on this transaction, except that you will pay tax
on any cash that General Mills gives you in place of fractional
shares. The number of General Mills shares you will receive depends
primarily on the amount of Ralcorp debt that General Mills assumes,
the trading price of General Mills stock at the time of the merger,
and the number of Ralcorp shares that are outstanding right before the
merger.
3. PAY YOU FOR YOUR SHARE PURCHASE RIGHTS.
We will pay you five cents per share for the "share purchase rights"
that are a part of your old Ralcorp shares.
Before we can go ahead with the spinoff and the merger, the holders of
two-thirds of our outstanding shares must vote in favor of each step. We have
scheduled a special meeting of our shareholders for this vote. At the meeting,
or on the enclosed proxy card, you may vote on the spinoff and on the merger
separately. Please keep in mind, however, that neither the spinoff nor the
merger will happen unless both are approved. The meeting will be held:
Friday, January 31, 1997
8:30 a.m.
Holiday Inn
1000 Eastport Plaza Drive
Collinsville, Illinois
YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend the meeting,
please take the time to vote by completing and mailing the enclosed proxy card.
We recommend
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that you vote FOR both the proposed spinoff and the merger. If you sign, date
and mail your proxy card without indicating how you want to vote, your proxy
will be counted as a vote in favor of both proposals. If you do not return your
card, the effect in most cases will be a vote against the proposals.
This Proxy Statement-Prospectus provides detailed information about the
proposed merger and spinoff. We also mailed to you, together with this Proxy
Statement-Prospectus, an Information Statement about New Ralcorp. This
Information Statement describes New Ralcorp's businesses, management, and
financial condition.
I encourage you to read all of these documents thoroughly. In addition, you
can find more information about Ralcorp and General Mills in the documents they
have filed with the Securities and Exchange Commission (SEC).
Sincerely,
/s/ Joe R. Micheletto
Joe R. Micheletto
Chief Executive Officer and President
Ralcorp Holdings, Inc.
NEITHER THE SEC NOR ANY STATE SECURITIES REGULATOR HAS APPROVED THE GENERAL
MILLS COMMON STOCK TO BE ISSUED UNDER THIS PROXY STATEMENT-PROSPECTUS OR THE NEW
RALCORP COMMON STOCK TO BE DISTRIBUTED TO RALCORP SHAREHOLDERS, OR DETERMINED IF
THIS PROXY STATEMENT-PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
Proxy Statement-Prospectus dated December 27, 1996, and first mailed to
shareholders on December 30, 1996.
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TABLE OF CONTENTS
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SUMMARY................................... 1
THE PROPOSED TRANSACTIONS................. 13
General................................. 13
Background.............................. 15
Reasons for the Transactions;
Recommendation of the Ralcorp Board of
Directors............................. 17
Opinion of Financial Advisor............ 17
Material Federal Income Tax
Consequences.......................... 23
Appraisal Rights........................ 25
HSR Act................................. 27
Accounting Treatment.................... 27
Interests of Certain Persons in the
Transactions.......................... 28
Cautionary Statement Concerning
Forward-Looking Statements............ 28
MARKETS AND MARKET PRICES................. 29
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION................... 30
THE MERGER AGREEMENT...................... 35
Terms of the Merger..................... 35
Effective Time; Closing................. 35
Exchange of Shares...................... 35
Net Assets Adjustment................... 36
Representations and Warranties.......... 36
Business of Ralcorp Pending the
Merger................................ 37
No Solicitation of Third Party
Acquisition Proposals................. 37
Certain Covenants of General Mills...... 38
Certain Other Covenants................. 38
Employment Matters...................... 39
Fees and Expenses....................... 39
Conditions.............................. 39
Termination; Certain Fees............... 41
THE INTERNAL MERGER, THE BRANDED
CONTRIBUTION, THE INTERNAL SPINOFF AND
THE DISTRIBUTION........................ 42
Background of and Reasons for the
Distribution.......................... 42
Terms of the Reorganization Agreement... 42
Terms of the Other Ancillary
Agreements............................ 46
THE SPECIAL MEETING....................... 53
General................................. 53
Date, Place and Time.................... 53
Record Date............................. 53
Votes Required.......................... 53
Voting and Revocation of Proxies........ 54
Solicitation of Proxies................. 54
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS OF COMMON STOCK.................. 55
DESCRIPTION OF CAPITAL STOCK OF GENERAL
MILLS................................... 57
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Capital Stock........................... 57
Rights.................................. 57
COMPARISON OF CERTAIN RIGHTS OF
SHAREHOLDERS OF RALCORP AND GENERAL
MILLS................................... 60
Size and Classification of the Board of
Directors............................. 60
Removal of Directors; Filling Vacancies
on the Board of Directors............. 61
Shareholder Nominations................. 62
Action by Written Consent............... 63
Meetings of Shareholders................ 63
Shareholder Proposals................... 64
Required Vote for Authorization of
Certain Actions....................... 65
Amendment of Corporate Charter and
By-Laws............................... 65
Appraisal Rights........................ 66
Fair Price Provisions................... 67
Rights Plans............................ 68
State Antitakeover Statutes............. 70
Limitation on Directors' Liability...... 70
Indemnification of Officers and
Directors............................. 70
No Cumulative Voting.................... 71
Conflict-of-Interest Transactions....... 71
Dividends and Other Distributions....... 72
Duties of Directors..................... 72
Issuance of Rights or Options to
Purchase Shares to Directors, Officers
and Employees......................... 73
Loans to Directors...................... 73
EXPERTS................................... 73
LEGAL MATTERS............................. 73
SUBMISSION OF SHAREHOLDER PROPOSALS....... 74
WHERE YOU CAN FIND MORE INFORMATION....... 74
INDEX OF DEFINED TERMS.................... 76
BRANDED BUSINESS OF RALSTON FOODS, INC.
INDEX TO COMBINED FINANCIAL
STATEMENTS.............................. F-i
Appendix A: Agreement and Plan of Merger, dated
as of August 13, 1996 and amended as
of October 25, 1996, by and among
Ralcorp, General Mills and General
Mills Missouri
Appendix B: Form of Reorganization Agreement by
and among Ralcorp, New Ralcorp,
Ralston Foods, the Branded
Subsidiary and General Mills
Appendix C: Opinion of Lehman Brothers, Inc.
Appendix D: Section 351.455 of the Missouri
General Business and Corporation Law
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<PAGE> 5
SUMMARY
This summary highlights selected information from this document, and may
not contain all of the information that is important to you. To better
understand the spinoff and the merger, and for a more complete understanding of
the legal terms of these transactions, you should read this entire document
carefully, as well as those additional documents we have referred you to. See
"Where You Can Find More Information." (Page 74)
Q: WHY IS RALCORP SELLING ITS BRANDED CEREALS AND SNACKS BUSINESSES?
A: Ralcorp's Board of Directors believes that the price that General Mills is
paying for these businesses is an attractive price to Ralcorp shareholders,
and that the sale will sharpen our focus on our remaining private label food
businesses and on our regional Beech-Nut baby food operation.
Q: WHAT WILL I RECEIVE FOR MY RALCORP SHARES?
A: First, in the spinoff, you will receive one share of New Ralcorp common stock
for each share of Ralcorp common stock you now own. This represents a
continuing interest in the businesses that General Mills is not buying.
Second, in the merger, you will receive a fraction of a share of General
Mills common stock in exchange for each of your Ralcorp shares. The exact
fraction that you will receive for each Ralcorp share will be computed using
a somewhat complicated formula that is explained in more detail in the Proxy
Statement-Prospectus.
In essence, the formula starts with $570 million, the total value that
General Mills has agreed to pay for Ralcorp's branded cereals and snacks
businesses. Next, we will subtract from $570 million the amount of Ralcorp
debt that General Mills will assume in the merger (as well as any remaining
payment that Ralcorp must make to redeem Ralcorp's share purchase rights). We
expect the total debt assumed to be about $210 million to $240 million. The
remaining amount will be divided by the trading price of a share of General
Mills at the time of the merger, in order to determine the total number of
shares that General Mills will issue. The total number of General Mills
shares to be issued will then be divided by the total number of Ralcorp
shares that are outstanding at the time of the merger, in order to determine
the fraction of a share of General Mills common stock that will be issued for
each Ralcorp share.
General Mills will not issue fractional shares in the merger. As a result,
the total number of General Mills shares that you receive in exchange for
your Ralcorp shares will be rounded down to the nearest whole number, and you
will receive a cash payment based on the value of the remaining fraction of a
share of General Mills that you would otherwise be entitled to receive.
Finally, Ralcorp will also pay you five cents per share to redeem the share
purchase rights currently associated with your Ralcorp shares.
Q: CAN YOU GIVE ME AN EXAMPLE OF HOW YOU WILL CALCULATE THE NUMBER OF GENERAL
MILLS SHARES I WILL RECEIVE?
A: Here is a hypothetical example of how we would use the formula to determine
the fraction of a share of General Mills common stock that will be issued for
each Ralcorp share in the merger. Let's assume the following:
- General Mills will assume $240 million of Ralcorp debt in the merger
(including any remaining payment to redeem Ralcorp's share purchase
rights).
- The trading price of a share of General Mills at the time of the merger is
$65 (which was the approximate trading price on December 24, 1996).
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- The total number of Ralcorp shares that are outstanding at the time of the
merger is 32,900,000 (which was the approximate number on November 30,
1996).
The formula tells us that the total value of shares that General Mills will
issue is equal to $570 million (the total price) minus $240 million (the
debt assumed), which equals $330 million. We would then divide by $65 (the
General Mills trading price), to get the total number of shares General
Mills would issue, which equals 5,076,923. Finally, we would divide by
32,900,000, the total number of Ralcorp shares outstanding, to get the ratio
of .154 of a share of General Mills for each Ralcorp share.
In this example, if you owned 100 Ralcorp shares, you would receive 15 whole
shares of General Mills, and a cash payment in place of the remaining .4 of
a share. You should remember that the numbers we have chosen here are
hypothetical. We are not attempting to predict the actual fraction of a
share of General Mills common stock that will be issued for each Ralcorp
share in the merger.
Q: WHEN WILL YOU DETERMINE THE EXACT EXCHANGE RATIO?
A: Because a number of the factors we use in the formula will not be set until
the time of the merger, we will not be able to calculate the exact ratio
until that time. This means that, when you vote on the merger, you will not
know the exact fraction of a share of General Mills that you will receive for
each Ralcorp share. While we expect that the merger will occur on January 31,
1997 (the day of the shareholder vote), it is possible that the merger could
be delayed.
After shareholder approval, Ralcorp does not have a right to call off the
merger if the General Mills stock price goes up or down. Ralcorp believes,
however, that the formula protects the value that General Mills will pay,
because it values the General Mills stock based on the trading price at the
time of the merger. This means that, if the General Mills stock price goes
down, General Mills will have to issue more shares to pay the purchase
price. If the General Mills stock price goes up, General Mills will issue
fewer shares to pay the same purchase price.
Q: WHY IS THE SALE STRUCTURED AS A SPINOFF AND A MERGER?
A: Ralcorp wants to sell and General Mills wants to buy only the branded cereals
and snacks businesses of Ralcorp. The spinoff is necessary to separate the
other Ralcorp businesses so that the remaining branded cereals and snacks
businesses can then be acquired by General Mills. Under this structure, our
tax counsel will give us an opinion that both transactions will be tax-free,
for federal income tax purposes, to Ralcorp and to our shareholders (except
that you will pay tax on any cash payments you receive in place of a
fractional General Mills share and to redeem your share purchase rights). To
review the tax consequences to shareholders in greater detail, see pages
23-25.
Q: WHAT DO I NEED TO DO NOW?
A: Just mail your signed proxy card in the enclosed return envelope as soon as
possible, so that your shares may be represented at the special meeting. The
meeting will take place on January 31, 1997. Ralcorp's Board of Directors
unanimously recommends that you vote in favor of the proposed spinoff and the
proposed merger.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED IN MY SIGNED PROXY CARD?
A: Yes. You can change your vote at any time before we vote your proxy at the
special meeting. You can do so in one of three different ways. First, you can
send a written notice stating that you would like to revoke
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your proxy to the Secretary of Ralcorp at the address given below. Second,
you can complete a new proxy card and send it to the Secretary of Ralcorp at
the address given below. Third, you can attend the special meeting and vote
in person. You should send any written notice or new proxy card to the
Secretary of Ralcorp at the following address: Ralcorp Holdings, Inc., 800
Market Street, Suite 2900, St. Louis, Missouri 63101, Attention: Secretary.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. If you continue to hold your Ralcorp shares at the time of the spinoff
and the merger, you will automatically receive your New Ralcorp shares and
the payment to redeem your share purchase rights, without the need to take
any further action. You will also receive written instructions for exchanging
your old Ralcorp shares for shares of General Mills common stock (and your
cash payment in place of any fraction of a General Mills share).
Q: WHEN DO YOU EXPECT THE SPINOFF AND THE MERGER TO BE COMPLETED?
A: We are working to complete the spinoff and the merger as quickly as possible.
We currently expect to complete the transactions by January 31, 1997.
Q: AM I ENTITLED TO APPRAISAL RIGHTS?
A: Yes. If you file a written objection to the merger prior to the special
meeting, you do not vote in favor of the merger, and you meet other legal
requirements, you will have the right to seek an appraisal and payment of the
fair value of your Ralcorp shares (after giving effect to the spinoff). The
requirements for seeking appraisal are summarized in the Proxy Statement-
Prospectus (see pages 25-27), and the provisions of Missouri law that govern
appraisal rights on the merger are attached as Appendix D. If you wish to
seek an appraisal of your shares, you should read and follow those provisions
carefully. You should be aware that an appraisal may result in a price for
your shares that has more value or less value than the General Mills shares
being issued in the merger.
3
<PAGE> 8
THE COMPANIES
GENERAL MILLS, INC.
Number One General Mills Boulevard
Minneapolis, Minnesota 55426
(612) 540-2311
General Mills manufactures and markets branded consumer foods products. In
the United States, the company's major businesses include Big G cereals; Betty
Crocker dessert, dinner and side dish mixes; snack foods including Pop Secret
microwave popcorn, Fruit Roll-Ups and Nature Valley granola bars; and Yoplait
and Colombo yogurts. General Mills' international operations include alliances
with global companies focused on cereals, snacks, and baking and dessert mixes.
RALCORP HOLDINGS, INC.
800 Market Street, Suite 2900
St. Louis, Missouri 63101
(314) 877-7000
Ralcorp manufactures, distributes, and markets private-label and branded
ready-to-eat cereal products and snacks, branded and private label crackers and
cookies, and branded baby foods and juices. Ralcorp also has ski resort
operations that it has agreed to sell.
REASONS FOR THE SPINOFF AND THE MERGER
Ralcorp was spun off from its former parent, Ralston Purina Company, in
March 1994. Over the next two years, Ralcorp's overall ready-to-eat cereal
business had substantial profits. However, in the late spring of 1996, major
branded cereal manufacturers took separate actions to reduce prices, and those
actions substantially reduced the profitability of Ralcorp's branded and private
label cereal businesses. Ralcorp then reviewed whether to remain a branded
cereal producer, or sell its branded cereals and snacks businesses. Ralcorp's
management considered the competitive price pressures in the cereal industry,
the difficulty of developing successful new branded cereal products, and the
added pressure of advertising and promotional spending increases necessary for
the long-term growth of branded products. In light of these concerns, management
concluded that a sale of the branded cereals and snacks businesses, in a
tax-free transaction, would be in the best interests of Ralcorp and its
shareholders.
Following this review, Ralcorp's Board of Directors authorized management
to look for buyers for these businesses. With the help of Lehman Brothers, Inc.,
Ralcorp's financial advisor, Ralcorp solicited bids for the branded cereals and
snacks businesses. General Mills' bid was higher than the bids received from
other interested parties. Ralcorp's Board of Directors believes that the sale
price reflects a fair and attractive price to Ralcorp and its shareholders. In
addition, Lehman Brothers has given an opinion to Ralcorp's Board of Directors
that the price is fair to Ralcorp's shareholders.
The Board of Directors also believes that the sale will sharpen Ralcorp's
focus on its remaining private label food businesses, where Ralcorp holds
leading positions, and on the company's regional Beech-Nut baby food operation.
Ralcorp plans a significant restructuring of its remaining food businesses in
order to reduce its cost structure substantially.
RECOMMENDATION TO SHAREHOLDERS
Ralcorp's Board of Directors has unanimously approved the spinoff and the
merger. The Board unanimously recommends that you vote FOR the proposals:
(a) to approve the spinoff to Ralcorp's shareholders of all the Ralcorp
businesses other than the branded cereals and snacks businesses; and
(b) to approve the merger and the merger agreement, under which General
Mills will acquire Ralcorp's branded cereals and snacks businesses.
ABOUT NEW RALCORP
In the spinoff, Ralcorp shareholders will receive shares of New Ralcorp
common stock. New Ralcorp will own all the Ralcorp businesses other than the
branded cereals and snacks businesses. Here is a brief description of New
Ralcorp's businesses:
Private Label Cereal Business. New Ralcorp will remain in the private label
cereal business, where it holds an estimated 55% to 60% of the sales volume
in the private label, ready-to-eat cereal segment. Private label cereals are
cereals that are sold under store-brand or generic names, rather than brand
names such as Chex. Excluding New Ralcorp's Keystone, Breckenridge and
Arapahoe Basin ski resorts
4
<PAGE> 9
in Colorado (the Resort Operations), it is expected that approximately 50% of
New Ralcorp's total sales will come from this business.
Baby Food Business. New Ralcorp's Beech-Nut baby food business is the second
largest manufacturer of baby food, juices and cereals in the United States.
Excluding Resort Operations, it is expected that about 33% of New Ralcorp's
total sales will be generated from this business.
Bremner Cracker and Cookie Business. New Ralcorp will continue manufacturing
private label crackers and cookies and Ry-Krisp brand crackers for sale in
the United States. Management believes that New Ralcorp is a leader in this
business. New Ralcorp has recently expanded its product lines to include
shredded wheat crackers. Excluding Resort Operations, management expects
this business will generate about 17% of New Ralcorp's total sales.
Resort Operations. New Ralcorp will continue to own the Resort Operations,
which New Ralcorp has decided to sell to Vail Resorts, Inc. The transaction
is subject to governmental approval and possibly court approval which may or
may not be received. If the transaction is approved, Vail Resorts will pay
for the Resort Operations by issuing common stock to New Ralcorp
representing 22% of the outstanding stock of Vail and assuming the Resort
Operations' debt. If the transaction is not approved, management will review
whether to retain the Resort Operations and operate them as a core business
or explore other strategic alternatives with respect to the Resort
Operations.
Ralcorp mailed to you an Information Statement about New Ralcorp together with
this Proxy Statement-Prospectus. The Information Statement describes New
Ralcorp, including a number of risks associated with these businesses, which are
discussed under the heading "RISK FACTORS." We encourage you to review the
Information Statement carefully.
THE SPINOFF AND THE MERGER
The merger agreement, which is the legal document that governs the merger,
is attached as Appendix A to this Proxy Statement-Prospectus. The reorganization
agreement, which is the legal document that governs the spinoff, is attached as
Appendix B to this Proxy Statement-Prospectus. We encourage you to read both
documents carefully. In addition, we have filed other related agreements as
exhibits to the Registration Statements filed by the two companies. These
agreements will govern specific relationships between the two companies after
the spinoff and the merger are complete. "Where You Can Find More Information"
(page 74) describes how to obtain copies of these exhibits.
HOW THE SPINOFF AND THE MERGER WILL BE COMPLETED (SEE PAGE 42)
The spinoff and the merger will involve the following steps:
(a) Ralcorp has created a new subsidiary (New Ralcorp) and will merge its
existing subsidiary, Ralston Foods, into New Ralcorp. The purpose of
this is to move Ralston Foods' state of incorporation from Nevada to
Missouri, where its headquarters are located.
(b) Ralcorp will create another new subsidiary (the Branded Subsidiary) to
hold its branded cereals and snacks businesses. Initially, New Ralcorp
will own the Branded Subsidiary and will put the branded cereals and
snacks businesses into the Branded Subsidiary.
(c) New Ralcorp will give the stock of the Branded Subsidiary directly to
Ralcorp, so that the Branded Subsidiary will be a direct subsidiary of
Ralcorp.
(d) Ralcorp will spin off to its shareholders all of New Ralcorp, leaving
behind only the branded cereals and snacks businesses in Ralcorp and
the Branded Subsidiary.
(e) Ralcorp will merge with a subsidiary of General Mills. As a result,
Ralcorp and the Branded Subsidiary will become subsidiaries of General
Mills.
5
<PAGE> 10
CONDITIONS TO THE SPINOFF AND THE MERGER
(SEE PAGE 39)
The spinoff and the merger will not be completed unless a number of
conditions are met (or waived), including the following:
(a) approval of shareholders holding at least two-thirds of Ralcorp's
outstanding shares;
(b) clearance under antitrust laws;
(c) opinions of tax counsel that the spinoff, the merger and related
transactions will be non-taxable for federal income tax purposes;
(d) the absence of any pending legislation or congressional action that
would materially alter the tax consequences of these transactions; and
(e) the absence of any material adverse changes to Ralcorp or the branded
businesses.
In addition, the merger will not occur unless the spinoff has been
completed. If the spinoff is completed and all other conditions to the merger
are met, the merger will occur right after the completion of the spinoff.
TERMINATION OF THE MERGER AGREEMENT
(SEE PAGE 41)
Ralcorp and General Mills can terminate the merger agreement by mutual consent.
In addition, General Mills can terminate the agreement if the Ralcorp Board
withdraws its approval or modifies its approval or recommendation of either the
spinoff or the merger in a manner adverse to General Mills, or if the Ralcorp
Board approves or recommends a significant transaction between Ralcorp and a
third party. Ralcorp can terminate the merger agreement if the Ralcorp Board has
withdrawn, modified or changed its recommendation of these transactions, or if
Ralcorp has entered into an agreement with a third party relating to a
significant transaction. In addition, either company can terminate if the merger
is not completed by August 31, 1997 (this date may be extended up to three
months in certain cases), and under other specified circumstances.
TERMINATION FEES (SEE PAGE 41)
Ralcorp will pay General Mills $20 million in termination fees, and
reimburse General Mills up to $2.5 million for its related expenses, if the
merger agreement fails for any of these three reasons:
- the Ralcorp Board withdraws or changes its approval of the merger; or
- Ralcorp enters into an agreement to sell its branded cereals and snacks
businesses to someone other than General Mills; or
- the Ralcorp shareholders reject this merger after a third party proposes
a different transaction and, within six months of the rejection, Ralcorp
enters into a final agreement to sell the branded cereals and snacks
businesses to someone other than General Mills.
REGULATORY APPROVALS (SEE PAGE 27)
The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
prohibits Ralcorp and General Mills from completing the merger until the two
companies have furnished certain information to the Antitrust Division of the
Department of Justice and the Federal Trade Commission (FTC), and a required
waiting period has ended. On December 9, 1996, General Mills signed an agreement
relating to a proposed consent order with the FTC. The FTC accepted the
agreement for public comment on December 24, 1996, at which time the FTC granted
early termination of the required waiting period.
The proposed consent order will become final if the FTC enters the order
after a 60-day public comment period. Pending entry of the order, General Mills
has agreed to comply with it (but General Mills will no longer be bound by the
order if the FTC withdraws its acceptance of the agreement relating to the
order). Under the proposed order, General Mills would permit New Ralcorp to
compete against General Mills by producing and selling a Chex-type private label
cereal as soon as the merger is completed, and would permit a third party to
acquire this right. General Mills and Ralcorp had originally agreed that New
Ralcorp would not produce and sell a Chex-type private label cereal for 18
months after the merger. The parties intend to complete the merger as soon as
they satisfy all the conditions to the merger, even if the public comment period
has not expired and the proposed order is not final.
OPINION OF RALCORP'S FINANCIAL ADVISOR
(SEE PAGE 17)
In deciding to approve the spinoff and the merger, Ralcorp's Board
considered the opinion of its financial advisor, Lehman Brothers, that the
6
<PAGE> 11
price General Mills will pay in the merger is fair to
Ralcorp's shareholders. Lehman Brothers' written opinion, dated August 13, 1996,
is attached as Appendix C to this Proxy Statement-Prospectus. We encourage you
to read it thoroughly.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
(SEE PAGE 23)
We have structured the transactions so that neither Ralcorp nor its
shareholders will recognize any gain or loss for federal income tax purposes in
the spinoff and the merger (except that Ralcorp shareholders will be taxed on
any cash payments they receive in place of a fractional General Mills share or
to redeem their share purchase rights). In addition, a Ralcorp shareholder who
exercises appraisal rights in connection with the merger and receives a cash
appraisal award would recognize gain or loss for federal income tax purposes in
an amount equal to the difference between the amount of the appraisal award and
the tax basis in the shareholder's Ralcorp shares.
The companies will not complete the spinoff and the merger unless we
receive opinions of tax counsel to the effect that the transactions will not be
taxable for federal income tax purposes. It is important that you consider,
however, that the opinions of tax counsel do not guarantee favorable tax
treatment. This means that there is a risk that the Internal Revenue Service
might determine that Ralcorp and/or its shareholders must recognize gain or loss
for federal income tax purposes in the spinoff and the merger, even though we
have obtained opinions of tax counsel that the transactions will not be taxable.
In addition, the companies are not required to complete the spinoff and the
merger if there is any pending legislation or congressional action that would
materially alter the tax consequences of these transactions.
ACCOUNTING TREATMENT
We expect the merger will be accounted for as a purchase in accordance with
generally accepted accounting principles.
EFFECTS OF THE MERGER ON THE RIGHTS OF RALCORP SHAREHOLDERS (SEE PAGE 60)
If the proposed spinoff and merger are completed and you continue to hold
your Ralcorp stock, you will be a shareholder of both New Ralcorp and General
Mills. General Mills is governed by Delaware corporate law and General Mills'
Restated Certificate of Incorporation and By-Laws. Rights of General Mills
shareholders under these provisions differ in certain respects from the current
rights of Ralcorp shareholders.
INTERESTS OF OFFICERS AND DIRECTORS IN THE SPINOFF AND THE MERGER (SEE PAGE 28)
The officers and directors of Ralcorp may have interests in the
transactions that are different from, or in addition to, yours. For example,
Ralcorp officers hold stock options, and some hold restricted stock, that will
vest if the transactions are completed.
MARKETS AND MARKET PRICES (SEE PAGE 29)
The common shares of General Mills and the common shares of Ralcorp are
listed on the New York Stock Exchange. On August 13, 1996, the last trading date
prior to the public announcement of the proposed sale of Ralcorp's branded
cereals and snacks businesses to General Mills, General Mills common stock
closed at $55 3/8 and Ralcorp common stock closed at $20. On December 24, 1996,
General Mills common stock closed at $65 5/8 and Ralcorp common stock closed at
$18 7/8.
LISTING OF GENERAL MILLS COMMON STOCK AND NEW RALCORP COMMON STOCK
The shares of General Mills common stock to be issued in the merger are
listed on the New York Stock Exchange. New Ralcorp expects to apply to list the
shares of New Ralcorp common stock to be issued in the spinoff on the New York
Stock Exchange. However, there is currently no public trading market for the New
Ralcorp common stock, and there is no guarantee that there will be an active
market in shares of New Ralcorp common stock after the spinoff.
7
<PAGE> 12
SELECTED HISTORICAL FINANCIAL INFORMATION
GENERAL MILLS
In the table below, we provide you with selected historical consolidated
financial data of General Mills. We prepared this information using the
consolidated financial statements of General Mills as of the dates indicated and
for each of the fiscal years in the five-year period ended May 26, 1996, as well
as for the unaudited 13-week periods ended August 25, 1996 and August 27, 1995.
The financial statements as of the dates indicated and for each of the fiscal
years in the five-year period ended May 26, 1996, have been audited by KPMG Peat
Marwick LLP, independent certified public accountants.
When you read this selected historical consolidated financial data, it is
important that you read along with it the historical financial statements and
accompanying Notes that General Mills has included in its Annual Report on Form
10-K for the year ended May 26, 1996 and its Quarterly Report on Form 10-Q for
the thirteen weeks ended August 25, 1996 (you can obtain these reports by
following the instructions we provide in this Proxy Statement-Prospectus under
"WHERE YOU CAN FIND MORE INFORMATION" on page 74).
It is also important that you read the unaudited pro forma combined
financial information and accompanying Notes that we have included in this Proxy
Statement-Prospectus under "UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
INFORMATION" on page 30.
<TABLE>
<CAPTION>
13 WEEKS ENDED YEAR ENDED
---------------------------- --------------------------------------------------------------------
AUG. 25, 1996 AUG. 27, 1995 MAY 26, 1996 MAY 28, 1995 MAY 29, 1994 MAY 30, 1993 MAY 31, 1992
------------- ------------- ------------ ------------ ------------ ------------ ------------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
EARNINGS STATEMENT DATA
Sales...................... $ 1,315.6 $ 1,276.3 $5,416.0 $5,026.7 $5,327.2 $5,138.4 $4,963.9
Earnings from Continuing
Operations............... 97.7 136.9 476.4 259.7 340.0 411.0 395.8
Unusual items after-tax
gain (loss).............. (29.2) -- -- (111.6) (87.1) (30.4) --
Earnings from Continuing
Operations per common
share.................... .62 .86 3.00 1.64 2.14 2.52 2.39
Dividends declared per
common share............. .50 .47 1.91 1.88 1.88 1.68 1.48
Common shares outstanding
(average)................ 157.9 158.4 158.9 158.0 159.1 163.1 165.7
BALANCE SHEET DATA
Working capital............ $ (321.9) $ (303.5) $ (196.8) $ (324.0) $ (629.7) $ (386.4) $ (237.6)
Total assets............... 3,413.4 3,455.0 3,294.7 3,358.2 4,804.0 4,310.4 3,997.3
Long-term debt, excluding
current portion.......... 1,153.8 1,334.9 1,220.9 1,400.9 1,413.3 1,264.3 916.4
Stockholders' equity....... 225.8 209.7 307.7 141.0 1,151.2 1,218.5 1,370.9
</TABLE>
8
<PAGE> 13
RALCORP
In the table below, we provide you with selected historical consolidated
financial data of Ralcorp. We prepared this information using the consolidated
financial statements of Ralcorp as of the dates indicated and for each of the
fiscal years in the five-year period ended September 30, 1996. The financial
statements as of the dates indicated and for each of the fiscal years in the
five-year period ended September 30, 1996, have been audited by Price Waterhouse
LLP, independent accountants.
When you read this selected historical consolidated financial data, it is
important that you read the footnotes set forth below the financial data. You
should also read the historical financial statements and accompanying Notes that
New Ralcorp has included in its Form 10 Registration Statement for the year
ended September 30, 1996 (you can obtain this report by following the
instructions we provide in this Proxy Statement-Prospectus under "WHERE YOU CAN
FIND MORE INFORMATION" on page 74).
It is also important that you read the unaudited pro forma combined
financial information and accompanying Notes that we have included in this Proxy
Statement-Prospectus under "UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
INFORMATION" on page 30.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------------
1996 1995 1994 1993 1992
-------- ------- ----- ----- -----
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
EARNINGS STATEMENT DATA
Revenue............................................ $1,027.4 1,013.4 987.0 902.8 870.6
Net (loss) earnings (a, b, c, d)................... (46.8) 33.4 53.6 42.6 38.2
(Loss) earnings per common share................... (1.42) 1.00 1.59 1.23 1.08
Dividends declared per common share................
Weighted average common shares outstanding......... 33.0 33.5 33.7 34.5 35.4
BALANCE SHEET DATA
Working capital(e)................................. $ 92.4 104.7 81.8 54.8 57.2
Total assets....................................... 627.1 716.2 700.1 626.4 519.9
Long-term debt..................................... 376.6 395.4 389.4 30.3 27.9
Shareholders' equity............................... 107.4 162.4 141.2
Ralston Purina's equity investment................. 474.4 380.0
</TABLE>
- ---------------
(a) Includes, in 1996, a $109.5 pre-tax impairment charge ($68.8 after taxes)
related to its private label ready-to-eat cereal and consumer hot cereal
operations.
(b) Includes, in 1996, a $16.5 pre-tax restructuring charge ($10.4 after taxes)
to recognize the costs related to the restructuring of its ready-to-eat
cereal subsidiary, Ralston Foods. The original charge of $20.7 was taken in
the third quarter of 1996. In the fourth quarter of 1996, Ralcorp reversed
$4.2 of that original amount. This reversal was offset by $4.0 ($2.5 after
taxes) of transaction fees related to the proposed sale of Ralcorp's Resort
Operations.
(c) Includes, in 1995, $21.9 pre-tax nonrecurring charges ($13.6 after taxes)
related to exiting the industrial oats and oats milling business and
impairment of the consumer hot cereal business.
(d) The cumulative effect of accounting changes for postretirement benefits
other than pensions and for income taxes reduced earnings by $9.3, after
taxes, in the year ended September 30, 1993.
(e) Excludes cash and current maturities of long-term debt, where applicable.
9
<PAGE> 14
BRANDED BUSINESS
In the table below, we provide you with selected historical combined
financial data of Ralcorp's branded cereals and snacks businesses. We prepared
this combined financial data using the combined financial statements of this
business as of the dates indicated and for each of the fiscal years in the four-
year period ended September 30, 1996 (all of which is unaudited except for 1996
and 1995). The combined financial statements of the branded cereals and snacks
businesses as of and for the two fiscal years ended September 30, 1996 and 1995,
have been audited by Price Waterhouse LLP, independent accountants for Ralcorp.
When you read this selected historical combined financial data, it is
important that you read the footnotes set forth below the financial data. You
should also read the combined financial statements of the branded cereals and
snacks businesses and accompanying Notes which we have included in this Proxy
Statement-Prospectus under "INDEX TO COMBINED FINANCIAL STATEMENTS" on page F-i.
It is also important that you read the Ralcorp historical consolidated
financial statements and accompanying Notes which are included in New Ralcorp's
Information Statement, which was mailed to you along with this Proxy
Statement-Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------------
1996 1995 1994 1993
------ ----- ----- -----
(IN MILLIONS)
<S> <C> <C> <C> <C>
EARNINGS STATEMENT DATA
Revenue................................................. $386.7 371.6 361.7 366.0
Net earnings(a;b)....................................... 31.6 42.8 40.4 33.0
BALANCE SHEET DATA
Working capital(c)...................................... $ 28.5 39.0 11.3 17.2
Total assets............................................ 124.3 134.5 104.0 106.4
Long-term debt.......................................... 61.2 62.8 42.6
Ralcorp Holdings' equity investment..................... 23.3 32.9 21.9 80.1
</TABLE>
- ---------------
(a) Includes, in 1996, a $2.5 pre-tax restructuring charge ($1.6 after taxes) to
recognize the costs related to the restructuring of its ready-to-eat cereal
operations.
(b) The cumulative effect of accounting changes for postretirement benefits
other than pensions and for income taxes reduced earnings by $3.5, after
taxes, in the year ended September 30, 1993.
(c) Excludes cash and current maturities of long-term debt, where applicable.
10
<PAGE> 15
SUMMARY SELECTED UNAUDITED PRO FORMA
FINANCIAL INFORMATION
In the table below, we attempt to illustrate the financial results that
might have occurred if the spinoff and the merger had been completed previously.
We present combined balance sheet information for General Mills and Ralcorp as
of August 25, 1996, as if the spinoff and the merger had been completed on
August 25, 1996. We present combined earnings statement information for General
Mills and Ralcorp for the fiscal year ended May 26, 1996 and the 13 weeks ended
August 25, 1996, as if the spinoff and the merger had been completed on May 29,
1995.
It is important to remember that this information is hypothetical, and does
not necessarily reflect the financial performance that would have actually
resulted if the spinoff and the merger had been completed on those dates. It is
also important to remember that this information does not necessarily reflect
future financial performance if the spinoff and the merger actually occur.
Please see "UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION"
on page 30 of this Proxy Statement-Prospectus for a more detailed explanation of
this analysis.
<TABLE>
<CAPTION>
13 WEEKS ENDED YEAR ENDED
AUGUST 25, MAY 26,
1996 1996
-------------- ----------
(IN MILLIONS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
Earnings Statement Information:
Sales......................................................... $1,396.5 $5,809.6
Earnings from continuing operations........................... 102.1 486.8
Earnings from continuing operations per common share.......... .63 2.97
Dividends declared per common share........................... .50 1.91
</TABLE>
<TABLE>
<CAPTION>
AUGUST 25,
1996
-------------
(IN MILLIONS,
EXCEPT PER
SHARE DATA)
<S> <C>
Balance Sheet Information:
Total assets............................................................... $ 4,026.3
Long-term debt, excluding current portion.................................. 1,407.8
Shareholders' equity....................................................... 555.8
Book value per common share................................................ 3.43
</TABLE>
11
<PAGE> 16
COMPARATIVE PER SHARE DATA
In the table below, we provide you with certain historical and pro forma
per share financial information as of and for the 13 weeks ended August 25,
1996, and for the year ended May 26, 1996. Ralcorp historical data and New
Ralcorp data are as of and for the quarter ended September 30, 1996, and for the
12-month period ended June 30, 1996. We prepared the General Mills pro forma
combined amounts based on the purchase method of accounting and a preliminary
allocation of the purchase price.
It is important that when you read this information, you read along with it
the consolidated financial statements and accompanying Notes of General Mills
and Ralcorp included in the documents described on page 74 of this Proxy
Statement-Prospectus under "WHERE YOU CAN FIND MORE INFORMATION." It is also
important that you read the pro forma condensed combined financial information
and accompanying discussion and Notes that we have included in this Proxy
Statement-Prospectus on page 30 under "UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION."
RALCORP PRO FORMA PER COMMON SHARE DATA
The table below compares historical amounts per share of Ralcorp with pro
forma amounts for the fraction of a share of General Mills and the full share of
New Ralcorp that will be issued for each old Ralcorp share. The "Total Pro
Forma" column in the table adds the amounts for the fraction of a General Mills
share and the full New Ralcorp share to show the total pro forma amount for the
shares that you will hold after completion of the spinoff and the merger for
each Ralcorp share that you held before the spinoff and the merger. We have
assumed for this purpose that General Mills issues .154 of a General Mills share
for each Ralcorp share. The actual fraction of a General Mills share will be
determined using a formula and may be higher or lower than .154 of a share. We
have also assumed in the amounts under the "New Ralcorp" column that the sale of
New Ralcorp's Resort Operations is completed.
<TABLE>
<CAPTION>
GENERAL MILLS
RALCORP PRO FORMA
HISTORICAL (PER .154 SHARE) NEW RALCORP TOTAL PRO FORMA
---------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C>
YEAR ENDED MAY 26, 1996
Earnings from continuing operations per
common
share................................. $ .27 $.46 $ (.97) $ (.51)
Dividends per common share.............. -- .29 -- .29
13 WEEKS ENDED AUGUST 25, 1996
Earnings from continuing operations per
common
share................................. (2.02) .10 (2.20) (2.10)
Dividends per common share.............. -- .08 -- .08
AS OF AUGUST 25, 1996
Book value per common share............. 3.26 .53 8.42 8.95
</TABLE>
GENERAL MILLS PRO FORMA PER COMMON SHARE DATA
<TABLE>
<CAPTION>
GENERAL MILLS GENERAL MILLS
HISTORICAL PRO FORMA
------------- -------------
<S> <C> <C>
YEAR ENDED MAY 26, 1996
Earnings from continuing operations per common share............ $3.00 $2.97
Dividends per common share...................................... 1.91 1.91
13 WEEKS ENDED AUGUST 25, 1996
Earnings from continuing operations per common share............ .62 .63
Dividends per common share...................................... .50 .50
AS OF AUGUST 25, 1996
Book value per common share..................................... 1.44 3.43
</TABLE>
12
<PAGE> 17
THE PROPOSED TRANSACTIONS
GENERAL
We are furnishing this Proxy Statement-Prospectus to the shareholders of
Ralcorp Holdings, Inc., a Missouri corporation ("Ralcorp"), in connection with
the solicitation of proxies by Ralcorp's Board of Directors (the "Ralcorp
Board") from holders of outstanding shares of Ralcorp's common stock, par value
$0.01 per share ("Ralcorp Common Stock"). These proxies will be used at a
Special Meeting of Shareholders of Ralcorp to be held on January 31, 1997, and
at any adjournments or postponements thereof (the "Special Meeting").
At the Special Meeting, shareholders of Ralcorp will be asked to consider
and vote upon:
(i) A proposal (the "Distribution Proposal") to approve the
distribution described in the Reorganization Agreement (as it may be
amended, supplemented or modified from time to time, the "Reorganization
Agreement") to be executed by Ralcorp, New Ralcorp Holdings, Inc., a
Missouri corporation ("New Ralcorp"), Chex Inc., a Delaware corporation
("Branded Subsidiary"), and General Mills, Inc., a Delaware corporation
("General Mills"). Under the Reorganization Agreement, immediately prior to
the Merger (as defined below), Ralcorp will distribute to its shareholders
on a share-for-share basis, in a non-taxable distribution (the
"Distribution"), all the shares of New Ralcorp. At the time of the
Distribution, New Ralcorp will own all the businesses, assets and
liabilities currently owned by Ralcorp and its subsidiaries (collectively,
the "New Ralcorp Business"), other than its branded cereals and snacks
businesses and certain assets and liabilities related thereto (the "Branded
Business") which will be acquired by General Mills in the Merger.
(ii) A proposal (the "Merger Proposal") to approve and adopt an
Agreement and Plan of Merger, dated as of August 13, 1996 (as it may be
amended, supplemented or modified from time to time, the "Merger
Agreement"), by and among Ralcorp, General Mills and General Mills
Missouri, Inc., a Missouri corporation and a wholly owned subsidiary of
General Mills ("General Mills Missouri"). Under the Merger Agreement,
conditioned on and immediately following the Distribution, General Mills
Missouri will merge (the "Merger") into Ralcorp, with Ralcorp being the
corporation surviving the Merger (sometimes hereinafter referred to as the
"Surviving Corporation"), upon the terms and conditions contained in the
Merger Agreement.
These proposals and related considerations are described in this Proxy
Statement-Prospectus, including the Appendices hereto. Copies of the Merger
Agreement and the form of Reorganization Agreement are attached as Appendices A
and B, respectively, to this Proxy Statement-Prospectus. The Merger Agreement
provides that, immediately prior to the Merger, Ralcorp will effect the
Distribution in accordance with the terms of the Reorganization Agreement. At
the time the Merger becomes effective (the "Effective Time"), each share of
Ralcorp Common Stock outstanding immediately prior to the Effective Time, other
than (a) shares held by General Mills, Ralcorp or any wholly owned subsidiary of
General Mills or Ralcorp, and (b) shares held by holders of Ralcorp Common Stock
exercising appraisal rights with respect to the transactions contemplated by the
Merger Agreement ("Dissenting Shareholders"), will be converted into a fraction
of a share of common stock, par value $0.10 per share, of General Mills
("General Mills Common Stock") equal to the Conversion Number (as defined
herein) (the "Merger Consideration"). Holders of Ralcorp Common Stock will
receive cash (without interest) in lieu of fractional shares of General Mills
Common Stock. The amount of cash payable in lieu of any fractional share of
General Mills Common Stock will be equal to that fraction multiplied by the
Average Value of General Mills Common Stock (as defined below).
In addition, pursuant to the terms of the Merger Agreement, Ralcorp will
make a payment of $.05 with respect to each share of Ralcorp Common Stock (other
than shares owned by General Mills or held in Ralcorp's treasury or by any
wholly owned subsidiary of Ralcorp) outstanding on the Distribution Record Date
(as defined herein) in payment of the redemption of the Ralcorp Rights (as
defined herein). See "THE MERGER AGREEMENT -- Terms of the Merger" and
"COMPARISON OF CERTAIN RIGHTS OF SHAREHOLDERS OF RALCORP AND GENERAL MILLS --
Rights Plans -- Ralcorp." Each share of
13
<PAGE> 18
General Mills Common Stock issued in the Merger will be accompanied by one
General Mills Right (as defined herein). See "DESCRIPTION OF CAPITAL STOCK OF
GENERAL MILLS -- Rights." In the Distribution, holders of Ralcorp Common Stock
on the Distribution Record Date will receive one share of common stock, par
value $.01 per share, of New Ralcorp ("New Ralcorp Common Stock") for each of
their shares of Ralcorp Common Stock. See "THE INTERNAL MERGER, THE BRANDED
CONTRIBUTION, THE INTERNAL SPINOFF AND THE DISTRIBUTION."
For purposes of the Merger Agreement, the term "Conversion Number" means a
number, expressed to three decimal places, equal to the fraction of (a)
$570,000,000 less (i) the amount of any Funded Debt of Ralcorp and the Branded
Subsidiary (as defined herein) as of the Effective Time and (ii) the amount
required to be paid by Ralcorp to the holders of the Ralcorp Rights to redeem
the Ralcorp Rights, to the extent such amount remains unpaid at the Effective
Time (the "Rights Payment"), divided by (b) the product of (i) the Average Value
of General Mills Common Stock multiplied by (ii) the number of shares of Ralcorp
Common Stock issued and outstanding immediately before the Effective Time. See
"THE MERGER AGREEMENT -- Terms of the Merger" and "COMPARISON OF CERTAIN RIGHTS
OF SHAREHOLDERS OF RALCORP AND GENERAL MILLS -- Rights Plan -- Ralcorp."
The term "Funded Debt of Ralcorp and the Branded Subsidiary" means, without
duplication, (a) Ralcorp's 8-3/4% Notes due September 15, 2004 (the "Notes"),
which will be valued at their face value, plus any accrued and unpaid interest
thereon as of the date (the "Closing Date") of the closing of the Merger (the
"Closing"), (b) any amounts outstanding under any bank credit facility of
Ralcorp or the Branded Subsidiary, (c) all other indebtedness of Ralcorp or the
Branded Subsidiary for borrowed money, and (d) any other indebtedness of Ralcorp
or the Branded Subsidiary that is evidenced by a note, bond or similar security.
The amount of any Funded Debt of Ralcorp and the Branded Subsidiary referred to
in the foregoing clauses (b), (c) and (d) will be the face value thereof, plus
any accrued and unpaid interest thereon as of the Closing Date, plus an amount,
if any, on an after-tax basis, equal to (a) the face value thereof, multiplied
by (b)(i) the number of days, if any, following the Effective Time during which
such Funded Debt of Ralcorp and the Branded Subsidiary is not payable or
prepayable without premium or penalty divided by (ii) 365, multiplied by (c)(i)
the applicable annual interest rate of such Funded Debt minus (ii) the annual
interest rate applicable to debt of General Mills having a maturity equal to the
number of days referred to in clause (b)(i) of this sentence, such rate to be
reasonably agreed upon by Lehman Brothers, Inc. ("Lehman Brothers"), Ralcorp's
financial advisor, and Dillon, Read & Co. Inc. ("Dillon Read"), General Mills'
financial advisor.
The term "Average Value of General Mills Common Stock" means the
volume-weighted average of the prices per share of General Mills Common Stock
for all trades reported on the New York Stock Exchange, Inc. ("NYSE") during the
ten trading days immediately preceding the last business day before the date of
the Effective Time; provided, however, that if, on any such day, there has been
any suspension of trading, the imposition of any NYSE market circuit breakers or
any delay in the opening of trading, in any such case affecting the trading of
the General Mills Common Stock on the NYSE, such day will be excluded and the
measurement period for the determination of the Average Value of General Mills
Common Stock will be the ten trading days immediately preceding the last
business day before the date of the Effective Time on which no such event has
occurred.
The table below sets forth hypothetical values for the Conversion Number
based on a range of hypothetical values for the Funded Debt of Ralcorp and the
Branded Subsidiary (inclusive of any remaining unpaid Rights Payment) and a
range of hypothetical values for the Average Value of General Mills Common Stock
(including values equal to the highest and lowest closing prices of the General
Mills Common Stock on the NYSE for the period August 1, 1996 through December
24, 1996). We have assumed, solely for purposes of these calculations, that the
number of shares of Ralcorp Common Stock issued and outstanding
14
<PAGE> 19
immediately before the Effective Time will be equal to 32,900,000, the
approximate number of shares of Ralcorp Common Stock outstanding at November 30,
1996.
<TABLE>
<CAPTION>
FUNDED DEBT OF RALCORP AND
THE BRANDED SUBSIDIARY
$210 $240 $270
---- ---- ----
<S> <C> <C> <C> <C>
AVERAGE VALUE OF $67.500 .162 .149 .135
GENERAL MILLS 60.813 .180 .165 .150
COMMON STOCK 54.125 .202 .185 .168
</TABLE>
In order to implement the transactions contemplated by the Merger
Agreement, immediately prior to, and subject to the satisfaction or waiver of
each condition to consummation of the Merger: (a) Ralston Foods, Inc., a Nevada
corporation and a wholly owned subsidiary of Ralcorp ("Ralston Foods"), will
merge into New Ralcorp, with New Ralcorp being the surviving corporation, as
provided in the Reorganization Agreement (the "Internal Merger"); (b) specified
assets and liabilities of the Branded Business will be contributed (the "Branded
Contribution") by New Ralcorp to the Branded Subsidiary, a newly-formed
subsidiary of New Ralcorp, as provided in the Reorganization Agreement; (c) all
the stock of the Branded Subsidiary will be distributed by New Ralcorp to
Ralcorp (the "Internal Spinoff"), as provided in the Reorganization Agreement;
and (d) the Distribution of New Ralcorp Common Stock will be effected, as
provided in the Reorganization Agreement. The New Ralcorp Common Stock will be
distributed on a pro rata basis to the shareholders of Ralcorp of record on
January 31, 1997 (the "Distribution Record Date"), as provided in the
Reorganization Agreement. The Internal Merger, the Branded Contribution, the
Internal Spinoff and the Distribution are sometimes referred to herein
collectively as the "Reorganization." The Merger, the Internal Merger, the
Branded Contribution, the Internal Spinoff and the Distribution are sometimes
referred to herein collectively as the "Transactions." All of the agreements,
instruments, understandings, assignments and other arrangements (excluding the
Merger Agreement) entered into in connection with the transactions contemplated
by the Reorganization Agreement, including, without limitation, the
Reorganization Agreement, the Transition Services -- Supply Agreement between
Ralcorp and New Ralcorp (the "Supply Agreement"), the Tax Sharing Agreement
among Ralcorp, New Ralcorp and certain other subsidiaries of Ralcorp (the "Tax
Sharing Agreement"), the Technology Agreement among Ralcorp, New Ralcorp and the
Branded Subsidiary (the "Technology Agreement") and the Trademark Agreement
among Ralcorp, New Ralcorp and the Branded Subsidiary (the "Trademark
Agreement"), are referred to herein collectively as the "Ancillary Agreements."
BACKGROUND
On March 31, 1994, Ralcorp was spun-off (the "1994 Spinoff") from its
former parent, Ralston Purina Company ("Ralston Purina"). At the time of the
1994 Spinoff, Ralcorp was primarily engaged in the manufacture, distribution,
and marketing of private label and branded cereals and branded snack mixes,
branded baby food, and branded and private label crackers and cookies in the
United States. In addition, Ralcorp owned and operated the Keystone,
Breckenridge and Arapahoe Basin ski resorts. In connection with the 1994
Spinoff, Ralcorp and Ralston Purina entered into a Trademark Agreement dated as
of March 31, 1994 (the "Prior Trademark Agreement") and a Technology Agreement
dated as of March 31, 1994 by and among Ralston Purina, Ralston Purina
International, Inc., VCS Holding Company Inc. and Ralcorp (the "Prior Technology
Agreement"). In addition, Ralston Foods and Ralston Purina entered into an
Exclusive Distribution Agreement for Cereals, dated as of April 1, 1994 (the
"Distributorship Agreement"), to which New Ralcorp will become a party as the
successor to Ralston Foods as a result of the Internal Merger. Pursuant to the
Distributorship Agreement, in Latin America affiliates of Ralston Purina
distribute cereal produced by Ralston Foods.
From March 31, 1994, the effective time of the 1994 Spinoff, to early 1996,
Ralcorp's overall ready-to-eat cereal business recorded substantial profits.
However, price cuts and promotion spending changes in the ready-to-eat cereal
category by major branded manufacturers in the late spring of 1996 substantially
reduced the profitability of Ralcorp's combined branded and private label
ready-to-eat cereal business. In May 1996, Ralcorp began to take steps to lower
its operating costs sharply by reducing its administrative staff by 25% and
closing portions of its Battle Creek, Michigan cereal plant. At the same time,
Ralcorp reviewed whether it
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should remain a branded cereal producer or sell its branded cereals and snacks
businesses. Ralcorp's management considered the competitive price pressures on
branded cereal, the added pressure to utilize increased advertising and
promotion spending to gain long-term growth of branded products and the
difficulty in developing successful new branded cereal products. In light of
these concerns, management concluded that a sale of the branded ready-to-eat
cereals and snacks businesses in a tax-free transaction would be in the best
interests of Ralcorp and its shareholders. Ralcorp believes that the Ralcorp
businesses, subsequent to the sale of the Branded Business, will be able to
focus on private label consumer products and quality branded baby food. Once the
Distribution is completed, it is expected that Ralcorp's businesses other than
the Branded Business (as previously defined, the "New Ralcorp Business"), will
subsequently restructure their operations and staffing so that the New Ralcorp
Business can operate in a substantially reduced cost structure.
Following this review, Ralcorp's Board of Directors authorized management
to look for buyers for the Branded Business and, with the help of Lehman
Brothers, Ralcorp began soliciting bids for the Branded Business. Earlier in
1996, the chairman and chief executive officer of General Mills had expressed
interest to Ralcorp's chief executive officer and president in a possible
acquisition of the Branded Business. After the Ralcorp Board's authorization to
solicit bids for the Branded Business, Ralcorp contacted General Mills, among
other potential bidders. On June 17, 1996, Ralcorp and General Mills entered
into a Confidentiality Letter (the "Confidentiality Agreement"), and Ralcorp
began providing confidential information to General Mills with respect to the
Branded Business and Ralcorp. Ralcorp also entered into confidentiality
agreements and provided confidential information to a number of other interested
parties. On June 28, 1996, General Mills submitted a preliminary indication of
interest in the acquisition of the Branded Business. Over the next several
weeks, General Mills continued to conduct a due diligence review of the Branded
Business. On July 11 and 12, 1996, representatives of General Mills and Ralcorp
met in St. Louis as part of this review. In addition, counsel for Ralcorp
provided counsel for General Mills with proposed drafts of the Merger Agreement,
the Reorganization Agreement and related agreements.
On July 23, 1996, the Board of Directors of General Mills (the "General
Mills Board") met to authorize submission of a definitive bid. The General Mills
Board also authorized the officers of General Mills to enter into definitive
agreements for the acquisition of the Branded Business, within specified
parameters, subject to the approval of the definitive agreements by the Chief
Executive Officer of General Mills. On July 25, 1996, General Mills submitted a
bid for the Branded Business. The bid also included markups of Ralcorp's
proposed agreements showing General Mills' requested changes to such agreements.
Ralcorp also received bids from several other bidders, but the General Mills bid
was higher than the other bids that Ralcorp received.
During the week of July 29, 1996, representatives of Ralcorp and General
Mills had telephonic discussions with respect to General Mills' bid. At the
conclusion of these discussions, representatives of the two companies agreed to
meet the following week. Beginning on August 5, 1996, representatives of Ralcorp
and General Mills met in St. Louis to discuss General Mills' bid and to
negotiate the proposed agreements. These negotiations continued through the end
of the week and, although progress was made, no agreement was reached by the end
of the week.
On August 12, 1996, the representatives of Ralcorp and General Mills
resumed discussions in St. Louis with respect to remaining open issues. These
issues related primarily to the scope of indemnities to be given by each party
to the other, the terms and restrictions associated with the technology licenses
to be granted between the parties, and the terms of New Ralcorp's post-spinoff
net worth covenant. By the afternoon of August 13, these remaining open issues
were resolved, and the Ralcorp Board convened a meeting to consider the Merger
Agreement, the Reorganization Agreement and the transactions contemplated
thereby. At this meeting, Lehman Brothers made financial presentations and
delivered its opinion, described below under "-- Opinion of Financial Advisor,"
to the effect that the price to be paid by General Mills in the Merger is fair
to Ralcorp shareholders. Following the presentations and discussion at the
meeting, the Ralcorp Board unanimously approved the Merger Agreement, the
Reorganization Agreement and the transactions contemplated thereby. Thereafter
on August 13, 1996, the Merger Agreement was executed and delivered.
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REASONS FOR THE TRANSACTIONS; RECOMMENDATION OF THE RALCORP BOARD OF DIRECTORS
The Ralcorp Board decided to enter into the Merger Agreement in order to
increase shareholder value and liquidity for its shareholders and to enhance the
growth opportunities of the remaining Ralcorp businesses. See "-- Background."
In May 1996, Ralcorp retained Lehman Brothers to conduct an auction of the
Branded Business. In light of the low tax basis in the Branded Business, Lehman
Brothers recommended that the sale be structured in a tax-free manner. Ralcorp
management, with the assistance of Lehman Brothers, reviewed the financial
aspects of each proposal. On August 13, 1996, the Ralcorp Board approved the
sale of the Branded Business to General Mills in the manner described in this
Proxy Statement-Prospectus. The Ralcorp Board considered many factors, the
primary factors consisting of the following:
(a) The presentation made by Lehman Brothers comparing proposals and
its opinion that the proposed consideration to be received by Ralcorp
shareholders pursuant to the Merger Agreement is fair to the Ralcorp
shareholders from a financial point of view (see "-- Opinion of Financial
Advisor");
(b) Presentations by Ralcorp management regarding the Merger and the
Distribution and the advantages of the form of the transaction, including
the expectation that the Merger and the Distribution would be tax-free for
federal income tax purposes to Ralcorp and its shareholders, and the
ability of Ralcorp shareholders to receive an equity position in General
Mills, a much larger and more profitable company with greater capital and
advertising and promotion spending resources;
(c) The expectation that the Merger and the Distribution would enhance
shareholder liquidity because Ralcorp shareholders would receive shares in
General Mills and New Ralcorp, each publicly traded (or expected to be
publicly traded) on the NYSE; and
(d) The Ralcorp Board's review with its legal and financial advisors
of the provisions of the Merger Agreement, including provisions that do not
prevent Ralcorp from considering or the Ralcorp Board from approving an
alternative acquisition proposal from a third party, under certain
conditions (see "THE MERGER AGREEMENT -- Terms of the Merger").
FOR THE REASONS DISCUSSED ABOVE, THE DIRECTORS OF RALCORP HAVE UNANIMOUSLY
APPROVED THE DISTRIBUTION AND THE TERMS OF THE MERGER AGREEMENT AND RECOMMEND
THAT RALCORP SHAREHOLDERS VOTE "FOR" APPROVAL OF THE MERGER PROPOSAL AND "FOR"
APPROVAL OF THE DISTRIBUTION PROPOSAL.
OPINION OF FINANCIAL ADVISOR
THE LEHMAN OPINION
At the request of the Ralcorp Board, on August 13, 1996, Lehman Brothers
delivered a written opinion to the Ralcorp Board that, on the basis of and
subject to the matters set forth in its written opinion, as of such date the
consideration to be received by the shareholders of Ralcorp in the Transactions
is fair, from a financial point of view, to such shareholders. In preparing this
opinion, Lehman Brothers performed a variety of financial and comparative
analyses.
THE FULL TEXT OF LEHMAN BROTHERS' WRITTEN OPINION DATED AUGUST 13, 1996 IS
ATTACHED AS APPENDIX C TO THIS PROXY STATEMENT-PROSPECTUS (THE "LEHMAN OPINION")
AND IS INCORPORATED HEREIN BY REFERENCE. SHAREHOLDERS MAY READ THE LEHMAN
OPINION FOR A DISCUSSION OF ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS
ON THE REVIEW UNDERTAKEN BY LEHMAN BROTHERS IN RENDERING ITS OPINION. THE
SUMMARY OF THE LEHMAN OPINION SET FORTH BELOW IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF SUCH OPINION.
No limitations were imposed by Ralcorp on the scope of Lehman Brothers'
investigation or the procedures to be followed by Lehman Brothers in rendering
its opinion, except as described below. Lehman Brothers was not requested to and
did not make any recommendation to the Ralcorp Board as to the form or amount of
the consideration to be received by Ralcorp's shareholders in the Transactions,
which was determined through arm's-length negotiations between the parties. In
arriving at its opinion, Lehman Brothers did not ascribe a specific range of
value to the Branded Business, but rather made its determination as to the
fairness, from a financial point of view, of the consideration to be received by
Ralcorp's shareholders in the
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Transactions on the basis of the financial and comparative analyses described
below. Lehman Brothers' opinion is for the use and benefit of the Ralcorp Board
and was rendered to the Ralcorp Board in connection with its consideration of
the Transactions. Lehman Brothers' opinion is not intended to be and does not
constitute a recommendation to any shareholder of Ralcorp as to how such
shareholder should vote with respect to the Transactions. Lehman Brothers was
not requested to opine as to, and its opinion does not address, Ralcorp's
underlying business decision to proceed with or effect the Transactions.
In addition, Lehman Brothers expressed no opinion as to the prices at which
shares of common stock of New Ralcorp or General Mills actually will trade
following the consummation of the Distribution and the Merger and its opinion
should not be viewed as providing any assurance that the combined market prices
of shares of common stock of New Ralcorp and shares of common stock of General
Mills to be received by a shareholder of Ralcorp pursuant to the Transactions
will be in excess of the market value of the shares of Ralcorp Common Stock
owned by such shareholder at any time prior to announcement or consummation of
the Transactions.
In arriving at its opinion, Lehman Brothers reviewed and analyzed the
following: (i) the Merger Agreement, the Ancillary Agreements and the specific
terms of the Transactions; (ii) publicly available information concerning
Ralcorp and General Mills that Lehman Brothers believed to be relevant to its
inquiry; (iii) financial and operating information with respect to the business,
operations and prospects of Ralcorp, the Branded Business and New Ralcorp
furnished to Lehman Brothers by Ralcorp; (iv) a trading history of Ralcorp
Common Stock from January 1, 1995 to August 13, 1996 and a comparison of such
trading history with those of other companies that Lehman Brothers deemed
relevant; (v) a comparison of the historical financial results and present
financial condition of Ralcorp and the Branded Business with those of other
companies deemed relevant; (vi) a comparison of the financial terms of the
Transactions with the financial terms of certain other transactions that Lehman
Brothers deemed relevant; (vii) publicly available information with respect to
the business, operations and financial condition of General Mills that Lehman
Brothers believe to be relevant to its inquiry; (viii) a trading history of
General Mills Common Stock from January 1, 1995 to August 13, 1996 and a
comparison of General Mills Common Stock price and valuation multiples with
those of other companies that Lehman Brothers deemed relevant, (ix) research
analysts' reports and earnings estimates regarding the business, financial
condition and future financial performance of General Mills; and (x) the results
of Lehman Brothers' efforts to solicit indications of interest and proposals
from strategic buyers with respect to a purchase of the Branded Business. In
addition, Lehman Brothers had discussions with the management of Ralcorp
concerning the business, operations, assets, financial condition and prospects
of Ralcorp, the Branded Business and New Ralcorp and the management of General
Mills concerning its business, operations, assets, financial condition and
prospects and undertook such other studies, analyses and investigations as
Lehman Brothers deemed appropriate.
In arriving at its opinion, Lehman Brothers assumed and relied upon the
accuracy and completeness of the financial and other information used by Lehman
Brothers without assuming any responsibility for independent verification of
such information and further relied upon the assurances of management of Ralcorp
that they were not aware of any facts that would make such information
inaccurate or misleading. With respect to the future financial performance of
New Ralcorp, upon advice of Ralcorp, Lehman Brothers assumed that such
projections had been reasonably prepared on a basis reflecting the best then
currently available estimates and judgments of the management of Ralcorp as to
the future financial performance of New Ralcorp and that New Ralcorp will
perform substantially in accordance with such projections. However, with respect
to the future financial performance of Ralcorp and the Branded Business, Lehman
Brothers was not provided with and did not review any financial forecasts or
projections prepared by management of Ralcorp. With respect to the proposed
disposition of Ralcorp's business consisting of three ski resorts in Summit
County, Colorado ("Resort Operations"), Lehman Brothers relied upon Ralcorp's
operating projections and valuation of the consideration to be received in such
transaction. In arriving at its opinion, Lehman Brothers also did not conduct a
physical inspection of the properties and facilities of Ralcorp and did not make
or obtain any evaluations or appraisals of the assets or liabilities of Ralcorp.
In the course of its engagement, Lehman Brothers did not approach any third
parties to solicit indications of interest in a possible acquisition of Ralcorp
as a whole. In addition, in arriving at its opinion, with Ralcorp's consent,
Lehman
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Brothers was not provided with and did not review any projections prepared by
management of General Mills regarding its future financial performance. However,
upon advice of General Mills, Lehman Brothers assumed that the publicly
available earnings estimates of research analysts are a reasonable basis to
evaluate and analyze the financial performance of General Mills and that General
Mills will perform substantially in accordance with such estimates. Upon advice
of Ralcorp and its legal and accounting advisors, Lehman Brothers assumed the
Transactions will qualify as a tax-free transaction whereby the Distribution and
the Internal Spinoff shall each qualify as tax-free distributions within the
meaning of Section 355 of the Internal Revenue Code of 1986, as amended (the
"Code"), and the Merger shall qualify as a reorganization under Section
368(a)(1)(B) of the Code and therefore represents a tax-free transaction for the
shareholders of Ralcorp. Lehman Brothers' opinion necessarily was based upon
market, economic and other conditions as they existed on, and could be evaluated
as of, the date of its opinion.
PRESENTATION BY LEHMAN BROTHERS
At the meeting of the Ralcorp Board on August 13, 1996, Lehman Brothers, as
the financial advisor to Ralcorp, made a presentation to the Ralcorp Board of
its analyses as of such date delivered in connection with its opinion, a summary
of which appears below. The preparation of a fairness opinion involves various
determinations as to the most appropriate and relevant methods of financial and
comparative analysis and application of those methods to the particular
circumstances and, therefore, such an opinion is not readily described in
summary fashion. Furthermore, in arriving at its opinion, Lehman Brothers did
not attribute any particular weight to any analysis or factor considered by it,
but rather made qualitative judgments as to the significance and relevance of
each analysis and factor. Accordingly, Lehman Brothers believes that its
analyses must be considered as a whole and that considering any portions of such
analyses and factors, without considering all analyses and factors, could create
a misleading or incomplete view of the process underlying its opinion. In its
analyses, Lehman Brothers made numerous assumptions with respect to industry
performance, general business and economic conditions and other matters, many of
which are beyond the control of Ralcorp, New Ralcorp and General Mills. Any
estimates contained in these analyses are not necessarily indicative of actual
values or predictive of future results or values, which may be significantly
more or less favorable than as set forth therein. In addition, analyses relating
to the value of businesses do not purport to be appraisals or to reflect the
prices at which businesses actually may be sold. The following quantitative
information, to the extent it is based on market data, is based on market data
as it existed on August 13, 1996, and is not necessarily indicative of current
market conditions.
Market Test for the Branded Business. Ralcorp and Lehman Brothers, as
financial advisor to Ralcorp, focused their efforts on soliciting indications of
interest regarding an acquisition of the Branded Business from strategic buyers
with a publicly-traded equity currency which could be used as consideration in a
"Morris Trust" transaction. A "Morris Trust" transaction is a transaction in
which a company conveys the assets it does not wish to divest into a subsidiary
whose shares are distributed tax-free to the company's shareholders. Shares in
the remaining company are then exchanged on a tax-free basis for shares of
another company wishing to acquire the remaining assets. Lehman Brothers
contacted six such potential purchasers, all of whom are companies in the cereal
industry. Of the four companies that ultimately submitted proposals regarding an
acquisition of the Branded Business, the bid submitted by General Mills
represented, of the firm bids received, the highest purchase price.
Comparable Companies Analysis of the Branded Business. Using publicly
available information Lehman Brothers analyzed the ratio of adjusted market
value (as of August 13, 1996) to last twelve months earnings before interest,
taxes and amortization ("EBITA") and earnings before interest, taxes,
depreciation and amortization ("EBITDA") for seven comparable food companies,
consisting of Kellogg Company, H. J. Heinz Company, CPC International Inc.,
General Mills, RJR Nabisco Holdings Corp., Ralston Purina and The Quaker Oats
Company ("Quaker", and collectively the "Comparable Companies"). The median
twelve months trailing EBITA and EBITDA multiples calculated were 11.9x and
9.7x, respectively. Based solely on the range of EBITA and EBITDA multiples
calculated, including the high and low multiples except as described below, the
value of the Branded Business ranged from approximately $400 million to $450
million. This range was determined excluding any EBITA or EBITDA multiples that
exceeded fifteen
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times the relevant last twelve months operating data. This adjustment was
performed primarily to exclude any valuation parameters calculated for Quaker
which were artificially elevated beyond fifteen times as a result of Quaker's
depressed last twelve months operating performance. In addition, because of the
inherent differences between the business, operations and prospects of the
Branded Business and business, operations and prospects of the Comparable
Companies, and because the range of trading values derived from the Comparable
Company analysis did not include the value of a control premium assignable to
the Branded Business in the case of a purchase of the entire business, Lehman
Brothers believed it was inappropriate to, and therefore did not, rely solely on
the quantitative results of the analysis, and accordingly also made qualitative
judgments concerning differences between the financial and operating
characteristics of the Branded Business and the Comparable Companies that would
affect the relative market value of the Branded Business and the Comparable
Companies. The qualitative factors considered by Lehman Brothers when reviewing
the relative valuations of the Branded Business and the companies included in
the Comparable Companies included the various companies' portfolios of products,
the strength of their respective brands, their geographic coverage, the
competitive dynamics and growth characteristics of the product categories in
which they compete, the companies' respective historical financial and operating
performance and research analysts' views of their future prospects.
Selected Comparable Transaction Analysis of the Branded Business. Lehman
Brothers noted nine recent food company transactions which were available to
guide relative valuation: Hillsdown Holdings' acquisition of Continental
Bakeries in May of 1996, CPC International's acquisition of Kraft Bakery
products division in August of 1995, Grand Metropolitan's acquisition of Pet,
Inc. in January of 1995, Interstate Bakeries' acquisition of Continental Baking
Company in January 1995, Sandoz's acquisition of Gerber Products Company in May
of 1994, United Biscuit PLC's acquisition of Bake-Line in January 1993, United
Biscuit PLC's acquisition of CCA Snacks in November of 1992 and Philip Morris
Companies Inc.'s acquisition of RJR Nabisco Holding Corp.'s ready to eat cereal
business in November of 1992 (the "Comparable Transactions"). In reviewing these
acquisitions, Lehman Brothers analyzed data including the price/trailing twelve
month sales, price/trailing twelve month EBITA and the price/trailing twelve
month EBITDA multiples for the twelve months preceding these transactions. The
median last twelve trailing month sales, EBITA and EBITDA multiples calculated
were 1.07x, 14.1x and 11.4x, respectively. The valuation of the Branded Business
based solely on the median of the price/trailing twelve months sales, EBITA and
EBITDA multiples ranged from approximately $400 million to $450 million. Lehman
Brothers noted that the value calculated may not fully reflect the value of the
Branded Business to any particular potential buyer. In addition, because the
market conditions, strategic rationale and circumstances affecting each of the
Comparable Transactions were specific to each transaction, and because of the
inherent differences between the business, operations and prospects of the
Branded Business and the business, operations and prospects of the companies
acquired in the Comparable Transactions, Lehman Brothers believed it was
inappropriate to, and therefore did not, rely solely on the quantitative results
of the analysis, and accordingly also made qualitative judgments concerning
differences between the circumstances of these transactions and the financial
and operating characteristics of the Branded Business and the companies acquired
in the Comparable Transactions that would affect the transaction value of the
Branded Business as compared to the transaction value of such acquired
companies. The qualitative factors considered by Lehman Brothers when reviewing
the transaction values of the acquired companies and businesses included in the
Comparable Transactions included their respective product portfolios, brands,
market positions, geographic coverage, competitive dynamics and growth
characteristics within the product categories in which they compete and
historical financial and operating performance records.
Discounted Cash Flow Analysis of the Branded Business. Lehman Brothers
calculated the present value of the future streams of after-tax cash flows that
the Branded Business could be expected to produce over a five-year period. The
analysis utilized historical financial and operating information relating to the
business, operations and prospects of the Branded Business provided by Ralcorp's
management and relied on certain assumptions with respect to the Branded
Business' future business and operations. Lehman Brothers also utilized publicly
available third party research reports on the cereal industry for future
operating and earnings trend information. After-tax cash flows were calculated
as the unlevered after-tax earnings plus depreciation and amortization minus net
changes in non-cash working capital and capital expenditures. Lehman Brothers
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calculated terminal values for the Branded Business in the year 2000 by applying
to the projected range of EBITA appropriate multiples. Lehman Brothers'
determination of the appropriate multiples was based on an assessment of current
trading multiples of the Comparable Companies and on Lehman Brothers' general
experience in valuations of companies. The cash flow streams and terminal values
were then discounted to present values using a range of discount rates, which
were chosen based on several assumptions regarding factors such as the inflation
rate, interest rates, the inherent business risk in the Branded Business, and
the cost of capital of the Branded Business. By applying discount rates of 9.5%
to 11.5% and EBITA terminal multiples ranging from 10.0x to 14.0x, Lehman
Brothers calculated a range of value for the Branded Business of approximately
$400 million to $590 million. However, because of a number of factors including
the sensitivity of the valuation to changes in assumed discount rates and
terminal EBITA multiples, Lehman Brothers believed it was inappropriate to, and
therefore did not, rely solely on the quantitative results of this analysis and
accordingly also made qualitative judgments as to the relevant valuation of the
Branded Business.
Review of New Ralcorp. Lehman Brothers also reviewed and analyzed certain
financial information provided by the management of Ralcorp pertaining to New
Ralcorp after giving effect to the Transactions.
Comparable Transaction Analysis of New Ralcorp. Lehman Brothers also
reviewed the same Comparable Transactions analyzed in relation to the sale of
the Branded Business. Lehman Brothers determined that it was reasonable to
assume that any equity market valuation of New Ralcorp based on takeover
speculation regarding the entire company would likely involve a discounted
valuation compared to the valuation of the acquired companies in the Comparable
Transactions. In reviewing these acquisitions, Lehman Brothers analyzed data
including the price/trailing twelve month EBITDA multiples and the
price/trailing twelve month EBITA multiples for the last twelve months preceding
these acquisitions. To review the value of New Ralcorp based on a comparable
transaction analysis, Lehman Brothers also estimated the range of values that
would be assigned to each of New Ralcorp's business segments. Each respective
business segment was valued based on the operating multiple Lehman Brothers
believed appropriate. Lehman Brothers applied a set of multiples to each of New
Ralcorp's businesses that Lehman Brothers believed appropriate in light of each
business' size, product portfolio, the strength of their respective brands,
market positions, their geographic coverage, the competitive dynamics and growth
characteristics of the product categories in which they compete and the
businesses' respective historical financial and operating performance. The
midpoints of the range of EBITA and EBITDA multiples applied to the forecast
normalized operating results for New Ralcorp's businesses in aggregate,
exclusive of unallocated corporate expenses and New Ralcorp's 24% equity
interest in Vail Resorts, Inc., were 5.3x and 17.0x respectively. In addition to
valuing the store branded, Beech-Nut and Bremmer segments of New Ralcorp, Lehman
Brothers considered the value of New Ralcorp's 24% equity stake in Vail Resorts,
Inc. as provided by the management of Ralcorp. In aggregate, the enterprise
value calculated for New Ralcorp, including New Ralcorp's 24% equity interest in
Vail Resorts, Inc., ranged from approximately $350 million to $420 million.
However, Lehman Brothers noted that it expressed no opinion as to the prices at
which shares of New Ralcorp Common Stock actually will trade following
consummation of the Transactions. In addition, because of the inherent
differences between the business, operations and prospects of New Ralcorp and
the business, operations and prospects of the companies included in the
Comparable Transactions analysis, Lehman Brothers believed it was inappropriate
to, and therefore did not, rely solely on the qualitative results of the
analysis, and accordingly also made qualitative judgments concerning differences
between the financial and operating characteristics of New Ralcorp's business
and the companies acquired in the comparable transactions that would affect the
transaction value of New Ralcorp as compared to the transaction value of such
acquired companies. The qualitative factors considered by Lehman Brothers when
reviewing the transaction values of the acquired companies and businesses
included in the Comparable Transactions included their respective product
portfolios, brands, market positions, geographic coverage, competitive dynamics
and growth characteristics within the product categories in which they compete
and historical financial and operating performance records.
Comparable Company Analysis of New Ralcorp. Using publicly available
information Lehman Brothers analyzed the ratio of adjusted market value (as of
August 13, 1996) to trailing twelve months EBITA and EBITDA for the following
comparable food companies: Lance, Inc., Grist Mill Co., J&J Snack Foods, Inc.
and Cott Corporation (the "Comparable Companies for New Ralcorp"). These
companies were considered relevant to a comparable company analysis of New
Ralcorp because, in aggregate, they represent a set of
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companies of relevant size, product portfolios, strength of their respective
brands, market positions, geographic coverage, competitive dynamics and growth
characteristics of the product categories in which they compete, as well as the
companies' respective historical financial and operating performance and
research analysts' views of their future prospects. The median last twelve
months' sales, EBITA and EBITDA multiples calculated were 0.6x, 8.0x and 7.1x,
respectively. Based solely on the range of EBITA and EBITDA multiples
calculated, including the high and low multiples except as described below,
applied to projected normalized operating statistics for New Ralcorp, the
enterprise value of New Ralcorp, including the value of New Ralcorp's 24% equity
stake in Vail Resorts, Inc., ranged from approximately $300 million to $600
million. However, Lehman Brothers again noted that it expressed no opinion as to
the prices at which shares of New Ralcorp Common Stock actually will trade
following the consummation of the Transactions. In calculating median multiples
and determining a range of high and low multiples used to calculate a range of
enterprise values for New Ralcorp, EBITA and EBITDA multiples of greater than
15.0x were excluded from the calculation of median multiples. This adjustment
was primarily to exclude any valuation parameters calculated for Lance, Inc. and
Cott Corporation which were elevated beyond fifteen times as a result of Lance,
Inc.'s and Cott Corporation's depressed last twelve months operating
performance. In addition, however, because of the inherent differences between
the business, operations and prospects of New Ralcorp and the business
operations and prospects of the Comparable Companies for New Ralcorp, Lehman
Brothers believed it was inappropriate to, and therefore did not, rely solely on
the quantitative results of the analysis, and accordingly also made qualitative
judgments concerning differences between the financial and operating
characteristics of New Ralcorp and the Comparable Companies for New Ralcorp that
would affect the relative market value of New Ralcorp and the companies in the
comparable group. The qualitative factors considered by Lehman Brothers when
reviewing the relative valuations of New Ralcorp and the companies included in
the Comparable Companies for New Ralcorp included the various companies'
portfolios of products, the strength of their respective brands, their
geographic coverage, the competitive dynamics and growth characteristics of the
product categories in which they compete, the companies' respective historical
financial and operating performance and research analysts' views of their future
prospects.
Valuation of the Consideration Received by Ralcorp's Shareholders. Lehman
Brothers noted that Ralcorp, immediately prior to the Distribution, will
refinance its existing debt (the "Refinancing"), then distribute any excess
proceeds to New Ralcorp, and that General Mills will assume, as part of the
consideration for the Merger, $210 million to $240 million (depending on the
stock price of General Mills Common Stock and Ralcorp's financial position
immediately preceding the Effective Time) of Ralcorp indebtedness attributable
to the Refinancing, and that consequently New Ralcorp is expected to be
debt-free at the time of the Distribution. Lehman Brothers also noted that the
stock consideration in the Merger will fluctuate based on the stock price of
General Mills Common Stock because holders of Ralcorp Common Stock will receive
a number of shares of General Mills, subject to an adjustment based on the
ten-day average volume weighed average of the high and low prices per share of
General Mills Common Stock calculated based on the ten trading days immediately
preceding the last business day before the Effective Time. See "THE MERGER
AGREEMENT -- Terms of the Merger -- Exchange of Shares." Lehman Brothers
performed an analysis in which it considered the aggregate valuation of the
Transactions from the perspective of Ralcorp's shareholders. In evaluating the
value of the General Mills stock to be received by Ralcorp shareholders in the
Transactions, Lehman Brothers reviewed a trading history of General Mills Common
Stock from January 1, 1995 to August 13, 1996. Lehman Brothers also evaluated
General Mills Common Stock and its valuation as compared to the Comparable
Companies, except General Mills itself, the Comparable Transactions, a
discounted cash flow analysis and a dividend discount valuation. Lehman Brothers
then compared the aggregate valuation of the components of the consideration to
be received by Ralcorp shareholders in the Transactions to the value of Ralcorp
Common Stock currently held by Ralcorp's shareholders and concluded that the
aggregate value of the compensation to be received by the Ralcorp shareholders
in the Transactions should be no less than the value of Ralcorp Common Stock
currently held
by Ralcorp shareholders. However, Lehman Brothers noted that it expressed no
opinion as to the prices at which shares of common stock of New Ralcorp or
General Mills actually will trade following the consummation of the Transactions
and that its opinion should not be viewed as providing any assurance that the
combined market value of the shares of New Ralcorp Common Stock and the shares
of General Mills
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<PAGE> 27
Common Stock to be received by a shareholder of Ralcorp pursuant to the
Transactions will be, at any time following the consummation of the
Transactions, in excess of the market value of the shares of Ralcorp Common
Stock owned by such shareholder at any time prior to announcement or
consummation of the Transactions.
The foregoing is a summary of the material terms of the presentation by
Lehman Brothers to the Ralcorp Board on August 13, 1996, and does not purport to
be a complete description of such presentation. As described above, the opinion
of Lehman Brothers and its presentation to the Ralcorp Board was one of a number
of factors considered by the Ralcorp Board in connection with its approval of
the Transactions.
ENGAGEMENT OF LEHMAN BROTHERS
Lehman Brothers is an internationally recognized investment banking firm
and, as part of its investment banking activities, is regularly engaged in the
evaluation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. Lehman Brothers was retained to act
as the exclusive financial advisor to Ralcorp in connection with exploration of
strategic alternatives for the Branded Business in May 1996. Lehman Brothers was
selected by Ralcorp because of its qualifications and experience in similar
transactions and familiarity with Ralcorp and with companies in the food
industry in which Ralcorp is engaged.
For its financial advisory services in connection with the Reorganization,
Lehman Brothers will receive a fee of $3,420,000 which is contingent upon the
consummation of the Transactions. Ralcorp also has agreed to reimburse Lehman
Brothers for its reasonable out-of-pocket expenses, including the fees and
expenses of legal counsel, and to indemnify Lehman Brothers and certain of its
related persons against certain liabilities in connection with its engagement
and the rendering of its opinion, including certain liabilities under the
federal securities laws.
Lehman Brothers has performed various investment banking services for
Ralcorp in the past and has received customary fees for such services. In the
ordinary course of its business, Lehman Brothers may actively trade in the debt
and equity securities of Ralcorp and General Mills (and, after the Transactions,
New Ralcorp) for its own account or for the accounts of its customers, and,
accordingly, may at any time hold long or short positions in such securities.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
GENERAL
In the opinion of Bryan Cave LLP, special counsel to Ralcorp, and Wachtell,
Lipton, Rosen & Katz, special counsel to General Mills, the following sets forth
the material United States federal income tax consequences of the Transactions.
The discussion which follows is based on the Code, Treasury regulations
promulgated thereunder, and judicial and administrative interpretations thereof,
all as in effect on the date hereof, and is subject to any changes in these or
other laws occurring after such date. The discussion below does not address the
effects of any state, local or foreign tax laws.
The tax treatment of a shareholder may vary depending upon his or her
particular situation, and certain shareholders (including individuals who hold
restricted stock of Ralcorp, individuals who hold options in respect of Ralcorp
Common Stock, insurance companies, tax-exempt organizations, financial
institutions or broker-dealers, persons who do not hold the Ralcorp Common Stock
as capital assets and persons who are neither citizens nor residents of the
United States, or who are foreign corporations, foreign partnerships or foreign
estates or trusts as to the United States) may be subject to special rules not
discussed below.
Earlier this year, the President's budget recommendations to Congress
called for new legislation, generally effective retroactive to March 19, 1996,
which, if enacted, would require Ralcorp to pay federal income tax upon the
consummation of the Branded Contribution, the Distribution and the Merger on
gain equal to the excess of the value of the New Ralcorp Common Stock
distributed to the shareholders over Ralcorp's basis in such stock. Such
legislation has not yet been introduced in Congress. Senate Finance
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<PAGE> 28
Committee Chairman William V. Roth, Jr. and House Ways and Means Committee
Chairman Bill Archer publicly announced on March 29, 1996 in a joint statement
that any such legislation, if enacted, would be effective "no earlier than the
date of appropriate Congressional action." Subsequently, Senator Daniel Patrick
Moynihan, the ranking minority member of the Senate Finance Committee, and
Representative Sam M. Gibbons, the ranking minority member of the House Ways and
Means Committee, and Representative Charles B. Rangel issued statements
supporting the substance of that joint statement.
As a result of such legislative climate, however, General Mills' and
Ralcorp's respective obligations to consummate the Merger is conditioned upon
there not being any legislation introduced in bill form and pending
congressional action which if enacted would have the effect of amending the Code
so as to alter in any materially adverse respect any of the tax consequences
described below to Ralcorp, New Ralcorp, any of their respective subsidiaries or
Ralcorp's shareholders with respect to the Internal Merger, the Branded
Contribution, the Internal Spinoff, the Distribution or the Merger.
EACH SHAREHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE
PARTICULAR TAX CONSEQUENCES TO HIM OR HER OF THE TRANSACTIONS DESCRIBED HEREIN,
INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS,
AND OF CHANGES IN APPLICABLE TAX LAWS.
FEDERAL INCOME TAX CONSEQUENCES OF THE TRANSACTIONS
Consummation of the Transactions is conditioned upon the receipt of tax
opinions (the "Tax Opinions") of Bryan Cave LLP, special counsel to Ralcorp, and
Wachtell, Lipton, Rosen & Katz, special counsel to General Mills, as to certain
of the federal income tax consequences of the Transactions. Specifically, the
Tax Opinions are expected to conclude that the Internal Merger will qualify as a
reorganization within the meaning of Section 368(a)(1)(F), the Branded
Contribution and the Distribution and related prior property transfers to New
Ralcorp will each qualify as reorganizations within the meaning of Section
368(a)(1)(D) of the Code, the Internal Spinoff, as well as the Distribution,
will each qualify as a distribution described in Code Section 355 and the Merger
will qualify as a "reorganization" under Section 368(a)(1)(B) of the Code.
If the Transactions so qualify, then the following consequences will
result:
(a) No gain or loss will be recognized by Ralcorp, Branded Subsidiary
or New Ralcorp as a result of the Internal Merger, Branded Contribution,
Internal Spinoff and/or the Distribution.
(b) No gain or loss will be recognized by (and no amount will be
included in the income of) the Ralcorp shareholders as a result of their
receipt of New Ralcorp Common Stock (and the associated stock purchase
rights) in the Distribution.
(c) The aggregate basis of New Ralcorp Common Stock and Ralcorp Common
Stock in the hands of Ralcorp's shareholders immediately after the
Distribution will be the same as the aggregate basis of Ralcorp Common
Stock held immediately before the Distribution and such tax basis will be
allocated between the New Ralcorp Common Stock and Ralcorp Common Stock
based upon relative fair market value at the time of the Distribution.
(d) The holding period of New Ralcorp Common Stock received by a
holder in the Distribution will include the period during which the
shareholder held Ralcorp Common Stock provided that the Ralcorp Common
Stock was held as a capital asset.
(e) Except for any cash received in lieu of fractional shares, a
shareholder will not recognize any income, gain or loss as a result of the
receipt of General Mills Common Stock (and the associated stock purchase
rights) in the Merger.
(f) A shareholder's tax basis for shares of General Mills Common Stock
received in the Merger, including any fractional share interest for which
cash is received, will equal such shareholder's basis in Ralcorp Common
Stock surrendered (as determined immediately following the Distribution as
adjusted in (d) above).
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<PAGE> 29
(g) A shareholder's holding period for the shares of General Mills
Common Stock received in the Merger, including any fractional share
interest for which cash is received, will include the period for which the
shares of Ralcorp Common Stock were held, provided such shares were held as
capital assets.
General Mills and Ralcorp will not complete the Distribution and the Merger
unless they receive the Tax Opinions. Shareholders should be aware, however,
that an opinion of counsel is not binding on the Internal Revenue Service
("IRS") or the courts. Further, the opinions of Bryan Cave LLP and Wachtell,
Lipton, Rosen & Katz will be based on current law and certain representations as
to factual matters made by, among others, Ralcorp, New Ralcorp and General Mills
which, if incorrect in certain material respects, would jeopardize the
conclusions reached by counsel in its opinion. Neither Ralcorp, New Ralcorp nor
General Mills is currently aware of any facts and circumstances which would
cause any such representations to Bryan Cave LLP and Wachtell, Lipton, Rosen &
Katz to be untrue or incorrect in any material respect. In addition, General
Mills and New Ralcorp have agreed to certain covenants restricting their
respective future actions to provide further assurances that the Merger, the
Internal Merger, the Branded Contribution, the Internal Spinoff and the
Distribution will be tax-free.
If the Branded Contribution and the Internal Spinoff and the Distribution
were not to qualify for tax-free treatment under Code Sections 368(a)(1)(D) and
355, Ralcorp would recognize gain equal to the excess of the fair market value
of the New Ralcorp Common Stock distributed to its shareholders over Ralcorp's
basis in such stock, and could recognize an additional gain in an amount equal
to the excess of the fair market value of the stock of the Branded Subsidiary
over its basis in such stock. Any resulting corporate income tax on such gain
would be payable by Ralcorp. New Ralcorp has agreed to indemnify General Mills
and Ralcorp for such tax liability unless the failure of the Merger, the
Internal Merger, the Internal Spinoff or Branded Contribution and the
Distribution to qualify under those sections of the Code is the result of
General Mills' breach of the covenants referred to in the preceding paragraph.
In addition, each Ralcorp shareholder who received shares of New Ralcorp Common
Stock would be generally treated as if it had received a taxable distribution in
an amount equal to the fair market value of New Ralcorp Common Stock received.
Further, if the Merger fails to qualify as a "reorganization" under Code Section
368(a)(1)(B) each Ralcorp shareholder who receives shares of General Mills
Common Stock would recognize gain or loss equal to the difference between the
fair market value of the General Mills Common Stock received and his or her
basis in the shares of Ralcorp Common Stock surrendered. Failure of the Merger
to qualify as a tax-free reorganization could jeopardize the tax-free treatment
of the Internal Merger, the Internal Spinoff, the Branded Contribution and the
Distribution under Code Sections 368(a)(1)(D) and 355.
BACKUP WITHHOLDING
Under the backup withholding rules, a holder of New Ralcorp Common Stock
and General Mills Common Stock may be subject to backup withholding at the rate
of 31% with respect to dividends and proceeds of redemption, unless such
shareholder (a) is a corporation or comes within certain other exempt categories
and, when required, demonstrates this fact or (b) provides a correct taxpayer
identification number, certifies as to no loss of exemption from backup
withholding and otherwise complies with applicable requirements of the backup
withholding rules. Any amount withheld under these rules will be credited
against the shareholder's federal income tax liability. New Ralcorp or General
Mills may require holders of New Ralcorp Common Stock or General Mills Common
Stock to establish an exemption from backup withholding or to make arrangements
satisfactory to New Ralcorp or General Mills with respect to the payment of
backup withholding. A shareholder who does not provide New Ralcorp or General
Mills with his or her current taxpayer identification number may be subject to
penalties imposed by the IRS.
APPRAISAL RIGHTS
Holders of shares of Ralcorp Common Stock are entitled to appraisal rights
under Section 351.455 of the Missouri General Business Corporation Law
("MGBCL"). The following summary of the applicable provisions of Section 351.455
of the MGBCL is not intended to be a complete statement of such provisions and
is qualified in its entirety by reference to the full text of Section 351.455 of
the MGBCL, which is attached as Appendix D to this Proxy Statement-Prospectus. A
PERSON HAVING A BENEFICIAL INTEREST IN SHARES OF
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<PAGE> 30
RALCORP COMMON STOCK THAT ARE HELD OF RECORD IN THE NAME OF ANOTHER PERSON, SUCH
AS A BANK, BROKER OR OTHER NOMINEE, MUST ACT PROMPTLY TO CAUSE THE RECORD HOLDER
TO FOLLOW THE STEPS SUMMARIZED BELOW PROPERLY AND IN A TIMELY MANNER IF SUCH
PERSON WISHES TO PERFECT ANY APPRAISAL RIGHTS SUCH PERSON MAY HAVE.
THIS DISCUSSION AND APPENDIX D SHOULD BE REVIEWED CAREFULLY BY ANY
SHAREHOLDER OF RALCORP WHO WISHES TO EXERCISE STATUTORY APPRAISAL RIGHTS OR WHO
WISHES TO PRESERVE THE RIGHT TO DO SO, BECAUSE FAILURE TO STRICTLY COMPLY WITH
ANY OF THE PROCEDURAL REQUIREMENTS OF SECTION 351.455 OF THE MGBCL MAY RESULT IN
A TERMINATION OR WAIVER OF APPRAISAL RIGHTS UNDER SECTION 351.455 OF THE MGBCL.
If a holder of shares of Ralcorp Common Stock files with Ralcorp, prior to
or at the Special Meeting, a written objection to the Merger, and does not vote
in favor of the Merger, and such shareholder, within twenty days after the
Merger is effected, makes written demand on the Surviving Corporation for
payment of the fair value of such shareholder's shares of Ralcorp Common Stock
as of the day prior to the date on which the vote was taken approving the Merger
(but after giving effect to the Distribution), the Surviving Corporation will
pay to such shareholder, upon surrender of such shareholder's Certificate (as
defined herein) or Certificates representing such shares of Ralcorp Common
Stock, the fair value thereof (as an alternative to payment of the applicable
Merger Consideration for such holder's shares of Ralcorp Common Stock pursuant
to the Merger). Such demand must state the number of shares of Ralcorp Common
Stock owned by such Dissenting Shareholder. Any shareholder failing to make
demand within the twenty-day period will be conclusively presumed to have
consented to the Merger and will be bound by the terms thereof and the shares of
Ralcorp Common Stock held by such shareholder will thereupon be treated as
though such shares had been exchanged pursuant to the Merger Agreement. A vote
against the Merger is not, in and of itself, sufficient to meet the written
objection and demand requirements.
A holder of shares of Ralcorp Common Stock will be entitled to receive, for
each share of Ralcorp Common Stock held, one share of New Ralcorp Common Stock
whether or not such shareholder exercises appraisal rights in accordance with
the terms of Section 351.455 of the MGBCL, as described herein.
If within thirty days after the Effective Time the value of such shares of
Ralcorp Common Stock (after giving effect to the Distribution) is agreed upon
between the Dissenting Shareholder and the Surviving Corporation, payment
therefor will be made within ninety days after the Effective Time, upon the
surrender of such shareholder's Certificate or Certificates representing such
shares of Ralcorp Common Stock. Upon payment of the agreed value, the Dissenting
Shareholder will cease to have any interest in such shares of Ralcorp Common
Stock or in the Surviving Corporation.
If within such period of thirty days the Dissenting Shareholder and the
Surviving Corporation do not so agree, then the Dissenting Shareholder may,
within sixty days after the expiration of the thirty day period, file a petition
in any court of competent jurisdiction within the county in which the registered
office of the Surviving Corporation is situated, asking for a finding and
determination of the fair value of such shares of Ralcorp Common Stock (after
giving effect to the Distribution), and will be entitled to judgment against the
Surviving Corporation for the amount of such fair value as of the day prior to
the date on which such vote was taken approving the Merger, together with
interest thereon to the date of such judgment. The judgment will be payable only
upon and simultaneously with the surrender to the Surviving Corporation of the
Certificate or Certificates representing such shares of Ralcorp Common Stock.
Upon the payment of the judgment, the Dissenting Shareholder will cease to have
any interest in such shares of Ralcorp Common Stock, or in the Surviving
Corporation. Such shares of Ralcorp Common Stock may be held and disposed of by
the Surviving Corporation as it may see fit. Unless the Dissenting Shareholder
files such petition within the time period set forth herein, such shareholder
and all persons claiming under such shareholder will be conclusively presumed to
have approved and ratified the Merger and will be bound by the terms thereof,
and the shares of Ralcorp Common Stock held by such Dissenting Shareholder and
all persons claiming under such shareholder will thereupon be treated as though
such shares had been exchanged pursuant to the Merger Agreement.
The right of a Dissenting Shareholder to be paid the fair value of such
shareholder's shares of Ralcorp Common Stock as herein provided will cease if
and when Ralcorp abandons the Merger. All notices of
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<PAGE> 31
election to dissent should be addressed to Ralcorp Holdings, Inc. at 800 Market
Street, St. Louis, Missouri 63101, Attention: Secretary.
HSR ACT
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), and the rules and regulations promulgated thereunder, certain
transactions, including the Merger, may not be consummated unless certain
waiting period requirements have been satisfied. On August 19, 1996, General
Mills and Ralcorp each filed Premerger Notification and Report Forms pursuant to
the HSR Act with the United States Department of Justice (the "DOJ") and the
Federal Trade Commission (the "FTC"). On September 18, 1996, General Mills and
Ralcorp each received a request for additional information under the HSR Act
from the FTC. On December 9, 1996, General Mills signed an agreement (the
"Consent Agreement") relating to a proposed consent order with the FTC (the
"Proposed FTC Order"). The FTC accepted the Consent Agreement for public comment
on December 24, 1996, at which time the FTC granted early termination of the
required waiting period under the HSR Act with respect to the Merger.
The Proposed FTC Order will become final if the FTC enters the Proposed FTC
Order after a 60-day public comment period. Pending entry of the Proposed FTC
Order, General Mills has agreed to comply with it (but General Mills will no
longer be bound by the Proposed FTC Order if the FTC withdraws its acceptance of
the Consent Agreement). Under the Proposed FTC Order, General Mills would permit
New Ralcorp to compete against General Mills by producing and selling a
Chex-type private label cereal as soon as the Merger is completed, and would
permit a third party to acquire this right. General Mills and Ralcorp had
originally agreed that New Ralcorp would not produce and sell a Chex-type
private label cereal for 18 months after the Merger. The parties intend to
complete the Merger as soon as they satisfy all the conditions to the Merger,
even if the public comment period has not expired and the Proposed FTC Order is
not final. Notwithstanding the Consent Agreement and the Proposed FTC Order, at
any time before or after the Effective Time, the FTC, the DOJ or others could
take action under the antitrust laws with respect to the Merger, including
seeking to enjoin the consummation of the Merger, to rescind the Merger or to
require divestiture of substantial assets of Ralcorp, General Mills or the
Surviving Corporation. There can be no assurance that a challenge to the Merger
on antitrust grounds will not be made or, if such a challenge is made, that it
would not be successful.
The Merger Agreement provides that, subject to certain terms and
conditions, the parties to the Merger Agreement agree to use their reasonable
best efforts to take, or cause to be taken, all actions and to do, or cause to
be done, all things necessary, proper or advisable to consummate and make
effective as promptly as practicable the transactions contemplated by the Merger
Agreement and to cooperate with each other in connection with the foregoing,
including, but not limited to, (a) defending all lawsuits or other legal
proceedings challenging the Merger Agreement, or the transactions contemplated
thereby, (b) attempting to lift or rescind any injunction or restraining order
or other order adversely affecting the ability of the parties to consummate the
transactions contemplated by the Merger Agreement, and (c) effecting all
necessary filings and submissions of information requested by governmental
authorities.
The Merger Agreement provides that Ralcorp and General Mills will promptly
make any filings requested pursuant to the HSR Act or which may be necessary to
consummate the transactions contemplated by the Merger Agreement.
Notwithstanding the foregoing or any other provision of the Merger Agreement,
(a) neither Ralcorp nor any of its subsidiaries will, without General Mills'
prior written consent, agree or commit to any divestiture, hold-separate order
or other restriction relating to the Branded Business and (b) neither General
Mills nor any of its subsidiaries will be required to agree or commit to any
divestiture, hold-separate order or other restriction relating to the Branded
Business or to any of its existing businesses or any other governmental order or
obligation that otherwise imposes any conditions or limitations in connection
with General Mills' acquisition of the Branded Business.
ACCOUNTING TREATMENT
The Merger will be accounted for by General Mills as a purchase for
financial accounting purposes in accordance with generally accepted accounting
principles.
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<PAGE> 32
INTERESTS OF CERTAIN PERSONS IN THE TRANSACTIONS
In considering the recommendations of the Ralcorp Board, shareholders
should be aware that certain members of management of Ralcorp and of the Ralcorp
Board have certain interests in the Transactions that are in addition to the
interests of shareholders generally and which may create potential conflicts of
interest.
Ralcorp's Restated Articles of Incorporation and certain Indemnification
Agreements between Ralcorp and its directors and officers provide for
indemnification of Ralcorp's directors and officers arising out of actions or
omissions taken (or not taken) during such individuals' terms of office. Such
indemnification would apply to liabilities arising out of the approval of the
Transactions. Additionally, all officers of Ralcorp currently hold Ralcorp stock
options and several Ralcorp officers hold Ralcorp restricted stock awards.
Ralcorp stock options and restricted stock awards, will accelerate and vest
immediately prior to the consummation of the Transactions. See "MANAGEMENT" and
"EXECUTIVE COMPENSATION" in New Ralcorp's Information Statement, which was
mailed with this Proxy Statement-Prospectus.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Ralcorp and General Mills have made forward-looking statements in this
document that are subject to risks and uncertainties. Forward-looking statements
include the information concerning possible or assumed future results of
operations of New Ralcorp and General Mills set forth under "-- Reasons for the
Transactions; Recommendation of the Ralcorp Board of Directors" and "Opinion of
Financial Advisor" and those preceded by, followed by or that include the words
"believes," "expects," "anticipates" or similar expressions. For those
statements, Ralcorp and General Mills claim the protection of the safe harbor
for forward-looking statements contained in the Private Securities Litigation
Reform Act of 1995. Shareholders of Ralcorp should understand that the following
important factors, in addition to those discussed elsewhere in this document and
in the documents which are incorporated by reference herein, could affect the
future results of New Ralcorp and General Mills, and could cause those results
to differ materially from those expressed in such forward-looking statements:
(i) significant price competition by the largest branded cereal manufacturers,
including competitive promotional spending levels; (ii) ingredient prices and
other cost factors; (iii) the effect of economic conditions; (iv) the impact of
competitive products and pricing; (v) product development; (vi) actions of
competitors; (vii) changes in laws and regulations, including changes in
accounting standards; (viii) customer demand; (ix) effectiveness of advertising
and marketing spending or programs; (x) consumer perception of health-related
issues; (xi) fluctuations in the cost and availability of supply-chain
resources; and (xii) foreign economic conditions, including currency rate
fluctuations.
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MARKETS AND MARKET PRICES
General Mills Common Stock is listed under the symbol "GIS" on the NYSE.
Ralcorp Common Stock is listed under the symbol "RAH" on the NYSE. Application
will be made to list the New Ralcorp Common Stock on the NYSE. There is
currently no public trading market for the New Ralcorp Common Stock and there
can be no assurance that an active trading market will develop or, if a trading
market develops, that such a market will be maintained, or as to the prices at
which trading in the New Ralcorp Common Stock will occur after the Transactions.
Unless the New Ralcorp Common Stock is fully distributed and an orderly market
develops, the prices at which trading in the New Ralcorp Common Stock occurs may
fluctuate significantly. Prices at which the General Mills Common Stock and the
New Ralcorp Common Stock may trade cannot be predicted.
On December 3, 1996, there were 20,462 holders of record of Ralcorp Common
Stock and on December 9, 1996, there were 42,529 holders of record of General
Mills Common Stock. On August 13, 1996, the last trading date prior to the
public announcements by Ralcorp and General Mills of the signing of the Merger
Agreement, the last reported sale prices on the NYSE Composite Tape were $55 3/8
per share for General Mills Common Stock and $20 per share for Ralcorp Common
Stock. On December 24, 1996, the last reported sale prices on the NYSE Composite
Tape were $65 5/8 per share for General Mills Common Stock and $18 7/8 per share
for Ralcorp Common Stock.
The following table sets forth, for the calendar quarters indicated (ended
March 31, June 30, September 30 and December 31), the range of high and low sale
prices of General Mills Common Stock and Ralcorp Common Stock as reported on the
NYSE Composite Tape, and the dividends per share declared on General Mills
Common Stock and Ralcorp Common Stock.
<TABLE>
<CAPTION>
GENERAL MILLS COMMON STOCK RALCORP COMMON STOCK
-------------------------------- --------------------------------
CALENDAR QUARTER HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
- ------------------------------------------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1994
1st Quarter.............................. $62 1/4 $53 5/8 $ .47 $-- $-- $ --
2nd Quarter.............................. 57 49 7/8 .47 16 3/4 13 1/2 --
3rd Quarter.............................. 57 7/8 49 3/8 .47 19 15 --
4th Quarter.............................. 59 53 1/4 .47 23 5/8 18 5/8 --
1995
1st Quarter.............................. $64 5/8 $54 1/2 $ .47 $25 1/4 $21 5/8 $ --
* 2nd Quarter.............................. 62 7/8 49 3/4 .47 25 21 1/2 --
3rd Quarter.............................. 56 7/8 50 3/8 .47 24 3/4 21 7/8 --
4th Quarter.............................. 58 3/4 53 1/2 .47 27 3/8 22 5/8 --
1996
1st Quarter.............................. $60 1/2 $52 7/8 $ .47 $28 1/4 $23 3/8 --
2nd Quarter.............................. 58 3/4 52 5/8 .50 25 20 3/8 --
3rd Quarter.............................. 60 5/8 52 .50 22 1/2 19 3/4 --
4th Quarter (through December 24,
1996)................................. 67 1/2 52 1/4 .50 21 5/8 18 5/8 --
</TABLE>
- ---------------
* Effective May 28, 1995, General Mills distributed the common stock of Darden
Restaurants, Inc. (comprising General Mills' former restaurant operations) to
its shareholders.
No assurance can be given as to the market price of General Mills Common
Stock or Ralcorp Common Stock at, or, in the case of General Mills Common Stock,
after the Effective Time. SHAREHOLDERS ARE ADVISED TO OBTAIN CURRENT MARKET
QUOTATIONS FOR GENERAL MILLS COMMON STOCK AND RALCORP COMMON STOCK.
29
<PAGE> 34
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The unaudited pro forma information set forth below gives effect to the
Branded Contribution, the Internal Merger, the Internal Spinoff, the
Distribution and the Merger (as each such term is defined under "THE PROPOSED
TRANSACTIONS -- General") as if they had been consummated on August 25, 1996 for
balance sheet presentation purposes and May 29, 1995 for income statement
purposes, subject to the assumptions and adjustments in the accompanying Notes
to the pro forma financial information.
The pro forma adjustments reflecting the consummation of the Merger are
based upon the purchase method of accounting and upon the assumptions set forth
in the Notes hereto, including the exchange of all the outstanding shares of
Ralcorp Common Stock for an aggregate of approximately 5.1 million shares of
General Mills Common Stock. This pro forma financial information should be read
in conjunction with the financial data appearing under "SUMMARY -- Selected
Historical Financial Information" and the historical financial statements of
General Mills and Ralcorp which have been incorporated herein by reference. See
"WHERE YOU CAN FIND MORE INFORMATION." This pro forma financial information
should also be read in conjunction with the combined financial statements of the
Branded Business and the Notes thereto contained herein.
The pro forma adjustments do not reflect any operating efficiencies and
cost savings which may be achievable with respect to the combined companies. The
pro forma adjustments do not include any adjustments to historical sales for any
future price changes nor any adjustments to selling and marketing expenses for
any future operating changes.
The following information is not necessarily indicative of the financial
position or operating results that would have occurred had the Merger been
consummated on the dates, or at the beginning of the periods, for which the
consummation of the Merger is being given effect. For purposes of preparing the
General Mills' consolidated financial statements, General Mills will establish a
new basis for Ralcorp's assets and liabilities (as adjusted to reflect only the
assets and liabilities of the Branded Business) based upon the fair values
thereof and the General Mills purchase price, including the costs of the Merger.
A final determination of required purchase accounting adjustments, including the
allocation of the purchase price to the assets acquired and liabilities assumed
based on their respective fair values, has not yet been made. Accordingly, the
purchase accounting adjustments made in connection with the development of the
pro forma combined financial information are preliminary and have been made
solely for purposes of developing such pro forma combined financial information.
General Mills will undertake a study to determine the fair value of certain of
Ralcorp's assets and liabilities (as so adjusted) and will make appropriate
purchase accounting adjustments upon completion of that study. Assuming
completion of the Merger, the actual financial position and results of
operations will differ, perhaps significantly, from the pro forma amounts
reflected herein because of a variety of factors, including access to additional
information, changes in value, and changes in operating results between the
dates of the pro forma financial data and the date on which the Merger takes
place.
30
<PAGE> 35
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF AUGUST 25, 1996
(IN MILLIONS) (UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA (A)
BRANDED BUSINESS --------------------------
GENERAL MILLS HISTORICAL MERGER
HISTORICAL AS ADJUSTED (A) ADJUSTMENTS COMBINED
------------- ---------------- ----------- --------
<S> <C> <C> <C> <C>
Cash and cash equivalents...................... $ 33.1 33.1
Receivables, net............................... 429.3 0.0(B) 429.3
Inventories.................................... 429.6 24.2 0.0(C) 453.8
Prepaids and other............................. 143.3 143.3
Deferred income taxes.......................... 111.7 1.7(D) 113.4
--------- ----- ------ ---------
Total Current Assets....................... 1,147.0 24.2 1.7 1,172.9
--------- ----- ------ ---------
Fixed assets at cost, net...................... 1,252.9 37.3 0.0(E) 1,290.2
Other assets (including goodwill).............. 1,013.5 549.7(F) 1,563.2
--------- ----- ------ ---------
Total Assets............................... 3,413.4 61.5 551.4 4,026.3
========= ===== ====== =========
Accounts payable............................... $ 654.9 3.8 14.1(G) 672.8
Current portion of long-term debt.............. 96.3 0.0(H) 96.3
Notes payable.................................. 300.5 300.5
Accrued taxes.................................. 180.7 180.7
Accrued payroll................................ 86.9 86.9
Other current liabilities...................... 149.6 6.8 0.0(I) 156.4
--------- ----- ------ ---------
Total Current Liabilities.................. 1,468.9 10.6 14.1 1,493.6
--------- ----- ------ ---------
Long-term debt................................. 1,153.8 254.0(J) 1,407.8
Deferred income taxes.......................... 241.6 241.6
Deferred income taxes -- tax leases............ 158.0 158.0
Other liabilities.............................. 165.3 4.9 (0.7)(K) 169.5
--------- ----- ------ ---------
Total Liabilities.......................... 3,187.6 15.5 267.4 3,470.5
--------- ----- ------ ---------
Common stock................................... 385.5 46.0 284.0(L) 715.5
Retained earnings.............................. 1,427.8 1,427.8
Treasury stock................................. (1,476.4) (1,476.4)
Unearned compensation and other................ (58.4) (58.4)
Foreign currency translation................... (52.7) (52.7)
--------- ----- ------ ---------
Total Stockholders' Equity................. 225.8 46.0 284.0 555.8
--------- ----- ------ ---------
Total Liabilities and Equity............... $ 3,413.4 61.5 551.4 4,026.3
========= ===== ====== =========
</TABLE>
- ---------------
(A) The accompanying pro forma condensed combined balance sheet combines the
General Mills balance sheet as of August 25, 1996 with the Ralcorp balance
sheet (after giving effect to the Branded Contribution, the Internal Merger,
the Internal Spinoff, and the Distribution) as of September 30, 1996 as if
the Branded Contribution, the Internal Merger, the Internal Spinoff, the
Distribution and the Merger had all been consummated at August 25, 1996. The
Branded Business Historical balance sheet includes those assets and
liabilities from the Ralcorp balance sheet that are associated with the
Branded Business. The associated assets and liabilities are either directly
attributable to the Branded Business or have been allocated to the Branded
Business based upon methods considered reasonable by Ralcorp's management.
While General Mills will acquire all the operations of the Branded Business
in the Merger, certain assets and liabilities reflected in the Branded
Business Historical balance sheet will not be transferred to General Mills
and, therefore, are not reflected under the column "Branded Business
Historical as adjusted." The most significant items excluded are (i)
historical receivables associated with the Branded Business, which are being
retained by New Ralcorp because it is impracticable to separate the Branded
Business receivables from the receivables associated with Ralcorp's
remaining private label foods businesses (as described in Note (B) below),
and (ii) fixed assets associated with manufacturing plants (other than
Ralcorp's Cincinnati plant, which will be transferred to General Mills) that
historically have produced both Branded Business products and private label
products, and that will be retained by New Ralcorp. In addition, a portion
of Ralcorp's long-term debt was allocated to the Branded Business for
purposes of the Branded Business Historical balance sheet, but is not
reflected under the column "Branded Business Historical as adjusted" because
the Ralcorp debt to be assumed in the Merger is separately reflected under
the column "Merger Adjustments." The following reflects the adjustments to
the Branded Business Historical balance sheet to remove those assets and
liabilities not
31
<PAGE> 36
included in the Merger and to reflect the separate accounting treatment for
the assumption of long-term debt.
<TABLE>
<CAPTION>
BRANDED BUSINESS
BRANDED BUSINESS HISTORICAL AS
HISTORICAL ADJUSTMENTS ADJUSTED
---------------- ----------- ----------------
<S> <C> <C> <C>
Receivables, net............................... $ 23.8 (23.8) --
Inventories.................................... 25.7 (1.5) 24.2
Prepaid expenses............................... 4.0 (4.0) --
----- ----- ----
Total Current Assets......................... 53.5 (29.3) 24.2
----- ----- ----
Fixed assets, at cost, net..................... 64.1 (26.8) 37.3
Other assets................................... 6.7 (6.7) --
----- ----- ----
Total Assets................................. $124.3 (62.8) 61.5
===== ===== ====
Accounts payable............................... $ 12.1 (8.3) 3.8
Other current liabilities...................... 12.9 (6.1) 6.8
----- ----- ----
Total Current Liabilities.................... 25.0 (14.4) 10.6
Long-term debt................................. 61.2 (61.2) --
Deferred income taxes.......................... 2.7 (2.7) --
Other liabilities.............................. 12.1 (7.2) 4.9
----- ----- ----
Total Liabilities............................ 101.0 (85.5) 15.5
Equity......................................... 23.3 22.7 46.0
----- ----- ----
Total Liabilities and Equity................. $124.3 (62.8) 61.5
===== ===== ====
</TABLE>
(B) New Ralcorp will retain and collect all trade accounts receivable of the
Branded Business as of the Effective Time. Accordingly, the merged business
will commence with Branded Business trade accounts receivable of zero.
(C) It is assumed that the historical valuation of the Branded Business
inventories approximates the new book basis for the merged business, using
the purchase method of accounting.
(D) The estimated adjustment for deferred taxes is the tax effect on the
difference between the new book basis and the tax basis of the merged assets
and liabilities of the Branded Business.
(E) It is assumed that the new book basis of the merged fixed assets from the
Branded Business using the purchase method of accounting is substantially
the same as the historical net book value to the Branded Business.
(F) The goodwill amount of $549.7 million represents the excess of the purchase
price paid by General Mills over the sum of the amounts assigned to
identifiable assets acquired, less liabilities assumed in the Merger.
(G) The accounts-payable adjustment of $14.1 million is made up of two items.
First, $10.0 million represents the accrued estimated transaction costs to
be incurred as the Merger is completed. The costs are primarily General
Mills' financial advisory, legal, accounting, printing and similar expenses.
Second, $4.1 million represents the payable from General Mills to Ralcorp
for the net assets adjustment. The net assets adjustment is specified by the
Merger Agreement which contemplated that Ralcorp would deliver net assets of
$41.9 million; the net assets of the Branded Business, as adjusted, as of
September 30, 1996 totalled $46.0 million.
(H) The long-term debt will not have a current portion, as of the Effective
Time. See Note (J) below.
(I) Other current liabilities are valued on the same basis for the merged
business as for the historical balance sheet of the Branded Business.
(J) The merged business will assume $150.0 million of Ralcorp 8 3/4% Notes due
September 15, 2004 plus an estimated $90.0 million of other Ralcorp debt
(which amount is subject to increase or decrease at Closing) at an
effective rate of 5.6% (after giving effect to the related interest-rate
swap agreements). The face value of the $150.0 million debt is recorded at
the current market value of $164.0 million by the merged business in
accordance with purchase accounting procedures as required by generally
accepted accounting principles. The $14 million increase in value is due to
the lower marginal borrowing rate (approximately 7%) experienced by General
Mills. The remaining debt of $90.0 million approximates market valuation
and has been recorded at the same $90.0 million figure.
(K) The $0.7 million adjustment to other liabilities is the net of two accounts
(one deferred income, and one deferred expense) recorded by the historical
Branded Business, that will have zero basis to the merged business.
(L) The common stock adjustment of $284.0 million, plus the $46.0 million net
assets of the Branded Business totals $330.0 million, which represents the
market valuation of General Mills stock to be issued in the Merger. This
$330.0 plus the face value of $240.0 of long-term debt described in note
(J) above equals the aggregate Merger Consideration of $570.0 million.
32
<PAGE> 37
PRO FORMA CONDENSED COMBINED STATEMENT OF EARNINGS
13 WEEKS ENDED AUGUST 25, 1996
(IN MILLIONS, EXCEPT PER SHARE AMOUNT) (UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA (A)
GENERAL BRANDED ---------------------------
MILLS BUSINESS MERGER
HISTORICAL HISTORICAL (A) ADJUSTMENT COMBINED
---------- -------------- ---------- ----------
<S> <C> <C> <C> <C>
Sales.......................................... $ 1,315.6 80.9 0.0(B) 1,396.5
Cost of sales.................................. (535.8) (21.7) 0.0(C) (557.5)
Selling, general and administrative............ (510.7) (39.7) 0.0(D) (550.4)
Depreciation and amortization.................. (42.9) (2.4) (3.4)(E) (48.7)
Interest, net.................................. (22.8) (2.1) (2.1)(F) (27.0)
Unusual items.................................. (48.4) (48.4)
-------- ----- ----- -------
Earnings before taxes and earnings (losses)
of joint ventures......................... 155.0 15.0 (5.5) 164.5
Income taxes................................... (56.5) (5.7) 0.6(G) (61.6)
Losses from joint ventures..................... (0.8) (0.8)
-------- ----- ----- -------
Net earnings................................. $ 97.7 9.3 (4.9) 102.1
======== ===== ===== =======
Net earnings per share......................... $ .62 N/A N/A $ .63
======== ===== ===== =======
Average number of common shares................ 157.9 N/A 5.1(H) 163.0
======== ===== ===== =======
</TABLE>
PRO FORMA CONDENSED COMBINED STATEMENT OF EARNINGS
YEAR ENDED MAY 26, 1996
(IN MILLIONS, EXCEPT PER SHARE AMOUNT) (UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA (A)
GENERAL BRANDED ---------------------------
MILLS BUSINESS MERGER
HISTORICAL HISTORICAL (A) ADJUSTMENT COMBINED
---------- -------------- ---------- ----------
<S> <C> <C> <C> <C>
Sales......................................... $ 5,416.0 393.6 0.0(B) 5,809.6
Cost of sales................................. (2,241.0) (107.7) 0.0(C) (2,348.7)
Selling, general and administrative........... (2,128.3) (218.6) 0.0(D) (2,346.9)
Depreciation and amortization................. (186.7) (8.4) (13.7)(E) (208.8)
Interest, net................................. (101.4) (3.9) (12.6)(F) (117.9)
Unusual items................................. (2.5) (2.5)
--------- ------ ----- --------
Earnings before taxes and earnings (losses)
of joint ventures........................ 758.6 52.5 (26.3) 784.8
Income taxes.................................. (279.4) (20.0) 4.2(G) (295.2)
Losses from joint ventures.................... (2.8) (2.8)
--------- ------ ----- --------
Net earnings................................ $ 476.4 32.5 (22.1) 486.8
========= ====== ===== ========
Net earnings per share........................ $ 3.00 N/A N/A $ 2.97
========= ====== ===== ========
Average number of common shares............... 158.9 N/A 5.1(H) 164.0
========= ====== ===== ========
</TABLE>
- ---------------
(A) The accompanying pro forma condensed combined statement of earnings for the
13 weeks ended August 25, 1996 combines the General Mills statement of
earnings for the 13 weeks ended August 25, 1996 with the Ralcorp statement
of earnings (after giving effect to the Branded Contribution, the Internal
Merger, the Internal Spinoff and the Distribution) for the three months
ended September 30, 1996, as if the Branded Contribution, the Internal
Merger, the Internal Spinoff, the Distribution and the Merger had been
consummated at May 29, 1995.
33
<PAGE> 38
The accompanying pro forma condensed combined statement of earnings for the
year ended May 26, 1996 combines the General Mills statement of earnings
for the 52 weeks ended May 26, 1996 with the Ralcorp statement of earnings
(after giving effect to the Branded Contribution, the Internal Merger, the
Internal Spinoff and the Distribution) for the 12 months ended June 30,
1996, as if the Branded Contribution, the Internal Merger, the Internal
Spinoff, the Distribution and the Merger had been consummated at May 29,
1995.
The Branded Business Historical statement of earnings includes those
revenues and expenses from the Ralcorp statement of earnings that are
associated with the Branded Business. The associated revenues and expenses
are either directly attributable to the Branded Business or have been
allocated to the Branded Business based upon methods considered reasonable
by Ralcorp's management. As the transaction contemplates the merger of the
complete operations of the Branded Business, no adjustments are necessary
to the Branded Business Historical statement of earnings.
(B) Sales (and the implicit selling prices) are all as-reported historically,
and have not been adjusted for any proposed future price changes.
(C) The pro forma adjustments do not reflect any operating efficiencies or cost
savings. A final determination of the required purchase accounting
adjustments has not been made, and the earnings results will vary from
those pro forma earnings shown.
(D) No changes have been made to historical estimated sales expense and
marketing expense. While it is possible that General Mills may incur
significant additional promotional expenditures in the first year for
introductory purposes, such expenditures are deemed exceptional, and not
continuing.
(E) The $3.4 million and $13.7 million of amortization expense for the 13 weeks
ended August 25, 1996 and the year ended May 26, 1996, respectively,
represent the estimated amount of goodwill amortization expense to be
recorded, assuming straight line amortization of the $549.7 million of
goodwill over a life of 40 years.
(F) The interest adjustment of $2.1 million for the 13 weeks ended August 25,
1996, when added to the $2.1 million historical interest expense allocated
to the Branded Business, reflects 13 weeks estimated interest expense ($4.2
million) for the debt assumed in the merger -- see Note J to the Pro Forma
Condensed Combined Balance Sheet.
The interest adjustment of $12.6 million for the year ended May 26, 1996,
when added to the $3.9 million historical interest expense allocated to the
Branded Business, reflects one year's estimated interest expense ($16.5
million) for the debt assumed in the Merger -- see Note J to the Pro Forma
Condensed Combined Balance Sheet.
(G) The adjustment to tax expense results from providing for taxes at a 39.6%
rate (net combined federal and state) against the pretax pro forma
adjustments and the Branded Business pretax income, after taking the
Branded Business income tax expense into consideration. The amortization of
goodwill is not deductible and therefore receives no tax benefit.
(H) The number of shares of General Mills Common Stock to be issued were
determined on the assumption that General Mills will issue shares with a
total market value of $330.0 million (see Note L to the Pro Forma Condensed
Combined Balance Sheet) at an estimated value of $65.00 per share. This
results in an estimated 5,076,923 shares to be issued. For purposes of the
pro forma information, such shares were deemed to be outstanding for the
entire pro forma period. The actual number of shares of General Mills
Common Stock to be issued in the Merger will be determined using a formula
and may be more or less than this amount.
34
<PAGE> 39
THE MERGER AGREEMENT
This section of the Proxy Statement-Prospectus describes certain aspects of
the Merger Agreement and the proposed Merger. To the extent that it relates to
the Merger Agreement, the following description does not purport to be complete
and is qualified in its entirety by reference to the Merger Agreement, which is
attached as Appendix A to this Proxy Statement-Prospectus and is incorporated
herein by reference. All shareholders are urged to read the Merger Agreement in
its entirety.
TERMS OF THE MERGER
General. At the Effective Time, General Mills, Ralcorp and General Mills
Missouri will consummate the Merger, in which General Mills Missouri will merge
into Ralcorp and the separate corporate existence of General Mills Missouri will
cease. Ralcorp will be the Surviving Corporation in the Merger and will continue
to be governed by the laws of the State of Missouri. The name of the Surviving
Corporation will be "General Mills Missouri, Inc."
Certificate of Incorporation and By-Laws. The Merger Agreement provides
that the certificate of incorporation and by-laws of General Mills Missouri in
effect at the Effective Time will be the certificate of incorporation and
by-laws of the Surviving Corporation.
Directors and Officers. The Merger Agreement provides that the directors
and officers of General Mills Missouri at the Effective Time will be the
directors and officers of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified.
Conversion of Ralcorp Common Stock. Pursuant to the Merger Agreement, as of
the Effective Time, each issued and outstanding share of Ralcorp Common Stock,
other than (a) shares held by General Mills, Ralcorp or any wholly owned
subsidiary of General Mills or Ralcorp, which will be cancelled in accordance
with the provisions of the Merger Agreement, and (b) shares held by Dissenting
Shareholders ("Dissenters' Shares"), will be converted into the right to receive
the Merger Consideration.
Fractional Shares. No fractional shares of General Mills Common Stock will
be issued in the Merger. Instead, each holder of Ralcorp Common Stock who would
otherwise be entitled to receive fractional shares of General Mills Common Stock
will be entitled to receive, in lieu thereof, cash (without interest) in an
amount equal to the fraction of a share to which such holder would otherwise
have been entitled multiplied by the Average Value of General Mills Common
Stock.
EFFECTIVE TIME; CLOSING
The Merger Agreement provides that the Merger will become effective and the
Effective Time will occur immediately following the Distribution upon the filing
of articles of merger or other appropriate documents (in any such case, the
"Certificate of Merger") with the Missouri Secretary of State or at such other
time as Ralcorp and General Mills agree. The Merger Agreement provides that the
Closing will take place as promptly as practicable after the satisfaction or
waiver of the conditions to the Merger (other than, but subject to, those
conditions to be performed at the Closing), except that the parties will use
reasonable efforts to cause the Closing to occur at the end of a month.
EXCHANGE OF SHARES
Pursuant to the Merger Agreement, as of the Effective Time, General Mills
will deposit with Norwest Bank Minnesota, N.A. (the "Exchange Agent"),
certificates representing the shares of General Mills Common Stock (together
with any dividends or distributions payable with respect thereto, the "Exchange
Fund") issuable pursuant to the Merger Agreement in exchange for certificates
formerly representing outstanding shares of Ralcorp Common Stock. As soon as
reasonably practicable after the Effective Time, the Surviving Corporation will
cause the Exchange Agent to mail a transmittal form and instructions to each
holder of record of certificates which immediately prior to the Effective Time
represented outstanding shares of Ralcorp Common Stock (the "Certificates"),
which form and instructions are to be used in forwarding the Certificates for
surrender and exchange for (a) certificates representing the number of whole
shares of
35
<PAGE> 40
General Mills Common Stock which such holder has the right to receive pursuant
to the Merger and (b) cash for any fractional shares of General Mills Common
Stock to which such holders otherwise would be entitled. RALCORP SHAREHOLDERS
ARE REQUESTED NOT TO SURRENDER THEIR CERTIFICATES FOR EXCHANGE UNTIL SUCH
TRANSMITTAL FORM AND INSTRUCTIONS ARE RECEIVED. Until surrendered as provided
above, Certificates will be deemed to represent the right to receive
certificates representing the number of whole shares of General Mills Common
Stock into which the shares of Ralcorp Common Stock formerly represented by such
Certificates were converted in the Merger and a cash payment in lieu of any
fractional shares, and the holders of Certificates will not be entitled to
receive dividends or any other distributions from General Mills until such
Certificates are so surrendered. Upon surrender of a Certificate, there will be
paid to the person in whose name such shares of General Mills Common Stock are
issued any dividends or other distributions which have a record date after the
Effective Time and which became payable prior to surrender with respect to such
shares of General Mills Common Stock. After such surrender, there will be paid
to the person in whose name the shares of General Mills Common Stock are issued
any dividends or other distributions on such shares which have a record date
after the Effective Time and prior to such surrender and a payment date after
such surrender, and such payment will be made on the payment date. In no event
will the persons entitled to receive such dividends or other distributions be
entitled to receive interest on such dividends or other distributions.
NET ASSETS ADJUSTMENT
The Merger Agreement provides that (a) if the value of the combined total
assets minus the total liabilities of Ralcorp and the Branded Subsidiary on the
Closing Date, as calculated in the manner set forth in the Merger Agreement
("Closing Date Net Asset Value"), is less than $41,900,000, then New Ralcorp
will pay to the Surviving Corporation an amount equal to such shortfall in the
manner set forth in the Merger Agreement, and (b) if the Closing Date Net Asset
Value is more than $41,900,000, then the Surviving Corporation will pay to New
Ralcorp an amount equal to such excess in the manner set forth in the Merger
Agreement.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of the
parties thereto. The Merger Agreement includes representations and warranties by
Ralcorp (in general, with respect to both Ralcorp and the Branded Subsidiary,
assuming that the Internal Merger, the Branded Contribution, the Internal
Spinoff and the Distribution had occurred immediately prior to the date of the
Merger Agreement on the terms and conditions set forth in the Reorganization
Agreement) as to (a) the corporate organization, standing and power of Ralcorp
and its subsidiaries, (b) Ralcorp's capitalization, (c) the authorization of the
Merger Agreement and the Ancillary Agreements, (d) noncontravention of laws and
agreements and the absence of the need (except as specified) for governmental or
third-party consents, (e) the accuracy of Ralcorp's financial statements,
filings with the Securities and Exchange Commission (the "SEC") and press
releases, (f) the accuracy of information to be supplied by Ralcorp for
inclusion in this Proxy Statement-Prospectus and in certain other filings with
the SEC, (g) the conduct of Ralcorp's business in the ordinary course and the
absence of any material adverse change with respect to Ralcorp, (h) pending or
threatened litigation, (i) Ralcorp's compliance with applicable laws, (j)
brokers and finders employed by Ralcorp, (k) certain matters relating to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
certain employment and labor relations matters, (l) the taking of action to
redeem the Ralcorp Rights and to render inapplicable to the transactions
contemplated by the Merger Agreement and the Ancillary Agreements any
anti-takeover statute or regulation, (m) the accuracy of the statement of assets
and liabilities as of March 31, 1996 (the "Branded Balance Sheet") and statement
of profit and loss for the period October 1, 1995 through March 31, 1996 for
Ralcorp and the Branded Subsidiary on a combined basis (collectively, the
"Branded Financial Statements") attached as a schedule to the Merger Agreement,
(n) the production capacity of Ralcorp's manufacturing facility located at 11301
Mosteller Road, Sharonville, Ohio (the "Branded Plant"), (o) Ralcorp's and its
subsidiaries' compliance with the terms and obligations of all of the agreements
between Ralcorp or its subsidiaries and Ralston Purina relating to the 1994
Spinoff, and (p) various other matters relating to Ralcorp, the Branded
Subsidiary and the Branded Business.
36
<PAGE> 41
The Merger Agreement also includes representations and warranties by
General Mills and General Mills Missouri as to (a) the corporate organization,
standing and power of General Mills and its subsidiaries, (b) General Mills'
capitalization, (c) the authorization of the Merger Agreement and the Ancillary
Agreements to which General Mills and General Mills Missouri are parties, (d)
noncontravention of laws and agreements and the absence of the need (except as
specified) for governmental or third-party consents, (e) the accuracy of General
Mills' financial statements, filings with the SEC and press releases, (f) the
accuracy of information to be supplied by General Mills for inclusion in this
Proxy Statement-Prospectus, (g) the absence of any material adverse change with
respect to General Mills, (h) pending or threatened litigation, (i) General
Mills' compliance with applicable laws, (j) the absence of General Mills'
receipt of written notice from any federal or state governmental agency or
authority indicating that such agency or authority would oppose or refuse to
grant or issue its consent or approval, if required, with respect to the
transactions contemplated by the Merger Agreement, (k) the absence of any
required action by the stockholders of General Mills to approve the Merger
Agreement and the transactions contemplated by the Merger Agreement, and (l)
brokers and finders employed by General Mills.
BUSINESS OF RALCORP PENDING THE MERGER
The Merger Agreement provides that, during the period from the date of the
Merger Agreement and continuing until the Effective Time, except for the
Distribution and the other transactions expressly provided for in the
Reorganization Agreement, as expressly contemplated or permitted by the Merger
Agreement, or to the extent that General Mills otherwise consents in writing,
Ralcorp and its subsidiaries will conduct the Branded Business in the ordinary
course, including, without limitation, using reasonable efforts to preserve
beneficial relationships between the Branded Business and its distributors,
brokers, lessors, suppliers, employees and customers in connection with the
Branded Business. The Merger Agreement also includes limitations, prohibitions
and other provisions relating to Ralcorp's conduct of business during this
period with respect to (a) capital projects, (b) contracts and agreements
outside the ordinary course of business, (c) broker sales incentive programs,
(d) trade, consumer promotions (including coupon expense and sampling) and
advertising expenditures (excluding broker sales incentives) relating to the
Branded Business, (e) inventory levels, (f) transfer or reassignment of
marketing and/or research and development employees associated as of the date of
the Merger Agreement primarily with the Branded Business, or any employees at
the Branded Plant, (g) changes in or issuances, repurchases or redemption of
capital stock, (h) charter or by-law amendments, (i) acquisitions and
dispositions, (j) levels of indebtedness as of the Effective Time, (k) adoption
or amendment of benefit plans or arrangements, (l) provision of information to
General Mills or its counsel, including monthly balance sheets, statements of
profit and loss and operating reports, (m) changes in accounting principles,
policies or procedures, (n) incurrence of liens, (o) actions that would impair
consummation of the Merger or the Distribution or that would impair the tax
treatment thereof, (p) nonwaiver of existing standstill and confidentiality
agreements, (q) transition arrangements with brokers, and (r) defense of pending
litigation.
NO SOLICITATION OF THIRD PARTY ACQUISITION PROPOSALS
Pursuant to the Merger Agreement, neither Ralcorp nor any of its directors,
officers or employees will, and Ralcorp will use its best efforts to ensure that
none of its representatives will, directly or indirectly, solicit, initiate or
encourage any inquiries or proposals from or with any person (other than General
Mills) or such person's directors, officers, employees, representatives and
agents that constitute, or could reasonably be expected to lead to a Third Party
Acquisition. A "Third Party Acquisition" means (a) the acquisition by any person
of more than twenty percent of the total assets of the Branded Business, (b) the
acquisition by any person (other than an acquisition by a person in connection
with a transaction permitted by the Merger Agreement, provided such person
agrees to vote the Ralcorp Common Stock acquired in such transaction in favor of
the Merger) of twenty percent or more of (i) the Ralcorp Common Stock or (ii)
the total number of votes that may be cast in the election of directors of
Ralcorp at any meeting of shareholders of Ralcorp assuming all shares of Ralcorp
Common Stock and all other securities of Ralcorp, if any, entitled to vote
generally in the election of directors were present and voted at such meeting,
or (c) any merger, amalgamation or other combination of Ralcorp with any person.
The Merger Agreement provides that Ralcorp may furnish
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or cause to be furnished information (pursuant to confidentiality arrangements
no less favorable to Ralcorp than the Confidentiality Agreement, unless already
in existence on the date of the Merger Agreement) and may participate in such
discussions and negotiations directly or through its representatives if (a) the
failure to provide such information or participate in such negotiations and
discussions would, in the opinion of its outside counsel, reasonably be deemed
to cause the members of the Ralcorp Board to breach their fiduciary duties under
applicable law or (b) another corporation, partnership, person or other entity
or group makes a written offer or written proposal which, based upon the
identity of the person or entity making such offer or proposal and the terms
thereof, and the availability of adequate financing therefor, the Ralcorp Board
believes, in the good faith exercise of its business judgment and based upon
advice of its outside legal and financial advisors, would reasonably be expected
to be consummated and represents a transaction more favorable to its
shareholders than the transactions contemplated by the Merger Agreement (a
"Higher Offer"). Ralcorp will notify General Mills as soon as practicable if any
such inquiries or proposals are received by, any such information is requested
from, or any such negotiations or discussions are sought to be initiated or
continued with it, which notice will provide the identity of the third party or
parties and the terms of any such proposal or proposals. The Merger Agreement
provides that the Ralcorp Board may fail to continue to recommend the Merger
Agreement in connection with any vote of its shareholders, or withdraw, modify,
or change any such recommendation, or recommend any other offer or proposal, if
the Ralcorp Board, based on the opinion of its outside counsel, determines that
making such recommendation, or the failure to recommend any other offer or
proposal, or the failure to so withdraw, modify, or change its recommendation,
would reasonably be deemed to cause the members of the Ralcorp Board to breach
their fiduciary duties under applicable law in connection with a Higher Offer.
In such event, notwithstanding anything contained in the Merger Agreement to the
contrary, any such failure to recommend, withdrawal, modification, or change of
recommendation or recommendation of such other offer or proposal, or the
entering by Ralcorp into an agreement with respect to a Higher Offer (provided
that Ralcorp has provided General Mills with at least six business days' notice
of its intention to so enter, the terms of the Higher Offer and the identity of
the other party thereto), will not constitute a breach of the Merger Agreement
by Ralcorp. Notwithstanding the foregoing, Ralcorp will not enter into an
agreement with a third party with respect to, or waive, modify or redeem the
Ralcorp Rights or take any action to approve such transaction under any
antitakeover provision of Ralcorp's Restated Articles of Incorporation or state
law in connection with, any Third Party Acquisition unless and until the Merger
Agreement is terminated in accordance with the provisions thereof. See "--
Termination; Certain Fees."
CERTAIN COVENANTS OF GENERAL MILLS
Under the Merger Agreement, General Mills has agreed to limitations,
prohibitions and other provisions applicable during the period from the date of
the Merger Agreement and continuing until the Effective Time, relating to (a)
actions that would impair consummation of the Merger or the Distribution or that
would impair the tax treatment thereof, (b) provision of certain information to
Ralcorp or its counsel, and (c) changes in the General Mills Common Stock.
CERTAIN OTHER COVENANTS
Distribution. The Merger Agreement provides that, prior to the Closing,
Ralcorp will (a) enter into the Reorganization Agreement and each of the other
Ancillary Agreements to which Ralcorp is to be a party and (b) cause New Ralcorp
and any other applicable subsidiaries to enter into the Reorganization Agreement
and each of the other Ancillary Agreements to which it is to be a party. Ralcorp
will, and will cause New Ralcorp to, take all action necessary to effect the
Distribution immediately prior to the Effective Time, pursuant to the terms of
the Reorganization Agreement and the other Ancillary Agreements. Prior to the
Effective Time, Ralcorp will not agree to or permit any modification, amendment,
supplement or waiver of the Reorganization Agreement or any of the other
Ancillary Agreements without the prior written consent of General Mills.
Stock Exchange Listing. The Merger Agreement provides that General Mills
will use its reasonable best efforts to cause the shares of General Mills Common
Stock to be issued in the Merger to be approved for listing on the NYSE, subject
to official notice of issuance, prior to the Closing Date.
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Affiliates. The Merger Agreement provides that prior to the Closing Date,
Ralcorp will deliver to General Mills a letter identifying all persons who are,
at the time the Merger Agreement is submitted for approval to the shareholders
of Ralcorp, "affiliates" of Ralcorp for purposes of Rule 145 under the
Securities Act of 1933, as amended (the "Securities Act"). Ralcorp will use its
reasonable best efforts to cause each such person to deliver to General Mills on
or prior to the Closing Date a written agreement (an "Affiliate Agreement")
providing that such affiliate will not sell, pledge, transfer or otherwise
dispose of the shares of General Mills Common Stock to be received by such
person in the Merger except in compliance with the applicable provisions of the
Securities Act and the rules and regulations thereunder.
Ralston Purina Company. The Merger Agreement provides that Ralcorp will use
reasonable efforts to reach an agreement prior to the Effective Time with
Ralston Purina, reasonably satisfactory in form and substance to General Mills,
providing for (a) the termination or other resolution of the obligations of New
Ralcorp (as successor to Ralston Foods) under the Distributorship Agreement, as
of the Effective Time, and (b) the substitution of New Ralcorp for Ralcorp, with
a novation of Ralcorp, effective as of the Effective Time, with respect to any
liabilities of Ralcorp to Ralston Purina under the agreements entered into
between Ralcorp and Ralston Purina in connection with the 1994 Spinoff, except
for any liabilities assumed or retained by Ralcorp or the Branded Subsidiary
pursuant to the Merger Agreement and the Ancillary Agreements. In connection
with and subject to the execution of such an agreement with Ralston Purina, to
the extent such agreement does not provide for termination of the
Distributorship Agreement, General Mills will use its reasonable efforts to
reach a mutually satisfactory arrangement under which Ralcorp, effective as of
the Effective Time, would supply New Ralcorp with Branded Business products for
New Ralcorp to supply to Ralston Purina for distribution under the
Distributorship Agreement (subject to limitations to be determined by General
Mills and New Ralcorp).
EMPLOYMENT MATTERS
Pursuant to the Merger Agreement, General Mills has agreed to cause Ralcorp
or the Branded Subsidiary to offer to retain all Branded Employees (as defined
in the Reorganization Agreement) as of 12:01 a.m. on the Closing Date. Such
offer of continuing employment will include provision for the payment of base
salary to each such employee at a rate at least equal to the rate of base salary
in effect for such employee immediately prior to the Closing. Pursuant to the
Merger Agreement, with respect to Branded Employees who are terminated by the
Surviving Corporation or the Branded Subsidiary after the Effective Time, the
Surviving Corporation will be responsible for severance benefits payable
pursuant to severance plans, policies and practices of the Surviving Corporation
applicable to Branded Employees at the time of their termination.
FEES AND EXPENSES
Except as provided in the Merger Agreement with respect to termination of
the Merger Agreement under certain circumstances, all fees and expenses incurred
in connection with the Merger, the Distribution, the Merger Agreement, the
Reorganization Agreement and the transactions contemplated by the Merger
Agreement and the Ancillary Agreements will be paid by the party incurring such
fees or expenses, whether or not the Merger is consummated, except that expenses
incurred in connection with printing and mailing this Proxy
Statement-Prospectus, the Information Statement of New Ralcorp that was mailed
with this Proxy Statement-Prospectus (the "New Ralcorp Information Statement"),
and the related registration statements of General Mills (the "General Mills
Registration Statement") and of New Ralcorp (the "New Ralcorp Registration
Statement"), will be shared equally by General Mills and Ralcorp. Any such fees
or expenses incurred by Ralcorp or its subsidiaries but not paid prior to the
Effective Time will be accrued and reflected as liabilities of Ralcorp and taken
into account in calculating the Closing Date Net Asset Value. See "-- Net Assets
Adjustment."
CONDITIONS
The respective obligations of each party to the Merger Agreement to effect
the Merger is subject to the satisfaction or waiver on or prior to the Closing
Date of a number of conditions, including the following: (a) approval and
adoption of the Merger Agreement by the affirmative vote or consent of the
holders of
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Ralcorp Common Stock representing two-thirds of the shares entitled to vote; (b)
the approval for listing on the NYSE, subject to official notice of issuance, of
the shares of General Mills Common Stock issuable to Ralcorp's shareholders
pursuant to the Merger Agreement and under certain employee benefit plans; (c)
the receipt by General Mills and Ralcorp of all requisite approvals of, or
satisfaction of all requisite filing requirements with, governmental entities in
connection with the transactions contemplated by the Merger Agreement and by the
Ancillary Agreements, including all requisite approvals under, and the
expiration of all waiting periods in respect of, the HSR Act; (d) receipt from
the IRS of the Private Letter Ruling (as defined in the Merger Agreement) or, if
agreed by Ralcorp and General Mills, receipt from tax counsel of the Tax
Opinions; (e) the absence of any order, injunction or other legal restraint or
prohibition preventing the consummation of the Merger, the Internal Spinoff or
the Distribution (provided, however, that subject to the terms and conditions of
the Merger Agreement, each of the parties will have used its reasonable efforts
to prevent the entry of any such injunction or other order and to appeal as
promptly as possible any such injunction or other order that may be entered);
(f) the absence of any pending action, suit or other proceeding by any
governmental entity that, if successful, would restrict or prohibit the
consummation of the Merger, the Internal Spinoff or the Distribution (provided,
however, that Ralcorp will not unreasonably withhold its waiver of this
condition upon General Mills' request in the event such an action, suit or other
proceeding is pending with respect to the Merger alone); (g) the effectiveness
of the General Mills Registration Statement under the Securities Act and the
absence of any stop order or pending proceedings by a governmental entity
seeking a stop order with respect to the General Mills Registration Statement;
(h) the effectiveness of the Distribution in accordance with the terms of the
Reorganization Agreement and each of the agreements contemplated thereby; and
(i) the absence of any proposed legislation introduced in bill form and pending
congressional action which, if passed, would have the effect of amending the
Code so as to alter in any materially adverse respect any of the tax
consequences prescribed by the Private Letter Ruling or the Tax Opinions. With
respect to the condition set forth in clause (d) of this paragraph, Ralcorp and
General Mills have agreed to proceed with the Transactions on the basis of the
receipt from tax counsel of the Tax Opinions.
In addition, the obligation of General Mills and General Mills Missouri to
effect the Merger is further subject to the following conditions, unless waived
in writing by General Mills: (a) the truthfulness and correctness of the
representations and warranties of Ralcorp set forth in the Merger Agreement that
are qualified as to materiality, and the truthfulness and correctness in all
material respects of the representations and warranties of Ralcorp set forth in
the Merger Agreement that are not so qualified; (b) the performance by Ralcorp
in all material respects of all obligations required to be performed by Ralcorp
under the Merger Agreement and the Reorganization Agreement at or prior to the
Closing Date; (c) the receipt by General Mills of an opinion of Bryan Cave LLP,
counsel to Ralcorp, or of internal counsel to Ralcorp, concerning legal matters
relating to the Merger Agreement and the Ancillary Agreements and the
transactions contemplated thereby; (d) the absence of any material adverse
change and any event that could reasonably be expected to result in a material
adverse change, to the business, properties, assets, results of operations, or
financial condition of Ralcorp and the Branded Subsidiary taken as a whole,
subject to certain exceptions; (e) the execution of each of the Ancillary
Agreements; (f) the absence of any event with respect to Ralcorp, any subsidiary
of Ralcorp or any security holder of Ralcorp which should have been set forth in
an amendment to the General Mills Registration Statement or a supplement to this
Proxy Statement-Prospectus which has not been set forth in such an amendment or
supplement; (g) the delivery by Ralcorp of Affiliate Agreements, executed by
each affiliate of Ralcorp who will acquire shares of General Mills Common Stock
in connection with the Merger; (h) the assignment or termination of certain
agreements by Ralcorp; (i) the delivery by Ralcorp to General Mills of a
certificate from the indenture trustee with respect to the Notes to the effect
that such indenture trustee has not, as of the Closing Date, received any notice
of and is not aware of any default or event of default with respect to the
Notes; and (j) the exercise of dissenters' rights by holders of no more than 5%
of the aggregate number of outstanding shares of Ralcorp Common Stock with
respect to the Merger or, if available, the value of the Ralcorp Common Stock
before giving effect to the Distribution.
In addition, the obligation of Ralcorp to effect the Merger is further
subject to the following conditions, unless waived in writing by Ralcorp: (a)
the truthfulness and correctness of the representations and warranties of
General Mills and General Mills Missouri set forth in the Merger Agreement that
are qualified as to materiality, and the truthfulness and correctness in all
material respects of the representations and warranties
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of Ralcorp set forth in the Merger Agreement that are not so qualified; (b) the
performance by General Mills in all material respects of all obligations
required to be performed by General Mills under the Merger Agreement at or prior
to the Closing Date; (c) the receipt by Ralcorp of an opinion of Wachtell,
Lipton, Rosen & Katz, counsel to General Mills, or of internal counsel to
General Mills, concerning legal matters relating to the Merger Agreement and the
Reorganization Agreement and the transactions contemplated thereby; (d) the
absence of any event with respect to General Mills, any subsidiary of General
Mills or any security holder of General Mills which should have been set forth
in an amendment to the General Mills Registration Statement or a supplement to
this Proxy Statement-Prospectus which has not been set forth in such an
amendment or supplement; (e) the execution of each of the Ancillary Documents to
which General Mills is a party; and (f) the exercise of dissenters' rights by
holders of no more than 5% of the aggregate number of outstanding shares of
Ralcorp Common Stock, if available, with respect to the value of the Ralcorp
Common Stock before giving effect to the Distribution.
TERMINATION; CERTAIN FEES
The Merger Agreement may be terminated: (a) by mutual written consent of
General Mills and Ralcorp; (b) by either General Mills or Ralcorp if (i) upon a
vote at the Special Meeting, any required approval of the shareholders of
Ralcorp is not obtained (a "Shareholder Termination"), (ii) the Merger has not
been consummated on or before August 31, 1997, unless the failure to consummate
the Merger is the result of a wilful and material breach of the Merger Agreement
by the party seeking to terminate the Merger Agreement (provided, however, that
the passage of such period will be tolled for any part thereof (but in no event
for more than an additional three months) during which any party is subject to a
nonfinal order, decree, ruling or action restraining, enjoining or otherwise
prohibiting the consummation of the Merger or the calling or holding of the
Special Meeting), (iii) any governmental entity has issued an order, decree or
ruling or taken any other action permanently enjoining, restraining or otherwise
prohibiting the Merger and such order, decree, ruling or other action has become
final and nonappealable, or (iv) prior to the Effective Time, the Code is
amended so as to alter in any materially adverse respect any of the tax
consequences prescribed by the Private Letter Ruling or Tax Opinions; (c) by
General Mills (a "General Mills Special Termination") if (i) the Ralcorp Board
withdraws, or modifies or changes, in a manner adverse to General Mills, its
approval or recommendation of the Merger or the other transactions contemplated
by the Merger Agreement and the Ancillary Agreements or recommends another offer
or proposal with respect to a Third Party Acquisition, or (ii) a Third Party
Acquisition has occurred or any person has entered into a definitive agreement
with Ralcorp with respect to a Third Party Acquisition; or (d) by Ralcorp (a
"Ralcorp Special Termination") if (i) the Ralcorp Board fails to recommend to
its shareholders the approval of the transactions contemplated by the Merger
Agreement, or withdraws, modifies or changes such recommendation, in a manner
permitted by the Merger Agreement, or (ii) Ralcorp enters into an agreement with
respect to a Higher Offer in a manner permitted by the Merger Agreement.
In the event (a) of a General Mills Special Termination, (b) of a Ralcorp
Special Termination, or (c) that a Shareholder Termination has occurred and at
the time of the Special Meeting there exists a proposal relating to a Third
Party Acquisition that has become public and, within six months following such
termination, Ralcorp has entered into a definitive agreement with respect to the
sale of the Branded Business, then Ralcorp will promptly pay to General Mills an
amount equal to the sum of (i) $20 million and (ii) the fees and expenses
actually incurred by General Mills in connection with the negotiation and
preparation of the Merger Agreement and the Ancillary Agreements to which
General Mills is a party, the performance of General Mills' covenants therein,
and the transactions contemplated thereby, including, without limitation, all
fees and disbursements of General Mills financial advisors, legal counsel,
accountants and other advisors, up to a maximum of an additional $2.5 million.
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THE INTERNAL MERGER, THE BRANDED CONTRIBUTION,
THE INTERNAL SPINOFF AND THE DISTRIBUTION
This section of the Joint Proxy Statement-Prospectus describes certain
aspects of the proposed Internal Merger, Branded Contribution, Internal Spinoff
and Distribution. The following descriptions do not purport to be complete and
are qualified in their entirety by reference to the Reorganization Agreement or
the applicable Ancillary Agreement, as the case may be. A copy of the form of
Reorganization Agreement is attached as Appendix B to this Proxy
Statement-Prospectus, and is incorporated herein by reference. Copies of the
other Ancillary Agreements have been filed as exhibits to the Registration
Statements. All Ralcorp shareholders are urged to read the Reorganization
Agreement and the other Ancillary Agreements in their entirety.
BACKGROUND OF AND REASONS FOR THE DISTRIBUTION
The Distribution is intended to facilitate General Mills' acquisition of
the Branded Business. Because General Mills desired only to acquire the Branded
Business and not the New Ralcorp Business, Ralcorp intends to distribute the New
Ralcorp Business to its shareholders, by means of the Distribution, prior to the
Merger.
Ralcorp shareholders are being asked to vote on the Distribution and the
Merger only, and are not being asked to vote on the Internal Merger, the Branded
Contribution or the Internal Spinoff. Although the Distribution will not be
effected unless the Merger is approved and about to occur, the Distribution is
separate from the Merger and the New Ralcorp Common Stock to be received by
holders of Ralcorp Common Stock in the Distribution will not constitute a part
of the Merger Consideration. In the event the Ralcorp shareholders do not
approve the Distribution and authorize the Merger, or the Merger Agreement is
otherwise terminated, Ralcorp nonetheless intends to effect the Internal Merger,
the Branded Contribution and the Internal Spinoff.
TERMS OF THE REORGANIZATION AGREEMENT
General Description of the Reorganization. The Reorganization involves the
following steps, which will be taken pursuant to the terms of the Reorganization
Agreement:
(a) Ralston Foods will merge into New Ralcorp, with New Ralcorp being
the surviving corporation. (Step (a) constitutes the Internal Merger.)
(b) New Ralcorp will transfer the assets of the Branded Business to
the Branded Subsidiary in exchange for capital stock of the Branded
Subsidiary. The Branded Subsidiary will also assume certain liabilities
associated with the Branded Business. (Step (b) constitutes the Branded
Contribution.)
(c) New Ralcorp will distribute the capital stock of the Branded
Subsidiary to Ralcorp. (Step (c) constitutes the Internal Spinoff.)
(d) Ralcorp will distribute the capital stock of New Ralcorp to its
shareholders in the Distribution. The Distribution will be made pro rata to
the shareholders of Ralcorp, as described below under "-- Method of
Effecting the Distribution."
Immediately after the Distribution, General Mills will acquire Ralcorp (and the
Branded Subsidiary) through the Merger.
The Branded Contribution; Assumption of Branded Liabilities. Pursuant to
the terms of the Reorganization Agreement, immediately prior to the
Distribution, New Ralcorp will contribute specified assets of the Branded
Business (the "Branded Assets") to the Branded Subsidiary. These assets consist
primarily of: (a) the Branded Plant; (b) the equipment and inventory currently
used by Ralston Foods to conduct the Branded Business at the Branded Plant; and
(c) certain contract and intellectual property rights related to or used in the
conduct of the Branded Business.
In connection with the Branded Contribution, the Branded Subsidiary will
assume the Branded Liabilities (as defined herein), subject to the
indemnification obligations of New Ralcorp described below
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under "-- Indemnification." The "Branded Liabilities" are defined in the
Reorganization Agreement as the following: (a) all of the liabilities arising
out of, relating to or resulting from the ownership, use or possession of the
Branded Assets or the operation of the Branded Business (other than those
portions of the Branded Business that are not conveyed to or retained by Ralcorp
and the Branded Subsidiary under the Reorganization Agreement) as of immediately
after 11:59 p.m. (the "Distribution Time") on the date as of which the
Distribution will be effected (the "Distribution Date"), whether arising prior
to or after the Closing Date; (b) certain liabilities identified on Schedule
1.1(d) to the Reorganization Agreement, which consist of certain pending
litigation matters (collectively, the "Scheduled Branded Litigation"); and (c)
the liabilities included in the combined balance sheet (but not the notes to
such balance sheet) of Ralcorp and the Branded Subsidiary as of the Closing Date
as contemplated by Schedule 2.3 to the Merger Agreement for purposes of
calculating the Closing Date Net Asset Value, regardless of the sufficiency of
the amount of any accrual thereon, and certain liabilities identified on
Schedule 1.1(c) to the Reorganization Agreement, which consist of debt and other
contract obligations (collectively, the "Known Branded Liabilities"). The
liabilities referred to in clause (a) above include product liability claims
relating to Branded Business products produced prior to the Distribution Time,
regardless of whether such products were produced at the Branded Plant, but do
not include employee, environmental, occupational safety, health and similar
liabilities related to any facility other than the Branded Plant.
The Reorganization Agreement also provides that Ralcorp will contribute to
New Ralcorp, immediately prior to the Distribution Time, any interest it may
have in any assets other than the Branded Assets (the "New Ralcorp Assets"). In
addition, the Reorganization Agreement provides that New Ralcorp will assume and
retain all liabilities other than the Branded Liabilities (the "New Ralcorp
Liabilities").
Accounts Receivable. The Reorganization Agreement provides that the
customer accounts receivable (including for any products of the Branded Business
shipped but not invoiced, which products will be relieved from inventory)
outstanding at the close of business on the Distribution Date will remain assets
of New Ralcorp. New Ralcorp will be entitled to collection and receipt of all
such receivables, subject to specified rules for allocation of customer payments
and deductions.
Representations and Warranties of New Ralcorp. In the Reorganization
Agreement, New Ralcorp will make certain representations and warranties to
Ralcorp and the Branded Subsidiary with respect to: (a) its due organization,
good standing and corporate power; (b) its power and authority to execute the
Reorganization Agreement and the other Ancillary Agreements to which it is or
will be party and to consummate the transactions contemplated thereby; (c) the
enforceability of the Reorganization Agreement and the other Ancillary
Agreements to which it is or will be party; and (d) the noncontravention of laws
and agreements and the absence of the need for governmental or third-party
consents in connection with the execution, delivery and performance by it of the
Reorganization Agreement and the other Ancillary Agreements to which it is or
will be party.
Internal Merger. Prior to the Branded Contribution and the Internal
Spinoff, Ralston Foods will merge with and into New Ralcorp, with New Ralcorp
being the surviving corporation. The purpose of the Internal Merger is to move
Ralston Foods' state of incorporation from Nevada to Missouri, where its
headquarters are located.
Internal Spinoff. After the Internal Merger, but before the Distribution,
New Ralcorp will effect the Internal Spinoff by distributing the capital stock
of the Branded Subsidiary to Ralcorp. The Internal Spinoff is necessary in order
to separate the Branded Business (which will be owned by New Ralcorp and the
Branded Subsidiary after the Internal Merger and the Branded Contribution) from
the businesses to be retained by New Ralcorp.
Method of Effecting the Distribution. The Reorganization Agreement provides
that, effective at the Distribution Time, Ralcorp will distribute all
outstanding shares of New Ralcorp Common Stock to holders of record of Ralcorp
Common Stock on the Distribution Record Date on the basis of one share of New
Ralcorp Common Stock for each share of Ralcorp Common Stock outstanding on the
Distribution Record Date.
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Employee Benefits and Labor Matters. For purposes of allocating employee
benefit liabilities and obligations, the Reorganization Agreement defines the
employees that will be employees of the Branded Business after the Merger as
"Branded Employees." Specifically, a "Branded Employee" is any individual who on
the Distribution Date is (a) actively employed at the Branded Plant, (b) who is
set forth on Schedule 1.1(b) to the Reorganization Agreement (which Schedule
will be updated by mutual agreement of New Ralcorp and General Mills prior to
the Effective Time), or (c) who is on leave or layoff (with recall rights) from
active employment but who, immediately prior to commencement of such leave or
layoff, was employed at the Branded Plant, except that "Branded Employee" does
not include any individual who, as of the Distribution Date, (i) has been
determined to be disabled under the Ralcorp Holdings Long Term Disability Plan
(the "LTD Plan"), the Ralcorp Holdings Group Life Insurance Plan or the Ralcorp
Holdings Retirement Plan for Sales, Administrative, Clerical and Production
Employees, or (ii) is on leave during a waiting period prior to a determination
of disability under the LTD Plan.
In general, the Reorganization Agreement requires Ralcorp to amend its
employee benefit and executive compensation plans to remove Ralcorp as sponsor
and named fiduciary and substitute New Ralcorp in its place prior to the
Distribution Date. Also prior to the Distribution Date, General Mills is
required to establish new plans, or amend existing plans, in order to make
available to all Branded Employees approximately the same benefits as were
available to them (with the same vesting or service credit status where
applicable) prior to the Merger. The Reorganization Agreement also provides that
the appropriate amount of plan assets, in the case of funded benefit plans, will
be transferred from the current Ralcorp plans to General Mills plans in order to
provide benefits to the Branded Employees after the Closing. Branded Employees
will be permitted to rollover their Ralcorp Holdings, Inc. Savings Investment
Plan account balances into the General Mills savings plan, subject to its terms.
Ralcorp and New Ralcorp will agree to cooperate with each other in order to
transfer plan records and make all appropriate governmental filings.
Indemnification. Pursuant to the Reorganization Agreement, General Mills,
Ralcorp and the Branded Subsidiary, on the one hand, and New Ralcorp, on the
other hand, will agree to indemnify each other for losses, liabilities, claims,
damages, obligations, payments, costs and expenses (including, without
limitation, reasonable attorneys' fees) (collectively, "Indemnifiable Losses"),
arising from certain matters. The indemnification provided by the Reorganization
Agreement will also apply to the indemnified parties' respective affiliates,
employees, directors, benefit plan fiduciaries, shareholders, agents,
consultants, representatives, successors, transferees and assigns.
Specifically, General Mills, Ralcorp and the Branded Subsidiary will agree
to jointly and severally indemnify New Ralcorp against Indemnifiable Losses
arising from the following:
(a) any and all Branded Liabilities (except for the Scheduled Branded
Litigation and the "Unknown Branded Liabilities" (defined as all Branded
Liabilities other than the Known Branded Liabilities, the Scheduled Branded
Litigation and the Post-Closing Branded Liabilities (as defined herein)),
to the extent that New Ralcorp is obligated to indemnify Ralcorp and the
Branded Subsidiary therefor as described below) assumed by the Branded
Subsidiary pursuant to the Reorganization Agreement;
(b) any breach or violation of any covenant made in the Merger
Agreement, the Reorganization Agreement or any other Ancillary Agreement by
General Mills, or, with respect to covenants to be performed after the
Effective Time, by Ralcorp or the Branded Subsidiary; or
(c) subject to the limitations described below, any breach or
violation of any representation or warranty (without regard to materiality
qualifications contained therein) made by General Mills and/or General
Mills Missouri in the Merger Agreement.
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New Ralcorp will agree to indemnify General Mills, Ralcorp and the Branded
Subsidiary against Indemnifiable Losses arising from the following:
(a) any and all liabilities assumed by New Ralcorp pursuant to the
Reorganization Agreement;
(b) subject to the limitations described below, any and all Branded
Liabilities other than (i) the Known Branded Liabilities and (ii) the
"Post-Closing Branded Liabilities," which are defined as Branded
Liabilities relating to or arising from the ownership, use or possession of
the Branded Assets or the operation of the Branded Business after the
Effective Time;
(c) any breach or violation of any covenant made in the Merger
Agreement, the Reorganization Agreement or any other Ancillary Agreement by
New Ralcorp or, with respect to covenants to be performed before the
Effective Time, by Ralcorp or the Branded Subsidiary;
(d) the ownership, use or possession of the New Ralcorp Assets or the
operation of the New Ralcorp Business, whether relating to or arising out
of occurrences prior to or after the Effective Time, except to the extent
liability therefor is assumed by the Branded Subsidiary pursuant to the
Reorganization Agreement;
(e) subject to the limitations described below, any breach or
violation of any representation or warranty (without regard to materiality
qualifications contained therein) made by Ralcorp in the Merger Agreement
or made by New Ralcorp in the Reorganization Agreement;
(f) any third party claim to the extent relating to the actions of the
Ralcorp Board in authorizing the Distribution or the Merger; or
(g) any third party claim arising out of the disclosures contained in
the New Ralcorp Information Statement, other than disclosures based on
information provided by or on behalf of General Mills for inclusion
therein.
In addition, Ralcorp and New Ralcorp will agree to allocate liability for,
and indemnify each other against, any amounts payable on account of the exercise
by any Ralcorp shareholder of appraisal rights.
The indemnification obligations described above will be subject to the
following limitations:
(a) Notwithstanding the expiration of the representations and
warranties in the Merger Agreement or anything else to the contrary in the
Merger Agreement, the indemnification obligations described above with
respect to breaches of representations or warranties will survive the
Distribution Date for eighteen months, at which time they will expire
automatically, except with respect to written claims for indemnification
made in good faith prior to such expiration (which claims will survive such
expiration);
(b) The indemnification obligation of New Ralcorp described in
paragraph (b) above with respect to certain pre-Closing Branded Liabilities
will survive the Distribution Date for five years, at which time it will
expire automatically, except with respect to written claims for
indemnification made in good faith prior to such expiration (which claims
will survive such expiration);
(c) The indemnification obligations of General Mills, Ralcorp and the
Branded Subsidiary for breaches of representations or warranties will apply
only to the extent Indemnifiable Losses exceed $6 million in the aggregate;
and
(d) The indemnification obligations of New Ralcorp for breaches of
representations or warranties and for certain pre-Closing Branded
Liabilities will apply only to the extent Indemnifiable Losses therefrom
exceed $6 million in the aggregate.
Net Worth Covenant. The Reorganization Agreement provides that New Ralcorp
and its subsidiaries will maintain certain minimum net worth levels for up to
five years after the Distribution Date, as follows:
(a) For a period of two years following the Distribution Date, New
Ralcorp and its subsidiaries, on a consolidated basis, will maintain at all
times a net worth (determined in accordance with generally accepted
accounting principles, consistently applied) of not less than $100 million.
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(b) Except as provided in paragraph (c) below, for a period of two
years commencing on the second anniversary of the Distribution Date, New
Ralcorp and its subsidiaries, on a consolidated basis, will maintain at all
times a net worth (determined in accordance with generally accepted
accounting principles, consistently applied) of not less than the lesser of
(i) the sum of $25 million plus the aggregate of all claims for
indemnification made against New Ralcorp pursuant to the Reorganization
Agreement (subject to the limitations described above) unresolved and
pending on the second anniversary of the Distribution Date, and (ii) $100
million.
(c) Notwithstanding the foregoing paragraph (b), in the event an
agreement between Ralcorp and Ralston Purina as contemplated by the Merger
Agreement (see "THE MERGER AGREEMENT -- Certain Other Covenants -- Ralston
Purina Company") is not entered into prior to the second anniversary of the
Distribution Date, for a period of three years commencing on the second
anniversary of the Distribution Date, New Ralcorp and its subsidiaries, on
a consolidated basis, will maintain at all times a net worth (determined in
accordance with generally accepted accounting principles, consistently
applied) of not less than the amounts specified below:
(i) during the first year of such three-year period, the lesser of
(A) the sum of $75 million plus the aggregate of all claims for
indemnification made against New Ralcorp pursuant to the Reorganization
Agreement (subject to the limitations described above) unresolved and
pending on the second anniversary of the Distribution Date, and (B) $100
million;
(ii) during the second year of such three-year period, the lesser
of (A) the sum of $50 million plus the aggregate of all claims for
indemnification made against New Ralcorp pursuant to the Reorganization
Agreement (subject to the limitations described above) unresolved and
pending on the third anniversary of the Distribution Date, and (B) the
amount specified in clause (i) of this paragraph (c); and
(iii) during the third year of such three-year period, the lesser
of (A) the sum of $25 million plus the aggregate of all claims for
indemnification made against New Ralcorp pursuant to the Reorganization
Agreement (subject to the limitations described above) unresolved and
pending on the fourth anniversary of the Distribution Date, and (B) the
amount specified in clause (ii) of this paragraph (c).
TERMS OF THE OTHER ANCILLARY AGREEMENTS
THE TECHNOLOGY AGREEMENT
The Technology Agreement will be entered into as of the Distribution Date
by and among Ralcorp, New Ralcorp and the Branded Subsidiary. It will facilitate
the assignment and/or license of certain Technical Information and Know How (as
defined herein) among Ralcorp, New Ralcorp and the Branded Subsidiary. As used
in the Technology Agreement, the term "Technical Information and Know How"
refers to all the information owned or licensed from third parties by Ralcorp
and its subsidiaries, and which, as of the date of the Technology Agreement, has
been used or reduced to practice for use by the Branded Business or the New
Ralcorp Business or by Ralston Purina in connection with either of such
businesses, including trade secrets, product formulas, processing and equipment
design and information, specifications, know how, manufacturing, research,
software, inventions, patent applications, patents and industrial property
rights and other technical information. For purposes of the Technology
Agreement, the term Branded Business refers to the business of manufacturing,
distributing and selling branded ready-to-eat cereal and branded cereal-based
snacks and snack mixes, as ever conducted by Ralcorp, Ralston Foods, or Ralston
Purina prior to the Distribution Date and the term New Ralcorp Business refers
to any business (including any of the same businesses as previously conducted by
Ralston Purina) as ever conducted by Ralcorp, Ralston Foods or any of their
affiliates prior to the Distribution Date, other than the Branded Business.
Assignments of Technical Information and Know How. The parties will assign
certain of the Technical Information and Know How to each other pursuant to the
Technology Agreement. Ralcorp will assign to New Ralcorp all of its right,
title, and interest in and to the "Assigned Technical Information and Know How,"
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which term refers to the Technical Information and Know How that is or has in
the past been used exclusively in, or reduced to practice for use exclusively
by, the New Ralcorp Business and that same business as it was previously
conducted by Ralston Purina. New Ralcorp will assign to Branded Subsidiary all
of its right, title and interest, in the United States of America and all
foreign countries, in and to (a) the Shared Technical Information and Know How
(as defined herein) and (b) the Branded Technical Information and Know How (as
defined herein).
The term "Shared Technical Information and Know How" refers to the
Technical Information and Know How that is or has in the past been used or
reduced to practice for use by (a) the Branded Business and that same business
as it was previously conducted by Ralston Purina for any products which are not
Designated Products (as defined herein) and (b) both the Branded Business and
the New Ralcorp Business and those same businesses as they were previously
conducted by Ralston Purina. The term "Branded Technical Information and Know
How" refers to the Technical Information and Know How that is or has in the past
been used exclusively, or reduced to practice for use exclusively, by Ralcorp,
its subsidiaries or Ralston Purina to produce Designated Products, including all
cereal-based snacks and snack mixes that are Designated Products. The term
"Designated Products" refers to cereals, cereal based snacks and snack mixes,
and products which are identical to or substantially similar in form or in
overall appearance to those products, which have been offered for sale in
connection with any form of the Chex trademark or the Cookie Crisp trademark
prior to the date of the Trademark Agreement, whether or not any of such
products are (a) similar in flavor to those products which have been offered for
sale in connection with such trademarks or (b) used in association with
ingredients different from the ingredients used in the products which have been
offered for sale in connection with such trademarks; provided, however, that
this term does not include the hexagonally shaped products currently sold under
the Crispy Hexagon designation or those wheat cereals denominated or described
as shredded wheat and similar in nature to other shredded wheat products
currently offered by other cereal manufacturers.
License Grants Relating to the Technical Information and Know How. Each of
Ralcorp and Branded Subsidiary will grant to New Ralcorp certain licenses
relating to the Shared Technical Information and Know How and the Branded
Technical Information and Know How. These licenses will be subject to the terms,
covenants, conditions, and limitations set forth in, among other agreements, the
Prior Technology Agreement. The licenses will include an irrevocable,
non-exclusive, royalty-free license to use: (a) the Shared Technical Information
and Know How from and after the date of the Technology Agreement until March 31,
1999 in the Western Hemisphere in a manner which does not violate the limited,
short-term business restrictions agreed upon by the parties (as described
below); (b) the Shared Technical Information and Know How from and after March
31, 1999, worldwide, in perpetuity, in a manner which does not violate the
limited, short-term business restrictions agreed upon by the parties; (c) the
Branded Technical Information and Know How to produce any products exclusively
for Ralcorp alone or for Ralston Purina pursuant to the Distributorship
Agreement, in each case, commencing as of the Distribution Date; (d) the Branded
Technical Information and Know How to produce (i) any products, other than snack
mix products or Cookie Crisp-type products, commencing on the Distribution Date
and (ii) any Cookie Crisp-type products, commencing eighteen (18) months after
the Distribution Date, in each case in the United States, its territories,
possessions, military installations and the Commonwealth of Puerto Rico for any
third parties; (e) the Branded Technical Information and Know How to produce any
products, other than snack mix products, commencing five (5) years after the
Distribution Date, in all other countries for any third parties; (f) the Branded
Technical Information and Know How to produce any snack mix products other than
those containing products, or a product substantially similar to, or identical
to, products which have been, prior to the date of the Technology Agreement,
offered for sale in connection with any form of the Chex trademark, including
products sold under the Crispy Hexagon designation, commencing two (2) years
after the Distribution Date, worldwide for any third parties; (g) the Branded
Technical Information and Know How to produce any snack mix products, commencing
five (5) years after the Distribution Date, worldwide, for any third parties;
and (h) the invention claimed in U.S. Patent No. 5,188,860 entitled "Process for
the Production for a Fiber Containing Cereal Product", worldwide, in perpetuity.
In the event the FTC withdraws its acceptance of the Consent Agreement, the
limits on the license of Branded Technical Information and Know How described
above that apply to production of Cookie Crisp-type products will also apply to
Chex-type products.
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Limited, Short-Term Business Restrictions. The Technology Agreement
contains certain provisions pursuant to which New Ralcorp, on behalf of itself
and its successors in interest and present and future subsidiaries and
affiliates other than the Branded Subsidiary, will agree not to make certain
products for certain periods of time, except as may otherwise be provided in the
Supply Agreement or in the Distributorship Agreement. New Ralcorp, on behalf of
the same parties, will also agree not to use on its products any snack mix
recipes that have been used in the three years prior to the Distribution Date in
connection with Chex products. The Technology Agreement provides that New
Ralcorp will not make or sell (a) any ready-to-eat cereals that are Cookie
Crisp-type Designated Products in the United States, its territories,
possessions, military installations or the Commonwealth of Puerto Rico for the
eighteen (18) month period commencing upon the Distribution Date; (b) any
ready-to-eat cereals that are Designated Products outside of the United States,
its territories, possessions, military installations or the Commonwealth of
Puerto Rico for the five (5) year period commencing upon the Distribution Date;
(c) any snack mix, cereal-based or otherwise, anywhere in the world for the two
(2) year period commencing upon the Distribution Date; and (d) any snack mix
containing those products, or a product substantially similar to, or identical
to, products which have been, prior to the date of the Technology Agreement,
offered for sale in connection with any form of the Chex trademark, which shall
include products sold under the Crispy Hexagon designation, for the five (5)
year period commencing upon the Distribution Date. In the event the FTC
withdraws its acceptance of the Consent Agreement, the restrictions on making
and selling Cookie Crisp-type Designated Products described in clause (a) above
will also apply to Chex-type Designated Products.
The foregoing restrictions on snack mix products will not apply to snack
mix products of an enterprise acquired by New Ralcorp if such snack mix business
generates less than 20% of the annual gross revenues of such enterprise and less
than $7,000,000 in annual sales. In addition, none of these provisions will
serve to restrict the existing business of any third party which acquires New
Ralcorp (although an acquiring third party would be restricted from using the
Shared Technical Information and Know How and the Branded Technical Information
and Know How in violation of the limited, short-term business restrictions
agreed upon by the parties). Moreover, the restrictions will not interfere with
the ability of New Ralcorp to meet its obligations to Ralcorp under the Supply
Agreement. Similarly, the limited, short-term business restrictions agreed upon
by the parties will not interfere with the ability of New Ralcorp to meet its
obligations to Ralston Purina as set forth in the Distributorship Agreement.
However, New Ralcorp will agree to terminate by September 1, 1999 the
Distributorship Agreement insofar as it may require the production or sale of
any Designated Products for Ralston Purina.
Provisions Relating to Confidentiality and Transferability. The parties
will each agree pursuant to the Technology Agreement to treat all Technical
Information and Know How as confidential and not to disclose any portion thereof
to any third party. However, New Ralcorp will have the right to license or
disclose the Shared Technical Information and Know How and Branded Technical
Information and Know How, in confidence, in accordance with the terms of the
Prior Technology Agreement and the Technology Agreement. Similarly, Ralcorp and
the Branded Subsidiary will have the right to license or disclose the Shared
Technical Information and Know How and the Branded Technical Information and
Know How, in confidence, in accordance with the terms of the Prior Technology
Agreement.
The Prior Technology Agreement provides that any party who is a sublicensee
of Technical Information and Know How must agree (a) to treat the same as
confidential and not to disclose it to any third parties without the written
consent of Ralston Purina and (b) to obtain a written agreement from each of its
employees, agents, officers and/or directors that any such Technical Information
and Know How will be kept confidential at all times by such parties and that
such information will not be disclosed to any third parties.
Pursuant to the Technology Agreement, upon New Ralcorp's request each of
Ralcorp and Branded Subsidiary will license the Shared Technical Information and
Know How and the Branded Technical Information and Know How to any subsidiaries
or affiliates of New Ralcorp (regardless of when any such relationship with New
Ralcorp may arise) and, unless the FTC withdraws its acceptance of the Consent
Agreement, to any third party that acquires substantially all of the Private
Label Business, or the business of producing Chex-type private label cereals,
from New Ralcorp. Any such license(s) will be on the same terms as set forth in
the Technology Agreement. A license to an affiliate or subsidiary of New Ralcorp
will remain in
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effect only for so long as such entity continues to be a subsidiary or affiliate
of New Ralcorp. Upon the granting of a license to a third party as described
above, New Ralcorp's license with respect to any such technology will
automatically terminate. All licensees will be bound by all restrictions set
forth in the Technology Agreement and the Trademark Agreement as to such
Technical Information and Know How.
Miscellaneous Provisions. The Technology Agreement provides that New
Ralcorp will assume from Ralcorp all of the technical assistance obligations
owed to Ralston Purina by Ralcorp pursuant to the Prior Technology Agreement. In
addition, none of the parties to the Technology Agreement will have an ongoing
obligation to assign, license, share or provide to the others any Technical
Information and Know How created or developed after the Distribution Date.
THE TRADEMARK AGREEMENT
The Trademark Agreement will be entered into as of the Distribution Date by
and among Ralcorp, New Ralcorp and the Branded Subsidiary. It will facilitate
the assignment and/or license among Ralcorp, New Ralcorp and the Branded
Subsidiary of certain trademarks, service marks, trade dress, and copyrights and
the registrations and applications for registrations relating thereto
(collectively, "Trademarks").
Assignments and Licenses. Effective as of the Distribution Date, New
Ralcorp will (a) assign to the Branded Subsidiary all of New Ralcorp's rights,
title and interest in the Branded Trademarks (as defined herein) and (b) grant
to the Branded Subsidiary a non-exclusive royalty free right to use the Ralston,
Ralston Foods, and red, stylized R trademarks (collectively, the "Ralston
Trademarks") in the United States, its territories and possessions and the
Commonwealth of Puerto Rico and military installations on packaging, promotional
or advertising materials for a period of one (1) year following the Distribution
Date. The "Branded Trademarks" refer to (a) all the Trademarks, other than the
Ralston Trademarks and the Sun Flakes and Spider-Man Trademarks, previously used
or currently owned by Ralston Foods or licensed to Ralston Foods or its
subsidiaries which are or have been almost always associated with the Branded
Business or intended almost always for use therein and (b) certain recipe names
used in connection with snack mix products produced by the Branded Business. The
license term relating to the use of the Ralston Trademarks may be extended for a
period of no more than one (1) additional year for the purpose of permitting the
Branded Subsidiary to use, sell or otherwise dispose of product packaging and
advertising or promotional materials that remain on hand on the one year
anniversary of the Distribution Date. The Branded Subsidiary will agree that it
will (a) make reasonable efforts to conclude the use of such product packaging
and promotional and advertising materials by the one year anniversary of the
Distribution Date and (b) not place any orders for such product packaging and
advertising or promotional materials at any time after the one year anniversary
of the Distribution Date.
Effective as of the Distribution Date, Ralcorp will assign to New Ralcorp,
on a quitclaim basis, all of Ralcorp's rights, title and interest in and to any
Trademarks owned by Ralcorp, other than the Branded Trademarks (collectively,
the "Other Trademarks"). Neither Ralcorp nor the Branded Subsidiary will have
any rights in the Other Trademarks, except with respect to use of the Ralston
Trademarks pursuant to the license grant.
Limitations on the Use of Trademarks by New Ralcorp. The Trademark
Agreement provides certain limitations on the ability of New Ralcorp and its
affiliates to use certain Trademarks. New Ralcorp may not use, register, seek to
register, license or otherwise grant rights in the Branded Trademarks or any
Trademarks or trade names confusingly similar to any of such Branded Trademarks.
However, New Ralcorp and its affiliates will be permitted to use the Branded
Trademarks in connection with any legally permissible comparative advertising.
These obligations will remain in effect as long as (a) the Branded Subsidiary
and its affiliates, successors in interest, assigns and licensees shall not have
abandoned all use of the applicable Branded Trademark, and Trademarks
confusingly similar thereto and (b) all registrations for the applicable Branded
Trademark and all Trademarks confusingly similar thereto shall not have expired.
Similarly, in connection with the Designated Products, New Ralcorp may not
use, register, seek to register, license or otherwise grant rights in the
following Trademarks: Purina, Checkerboard, any checkerboard or checkered logo
or symbol, and any Trademarks or trade names confusingly similar thereto.
Moreover, New Ralcorp may not make any statements in connection with its
products which indicates that any Chex-type ready-to-eat cereal Designated
Products were produced at any time prior to the Distribution Date, or that
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any other Designated Products were produced at any time prior to the date which
is 18 months after the Distribution Date, in either case by Ralston Purina or
New Ralcorp or their affiliates. In the event the FTC withdraws its acceptance
of the Consent Agreement, the foregoing restriction that applies to all other
Designated Products will also apply to Chex-type ready-to-eat cereal Designated
Products. Each of these obligations will remain in effect as long as the Branded
Subsidiary and its affiliates, successors in interest, assigns and licensees
shall not have permanently discontinued offering all products which are
identical to or substantially similar to the applicable Designated Product.
Moreover, as to the Designated Products, for the three (3) year period
following the Distribution Date, New Ralcorp may not use, register, seek to
register, license or otherwise grant rights in any trademarks or trade names,
other than those trademarks and trade names owned by a grocery retailer, a
wholesaler, or broker and which are used by such persons or entities to identify
grocery products sold by such parties or entities and in which New Ralcorp and
its affiliates have no rights, except for the right to produce products
utilizing such Trademarks and trade names for such parties or entities or their
licensees ("Private Label Trademarks"). Notwithstanding this limitation,
commencing two (2) years after the Distribution Date in connection with any
Designated Products, and commencing immediately after the Distribution Date with
any other products, New Ralcorp will have the right to use the Ralston
Trademarks as a Control Brand (as defined below) and the right to use any other
Control Brands. The term "Control Brand" refers to those Trademarks and trade
names which are utilized by New Ralcorp and/or its subsidiaries on a line of
products which are typically offered by New Ralcorp to re-sellers of grocery
products for use on such products in lieu of a Private Label Trademark on such
products. None of the foregoing restrictions will in and of themselves restrict
the use of any preexisting Trademarks, or Trademarks confusingly similar
thereto, in the business of any third party which may acquire New Ralcorp or its
affiliates through a merger, consolidation or other acquisition transaction.
New Ralcorp will have no rights to use the Ralston Trademarks on the
Designated Products other than as a Control Brand for the three years following
the Distribution Date. Thereafter, New Ralcorp will have the right to use the
Ralston Trademarks in connection with the Designated Products only as a house
brand in the same manner as it does for its other cereal products and only on
the condition that the Ralston Trademarks are less prominently displayed than
the primary trademark or product name in all uses on the principal display
panels of the products and in the advertising of such products. Also, the
Ralston Trademarks will not be permitted to be used as part of the product name
on the Designated Products.
Rights and Liabilities Related to Trademarks. The Trademark Agreement
provides that each of New Ralcorp and the Branded Subsidiary will assume the
limitations, undertakings and liabilities related to the Branded Trademarks or
the Other Trademarks, as applicable, pursuant to, and in accordance with, the
terms of the Reorganization Agreement. These will include the limitations,
undertakings and liabilities arising out of the Prior Trademark Agreement and
the obligations arising out of certain license agreements and other contracts
related to the Branded Trademarks or the Other Trademarks, as applicable. The
rights under these license agreements and contracts will be assigned, effective
as of the Distribution Date, to the Branded Subsidiary or New Ralcorp, as
applicable, pursuant to the Trademark Agreement.
SUPPLY AGREEMENT
The Supply Agreement will be entered into as of the Distribution Date by
Ralcorp (which, after the Merger, will be named General Mills Missouri, Inc.)
and New Ralcorp. Pursuant to the Supply Agreement, New Ralcorp will agree to
produce (i) ready to eat cereals that have been packaged using the Cookie Crisp
trademark, and products substantially similar thereto ("Cookie Crisp"), and (ii)
rice-based cereals that have been packaged using the Chex trademark, and
products substantially similar thereto ("Rice Chex," and together with Cookie
Crisp, the "Products"), for General Mills Missouri and to provide certain other
transition services to General Mills Missouri for certain periods of time
following the Merger.
Supply Arrangements
Term. New Ralcorp's obligations pursuant to the Supply Agreement will
commence immediately after the Closing Date of the Merger Agreement and will
expire eighteen months after the Closing Date, subject to extension under
certain circumstances.
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Production System and Materials. Pursuant to the Supply Agreement, New
Ralcorp will provide all equipment and personnel necessary to produce, package
and ship Products without any additional costs to General Mills Missouri beyond
those incorporated into the respective Product prices and/or rates set forth in
the Supply Agreement. The Supply Agreement provides that each of New Ralcorp and
General Mills Missouri will provide certain ingredients and materials
("Materials") for use in connection with the manufacturing and packaging of the
Products.
Sampling and Testing Obligations. The Supply Agreement requires New Ralcorp
to sample and test (i) all Materials received by New Ralcorp to be used to
produce or package Products, and (ii) the Products, in each case in accordance
with certain specifications (the "Specifications").
Storage and Disposal Obligations. Pursuant to the Supply Agreement, New
Ralcorp will provide suitable storage and warehousing space and disposal
services for Materials at rates set forth in the Supply Agreement (subject to
certain exceptions). The Supply Agreement requires General Mills Missouri to
promptly provide New Ralcorp with instructions with respect to the disposition
of unusable Materials.
Nonconforming Products. For purposes of the Supply Agreement, the term
"Nonconforming Products" means Products which do not comply with certain
applicable laws or the Specifications. Pursuant to the terms of the Supply
Agreement, in the event that New Ralcorp produces any Nonconforming Products,
New Ralcorp will be required to promptly replace such Products at no cost to
General Mills Missouri, except to the extent such nonconformance was the result
of General Mills Missouri's actions. The Supply Agreement provides that any
Materials which do not comply with the requirements of the Specifications will
not be used by New Ralcorp for any reason in connection with the Products.
Inspection of Records and Plant. The Supply Agreement provides that General
Mills Missouri will be entitled to inspect New Ralcorp's records relating to the
Products and to take inventory of Materials and finished Products produced by
New Ralcorp for General Mills Missouri.
Supply Quantities. The Supply Agreement is designed to ensure that General
Mills Missouri will have sufficient Products during the first 18 months of the
transition following the Merger (and an additional six months with respect to
Cookie Crisp cereal in the event that General Mills Missouri exercises its
option to renew the Supply Agreement for such products). The Supply Agreement
specifies the terms and limits of General Mills Missouri's rights to New
Ralcorp's and its subsidiaries' and affiliates' capacity to make Products at all
of their plants and facilities above the minimum supply commitments to General
Mills Missouri. Such rights will not prevent New Ralcorp from meeting its
obligations to Ralston Purina under the Distributorship Agreement. The Supply
Agreement provides that New Ralcorp's obligation to supply General Mills
Missouri with the Products will not exceed New Ralcorp's stated capacity to
produce such products, which capacity is subject to certain adjustments.
Pursuant to the Supply Agreement, General Mills Missouri agrees to order certain
minimum amounts of Cookie Crisp and Rice Chex cereals, subject to certain
exceptions.
Payment Terms. The Supply Agreement specifies the prices that General Mills
Missouri will pay to New Ralcorp for supply of Cookie Crisp and Rice Chex
cereals for the periods covered by the Supply Agreement. General Mills Missouri
will also be obligated to pay New Ralcorp an amount equal to actual costs for
all Materials provided by New Ralcorp in connection with Rice Chex and Cookie
Crisp cereals produced and packaged in accordance with the Supply Agreement,
subject to certain yield losses. In addition, the Supply Agreement requires
General Mills Missouri to pay a fixed amount for each month in the period
commencing on the first date of the term of the Supply Agreement and ending upon
the earlier of the expiration of the term of the Supply Agreement or any
termination of the Supply Agreement with respect to Rice Chex cereal by General
Mills Missouri.
Indemnification. Pursuant to the Supply Agreement, New Ralcorp will
indemnify General Mills Missouri for all liabilities (excluding consequential
damages (which shall include but not be limited to lost profits)) incurred by
General Mills Missouri arising out of (i) material breaches of any of New
Ralcorp's warranties, representations or agreements under the Supply Agreement,
(ii) certain injuries or damages to third parties, (iii) certain injuries to
person or property occurring on New Ralcorp's premises, (iv) certain
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fines, penalties and similar liabilities, (v) certain claims alleging
infringement of third party rights, and (vi) certain recalls of Products.
Pursuant to the Supply Agreement, General Mills Missouri will indemnify New
Ralcorp for all liabilities incurred by New Ralcorp arising out of (i) material
breaches of any of General Mills Missouri's warranties, representations or
agreements under the Supply Agreement, (ii) certain injuries or damages to third
parties, (iii) certain fines, penalties and similar liabilities, and (iv)
certain claims alleging infringement of third party rights.
Termination. The Supply Agreement may be terminated by either party in the
event of the occurrence of any material breach not cured within thirty (30) days
of written notice of such breach. Moreover, upon any change of control of New
Ralcorp, General Mills Missouri may terminate the Supply Agreement effective
immediately upon written notice to New Ralcorp.
Transition Services Arrangements
Services. From and after the effective date of the Supply Agreement for a
period up to ninety days after the Closing Date, New Ralcorp will make certain
services available to General Mills Missouri, including (but not limited to)
services related to data processing, finished product distribution and raw
material supply (the "Services"). In consideration for the Services, General
Mills Missouri will pay to New Ralcorp an amount equal to the reasonable costs
to New Ralcorp in providing such Services.
Liability; Indemnification. The Supply Agreement provides that New Ralcorp
will have no liability to General Mills Missouri with respect to its furnishing
any of the Services except for its willful misconduct or gross negligence.
Moreover, pursuant to the Supply Agreement, General Mills Missouri will
indemnify New Ralcorp and its affiliates and certain related parties for any and
all liabilities arising from New Ralcorp's furnishing or failing to furnish the
Services, other than liabilities arising out of the willful misconduct or gross
negligence of New Ralcorp or its affiliates or such related parties.
TAX SHARING AGREEMENT
The Tax Sharing Agreement provides that each of Ralcorp and New Ralcorp
will be responsible for and will indemnify the other party against its (and its
respective affiliates) allocable share of tax liabilities before and after the
Distribution Date. New Ralcorp will be liable for all taxes of (a) New Ralcorp
or any of its affiliates for any pre- or post-Distribution Date tax period, (b)
Ralcorp or any Ralcorp affiliate for any pre-Distribution Date tax period,
including any liabilities resulting from an audit or other adjustment to
previously filed tax returns and (c) any person arising out of or directly
resulting from any of the transactions set forth in the Reorganization
Agreement, the other Ancillary Agreements or the Merger Agreement unless such
liability results from a breach of certain covenants by Ralcorp with respect to
taxes. Ralcorp will be liable for all taxes of Ralcorp or any Ralcorp affiliate
attributable to any post-Distribution Date tax period. In the Tax Sharing
Agreement, Ralcorp and New Ralcorp will agree to cooperate with respect to the
preparation and filing of tax returns and with respect to any tax-related
challenges or proceedings.
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THE SPECIAL MEETING
GENERAL
This Proxy Statement-Prospectus is furnished to holders of Ralcorp Common
Stock in connection with the solicitation of proxies by the Ralcorp Board for
use at the Special Meeting (i) to consider and vote upon the approval of the
Distribution Proposal and (ii) to consider and vote upon the approval and
adoption of the Merger Proposal. Each copy of this Proxy Statement-Prospectus
mailed to holders of Ralcorp Common Stock is accompanied by a form of proxy for
use at the Special Meeting.
This Proxy Statement-Prospectus is also furnished to Ralcorp shareholders
as a prospectus in connection with the issuance by General Mills of the shares
of General Mills Common Stock in connection with the Merger. The New Ralcorp
Information Statement, mailed to Ralcorp shareholders along with this Proxy
Statement-Prospectus, is furnished to Ralcorp shareholders as an information
statement in connection with the issuance of the shares of New Ralcorp Common
Stock in connection with the Distribution.
DATE, PLACE AND TIME
The Special Meeting will be held at Holiday Inn, 1000 Eastport Plaza Drive,
in the city of Collinsville, Illinois, on January 31, 1997, at 8:30 a.m. local
time.
RECORD DATE
The Ralcorp Board has fixed the close of business on December 3, 1996 as
the record date (the "Special Meeting Record Date") for the determination of the
holders of Ralcorp Common Stock entitled to receive notice of and to vote at the
Special Meeting.
VOTES REQUIRED
As of December 3, 1996, the Special Meeting Record Date, there were
32,880,889 shares of Ralcorp Common Stock outstanding. Each share of Ralcorp
Common Stock outstanding on such record date is entitled to one vote upon each
matter properly submitted at the Special Meeting. The affirmative vote of at
least two-thirds of the outstanding shares of Ralcorp Common Stock is required
to approve the matters to be considered and voted on at the Special Meeting in
connection with the Distribution and the Merger Agreement.
The presence in person or by proxy at the Special Meeting of the holders of
at least a majority of the outstanding shares of Ralcorp Common Stock is
necessary to constitute a quorum for the transaction of business. Abstentions
will be counted as present for purposes of determining whether a quorum is
present. Because the vote on the Distribution Proposal and the vote on the
Merger Proposal in each case requires the approval of at least two-thirds of the
outstanding shares of Ralcorp Common Stock, abstentions or the failure to vote
will have the same effect as a negative vote. Under the rules of the NYSE,
brokers who hold shares in street name for customers will not have the authority
to vote on the Distribution Proposal or to vote on the Merger Proposal unless
they receive specific instructions from beneficial owners. Such a broker
non-vote will be counted as present for purposes of a quorum but will otherwise
have the same effect as a vote against the Distribution Proposal and a vote
against the Merger Proposal.
As of December 3, 1996, directors and executive officers of Ralcorp and
their affiliates owned beneficially an aggregate of 867,213 shares of Ralcorp
Common Stock (including shares which may be acquired upon exercise of employee
stock options). Directors and executive officers of Ralcorp have indicated their
intention to vote their shares of Ralcorp Common Stock in favor of the
Distribution Proposal and in favor of the Merger Proposal.
See "THE PROPOSED TRANSACTIONS -- Interests of Certain Persons in the
Transactions."
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VOTING AND REVOCATION OF PROXIES
Shares of Ralcorp Common Stock represented by a proxy properly signed and
received at or prior to the Special Meeting, unless subsequently revoked, will
be voted in accordance with the instructions thereon. IF A PROXY IS SIGNED AND
RETURNED WITHOUT INDICATING ANY VOTING INSTRUCTIONS, SHARES OF RALCORP COMMON
STOCK REPRESENTED BY THE PROXY WILL BE VOTED FOR THE DISTRIBUTION PROPOSAL AND
FOR THE MERGER PROPOSAL. Ralcorp proxy holders may in their discretion vote
shares voted for the Distribution Proposal and vote shares voted for the Merger
Proposal to adjourn the Special Meeting to solicit additional proxies in favor
of either of such proposals. Any proxy given pursuant to this solicitation may
be revoked by the person giving it at any time before the proxy is voted by the
filing of an instrument revoking it or of a duly executed proxy bearing a later
date with the Secretary of Ralcorp, prior to or at the Special Meeting, or by
voting in person at the Special Meeting. All written notices of revocation and
other communications with respect to revocation of proxies should be addressed
as follows: Ralcorp Holdings, Inc., 800 Market Street, Suite 2900, St. Louis,
Missouri 63101, Attention: Secretary. Attendance at the Special Meeting will not
in and of itself constitute revocation of a proxy.
The Ralcorp Board is not currently aware of any business to be acted upon
at the Special Meeting other than as described herein. If, however, other
matters are properly brought before the Special Meeting, the persons appointed
as proxies will have discretion to vote or act thereon according to their best
judgment. Shareholders of Ralcorp will not be entitled to present any matters
for consideration at the Special Meeting.
SOLICITATION OF PROXIES
In addition to solicitation by mail, directors, officers and employees of
Ralcorp, who will not be specifically compensated for such services, may solicit
proxies from the shareholders of Ralcorp, personally or by telephone, telecopy
or telegram or other forms of communication. Brokerage houses, nominees,
fiduciaries and other custodians will be requested to forward soliciting
materials to beneficial owners and will be reimbursed for their reasonable
expenses incurred in sending proxy materials to beneficial owners.
In addition, Ralcorp has retained Georgeson & Company, Inc. to assist in
the solicitation of proxies from its shareholders. Georgeson will assist by
distributing proxy material to banks, brokers and other institutional holders
and by reviewing charges from brokers for forwarding material to beneficial
owners. Georgeson will also monitor returned proxy cards and may assist in
sending follow-up letters and in some cases making phone calls to broker clients
and larger record holders. The fees to be paid to such firm for such services by
Ralcorp are not expected to exceed $15,000, plus reasonable out-of-pocket costs
and expenses such as trucking, air freight and postage, data processing and
other miscellaneous items. In addition, telephone calls to registered
shareholders and non-objecting beneficial owners would be billed at $6.00 per
call. Ralcorp will bear its own expenses in connection with the solicitation of
proxies for the Special Meeting, except that each of Ralcorp and General Mills
will pay one-half of the costs incurred in printing this Proxy
Statement-Prospectus and the New Ralcorp Information Statement (and the related
General Mills Registration Statement and New Ralcorp Registration Statement),
the form of proxy and other proxy materials.
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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS OF COMMON STOCK
The following table sets forth Ralcorp Common Stock ownership information
with respect to each of Ralcorp's Directors, five highest paid Executive
Officers (the "Named Executive Officers"), and all Directors and Executive
Officers as a group and with respect to each person who owns more than 5% of
Ralcorp Common Stock. Ownership information for 5% holders is as of October 31,
1996. Ownership information for Directors, Named Executive Officers and all
Directors and Executive Officers as a group is as of November 30, 1996. Except
as noted, all such parties possess sole voting and investment powers with
respect to the shares noted. An asterisk in the column listing the percentage of
shares beneficially owned indicates the person owns less than 1% of the Ralcorp
Common Stock as of November 30, 1996.
<TABLE>
<CAPTION>
NUMBER OF SHARES % OF SHARES EXPLANATORY
NAME AND ADDRESS BENEFICIALLY OWNED OUTSTANDING(A) NOTES
- ---------------------------------------------------- ------------------ -------------- -----------
<S> <C> <C> <C>
Boatmen's Bancshares, Inc. ......................... 1,785,459 5.4 (B)
One Boatmen's Plaza
St. Louis, MO 63101
FMR Corp. .......................................... 2,825,317 8.6 (C)
82 Devonshire Street
Boston, MA 02109
William H. Danforth................................. 307,417 * (D)(E)(F)
William D. George, Jr. ............................. 1,000 *
Jack W. Goodall..................................... 35,100 *
David W. Kemper..................................... 1,000 * (E)
Joe R. Micheletto................................... 71,084 * (G)
William P. Stiritz.................................. 281,959 * (E)(H)
Kevin J. Hunt....................................... 17,103 * (I)
Robert W. Lockwood.................................. 31,070 * (J)
James A. Nichols.................................... 96,182 * (K)
David P. Skarie..................................... 17,648 * (L)
All Directors and Executive Officers as a group (12
persons).......................................... 867,213 2.6 (M)
</TABLE>
- ---------------
(A) For purposes of calculating the percentage of Shares Outstanding owned by
each individual or the group, Shares Outstanding were deemed to be (i)
shares actually outstanding on November 30, 1996, plus, in the case of each
Named Executive Officer and of the group, (ii) shares attributable to stock
options held by the officer or members of the group which could be exercised
for Common Stock within 60 days after December 3, 1996.
(B) This amount consists of shares of Ralcorp Common Stock owned by the
following subsidiaries of Boatmen's Bancshares, Inc: Boatmen's Trust
Company -- 1,783,259 shares and other Boatmen's Bancshares, Inc.
subsidiaries -- 2,200 shares. Of such shares, Boatmen's has voting and
investment powers as follows: sole voting -- 390,459 shares; shared voting
-- 1,393,920 shares; sole investment -- 87,934 shares; and shared
investment -- 1,637,280 shares. Of such shares, voting and investment
powers for 254,922 shares are shared with Dr. Danforth who is a director of
the Company.
(C) Includes 1,979,132 shares beneficially owned by Fidelity Management &
Research Company, as a result of its serving as investment adviser to
various investment companies registered under Section 8 of the Investment
Company Act of 1940 and its serving as investment adviser to certain other
funds which are generally offered to limited groups of investors; 838,685
shares beneficially owned by Fidelity Management Trust Company, as a result
of its serving as trustee or managing agent for various private investment
accounts, primarily employee benefit plans and its serving as investment
adviser to certain other funds which are generally offered to limited groups
of investors; and 7,500 shares beneficially owned by Fidelity International
Limited, as a result of its serving as investment adviser to various
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<PAGE> 60
non-U.S. investment companies. FMR Corp. has sole voting power with respect to
651,293 shares and sole investment power with respect to 2,817,817 shares.
Fidelity International Limited has sole voting and investment powers with
respect to all the shares it beneficially owns.
(D) Excludes 1,100,000 shares, or 3.3% of the outstanding Common Stock, held by
The Danforth Foundation, St. Louis, Missouri. Dr. Danforth is one of the ten
trustees of the Foundation. Dr. Danforth disclaims beneficial ownership of
such shares.
(E) Excludes 841,870 shares, or 2.6% of the outstanding Common Stock, held by
Washington University, St. Louis, Missouri. Dr. Danforth is Chairman of the
Board of Trustees of the University and Messrs. Stiritz and Kemper serve on
the University's Board of Trustees, which consists of 49 members.
(F) Dr. Danforth has sole voting and investment powers respecting 22,648
shares. He shares voting and investment powers respecting 284,769 shares,
and disclaims beneficial ownership of 29,847 of such shares.
(G) Includes 21,000 restricted shares of Ralcorp Common Stock as to which Mr.
Micheletto presently has only voting power and 30,388 shares of Ralcorp
Common Stock which are not presently owned but could be acquired within 60
days by the exercise of stock options. Also includes 9,381 shares of Ralcorp
Common Stock held under Ralcorp's Savings Investment Plan. Mr. Micheletto
has only voting power with respect to 1,279 of these shares.
(H) Includes 3,333 shares of Ralcorp Common Stock owned by Mr. Stiritz's wife.
(I) Includes 4,637 restricted shares of Ralcorp Common Stock as to which Mr.
Hunt presently has only voting power and 5,472 shares of Ralcorp Common
Stock which are not presently owned but could be acquired within 60 days by
the exercise of stock options. Also includes 1,729 shares of Ralcorp Common
Stock held under Ralcorp's Savings Investment Plan. Mr. Hunt has only
voting power with respect to 1,929 of these shares.
(J) Includes 6,000 restricted shares of Ralcorp Common Stock as to which Mr.
Lockwood presently has only voting power, 216 shares of Ralcorp Common
Stock as to which he shares voting and investment powers, and 14,443 shares
of Ralcorp Common Stock which are not presently owned but could be acquired
within 60 days by the exercise of stock options. Also includes 2,085 shares
of Ralcorp Common Stock held under Ralcorp's Savings Investment Plan. Mr.
Lockwood has only voting power with respect to 2,081 of these shares.
(K) Includes 4,800 restricted shares of Ralcorp Common Stock as to which Mr.
Nichols presently has only voting power and 64,424 shares of Ralcorp Common
Stock which are not presently owned but could be acquired within 60 days by
the exercise of stock options. Also includes 3,866 shares of Ralcorp Common
Stock held under Ralcorp's Savings Investment Plan. Mr. Nichols has only
voting power with respect to 1,778 of these shares.
(L) Includes 6,000 shares of Ralcorp Common Stock as to which Mr. Skarie
presently has only voting power and 4,866 shares of Ralcorp Common Stock
which are not presently owned but could be acquired within 60 days by the
exercise of stock options. Also includes 2,288 shares of Ralcorp Common
Stock held under Ralcorp's Savings Investment Plan. Mr. Skarie has only
voting power with respect to 1,357 of these shares.
(M) With respect to all Executive Officers except those named in the above
Table: includes 4,056 shares of Ralcorp Common Stock held under Ralcorp's
Savings Investment Plan (the Executive Officers have only voting power with
respect to 1,487 of these shares); 600 restricted shares of Ralcorp Common
Stock as to which such officers presently have only voting power; and 1,218
shares of Ralcorp Common Stock which are not presently owned but could be
acquired within 60 days by the exercise of stock options.
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DESCRIPTION OF CAPITAL STOCK OF GENERAL MILLS
CAPITAL STOCK
The following description of certain terms of the capital stock of General
Mills does not purport to be complete and is qualified in its entirety by
reference to General Mills' Restated Certificate of Incorporation incorporated
herein by reference. See "WHERE YOU CAN FIND MORE INFORMATION."
General Mills' Restated Certificate of Incorporation currently authorizes
the issuance of one billion shares of General Mills Common Stock and five
million shares of Cumulative Preference Stock, without par value, issuable in
series (the "General Mills Preference Stock"). The General Mills Board is
authorized to approve the issuance of one or more series of General Mills
Preference Stock without further authorization of the shareholders of General
Mills and to fix the number of shares, the designations, the relative rights and
the limitations of any such series.
No shares of General Mills Preference Stock are currently outstanding, but
General Mills has reserved for issuance 2,000,000 shares of its Series B
Participating Cumulative Preference Stock (the "Preference Shares") issuable
upon exercise of the General Mills Rights. The General Mills Board, without
shareholder approval, could authorize the issuance of General Mills Preference
Stock with voting, conversion and other rights that could adversely affect the
voting power and other rights of holders of General Mills Common Stock or other
series of General Mills Preference Stock or that could have the effect of
delaying, deferring or preventing a change in control of General Mills. A
summary of the General Mills Rights, which are attached to and trade with the
General Mills Common Stock, is set forth under "-- Rights."
The holders of General Mills Common Stock are entitled to receive dividends
when and as declared by the General Mills Board out of funds legally available
therefor, provided that if any shares of General Mills Preference Stock are at
the time outstanding, the payment of dividends on General Mills Common Stock or
other distributions (including purchases of General Mills Common Stock) may be
subject to the declaration and payment of full cumulative dividends, and the
absence of arrearages in any mandatory sinking fund, on outstanding shares of
General Mills Preference Stock.
The holders of General Mills Common Stock are entitled to one vote for each
share on all matters voted on by stockholders, including election of directors.
The holders of General Mills Common Stock do not have any conversion, redemption
or preemptive rights. In the event of the dissolution, liquidation or winding up
of General Mills, holders of General Mills Common Stock are entitled to share
ratably in any assets remaining after the satisfaction in full of the prior
rights of creditors, including holders of General Mills' indebtedness, and the
aggregate liquidation preference of any General Mills Preference Stock then
outstanding.
All outstanding shares of General Mills Common Stock are fully paid and
nonassessable.
The transfer agent for the General Mills Common Stock is Norwest Bank
Minnesota, N.A., 161 North Concord Exchange, P.O. Box 566, South St. Paul,
Minnesota 55075-0738.
For a discussion of certain differences between the General Corporation Law
of the State of Delaware (the "DGCL") and the MGBCL applicable to shareholders
generally, see "COMPARISON OF CERTAIN RIGHTS OF SHAREHOLDERS OF RALCORP AND
GENERAL MILLS."
RIGHTS
On December 11, 1995, the General Mills Board declared a dividend of one
preference share purchase right (a "General Mills Right") for each outstanding
share of General Mills Common Stock. The dividend was paid on February 1, 1996
to shareholders of record on January 10, 1996 (the "General Mills Record Date").
Each General Mills Right entitles the registered holder to purchase from General
Mills one one-hundredth of a Preference Share at a price of $240 per one
one-hundredth of a Preference Share (the "General Mills Purchase Price"),
subject to adjustment. The description and terms of the General Mills Rights are
set forth in a Rights Agreement (the "General Mills Rights Agreement") between
General Mills and Norwest Bank Minnesota, N.A., as Rights Agent (the "General
Mills Rights Agent"). Pursuant to the
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Merger Agreement, each share of General Mills Common Stock issued in the Merger
will be accompanied by one duly authorized and validly issued General Mills
Right having the terms summarized herein.
Until the earlier to occur of (a) 10 days following a public announcement
that a person or group of affiliated or associated persons (a "General Mills
Acquiring Person") have acquired beneficial ownership of 20% or more of the
outstanding shares of General Mills Common Stock or (b) 10 business days (or
such later date as may be determined by action of the General Mills Board prior
to such time as any person or group of affiliated persons becomes a General
Mills Acquiring Person) following the commencement of, or announcement of an
intention to make, a tender offer or exchange offer, the consummation of which
would result in the beneficial ownership by a person or group of 20% or more of
the outstanding shares of General Mills Common Stock (the earlier of such dates
being called the "General Mills Distribution Date"), the General Mills Rights
will be evidenced, with respect to any of the General Mills Common Stock
certificates outstanding as of the General Mills Record Date, by such General
Mills Common Stock certificate with a copy of a summary of the terms of the
General Mills Rights (the "Summary of General Mills Rights") attached thereto.
The General Mills Rights Agreement provides that, until the General Mills
Distribution Date (or earlier redemption or expiration of the General Mills
Rights), the General Mills Rights will be transferred with and only with the
shares of General Mills Common Stock. Until the General Mills Distribution Date
(or earlier redemption or expiration of the General Mills Rights), new General
Mills Common Stock certificates issued after the General Mills Record Date upon
transfer or new issuance of shares of General Mills Common Stock will contain a
notation incorporating the General Mills Rights Agreement by reference. Until
the General Mills Distribution Date (or earlier redemption or expiration of the
General Mills Rights), the surrender for transfer of any certificates for shares
of General Mills Common Stock outstanding as of the General Mills Record Date,
even without such notation or a copy of the Summary of General Mills Rights
being attached thereto, will also constitute the transfer of the General Mills
Rights associated with the shares of General Mills Common Stock represented by
such certificate. As soon as practicable following the General Mills
Distribution Date, separate certificates evidencing the General Mills Rights
("General Mills Right Certificates") will be mailed to holders of record of the
shares of General Mills Common Stock as of the close of business on the General
Mills Distribution Date and such separate General Mills Right Certificates alone
will evidence the General Mills Rights.
The General Mills Rights are not exercisable until the General Mills
Distribution Date. The General Mills Rights will expire on February 1, 2006 (the
"General Mills Final Expiration Date"), unless the General Mills Final
Expiration Date is extended or unless the General Mills Rights are earlier
redeemed or exchanged by General Mills, in each case, as described below.
The General Mills Purchase Price payable, and the number of Preference
Shares or other securities or property issuable, upon exercise of the General
Mills Rights are subject to adjustment from time to time to prevent dilution (a)
in the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Preference Shares, (b) upon the grant to holders of the
Preference Shares of certain rights or warrants to subscribe for or purchase
Preference Shares at a price, or securities convertible into Preference Shares
with a conversion price, less than the then-current market price of the
Preference Shares or (c) upon the distribution to holders of the Preference
Shares of evidences of indebtedness or assets (excluding regular periodic cash
dividends paid out of earnings or retained earnings or dividends payable in
Preference Shares) or of subscription rights or warrants (other than those
referred to above).
The number of outstanding General Mills Rights and the number of one
one-hundredths of a Preference Share issuable upon exercise of each General
Mills Right are also subject to adjustment in the event of a stock split of the
shares of General Mills Common Stock or a stock dividend on the shares of
General Mills Common Stock payable in shares of General Mills Common Stock or
subdivisions, consolidations or combinations of the shares of General Mills
Common Stock occurring, in any such case, prior to the General Mills
Distribution Date.
Preference Shares purchasable upon exercise of the General Mills Rights
will not be redeemable. Each Preference Share will be entitled to a minimum
preferential quarterly dividend payment of $10 per share but will be entitled to
an aggregate dividend of 100 times the dividend declared per share of General
Mills
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Common Stock. In the event of liquidation, the holders of the Preference Shares
will be entitled to a minimum preferential liquidation payment of $100 per share
but will be entitled to an aggregate payment of 100 times the payment made per
share of General Mills Common Stock. Each Preference Share will have 100 votes,
voting together with the shares of General Mills Common Stock. Finally, in the
event of any merger, consolidation or other transaction in which shares of
General Mills Common Stock are exchanged, each Preference Share will be entitled
to receive 100 times the amount received per share of General Mills Common
Stock. These rights are protected by customary antidilution provisions.
Because of the nature of the Preference Shares' dividend, liquidation and
voting rights, the value of the one one-hundredth interest in a Preference Share
purchasable upon exercise of each General Mills Right should approximate the
value of one share of General Mills Common Stock.
In the event that General Mills is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning
power are sold after a person or group has become a General Mills Acquiring
Person, proper provision will be made so that each holder of a General Mills
Right will thereafter have the right to receive, upon the exercise thereof at
the then current exercise price of the General Mills Right, that number of
shares of common stock of the acquiring company which at the time of such
transaction will have a market value of two times the exercise price of the
General Mills Right. In the event that any person or group of affiliated or
associated persons becomes a General Mills Acquiring Person, proper provision
shall be made so that each holder of a General Mills Right, other than General
Mills Rights beneficially owned by the General Mills Acquiring Person (which
will thereafter be void), will thereafter have the right to receive upon
exercise that number of shares of General Mills Common Stock having a market
value at the time of such occurrence of two times the exercise price of the
General Mills Right.
At any time after any person or group becomes a General Mills Acquiring
Person and prior to the acquisition by such person or group of 50% or more of
the outstanding shares of General Mills Common Stock, the General Mills Board
may exchange the General Mills Rights (other than General Mills Rights owned by
such person or group which will have become void), in whole or in part, at an
exchange ratio of one share of General Mills Common Stock, or one one-hundredth
of a Preference Share, per General Mills Right (subject to adjustment).
With certain exceptions, no adjustment in the General Mills Purchase Price
will be required until cumulative adjustments require an adjustment of at least
1% in such General Mills Purchase Price. No fractional Preference Shares will be
issued (other than fractions which are integral multiples of one one-hundredth
of a Preference Share, which may, at the election of General Mills, be evidenced
by depositary receipts) and in lieu thereof, an adjustment in cash will be made
based on the market price of the Preference Shares on the last trading day prior
to the date of exercise.
At any time prior to the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 20% or more of the outstanding
share of General Mills Common Stock, the General Mills Board may redeem the
General Mills Rights in whole, but not in part, at a price of $.01 per General
Mills Right (the "General Mills Redemption Price"). The redemption of the
General Mills Rights may be made effective at such time, on such basis and with
such conditions as the General Mills Board in its sole discretion may establish.
Immediately upon any redemption of the General Mills Rights, the right to
exercise the General Mills Rights will terminate and the only right of the
holders of General Mills Rights will be to receive the General Mills Redemption
Price.
The terms of the General Mills Rights may be amended by the General Mills
Board without the consent of the holders of the General Mills Rights, including
an amendment to lower certain thresholds described above to not less than the
greater of (a) the sum of .001% and the largest percentage of the outstanding
shares of General Mills Common Stock then known to General Mills to be
beneficially owned by any person or group of affiliated or associated persons
and (b) 10%, except that from and after such time as any person or group of
affiliated or associated persons becomes a General Mills Acquiring Person, no
such amendment may adversely affect the interests of the holders of the General
Mills Rights.
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Until a General Mills Right is exercised, the holder thereof, as such, will
have no rights as a shareholder of General Mills, including, without limitation,
the right to vote or to receive dividends.
The General Mills Rights have certain antitakeover effects. The General
Mills Rights will cause substantial dilution to a person or group of persons
that attempts to acquire General Mills on terms not approved by the General
Mills Board. The General Mills Rights should not interfere with any merger or
other business combination approved by the General Mills Board prior to the time
that a person or group has acquired beneficial ownership of 20 percent or more
of the General Mills Common Stock since the General Mills Rights may be redeemed
by General Mills at the General Mills Redemption Price until such time.
A copy of the General Mills Rights Agreement has been filed with the SEC as
an Exhibit to a Registration Statement on Form 8-A dated December 18, 1995. A
copy of the General Mills Rights Agreement is available free of charge from
General Mills. This summary description of the General Mills Rights does not
purport to be complete and is qualified in its entirety by reference to the
General Mills Rights Agreement, which is hereby incorporated herein by
reference.
COMPARISON OF CERTAIN RIGHTS OF SHAREHOLDERS
OF RALCORP AND GENERAL MILLS
Upon consummation of the Merger, the shareholders of Ralcorp will become
shareholders of General Mills and their rights will be governed by the General
Mills Restated Certificate of Incorporation and By-Laws, which differ in certain
material respects from the Ralcorp Restated Articles of Incorporation and
By-Laws. As shareholders of General Mills, the rights of former Ralcorp
shareholders will be governed by the DGCL instead of the MGBCL. Delaware is the
jurisdiction of incorporation of General Mills and Missouri is the jurisdiction
of incorporation of Ralcorp.
The following comparison of the DGCL, the General Mills Restated
Certificate of Incorporation and By-Laws, on the one hand, and the MGBCL, the
Ralcorp Restated Articles of Incorporation and By-Laws, on the other, is not
intended to be complete and is qualified in its entirety by reference to the
General Mills Restated Certificate of Incorporation, the General Mills By-Laws,
the Ralcorp Restated Articles of Incorporation and the Ralcorp By-Laws. Copies
of the General Mills Restated Certificate of Incorporation and General Mills
By-Laws are available for inspection at the offices of General Mills and copies
will be sent to the holders of Ralcorp Common Stock upon request. Copies of the
Ralcorp Restated Articles of Incorporation and Ralcorp By-Laws are available for
inspection at the principal executive offices of Ralcorp and copies will be sent
to holders of Ralcorp Common Stock upon request. See also "DESCRIPTION OF NEW
RALCORP CAPITAL STOCK" in the New Ralcorp Information Statement mailed with this
Proxy Statement-Prospectus.
The General Mills Restated Certificate of Incorporation and By-Laws and the
DGCL contain certain provisions similar to those in the Ralcorp Restated
Articles of Incorporation and By-Laws and the MGBCL that could prevent or delay
the acquisition of General Mills by means of a tender offer, a proxy contest or
otherwise. These provisions could limit shareholders' participation in certain
types of business combinations or other transactions that might be proposed in
the future, whether or not such transactions were favored by a majority of
shareholders, and could enhance the ability of officers and directors to retain
their positions.
SIZE AND CLASSIFICATION OF THE BOARD OF DIRECTORS
Ralcorp
Pursuant to the Ralcorp Restated Articles of Incorporation, the Ralcorp
Board is divided into three classes which are as nearly equal in number as
possible except that one class may be one greater or one less in number than the
other two classes. Directors of the Ralcorp Board are elected to serve staggered
three-year terms. Ralcorp's Restated Articles of Incorporation provides that the
number of directors will be fixed by the By-Laws at not less than three. The
Ralcorp By-Laws provide that the Board of Directors must consist of not less
than five nor more than twelve members. Notwithstanding the foregoing, however,
whenever the holders of Ralcorp stock, other than Ralcorp Common Stock, will
have the right to elect directors, voting separately
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by class or series, to elect directors, the election, term of office, filling of
vacancies and other features of such directorship, will be governed by the terms
of the Restated Articles of Incorporation, and such directors so elected will
not be divided into classes unless expressly provided. The provision of the
Restated Articles of Incorporation regarding the division of the Board into
three classes may not be changed except by the affirmative vote of not less than
two-thirds of all the outstanding shares of capital stock of Ralcorp then
entitled to vote generally in the election of directors; provided, however, that
whenever the holders of shares of any class are entitled to elect one or more
directors, such amendment requires the affirmative vote of not less than
two-thirds of the outstanding shares of each such class entitled to vote at such
meeting.
General Mills
Pursuant to the General Mills Restated Certificate of Incorporation, the
number of directors of General Mills may be not less than three, with the
precise number to be prescribed by the By-Laws. The General Mills By-Laws
provide that the number of directors of General Mills will be not less than
twelve, with the precise number determined by a majority vote of the directors
present at a meeting at which a quorum is constituted. General Mills directors
are elected to serve one-year terms. No person is eligible to become or remain a
director of the corporation unless the person is a stockholder of the
corporation, and no more than six of the members of the Board of Directors will
be officers or employees of the corporation, with the exception that the
Chairman of the Board is not deemed to be such an officer or employee. The
current General Mills Board consists of 12 members. The current members of the
General Mills Board who are officers or employees of General Mills are the
Chairman and Chief Executive Officer, the President and the Vice Chairman.
REMOVAL OF DIRECTORS; FILLING VACANCIES ON THE BOARD OF DIRECTORS
Ralcorp
Directors of Ralcorp may be removed only for cause at a meeting called
expressly for that purpose and only upon the affirmative vote of two-thirds of
all members of the Board of Directors and two-thirds of all of the then
outstanding shares of capital stock entitled to vote in the election of
Directors. In addition, in the event that a Director fails to meet any
qualifications stated in the Ralcorp By-Laws for election as a Director or is in
breach of any agreement relating to the Director's service as a Director or
employee of Ralcorp, he or she may be removed from office by the affirmative
vote of a majority of the entire Board of Directors. The Ralcorp By-Laws provide
that no one will be eligible for election as a Director of Ralcorp if his or her
70th birthday falls on a date prior to the commencement of the term for which he
or she is to be elected or appointed, and that no person will be qualified to be
elected and to hold office as a Director if such person is determined by a
majority of the Board of Directors to have acted in a manner contrary to the
best interest of Ralcorp, including, but not limited to, the violation of any
federal or state law, or breach of any agreement between that Director and
Ralcorp relating to his or her service as a Director, employee or agent of
Ralcorp. Where a vacancy occurs in any class of Directors or where a
directorship is created as a result of an increase in the number of Directors to
constitute the Board of Directors, that vacancy may be filled only by the vote
of a majority of the Directors remaining in office, although less than a quorum,
until the next election of Directors by the shareholders of Ralcorp.
General Mills
Neither the General Mills Restated Certificate of Incorporation nor its
By-Laws provide for the removal of directors. However, under the DGCL, any
Director or the entire Board of Directors generally may be removed, with or
without cause, by the holders of a majority of the shares entitled to vote at an
election of Directors. Any vacancy in the Board of Directors resulting from
death, resignation, disqualification, increase in number of Directors, or any
other cause may be filled by a majority of the remaining Directors, though less
than a quorum, at any regular or special meeting of the Directors, by
stockholders at the first annual meeting held after such vacancy occurs or by
stockholders at a special meeting called for the purpose of filling such
vacancy.
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SHAREHOLDER NOMINATIONS
Ralcorp
The By-Laws of Ralcorp provide that shareholders may nominate individuals
for election to the Board at either the annual meeting or at a special meeting
which the Board of Directors has called for the purpose of electing Directors.
In order to nominate an individual at an annual meeting, a shareholder must
deliver written notice of the nomination to the secretary of Ralcorp at the
principal executive offices of the corporation not less than 60 days nor more
than 90 days prior to the first anniversary of the preceding year's annual
meeting; provided, however, that in the event that the date of the annual
meeting is advanced by more than 30 days or delayed by more than 60 days from
that anniversary, notice by the shareholder must be so delivered not earlier
than the 90th day prior to such annual meeting and not later than the close of
business on the later of the 60th day prior to date of the annual meeting or the
10th day following the day on which the date of the annual meeting is publicly
announced. Notwithstanding the foregoing, in the event that the number of
Directors to be elected to the Board is increased and a public announcement
naming all of the nominees for Director or specifying the number of Directors to
be elected is not made by Ralcorp at least 70 days prior to the first
anniversary of the preceding year's annual meeting, a shareholder's notice with
respect to nominees for any new positions must be delivered to the Secretary of
Ralcorp at the principal executive offices of Ralcorp not later than the close
of business on the tenth day following the day on which such public announcement
is first made by Ralcorp.
In order to nominate an individual at a special meeting, the shareholder
must deliver written notice to the Secretary of Ralcorp at its principal
executive offices not earlier than the 90th day prior to the special meeting and
not later than the close of business on the later of either the 60th day prior
to such special meeting or the tenth day following the day on which the date of
the special meeting is publicly announced.
In both instances, the written notice must set forth as to each person whom
the shareholder proposes to nominate for election or re-election as a Director,
the name, age, business and residential addresses, and principal occupation of
each nominee, the class and number of shares of Ralcorp capital stock
beneficially owned by such nominee on the date of such notice, a description of
all arrangements or understanding between the shareholder and each nominee, any
information required to be disclosed in the solicitation of proxies, and the
written consent of each proposed nominee to be named as a nominee and to serve
as a Director if so elected; and as to the shareholder giving the notice and the
beneficial owner, if any, on whose behalf the nomination or proposal is made,
the name and address of such shareholder, the class and number of shares of
stock of Ralcorp which are owned beneficially and of record of that shareholder,
and a representation that the shareholder intends to appear in person or by
proxy at the meeting to nominate the person or persons specified in the notice.
The Ralcorp Board may reject any nomination which is not made in accordance
with the foregoing requirements. If the Ralcorp Board fails to consider the
validity of any nomination, the presiding officer of the meeting has the power
and duty to determine whether a nomination was made in accordance with the
foregoing requirements, and, if the presiding officer finds otherwise, to
declare that the defective nomination be disregarded.
General Mills
The By-Laws of General Mills provide that stockholders may nominate
individuals for election to the Board at either the annual meeting or at a
special meeting which has been called by the General Mills Board for the purpose
of electing Directors. A stockholder who wants to nominate an individual for
election to the Board at the annual meeting must deliver written notice of the
nomination to the Secretary of the corporation at the principal executive
offices of the corporation not later than the close of business on the 90th day
prior to the first anniversary of the preceding year's annual meeting but before
the close of business on the 60th day prior to such anniversary; provided,
however, that if the date of the annual meeting is more than 30 days before or
more than 60 days after such anniversary date, the stockholder must provide the
Secretary with written notice after the close of business on the 90th day prior
to such annual meeting but before the close of business
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on the later of either the 60th day prior to such anniversary or the tenth day
following the public announcement of the date of the annual meeting.
A stockholder who wants to nominate an individual for election to the Board
at a special meeting called by the Board for the purpose of electing Directors
must deliver written notice to the Secretary at the principal executive offices
of General Mills after the close of business on the 90th day prior to such
special meeting, but before the close of business on the later of either the
60th day prior to such special meeting or the tenth day following the day on
which the date of the special meeting is publicly announced.
In the event that the number of Directors to be elected to the Board of
Directors of General Mills is increased and there is no public announcement by
General Mills naming all of the nominees for Director or specifying the size of
the increased board at least 70 days prior to the first anniversary of the
preceding year's annual meeting, stockholders must deliver written notice to the
Secretary at the principal executive offices of General Mills not later than the
close of business on the tenth day following the day on which such public
announcement is made by General Mills.
In all instances, the written notice must set forth: (a) such information
about the person to be nominated that is required to be disclosed in
solicitation of proxies for election of directors; and (b) the name and address
of the stockholder making the nomination as well as the class and number of
shares owned by such stockholder. Except as otherwise provided by law, if the
Chairman of an annual meeting determines that a nomination was not made in
accordance with these procedures, he will so declare at the meeting and the
defective proposal will be disregarded.
ACTION BY WRITTEN CONSENT
Ralcorp
Under Section 351.273 of the MGBCL, any corporate action that must be taken
at a meeting of the shareholders may be taken without a meeting if consents in
writing, setting forth the action to be taken, are signed by all of the
shareholders entitled to vote with respect to the subject matter of the
election. Ralcorp's By-Laws provide that any action required or permitted to be
taken by the shareholders of Ralcorp may be taken without a meeting of the
shareholders only if consents in writing, setting forth the action so taken, are
signed by all of the shareholders entitled to vote thereon.
General Mills
Under the DGCL, unless otherwise provided in the corporation's certificate
of incorporation, shareholders may take action without a meeting without prior
notice and without a vote, upon the written consent of shareholders having not
less than the minimum number of votes that would be necessary to authorize the
proposed action at a meeting at which all shares entitled to vote were present
and voted. The General Mills Restated Certificate of Incorporation provides that
action can be taken by stockholders only at a meeting of stockholders and that
stockholder action by written consent is prohibited.
MEETINGS OF SHAREHOLDERS
Ralcorp
A special meeting of shareholders of Ralcorp or of the holders of any
special class of stock of Ralcorp may be called only by the affirmative vote of
a majority of the entire Board of Directors or by the Chairman of the Board, or
the President by request for such a meeting in writing. Request must be
delivered to the Secretary of Ralcorp and must state the purpose of the proposed
meeting. Upon such request, the Secretary is required to call a special meeting
of the shareholders, to be held at the time specified in the request.
At any meeting of shareholders, a majority of the outstanding shares
entitled to vote and present in person or represented by proxy constitutes a
quorum. A majority of the votes cast is generally required for action by the
shareholders of Ralcorp.
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General Mills
A special meeting of the stockholders may be called for any purpose or
purposes by the Chairman of the Board of Directors or by resolution of the Board
of Directors. Special meetings of the holders of any class or classes of stock
or any one or more series of any class or classes of stock for the purpose of
electing directors in accordance with a special right as a class or series will
be called as provided in General Mills Restated Certificate of Incorporation.
Any number of stockholders holding one-half of the stock issued and
outstanding entitled to vote, whether present in person or by proxy, constitutes
a quorum for a meeting of the stockholders of General Mills. Questions at a
meeting of the stockholders are generally determined by a majority vote in
interest of those stockholders who are present at the meeting in person or by
proxy and who are entitled to vote. At any meeting of stockholders for the
election of Directors at which any class or classes of stock or any one or more
series of any class or classes of stock will have a separate vote as such class
or series for the election of Directors by such class or series, the absence of
a quorum of any other class of stock or of any other series of any class of
stock will not prevent the election of the Directors to be elected by such class
or series. The DGCL provides that these quorum and voting requirements may be
increased or decreased by an amendment to the Restated Certificate of
Incorporation and By-Laws of General Mills (which may be effected by the General
Mills Board), so long as the requirement for a quorum does not fall below
one-third of the shares entitled to vote and subject to provisions of the DGCL
in respect of the vote required for certain specified actions, such as mergers.
SHAREHOLDER PROPOSALS
Ralcorp
The By-Laws of Ralcorp provide that shareholders may make a proposal of
business for consideration at the annual meeting. In order to make such a
proposal, a shareholder must deliver written notice of the proposal to the
Secretary of Ralcorp at the principal executive offices of Ralcorp not less than
60 days nor more than 90 days prior to the first anniversary of the preceding
year's annual meeting; provided, however, that in the event that the date of the
annual meeting is advanced by more than 30 days or delayed by more than 60 days
from such date, notice by the shareholder to be timely must be so delivered not
earlier than the 90th day prior to such annual meeting and not later than the
close of business on the later of either the 60th day prior to date of the
annual meeting or the tenth day after the date of the annual meeting is publicly
announced. The written notice must set forth: (a) a brief description of the
business the shareholder desires to be brought before the meeting, the reasons
for conducting such business at the meeting, and any material interest in such
business of the shareholder making the proposal; and (b) the shareholder giving
the notice and the beneficial owner, if any, on whose behalf the nomination or
proposal is made, the name and address of such shareholder, the class and number
of shares of stock of Ralcorp which are owned beneficially and of record of that
shareholder, and a representation that the shareholder intends to appear in
person or by proxy at the meeting to propose such business.
The Ralcorp Board may reject any shareholder proposal submitted for
consideration at the annual meeting which is not made in accordance with the
foregoing requirements. If the Ralcorp Board fails to consider the validity of
any shareholder proposal, the presiding officer of the meeting has the power and
duty to determine whether a proposal was made in accordance with the foregoing
requirements, and, if the presiding officer finds otherwise, to declare that the
defective nomination be disregarded.
General Mills
The By-Laws of General Mills provide that stockholder proposals of business
may be made at an annual meeting of the stockholders pursuant to General Mills'
notice of meeting, by or at the direction of the General Mills Board or by any
stockholder. To bring a proposal of business before the stockholders at an
annual meeting, a stockholder must first provide written notice of the business
proposal to the Secretary of General Mills at the principal executive offices of
General Mills after the close of business on the 90th day prior to the first
anniversary of the preceding year's annual meeting but before the close of
business on the 60th day prior
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to such anniversary; provided, however, that if the date of the annual meeting
is more than 30 days before or more than 60 days after such anniversary date,
the stockholder must provide the secretary with written notice after the 90th
day prior to such annual meeting but before the close of business on the later
of either the 60th day prior to such anniversary or the tenth day following the
public announcement of the date of the annual meeting. The written notice must
contain (a) a brief description of the business to be brought before the
meeting, the reasons for conducting such business at the meeting, and any
material interest the stockholder may have in such business, and (b) the name
and address of the stockholder bringing the proposal, as well as the class and
number of shares of General Mills owned by that stockholder. Except as otherwise
provided by law, if the Chairman of an annual meeting determines that a proposal
was not made in accordance with these procedures, such Chairman must so declare
at such annual meeting and such defective proposal will be disregarded.
REQUIRED VOTE FOR AUTHORIZATION OF CERTAIN ACTIONS
Ralcorp
Subject to the provisions of Ralcorp's Restated Articles of Incorporation
described below under "-- Fair Price Provisions," with respect to certain
business combinations and subject to certain provisions of the MGBCL described
below under "-- State Antitakeover Statutes," under Section 351.420 of the
MGBCL, the approval of two-thirds of the outstanding shares entitled to vote are
required to effect a merger or consolidation.
General Mills
Under the DGCL, the recommendation of the Board of Directors and the
approval of a simple majority of the outstanding shares of General Mills
entitled to vote thereon are required to effect a merger or consolidation or to
sell, lease or exchange substantially all of General Mills' assets. Subject to
the provisions of General Mills' Restated Certificate of Incorporation described
below under "-- Fair Price Provisions," with respect to "business combinations"
(as defined in such Restated Certificate of Incorporation) and subject to
Section 203 of the DGCL described below under "-- State Antitakeover Statutes,"
no vote of the stockholders of General Mills would be required with respect to a
merger or consolidation if General Mills were the surviving corporation of such
merger or consolidation and (a) the related agreement of merger or consolidation
did not amend General Mills' Restated Certificate of Incorporation, (b) each
share of stock of General Mills outstanding immediately prior to the merger was
an identical outstanding or treasury share of General Mills after the Merger and
(c) the number of shares of General Mills Common Stock to be issued in such
merger or consolidation (or to be issuable upon conversion of any convertible
instruments to be issued in such merger or consolidation) did not exceed 20
percent of the shares of General Mills Common Stock outstanding immediately
prior to such merger or consolidation.
AMENDMENT OF CORPORATE CHARTER AND BY-LAWS
Ralcorp
Pursuant to Section 351.090 of the MGBCL, amendments to a certificate of
incorporation may be made in the following manner: (a) the Board of Directors
must adopt a resolution setting forth the proposed amendment and submit the
resolution to a vote at a meeting of the shareholders, or submit the resolution
without first adopting it; and (b) the shareholders must adopt the resolution by
an affirmative vote of a majority of the outstanding shares entitled to vote.
The provision of Ralcorp's Restated Articles of Incorporation relating to the
number and classification of the Board, removal of Directors, and the filling of
vacancies on the Board of Directors may only be amended by an affirmative vote
of two-thirds of all of the outstanding stock of Ralcorp entitled to vote in the
election of Directors. The provisions of Ralcorp's Restated Articles of
Incorporation relating to the approval of certain business combinations and to
the indemnification and liability of directors may only be amended by an
affirmative vote of 85 percent of the outstanding shares of Ralcorp stock
entitled to vote in the election of Directors. Ralcorp's Restated Articles of
Incorporation provides that any of its provisions other than the foregoing may
be amended in the manner prescribed by law.
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The Ralcorp By-Laws may be amended only by the affirmative vote of
two-thirds of all of the members of the Ralcorp Board.
General Mills
The DGCL permits amendment of the certificate of incorporation by a
resolution of the corporation's Board of Directors, followed by a majority vote
of the outstanding stock entitled to vote thereon. The General Mills Restated
Certificate of Incorporation provides that such Restated Certificate of
Incorporation may not be amended in any manner which would adversely affect the
powers, preferences or special rights of the Preference Shares without the
affirmative vote of the holders of a majority of the outstanding Preference
Shares, voting separately as a class. No such preference stock is outstanding.
The General Mills Restated Certificate of Incorporation further provides that
neither the fair price provision in the Restated Certificate of Incorporation
which is described below under "-- Fair Price Provisions," nor the prohibition
of action by written consent which is described above under "-- Action by
Written Consent," may be amended unless such amendment receives the affirmative
vote of at least 51 percent of the stock entitled to vote thereon, excluding the
stock of any person that constitutes an interested stockholder for purposes of
the fair price provision.
With certain exceptions described below, the By-Laws of General Mills may
be amended either by (a) the stockholders at an annual meeting or at any special
meeting, or (b) by the affirmative vote of a majority of the whole General Mills
Board at any regular or special meeting of the General Mills Board. The General
Mills Board may not: (a) amend the provisions of the By-Laws relating to the
eligibility of officers or employees of General Mills to become members of the
General Mills Board or of the Executive Committee of the Board, or (b) alter
certain provisions of the By-Laws with the effect of reducing the size of the
Board of Directors below twelve or the size of the Executive Committee below
eight. So long as any class or classes of stock or any one or more series of any
class or classes of stock which have a separate vote for the election of
Directors are outstanding, no amendment of certain provisions of the General
Mills By-Laws which amendment would adversely affect the rights or preferences
of any such outstanding class or series of stock may be made without the consent
or affirmative vote of the holders of at least two-thirds of each such class or
series entitled to vote thereon; provided, however, that any increase or
decrease in the number of Directors as set forth in the provision of the By-Laws
establishing the current number of directors will not be deemed to affect
adversely such rights or preferences.
APPRAISAL RIGHTS
Ralcorp
The MGBCL provides appraisal rights for (a) mergers and consolidations, and
(b) certain sales or exchanges of substantially all of the property and assets
of a corporation, otherwise than in the usual and regular course of the
corporation's business. Appraisal rights are not available with respect to any
sale or exchange of assets of a corporation authorized by a vote of the
shareholders of the corporation if, prior to or in connection with such
authorization, the shareholders have consented to or approved the voluntary
dissolution of the corporation pursuant to the MGBCL, and such sale, exchange or
other disposition is made in liquidation of the corporation's business and
affairs as provided in the MGBCL. See "THE PROPOSED TRANSACTIONS -- Appraisal
Rights."
General Mills
The DGCL provides appraisal rights for certain mergers and consolidations.
Appraisal rights are not available to holders of (a) shares listed on a national
securities exchange or held of record by more than 2,000 stockholders or (b)
shares of the surviving corporation of the merger, if the merger did not require
the approval of the stockholders of such corporation, unless in either case, the
holders of such stock are required pursuant to the merger to accept anything
other than (i) shares of stock of the surviving corporation, (ii) shares of
stock of another corporation which are also listed on a national securities
exchange or held by
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more than 2,000 holders or (iii) cash in lieu of fractional shares of such
stock. Appraisal rights are not available for a sale of assets or an amendment
to the certificate of incorporation.
FAIR PRICE PROVISIONS
Ralcorp
Ralcorp's Restated Articles of Incorporation provides that certain business
combinations involving Ralcorp and an interested shareholder (defined generally
as a holder of 20 percent or more of the outstanding shares of Ralcorp Common
Stock) require the recommendation of the Ralcorp Board and the affirmative vote
of the holders of not less than 85 percent of all of the outstanding shares of
capital stock of Ralcorp of which an interested shareholder is not the
beneficial owner; provided, however, that such a business combination may be
approved on any affirmative vote required by the MGBCL if: (a) there are one or
more Ralcorp Continuing Directors (as defined below) and the business
combination is approved by a majority of those directors, or (b) the
consideration to be received by shareholders of each class of stock of Ralcorp
is in cash or in the same form as the interested shareholder and its affiliates
have previously paid for a majority of the shares of such class of stock owned
by the interested shareholder, and the cash, or market value of the property,
securities or other consideration to be received per share by the shareholders
of each class of Ralcorp in the business combination is not less than 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, or the market value of such
shares on the date the business combination receives the approval of the Ralcorp
Board. Ralcorp's Restated Articles of Incorporation provides that any amendments
to the foregoing provisions require the affirmative vote of 85 percent of all of
the outstanding shares of capital stock entitled to vote of which an interested
shareholder is not the beneficial owner.
For purposes of these provisions, a "Ralcorp Continuing Director" means any
member of the Ralcorp Board who is not an affiliate or associate of an
interested shareholder and who was a member of the Ralcorp Board prior to the
time that an interested shareholder became an interested shareholder, and any
successor of a Ralcorp Continuing Director if the successor is not an affiliate
or associate of an interested shareholder and is recommended or elected to
succeed a Ralcorp Continuing Director by a majority of Ralcorp Continuing
Directors.
General Mills
The affirmative vote of not less than 51 percent of the voting stock of
General Mills, excluding the voting stock of an interested stockholder (defined
generally as a holder of 10 percent or more of the outstanding shares of General
Mills Common Stock) who is a party to certain business combinations with General
Mills is required for the adoption or authorization of such business
combination, unless by a two-thirds vote the disinterested members of the
General Mills Board determine that: (a) the interested stockholder is the
beneficial owner of not less than 80 percent of the voting stock of General
Mills and has declared its intention to vote in favor of or approve such
business combination; or (b) the fair market value of the consideration per
share to be received or retained by the holders of each class or series of stock
of General Mills in a business combination is equal to or greater than the
consideration per share (including brokerage commissions and soliciting dealers'
fees) paid by such interested stockholder in acquiring the largest number of
shares of such class of stock previously acquired in any one transaction or
series of related transactions, whether before or after the interested
stockholder has not and will not receive the benefit, directly or indirectly
(except proportionately as a stockholder), of any loans, advances, guarantees,
pledges or other financial assistance provided by General Mills, whether in
anticipation of or in connection with such business combination or otherwise. In
the event any vote of holders of voting stock of General Mills is required, an
information statement describing the applicable business combination must be
mailed to all stockholders of General Mills. The statement must contain any
recommendations as to the advisability of such business combination and, if
deemed advisable by the disinterested Directors, an opinion of an investment
banking firm as to the fairness of the terms of such business combination.
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RIGHTS PLANS
Ralcorp
On March 24, 1994, the Ralcorp Board adopted a Rights Agreement and
authorized and declared a dividend on March 24, 1994 (the "Ralcorp Record Date")
of one common share purchase right (a "Ralcorp Right") for each outstanding
share of Ralcorp Common Stock (including shares of Ralcorp Common Stock that
become outstanding after the Ralcorp Record Date but prior to the Ralcorp
Distribution Date, as defined below). Each right entitles the registered holder
to purchase from Ralcorp one share of Ralcorp Common Stock at a price of $75.00
per share (the "Ralcorp Purchase Price") subject to adjustment. The description
and terms of the Ralcorp Rights are as set forth in the Rights Agreement (the
"Ralcorp Rights Agreement") between Ralcorp and Boatmen's Trust Company, as
Rights Agent (the "Ralcorp Rights Agent").
Until the earlier to occur of (a) ten days following a public announcement
that a person or group of affiliated persons (a "Ralcorp Acquiring Person") has,
after the Ralcorp Record Date, acquired beneficial ownership of shares of
Ralcorp Common Stock (other than any shares of Ralcorp Common Stock owned on the
Ralcorp Record Date) constituting 20 percent or more of the outstanding shares
of Ralcorp Common Stock, or (b) ten business days (or such later date as may be
determined by action of the Ralcorp Board prior to such time as any person
becomes a Ralcorp Acquiring Person) following the commencement of, or
announcement of an intention to make, a tender offer or exchange offer, the
consummation of which would result in a person or group acquiring beneficial
ownership of 20 percent or more of such outstanding shares of Ralcorp Common
Stock (the earlier of such dates being called the "Ralcorp Distribution Date"),
the Ralcorp Rights will be evidenced, with respect to any of the Ralcorp Common
Stock share certificates outstanding as of the Ralcorp Record Date, by such
Ralcorp Common Stock share certificate with a copy of a summary of the terms of
the Ralcorp Rights (the "Summary of Ralcorp Rights") attached thereto.
The Ralcorp Rights Agreement provides that, until the Ralcorp Distribution
Date (or earlier redemption, exchange or expiration of the Ralcorp Rights), new
Ralcorp Common Stock share certificates issued after the Ralcorp Record Date,
upon transfer or new issuance of shares of Ralcorp Common Stock, will contain a
notation incorporating the Ralcorp Rights Agreement by reference. Until the
Ralcorp Distribution Date (or earlier redemption or expiration of the Ralcorp
Rights), the surrender for transfer of any certificates for shares of Ralcorp
Common Stock, outstanding as of the Ralcorp Record Date, even without such
notation or a copy of the Summary of Ralcorp Rights being attached thereto, will
also constitute the transfer of the Ralcorp Rights associated with the shares of
Ralcorp Common Stock represented by such certificate. As soon as practicable
following the Ralcorp Distribution Date, separate certificates evidencing the
Ralcorp Rights ("Ralcorp Right Certificates") will be mailed to holders of
record of the shares of Ralcorp Common Stock as of the close of business on the
Ralcorp Distribution Date and such separate Ralcorp Right Certificates alone
will evidence the Ralcorp Rights.
The Ralcorp Rights are not exercisable until the Ralcorp Distribution Date.
The Ralcorp Rights will expire on March 31, 2004 (the "Ralcorp Final Expiration
Date"), unless the Ralcorp Final Expiration Date is extended or unless the
Ralcorp Rights are earlier redeemed or exchanged by Ralcorp, in each case as
described below.
The Ralcorp Purchase Price payable, and the number of shares of Ralcorp
Common Stock or other securities or property issuable, upon exercise of the
Ralcorp Rights are subject to adjustment from time to time to prevent dilution
(a) in the event of a stock dividend on, or a subdivision, combination or
reclassification of, the shares of Ralcorp Common Stock, (b) upon the grant to
holders of the shares of Ralcorp Common Stock of certain rights or warrants to
subscribe for or purchase shares of Ralcorp Common Stock at a price, or
securities convertible into shares of Ralcorp Common Stock with a conversion
price, less than the then current market price of the shares of Ralcorp Common
Stock or (c) upon the distribution to holders of the shares of Ralcorp Common
Stock of evidences of indebtedness or assets (excluding regular periodic cash
dividends paid out of earnings or retained earnings or dividends payable in
shares of Ralcorp Common Stock) or of subscription rights or warrants (other
than those referred to above).
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In the event that Ralcorp is acquired in a merger or other business
combination transaction or 50 percent or more of its consolidated assets or
earning power is sold, proper provision will be made so that each holder of a
Ralcorp Right will thereafter have the right to receive, upon the exercise
thereof at the then current exercise price of the Ralcorp Right, that number of
shares of common stock of the acquiring company which at the time of such
transaction will have a market value of two times the exercise price of the
Ralcorp Right. In the event that any person becomes a Ralcorp Acquiring Person,
proper provision shall be made so that each holder of a Ralcorp Right, other
than Ralcorp Rights beneficially owned by the Ralcorp Acquiring Person (which
will thereafter be void), will thereafter have the right to acquire a share of
Ralcorp Common Stock at 33 1/3 percent of its then current market value. A
Ralcorp Acquiring Person is a person (or a group of affiliated or associated
persons) that becomes the beneficial owner, after the Ralcorp Record Date, of
shares of Ralcorp Common Stock (other than any shares of Ralcorp Common Stock
owned on the Ralcorp Record Date) constituting 20 percent or more of the then
outstanding shares of Ralcorp Common Stock.
At any time after any person becomes a Ralcorp Acquiring Person and prior
to the acquisition by such person or group of 50 percent or more of the
outstanding shares of Ralcorp Common Stock, the Ralcorp Board may exchange the
Ralcorp Rights (other than Ralcorp Rights owned by such person or group which
have become void), in whole or in part, at an exchange rate of one share of
Ralcorp Common Stock per Ralcorp Right (subject to adjustment).
With certain exceptions, no adjustment in the Ralcorp Purchase Price will
be required until cumulative adjustments require an adjustment of at least 1
percent in such Ralcorp Purchase Price. No fractional shares of Ralcorp Common
Stock will be issued, and in lieu thereof, an adjustment in cash will be made
based on the market price of the shares of Ralcorp Common Stock on the last
trading day prior to the date of exercise.
At any time prior to the time a person becomes a Ralcorp Acquiring Person,
the Ralcorp Board may redeem the Ralcorp Rights in whole, but not in part, at a
price of $.05 per Ralcorp Right (the "Ralcorp Redemption Price"). The redemption
of the Ralcorp Rights may be made effective at such time, on such basis and with
such conditions as the Ralcorp Board in its sole discretion may establish.
Immediately upon any redemption of the Ralcorp Rights, the right to exercise the
Ralcorp Rights will terminate and the only right of the holders of Ralcorp
Rights will be to receive the Ralcorp Redemption Price.
The terms of the Ralcorp Rights may be amended by the Ralcorp Board without
the consent of the holders of the Ralcorp Rights, provided that no amendment may
adversely affect such holders.
Until a Ralcorp Right is exercised, the holder thereof, as such, will have
no rights as a shareholder of Ralcorp, including, without limitation, the right
to vote or to receive dividends.
The Ralcorp Rights have certain antitakeover effects. The Ralcorp Rights
will cause substantial dilution to a person or group of persons that attempts to
acquire Ralcorp on terms not approved by the Ralcorp Board. The Merger Agreement
provides that Ralcorp will redeem the Ralcorp Rights pursuant to the terms of
the Ralcorp Rights Agreement prior to the Effective Time.
A copy of the Ralcorp Rights Agreement has been filed with the SEC as an
Exhibit to a Form 10 dated March 24, 1994. A copy of the Ralcorp Rights
Agreement is available free of charge from Ralcorp. This summary description of
the Ralcorp Rights does not purport to be complete and is qualified in its
entirety by reference to the Ralcorp Rights Agreement, which is hereby
incorporated herein by reference.
General Mills
General Mills has declared a dividend of one General Mills Right for each
outstanding share of General Mills Common Stock. The General Mills Rights may
have certain antitakeover effects. See "DESCRIPTION OF CAPITAL STOCK OF GENERAL
MILLS -- Rights."
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STATE ANTITAKEOVER STATUTES
Ralcorp
The MGBCL provides that under certain circumstances, a corporation may
engage in a business combination with a shareholder owning 20 percent or more of
the outstanding voting power of the corporation provided such business
combination occurs at least five years after such interested shareholder became
such; provided further, that the consideration received by shareholders in such
transaction is at least equal to the greater of (a) the highest per share price
paid by the interested shareholder while an interested shareholder during the
five-year period prior to the announcement of the business combination or (b)
the higher of the market price of the shares on the announcement date or on the
date of the interested shareholder's acquisition of the stock.
General Mills
Section 203 of the DGCL would prohibit a "business combination" (as defined
in Section 203, generally including mergers, sales and leases of assets,
issuances of securities and similar transactions) by General Mills or a
subsidiary with an "interested stockholder" (as defined in Section 203,
generally the beneficial owner of 15 percent or more of General Mills' voting
stock) within three years after the person or entity becomes an interested
stockholder, unless (a) prior to the person or entity becoming an interested
stockholder, the business combination or the transaction pursuant to which such
person or entity became an interested stockholder will have been approved by the
General Mills Board, (b) upon the consummation of the transaction in which the
person or entity became an interested stockholder, the interested stockholder
holds at least 85 percent of the voting stock of General Mills (excluding, for
purposes of determining the number of shares outstanding, shares held by persons
who are both officers and directors of General Mills and shares held by certain
employee benefit plans) or (c) the business combination is approved by the
General Mills Board and by the holders of at least two-thirds of the outstanding
voting stock of General Mills, excluding shares held by the interested
stockholder. In connection with approving the Merger Agreement, the General
Mills Board approved the Merger, so that the Merger is not subject to the
limitations set forth in Section 203.
LIMITATION ON DIRECTORS' LIABILITY
Ralcorp
Ralcorp's Restated Articles of Incorporation limits the liability of
Ralcorp's Directors to the fullest extent permitted by applicable law. Missouri
law, however, does not contain any express provision permitting Missouri
corporations to limit the personal liability of directors to a corporation.
General Mills
Section 102 of the DGCL allows a corporation to limit or eliminate the
personal liability of directors to the corporation and its stockholders for
monetary damages for breach of fiduciary duty as a director. However, this
provision excludes any limitation on liability (a) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (b) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (c) for intentional or negligent payment of unlawful
dividends, stock purchase or redemption, or (d) for any transaction from which
the director derived an improper personal benefit. The General Mills Restated
Certificate of Incorporation provides for the limitation on directors' liability
as permitted by this statute.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Ralcorp
Under Section 351.355 of the MGBCL, a Missouri corporation may indemnify
any person against all expenses, liabilities and losses arising by reason of the
fact that such person is or was a director, officer, employee or agent of the
corporation (other than arising in an action by or in the right of the
corporation), if a determination that a person acted in good faith and in a
manner such person reasonably believed to be in or
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not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe such person's
conduct was unlawful is made (a) by the board of directors of the corporation by
a majority vote of a quorum consisting of directors who were not parties to the
action in question, or (b) if 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 (c) by the shareholders of the corporation. A
Missouri corporation must indemnify any person against all expenses, liabilities
and losses arising by reason of the fact that such person is or was a director,
officer, employee or agent of the corporation (other than arising in an action
by or in the right of the corporation), if the person is successful on the
merits or otherwise in the defense of any action, suit or proceeding referred to
above.
Ralcorp's Restated Articles of Incorporation provides that, to the maximum
extent permitted by law, Ralcorp must indemnify all past and present directors
and officers against any claim, liability or expense incurred as a result of
such person's service. Ralcorp's Restated Articles of Incorporation further
provides that Ralcorp may indemnify all past and present employees or agents
against any claim, liability or expense incurred as a result of such person's
service or as a result of any other service, except that, to the extent that an
employee or agent has been successful on the merits or otherwise in the defense
of any action, suit or proceeding, the employee must be so indemnified.
Notwithstanding the foregoing, however, no director, officer, employee or agent
may be indemnified if such person is found to have been knowingly fraudulent,
deliberately dishonest or to have engaged in willful misconduct.
General Mills
Section 145 of the DGCL provides that a corporation may indemnify any of
its officers or directors party to any action, suit or proceeding by reason of
the fact that such person was a director, officer, or employee of the
corporation by, among other things, a majority vote of a quorum consisting of
directors who were not parties to such action, suit, or proceeding provided that
such officer or director acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
corporation.
The General Mills By-Laws provide that General Mills will indemnify any
person against all expenses, liabilities and losses arising by reason of the
fact that such person is or was a director, officer, employee or agent of
General Mills (other than arising in an action by or in the right of General
Mills), if a determination that such person acted in good faith and in a manner
such person reasonably believed to be in or not opposed to the best interests of
General Mills, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe such person's conduct was unlawful is made by (a)
the General Mills Board by a majority vote of a quorum consisting of directors
who were not parties to the action in question, or (b) if 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 (c) by the
stockholders. No indemnification will be made in respect of any claim, issue or
matter as to which a person has been adjudged to be liable to General Mills
unless and only to the extent that the Court of Chancery of the State of
Delaware or the court in which such action or suit was brought determines upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery of the State of Delaware
or such other court will deem proper.
NO CUMULATIVE VOTING
Neither Ralcorp nor General Mills permits cumulative voting.
CONFLICT-OF-INTEREST TRANSACTIONS
Ralcorp
The MGBCL generally permits transactions involving a Missouri corporation
and an interested director of that corporation if (a) the material facts are
disclosed and a majority of disinterested directors consents, (b) the material
facts are disclosed and a majority of shares entitled to vote thereon consents
or (c) the transaction is fair to the corporation at the time it is authorized
by the Board of Directors, a committee thereof, or the shareholders.
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General Mills
The DGCL generally permits transactions involving a Delaware corporation
and an interested director of that corporation if (a) the material facts are
disclosed and a majority of disinterested directors consents, (b) the material
facts are disclosed and a majority of shares entitled to vote thereon consents
or (c) the transaction is fair to the corporation at the time it is authorized
by the Board of Directors, a committee thereof, or the stockholders.
DIVIDENDS AND OTHER DISTRIBUTIONS
Ralcorp
Section 351.220 of the MGBCL generally allows Missouri corporations to pay
dividends where the net assets of the corporation are not less than its stated
capital and the payment of such dividends will not reduce the net assets of the
corporation below its stated capital, subject to the following limitations: (a)
if a dividend of the corporation's own shares having a par value is declared,
such shares must be issued at the par value thereof and an amount of surplus
equal to the aggregate par value of such shares must be transferred to stated
capital at that time; (b) if a dividend is declared payable in its own shares,
without par value, and such shares have a preferential right in the assets of
the corporation in the event of its involuntary liquidation, those shares must
be issued at the liquidation value thereof, and an amount of surplus equal to
the aggregate preferential amount payable with respect to the shares in the
event of involuntary liquidation must be transferred to stated capital at that
time; and (c) if a dividend is declared payable in the corporation's own shares
without par value and none of such shares has a preferential right in the assets
of the corporation in the event of involuntary liquidation, such shares must be
issued at the value that is fixed by resolution of the board of directors at the
time the dividend is declared, and an amount of surplus equal to the aggregate
value so fixed in respect of such shares must be transferred to stated capital
at that time.
General Mills
The DGCL generally allows dividends to be paid out of surplus of the
corporation or out of the net profits of the corporation for the current fiscal
year and/or the prior fiscal year. No dividends may be paid if they would result
in the capital of the corporation being less than the capital represented by the
preferred stock of the corporation.
The By-Laws of General Mills give the Board of Directors the power to
declare lawful dividends when it deems it expedient to do so. The By-Laws
further state that, before declaring a dividend, the Board of Directors may
reserve out of the accumulated profits a sum of money if it deems such sum to be
necessary to provide working capital, for a reserve fund to meet contingencies,
to equalize dividends, or for any other purpose that the Board of Directors
deems conducive to the interests of the corporation.
DUTIES OF DIRECTORS
Ralcorp
The MGBCL provides that directors may consider various constituencies
(including constituencies whose interests may diverge from the interests of
shareholders) in connection with proposals relating to the acquisition of
control of the corporation and in other contexts.
General Mills
The DGCL does not contain a specific provision elaborating the duties of a
board of directors with respect to the best interests of the corporation.
Delaware courts have permitted directors to consider various constituencies
provided that there be some rationally related benefit to the stockholders.
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ISSUANCE OF RIGHTS OR OPTIONS TO PURCHASE SHARES TO DIRECTORS, OFFICERS AND
EMPLOYEES
Ralcorp
None of Ralcorp's Restated Articles of Incorporation, its By-Laws nor the
MGBCL contains any provision requiring the issuance of rights or options to
officers, directors and employees to be approved by a shareholder vote.
General Mills
The General Mills Restated Certificate of Incorporation provides that, upon
the affirmative vote of not less than 66 2/3 percent of the shares of General
Mills Common Stock voting thereon at any meeting of General Mills stockholders,
the General Mills Board may adopt and carry out profit sharing, stock option and
restricted stock plans for any or all of General Mills' directors, officers or
employees, and for any or all of the officers and employees of General Mills'
subsidiaries. The DGCL does not contain any provision requiring the issuance of
rights or options to officers, directors and employees to be approved by a
shareholder vote.
LOANS TO DIRECTORS
Ralcorp
The MGBCL contains no provision requiring that loans to or guarantees of
obligations of officers and directors be subject to shareholder approval.
General Mills
The DGCL allows loans to and guarantees of obligations of officers and
directors without any shareholder approval.
EXPERTS
The audited financial statements of Ralcorp incorporated by reference in
this Proxy Statement-Prospectus have been audited by Price Waterhouse LLP
("Price Waterhouse"), independent accountants, for the periods indicated in
their report thereon which is included in New Ralcorp's Registration Statement
on Form 10 dated December 27, 1996, which is incorporated herein by reference.
The audited financial statements of the Branded Business of Ralston Foods
included in this Proxy Statement-Prospectus have been audited by Price
Waterhouse for the period indicated in their report thereon which is included
herein. The financial statements audited by Price Waterhouse have been included
or incorporated by reference herein in reliance on their reports given on their
authority as experts in accounting and auditing.
The consolidated financial statements and related schedule of General Mills
as of May 26, 1996 and May 28, 1995, and for each of the fiscal years in the
three-year period ended May 26, 1996, included or incorporated by reference in
General Mills' Annual Report on Form 10-K, which is incorporated by reference in
this Proxy Statement-Prospectus, have been included herein in reliance upon the
reports of KPMG Peat Marwick LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of such firm as experts
in accounting and auditing.
Representatives of Price Waterhouse are expected to be present at the
Special Meeting. These representatives will have an opportunity to make
statements if they so desire and will be available to respond to appropriate
questions.
LEGAL MATTERS
The validity of the shares of General Mills Common Stock to be issued
pursuant to the Merger will be passed upon for General Mills by Wachtell,
Lipton, Rosen & Katz, New York, New York, special counsel for General Mills.
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SUBMISSION OF SHAREHOLDER PROPOSALS
Due to the contemplated consummation of the Merger, Ralcorp does not
currently intend to hold a 1997 Annual Meeting of Shareholders. In the event
that such a meeting is held, any proposals of shareholders intended to be
presented at the 1997 Annual Meeting of Shareholders must have been received by
the Secretary of Ralcorp no later than August 15, 1996.
WHERE YOU CAN FIND MORE INFORMATION
General Mills and Ralcorp file annual, quarterly and special reports, proxy
statements and other information with the SEC. Following the Distribution, New
Ralcorp will also make these filings with the SEC. You may read and copy any
reports, statements or other information that the companies file at the SEC's
public reference rooms in Washington, D.C., New York, New York and Chicago,
Illinois. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. Our SEC filings are also available to the public from
commercial document retrieval services and at the Internet web site maintained
by the SEC at "http://www.sec.gov."
General Mills filed a Registration Statement on Form S-4 to register with
the SEC the General Mills Common Stock to be issued to Ralcorp shareholders in
the Merger. This Proxy Statement-Prospectus is a part of that Registration
Statement and constitutes a prospectus of General Mills, as well as being a
proxy statement of Ralcorp for the Special Meeting. In addition, New Ralcorp has
filed a Registration Statement on Form 10 to register with the SEC the New
Ralcorp Common Stock to be issued to Ralcorp shareholders in the Distribution.
The Information Statement mailed with this Proxy Statement-Prospectus is part of
New Ralcorp's Registration Statement.
As allowed by SEC rules, this Proxy Statement-Prospectus does not contain
all the information you can find in General Mills' Registration Statement or the
exhibits to that Registration Statement. Similarly, New Ralcorp's Information
Statement does not contain all the information you can find in New Ralcorp's
Registration Statement.
The SEC allows us to "incorporate by reference" information into this Proxy
Statement-Prospectus, which means that we can disclose important information to
you by referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be part of this Proxy
Statement-Prospectus, except for any information superseded by information
contained directly in the Proxy Statement-Prospectus. This Proxy
Statement-Prospectus incorporates by reference the documents set forth below
that we have previously filed with the SEC. These documents contain important
information about our companies and their financial condition.
<TABLE>
<CAPTION>
GENERAL MILLS SEC FILINGS (FILE NO. 1-01185) PERIOD
- --------------------------------------------- ---------------------------------------------
<S> <C>
Annual Report on Form 10-K................... Year ended May 26, 1996
Quarterly Report on Form 10-Q................ 13 Weeks ended August 25, 1996
</TABLE>
<TABLE>
<CAPTION>
RALCORP SEC FILINGS (FILE NO. 12766) PERIOD
- --------------------------------------------- ---------------------------------------------
<S> <C>
Annual Report on Form 10-K................... Year ended September 30, 1995
Quarterly Reports on Form 10-Q............... Quarters ended December 31, 1996, March 31,
1996 and June 30, 1996
Current Reports on Form 8-K.................. Filed on July 23, 1996, August 1, 1996,
September 10, 1996 and September 27, 1996
</TABLE>
In addition, we incorporate by reference New Ralcorp's Registration
Statement on Form 10 dated December 27, 1996. We also incorporate by reference
additional documents we may file with the SEC from the date of this Proxy
Statement-Prospectus to the date of the Special Meeting. These include periodic
reports, such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q,
and Current Reports on Form 8-K, as well as proxy statements.
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General Mills has supplied all information contained or incorporated by
reference in this Proxy Statement-Prospectus relating to General Mills and
Ralcorp has supplied all such information relating to Ralcorp.
If you are a shareholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them through us, the SEC or
the SEC's Internet web site as described above. Documents incorporated by
reference are available from us without charge, excluding all exhibits unless we
have specifically incorporated by reference an exhibit in this Proxy
Statement-Prospectus. Shareholders may obtain documents incorporated by
reference in this Proxy Statement-Prospectus by requesting them in writing or by
telephone from the appropriate company at the following addresses:
Secretary
General Mills, Inc.
P.O. Box 1113
Minneapolis, MN 55440
Tel: (800) 245-5703
(Investor Relations Department)
Secretary
Ralcorp Holdings, Inc.
800 Market Street, Suite 2900
St. Louis, MO 63101
Tel: (314) 877-7046
If you would like to request documents from us, please do so by January 14,
1997 to receive them before the Special Meeting.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT-PROSPECTUS TO VOTE ON THE MERGER AND ON THE
DISTRIBUTION. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT
IS DIFFERENT FROM WHAT IS CONTAINED IN THIS PROXY STATEMENT-PROSPECTUS. THIS
PROXY STATEMENT-PROSPECTUS IS DATED DECEMBER 27, 1996. YOU SHOULD NOT ASSUME
THAT THE INFORMATION CONTAINED IN THE PROXY STATEMENT-PROSPECTUS IS ACCURATE AS
OF ANY DATE OTHER THAN THAT DATE, AND NEITHER THE MAILING OF THIS PROXY
STATEMENT-PROSPECTUS TO SHAREHOLDERS NOR THE ISSUANCE OF GENERAL MILLS COMMON
STOCK IN THE MERGER SHALL CREATE ANY IMPLICATION TO THE CONTRARY.
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INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
PAGE NO.
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<S> <C>
1994 Spinoff......................... 15
Affiliate Agreement.................. 39
Ancillary Agreements................. 15
Assigned Technical Information and
Know How........................... 46
Average Value of General Mills Common
Stock.............................. 14
Branded Assets....................... 42
Branded Balance Sheet................ 36
Branded Business..................... 13
Branded Contribution................. 15
Branded Employees.................... 44
Branded Financial Statements......... 36
Branded Liabilities.................. 43
Branded Plant........................ 36
Branded Subsidiary................... 13
Branded Technical Information and
Know How........................... 47
Branded Trademarks................... 49
business combination................. 70
Certificate of Merger................ 35
Certificates......................... 35
Closing.............................. 14
Closing Date......................... 14
Closing Date Net Asset Value......... 36
Comparable Companies................. 19
Comparable Companies for New
Ralcorp............................ 21
Comparable Transaction............... 20
Code................................. 19
Cookie Crisp......................... 50
Confidentiality Agreement............ 16
Control Brand........................ 50
Conversion Number.................... 14
Designated Products.................. 47
DGCL................................. 57
Dillon Read.......................... 14
Dissenter's Shares................... 35
Dissenting Shareholders.............. 13
Distribution......................... 13
Distribution Date.................... 43
Distribution Proposal................ 13
Distribution Record Date............. 15
Distribution Time.................... 43
Distributorship Agreement............ 15
DOJ.................................. 27
EBITA................................ 19
EBITDA............................... 19
Effective Time....................... 13
ERISA................................ 36
Exchange Agent....................... 35
Exchange Fund........................ 35
<CAPTION>
PAGE NO.
--------
<S> <C>
FTC.................................. 27
Funded Debt of Ralcorp and the
Branded Subsidiary................. 14
General Mills........................ 13
General Mills Acquiring Person....... 58
General Mills Board.................. 16
General Mills Common Stock........... 13
General Mills Distribution Date...... 58
General Mills Final Expiration
Date............................... 58
General Mills Missouri............... 13
General Mills Preference Stock....... 57
General Mills Purchase Price......... 57
General Mills Record Date............ 57
General Mills Redemption Price....... 59
General Mills Registration
Statement.......................... 39
General Mills Right.................. 57
General Mills Right Certificates..... 58
General Mills Rights Agent........... 57
General Mills Rights Agreement....... 57
General Mills Special Termination.... 41
Higher Offer......................... 38
HSR Act.............................. 27
Indemnifiable Losses................. 44
Internal Merger...................... 15
Internal Spinoff..................... 15
IRS.................................. 25
Known Branded Liabilities............ 43
Lehman Brothers...................... 14
Lehman Opinion....................... 17
LTD Plan............................. 44
Materials............................ 50
Merger............................... 13
Merger Agreement..................... 13
Merger Consideration................. 13
Merger Proposal...................... 13
MGBCL................................ 25
Morris Trust......................... 19
Named Executive Officers............. 55
New Ralcorp.......................... 13
New Ralcorp Assets................... 43
New Ralcorp Business................. 13
New Ralcorp Common Stock............. 14
New Ralcorp Information Statement.... 39
New Ralcorp Liabilities.............. 43
New Ralcorp Registration Statement... 39
Nonconforming Products............... 51
Notes................................ 14
NYSE................................. 14
Other Trademarks..................... 49
Post-Closing Branded Liabilities..... 45
Preference Shares.................... 57
</TABLE>
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<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Price Waterhouse..................... 73
Prior Technology Agreement........... 15
Prior Trademark Agreement............ 15
Private Label Trademarks............. 50
Private Letter Ruling................ 40
Products............................. 50
Quaker............................... 19
Ralcorp.............................. 13
Ralcorp Acquiring Person............. 68
Ralcorp Board........................ 13
Ralcorp Common Stock................. 13
Ralcorp Continuing Director.......... 67
Ralcorp Distribution Date............ 68
Ralcorp Final Expiration Date........ 68
Ralcorp Purchase Price............... 68
Ralcorp Record Date.................. 68
Ralcorp Redemption Price............. 69
Ralcorp Right........................ 68
Ralcorp Right Certificates........... 68
Ralcorp Rights Agent................. 68
Ralcorp Rights Agreement............. 68
Ralcorp Special Termination.......... 41
Ralston Foods........................ 15
Ralston Purina....................... 15
Ralston Trademarks................... 49
Refinancing.......................... 22
Reorganization....................... 15
Reorganization Agreement............. 13
<CAPTION>
PAGE NO.
--------
<S> <C>
Resort Operations.................... 18
Rice Chex............................ 50
Rights Payment....................... 14
Scheduled Branded Litigation......... 43
SEC.................................. 36
Second Request....................... 27
Securities Act....................... 39
Services............................. 52
Shared Technical Information and Know
How................................ 47
Shareholder Termination.............. 41
Special Meeting...................... 13
Special Meeting Record Date.......... 53
Specifications....................... 50
Summary of General Mills Rights...... 58
Summary of Ralcorp Rights............ 68
Supply Agreement..................... 15
Surviving Corporation................ 13
Tax Opinions......................... 24
Tax Sharing Agreement................ 15
Technical Information and Know How... 46
Technology Agreement................. 15
Third Party Acquisition.............. 37
Trademark Agreement.................. 15
Trademarks........................... 49
Transactions......................... 15
Unknown Branded Liabilities.......... 44
</TABLE>
77
<PAGE> 82
BRANDED BUSINESS OF RALSTON FOODS, INC.
INDEX TO COMBINED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Branded Business of Ralston Foods, Inc. Combined Financial Statements:
Report of Independent Accountants................................................... F-1
Combined Balance Sheets as of September 30, 1996 and 1995........................... F-2
Combined Statements of Earnings for Fiscal Years 1996, 1995 and 1994................ F-3
Combined Statements of Cash Flows for Fiscal Years 1996, 1995 and 1994.............. F-4
Notes to Combined Financial Statements.............................................. F-5
Management's Discussion and Analysis of Financial Condition and Results of
Operations....................................................................... F-18
</TABLE>
F-i
<PAGE> 83
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and
Board of Directors of
Ralcorp Holdings, Inc.
In our opinion, the accompanying combined balance sheets and the related
combined statements of earnings and of cash flows present fairly, in all
material respects, the financial position of the Branded Business of Ralston
Foods, Inc. (a wholly owned subsidiary of Ralcorp Holdings, Inc.) at September
30, 1996 and 1995, and the results of their operations and their cash flows for
the two years ended September 30, 1996, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
management of Ralcorp Holdings, Inc.; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
St. Louis, Missouri
November 22, 1996
F-1
<PAGE> 84
BRANDED BUSINESS OF RALSTON FOODS, INC.
COMBINED BALANCE SHEETS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------
1996 1995
------ ------
<S> <C> <C>
ASSETS
Current assets
Cash...................................................................... $ -- $ --
Receivables, less allowance for customer promotions and doubtful
accounts............................................................... 23.8 32.5
Inventories............................................................... 25.7 28.6
Prepaid expenses.......................................................... 4.0 4.2
------ ------
Total current assets................................................. 53.5 65.3
Other assets................................................................ 6.7 3.4
------ ------
Property at cost
Land...................................................................... 0.3 0.3
Buildings................................................................. 21.0 19.4
Machinery and equipment................................................... 119.0 109.4
Construction in progress.................................................. 0.7 5.2
------ ------
141.0 134.3
Accumulated depreciation............................................... 76.9 68.5
------ ------
64.1 65.8
------ ------
Total assets......................................................... $124.3 $134.5
====== ======
LIABILITIES AND RALCORP HOLDINGS' EQUITY
Current liabilities
Current maturities of long-term debt...................................... $ -- $ --
Accounts payable and accrued liabilities.................................. 25.0 26.3
------ ------
Total current liabilities.............................................. 25.0 26.3
Long-term debt............................................................ 61.2 62.8
Deferred income taxes..................................................... 2.7 2.8
Other liabilities......................................................... 12.1 9.7
Commitments and contingencies............................................. -- --
Equity:
Ralcorp Holdings' equity investment.................................... 23.3 32.9
------ ------
Total liabilities and equity......................................... $124.3 $134.5
====== ======
</TABLE>
See accompanying Notes to Combined Financial Statements.
F-2
<PAGE> 85
BRANDED BUSINESS OF RALSTON FOODS, INC.
COMBINED STATEMENTS OF EARNINGS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED SEPTEMBER 30,
---------------------------------
1996 1995 1994
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Net sales........................................................ $386.7 $371.6 $ 361.7
------ ------ ------
Costs and expenses
Cost of products sold.......................................... 114.1 103.5 102.5
Selling, general and administrative............................ 52.5 46.7 38.3
Advertising and promotion...................................... 162.5 147.8 154.1
Interest....................................................... 4.2 4.4 1.2
Restructuring charge........................................... 2.5 -- --
Other expense, net............................................. -- -- 0.4
------ ------ ------
335.8 302.4 296.5
------ ------ ------
Earnings before income taxes..................................... 50.9 69.2 65.2
Income taxes..................................................... 19.3 26.4 24.8
------ ------ ------
Net earnings........................................... $ 31.6 $ 42.8 $ 40.4
====== ====== ======
</TABLE>
See accompanying Notes to Combined Financial Statements.
F-3
<PAGE> 86
BRANDED BUSINESS OF RALSTON FOODS, INC.
COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
SEPTEMBER 30,
-------------------------------
1996 1995 1994
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Cash flow from operations:
Net earnings.................................................... $ 31.6 $ 42.8 $ 40.4
------ ------ ------
Adjustments to reconcile net earnings to net cash flow provided
by operations:
Depreciation and amortization................................ 8.7 8.3 7.9
Restructuring charge, $2.5 less cash payments of $1.1........ 1.4
Deferred income taxes........................................ 0.2 (0.6) (0.4)
Changes in assets and liabilities used in operations:
Decrease (increase) in receivables, net.................... 8.7 (17.4) 2.0
Decrease (increase) in inventories......................... 2.9 (8.0) 1.3
(Increase) decrease in prepaid expenses.................... (0.1) (1.0) 0.4
(Decrease) increase in accounts payable and accrued
liabilities............................................... (1.8) (0.7) 8.6
Other, net................................................... 2.8 1.1 3.7
------ ------ ------
Net cash flow from operations.............................. 54.4 24.5 63.9
------ ------ ------
Cash flow from investing activities:
Additions to property and intangible assets..................... (11.6) (11.7) (1.9)
------ ------ ------
Net cash used by investing activities...................... (11.6) (11.7) (1.9)
Cash flow from financing activities:
Discontinued sale of trade receivables.......................... (7.2)
(Payments on) proceeds from long-term debt...................... (1.6) 19.0 43.8
------ ------ ------
Net cash (used) provided by financing activities........... (1.6) 19.0 36.6
------ ------ ------
Net cash distributions to Ralcorp................................. $(41.2) $(31.8) $ (98.6)
------ ------ ------
</TABLE>
See accompanying Notes to Combined Financial Statements.
F-4
<PAGE> 87
BRANDED BUSINESS OF RALSTON FOODS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS)
1. GENERAL INFORMATION
Merger Agreement with General Mills
On August 13, 1996, Ralcorp Holdings, Inc. ("Ralcorp"), General Mills, Inc.
("General Mills") and General Mills Missouri, Inc. ("General Mills Missouri")
entered into an Agreement and Plan of Merger (the "Merger Agreement") pursuant
to which General Mills, through General Mills Missouri, will purchase certain
assets and liabilities (the "Merger") of the branded ready-to-eat-cereal and
snack business ("Branded Business" or the "Company") of Ralston Foods Inc., a
wholly owned subsidiary of Ralcorp. The consideration to be paid by General
Mills for the Branded Business is equal to $570 million and consists of: (i) the
distribution of a pro rata share of voting General Mills Common Stock to each
Ralcorp shareholder and (ii) the assumption by General Mills of Ralcorp debt and
accrued interest, not to exceed $300 million.
The Merger will be completed using a tax-free reorganization structure, as
follows. First, Ralcorp will distribute shares of New Ralcorp common stock, in a
tax-free distribution to Ralcorp shareholders. At the time of such distribution
New Ralcorp will own all of Ralcorp's businesses other than the Branded
Business. Each shareholder will receive one share of New Ralcorp common stock
for each share of Ralcorp common stock they owned prior to the Merger. The New
Ralcorp common stock will represent a share in the businesses that are not being
sold to General Mills.
Second, immediately after the spin-off, Ralcorp will merge the Branded
Business with General Mills Missouri, a wholly owned subsidiary of General
Mills. As a result of the Merger, Ralcorp shareholders will exchange their
shares of Ralcorp common stock for General Mills Common Stock. This exchange
will also be tax-free. The exchange ratio will be set using a formula that will
depend primarily on the amount of Ralcorp debt and accrued interest that General
Mills assumes, the trading price of General Mills Common Stock at the time of
the Merger, and the number of shares of Ralcorp outstanding prior to the Merger.
In substance, Ralcorp is selling the Branded Business for General Mills Common
Stock and the assumption of Ralcorp debt and accrued interest by General Mills.
For the purpose of governing certain relationships among Ralcorp, New
Ralcorp and General Mills, as well as to help in the orderly separation and
transition of the Branded Business, Ralcorp, New Ralcorp and General Mills,
directly or through various wholly owned legal entities, have entered into
numerous agreements, including the Reorganization Agreement, Tax Sharing
Agreement, Technology Agreement, Trademark Agreement, Supply Agreement,
Transition Services Agreement and other agreements. These agreements deal with
many operational issues, including: (a) the separation of the Branded Business
from the remaining businesses; (b) transitional services provided by New Ralcorp
to Ralcorp when it is owned by General Mills; (c) the sharing of technology
between the Branded Business and New Ralcorp; (d) the supply of specific cereal
products by New Ralcorp to General Mills and Ralcorp; (e) the use of certain
trademarks by General Mills for a period of time; and (f) the allocation of
certain tax and other liabilities among New Ralcorp, General Mills and Ralcorp.
1994 Spin-off from Ralston Purina Company
Effective at the close of business on March 31, 1994 (the "1994 Spin-off
Date"), Ralcorp became an independent, publicly owned company as a result of the
tax-free distribution by Ralston Purina Company ("Ralston Purina") of Ralcorp's
$.01 per value Common Stock to holders of Ralston-Ralston Purina Group $.10 par
value Common Stock, at a distribution ratio of one for three (the "1994
Spin-off"). Prior to the 1994 Spin-off Ralcorp was formed as a wholly owned
subsidiary of Ralston Purina for the purpose of effecting the 1994 Spin-off.
Included in this transaction was the transfer of substantially all of the assets
and liabilities related to the branded and private label cereal business
(excluding cereal products manufactured in Korea and France), baby food
business, branded and private label crackers and cookies business, coupon
redemption
F-5
<PAGE> 88
BRANDED BUSINESS OF RALSTON FOODS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS)
business and the ski operations business (collectively, the "Ralcorp
Businesses"), all of which were previously owned by Ralston Purina. Ralston
Purina did not retain any ownership interest in Ralcorp.
For the purpose of governing certain of the relationships between Ralston
Purina and Ralcorp, as well as providing an orderly transition to the status of
two separate companies, Ralston Purina and Ralcorp entered into various
agreements, including the Agreement and Plan of Reorganization (the "1994
Reorganization Agreement"), the 1994 Tax Sharing Agreement, the 1994 Bridging
Agreement, the 1994 Trademark Agreement and other agreements.
These agreements deal with many operational issues, including (a) the
separation of Ralcorp from Ralston Purina; (b) transitional services provided by
Ralston Purina to Ralcorp, which include certain administrative, data processing
and technical services and office facilities for Ralcorp's headquarters; (c) use
of certain trademarks by Ralcorp; and (d) the allocation of certain tax and
other liabilities among Ralcorp and Ralston Purina.
2. DESCRIPTION OF BUSINESS
The Company produces and sells ready-to-eat cereals under various brand
names including Chex and Cookie Crisp, and snacks under the Chex Mix brand.
Sales tend to be somewhat seasonal, with historically strong fall and winter
periods which management believes are attributable to promotions associated with
the cereal-related recipes used for holiday parties. The Company's production is
currently performed at one facility. The Company's revenues are primarily
generated by sales within the United States. Finished products are warehoused in
eight independent warehouse facilities and shipped to customers principally via
independent truck lines. These products are marketed primarily through food
brokers to grocery wholesalers, retail chains, mass merchandisers, warehouse
club outlets and other customers.
3. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICES
Basis of Presentation
The financial statements as of and for each of the three fiscal years ended
September 30, 1996 are presented on a combined basis. The combined financial
statements include assets, liabilities, revenues and expenses that are directly
attributable to the Branded Business or have been allocated to the Branded
Business based upon methods considered reasonable by Ralcorp's management. Such
methodologies employ volume or percentage allocation bases or the activity of
other expense or balance sheet accounts. Revenues; certain expenses, including
cost of products sold and advertising and promotion; and finished products
inventories are directly attributable to the Branded Business. Most balance
sheet accounts, including debt and accrued interest, and certain expenses, such
as selling, general administration, interest and corporate overhead, have been
allocated to the Branded Business. Management believes the expenses reflected in
the combined statements of earnings for the three fiscal years ended September
30, 1996 materially represent the expenses that would have been incurred had the
Branded Business operated on a stand alone basis.
Cash Equivalents
Cash equivalents for purposes of the statements of cash flows are
considered to be all highly liquid investments with an original maturity of
three months or less.
Financial Instruments
The Company has a policy which allows the use of various derivative
financial instruments to manage the Company's financial risks that exist as part
of conducting business. Under the policy, the Company is not permitted to engage
in speculative or leveraged transactions that have the potential for a
disproportionate ratio
F-6
<PAGE> 89
BRANDED BUSINESS OF RALSTON FOODS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS)
between the change in value of the liability being hedged and the expected
change in value of the related derivative instrument. The Company does not hold
or issue financial instruments for trading purposes. As of September 30, 1996,
the Company had no material derivative financial instruments outstanding.
Receivables
The Company has a policy of classifying certain accrued promotional
liabilities as contra-receivables to the extent management believes these
liabilities will be settled via customers remitting amounts less than that are
invoiced.
Inventories
Inventories are valued generally at the lower of average cost or market. In
connection with purchasing key raw ingredient materials, the Company follows a
policy of from time to time using commodities futures contracts to minimize the
risk associated with market price fluctuations. Such contracts are accounted for
as hedges, with related gains and losses ultimately included as part of the cost
of products sold. The effect of any realized or deferred gains and losses is
immaterial to the financial condition and results of operations of the Branded
Business.
Property at Cost
Expenditures for new facilities and those which substantially increase the
useful lives of the property, including interest during construction, are
capitalized. Maintenance, repairs and minor renewals are expensed as incurred.
When properties are retired or otherwise disposed of, the related cost and
accumulated depreciation are removed from the accounts and gains or losses on
the disposition are reflected in earnings.
Depreciation is generally provided on the straight-line basis by charges to
costs or expenses at rates based on the estimated useful lives of the
properties. Estimated useful lives range from 3 to 25 years for machinery and
equipment and 10 to 50 years for buildings.
Intangible Assets
The Company defers systems development costs when they reach technological
feasibility. Amounts deferred are amortized over estimated periods of related
benefit not to exceed 5 years. Intangible assets are included in Other Assets.
Impairment
The Company continually evaluates whether events or circumstances have
occurred which might impair the recoverability of the carrying value of its
long-lived assets, including identifiable intangibles and goodwill.
Income Taxes
In accordance with the 1994 Tax Sharing Agreement, Ralcorp is liable for
its federal, state and local tax liabilities for taxable periods beginning after
the 1994 Spin-off Date. Accordingly, the Ralcorp Businesses, including the
Branded Business, were included in the consolidated federal, state and local
income tax returns filed by Ralston Purina for periods ending on or before the
1994 Spin-off Date.
Income taxes have been provided in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (FAS 109). FAS 109
requires the liability method of income tax accounting, accordingly, a deferred
tax liability or assets is recognized for the effect of temporary differences
between financial and tax reporting.
F-7
<PAGE> 90
BRANDED BUSINESS OF RALSTON FOODS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS)
Earnings per Share
Historical earnings per share are not presented since the Company had no
capital structure separate from its parents, Ralston Foods, Inc. and Ralcorp,
for the periods presented.
Advertising Costs
Advertising costs are expensed in the year in which the costs are incurred.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses and the disclosure of contingent assets and liabilities. Actual
results could differ from those estimates.
Reclassifications
Certain reclassifications of the prior year's amounts have been made to
conform with the current year's presentation.
Unaudited Financial Information
The combined statements of earnings and cash flows for the fiscal year
ended September 30, 1994 have been prepared on a basis consistent with the
audited combined statement of earnings and cash flows for the two fiscal years
ended September 30, 1996 and 1995. In management's opinion, all adjustments
(consisting of only normal recurring adjustments) necessary to present fairly
the results of operations for such periods have been included in the financial
statements.
4. RESTRUCTURING CHARGE
For the year ended September 30, 1996, the Company recorded a pre-tax
charge of $2.5 ($1.6 after taxes) to recognize the costs related to the
restructuring of its ready-to-eat cereal operations. This restructuring plan is
aimed at reducing the cost structure of the cereal operations. As a result of
this restructuring plan, numerous positions have been eliminated from the cereal
operations and corporate support groups, primarily at the Company's headquarters
in St. Louis. In addition, the restructuring plan includes the partial closing
of the production facility in Battle Creek, MI, thereby reducing excess
production capacity and eliminating jobs from the production and administrative
staffs at that facility.
The components of the restructuring charge are summarized in the following
table:
<TABLE>
<CAPTION>
AMOUNT AMOUNT BALANCE
OF CHARGE UTILIZED OF RESERVE
--------- ------ ----------
<S> <C> <C> <C>
Salaries, severance and benefits................................. $ 1.6 $1.1 $0.5
Asset writedowns................................................. 0.9 0.9 --
---- ---- ----
Total.......................................................... $ 2.5 $2.0 $0.5
==== ==== ====
</TABLE>
F-8
<PAGE> 91
BRANDED BUSINESS OF RALSTON FOODS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS)
5. RELATED PARTY TRANSACTIONS
Transactions With Ralston Purina
Ralcorp, on behalf of itself and the Company, and Ralston Purina entered
into the 1994 Bridging Agreement under which Ralston Purina continued to provide
certain administrative, data processing and technical services and office
facilities for Ralcorp's headquarters. As of September 30, 1995, most of these
arrangements had ended. Prior to the 1994 Spin-off Date, the expenses related to
these services were allocated to Ralcorp based on utilization or other methods
deemed reasonable by management. This allocation was $18.1 for the six months
ended March 31, 1994. The Company's share of this allocation was $5.5. Actual
expenses paid by Ralcorp to Ralston Purina for such services had declined to
$1.7 for the year ended September 30, 1996 from $19.2 for the year ended
September 30, 1995 and $10.3 for the six months ended September 30, 1994. Actual
expenses paid by Ralcorp, on behalf of the Company, to Ralston Purina for such
services were $0.5 for the year ended September 30, 1996, $4.7 for the year
ended September 30, 1995 and $3.1 for the six months ended September 30, 1994.
Transactions With Ralcorp
Subsequent to the 1994 Spin-off Date, Ralcorp provided certain general and
administrative services to the Company, including tax, treasury, risk management
and insurance, legal, research and development, information systems and human
resources. These expenses were allocated to the Company based on actual usage or
other methods Ralcorp's management believes to be reasonable. These allocations
were $26.9, $22.5 and $20.9 in fiscal years 1996, 1995 and 1994, respectively.
These costs could have been different had the Company operated on its own during
the periods presented. However, management believes these costs, which are
reflected in the combined statements of earnings for the three fiscal years
ended September 30, 1996, materially represent the costs that would have been
incurred had the Branded Business operated on a stand alone basis. The Company
and Ralcorp do not intend to settle these intercompany amounts and, therefore,
are reflected as part of the permanent equity of the Company.
The Company is included in the consolidated federal and certain state
income tax returns of Ralcorp. The provision for income taxes and related tax
payments reflected in the Company's financial statements are computed as if a
separate return had been filed for the Company, using those elements of income
and expense as reported in the Combined Statements of Earnings.
The Company participates in a centralized cash management system
administered by Ralcorp. The Company's cash deposits are transferred to Ralcorp
on a daily basis and Ralcorp funds the Company's disbursement bank accounts as
required. Unpaid checks are included in accounts payable. No interest was
charged on transactions with Ralcorp.
F-9
<PAGE> 92
BRANDED BUSINESS OF RALSTON FOODS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS)
6. INCOME TAXES
The provisions for income taxes consisted of the following:
<TABLE>
<CAPTION>
1994
1996 1995 -----------
----- ----- (UNAUDITED)
<S> <C> <C> <C>
Current:
United States.................................................... $17.7 $23.7 $22.2
State............................................................ 1.4 3.3 3.0
----- ----- -----
Total current................................................. 19.1 27.0 25.2
----- ----- -----
Deferred:
United States.................................................... 0.2 (0.6) (0.4)
State............................................................ -- -- --
----- ----- -----
Total deferred................................................ 0.2 (0.6) (0.4)
----- ----- -----
Total....................................................... $19.3 $26.4 $24.8
===== ===== =====
</TABLE>
Income taxes were 37.9%, 38.1% and 38.0% of pre-tax earnings in 1996, 1995
and 1994, respectively. A reconciliation of income taxes with the amounts
computed at the statutory federal rate follows:
<TABLE>
<CAPTION>
1994
1996 1995 -----------
----- ----- (UNAUDITED)
<S> <C> <C> <C>
Computed tax at federal statutory rate............................. $17.8 $24.2 $22.8
State income taxes, net of federal tax benefit..................... 1.5 2.1 1.9
Other, net......................................................... -- 0.1 0.1
----- ----- -----
$19.3 $26.4 $24.8
===== ===== =====
</TABLE>
The deferred tax assets and deferred tax liabilities as set forth on the
Combined Balance Sheets at September 30, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
DEFERRED TAX DEFERRED TAX
ASSETS LIABILITIES
-------------- --------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Current:
Accrued liabilities..................................... $0.9 $1.0 $ -- $ --
Inventories............................................. 0.6 0.8
Other items............................................. 0.1 0.1 -- --
---- ---- ---- ----
Total current........................................ 1.6 1.9 -- --
---- ---- ---- ----
Noncurrent:
Property basis differences.............................. 7.3 6.7
Postretirement benefits................................. 3.3 2.9
Other items............................................. 1.3 1.0 -- --
---- ---- ---- ----
Total noncurrent..................................... 4.6 3.9 7.3 6.7
---- ---- ---- ----
Total deferred taxes............................... $6.2 $5.8 $7.3 $6.7
==== ==== ==== ====
</TABLE>
Total income tax payments made by Ralcorp, on behalf of the Company, after
the 1994 Spin-off Date were $19.1 for the year ended September 30, 1996, $27.0
for the year ended September 30, 1995 and $11.7 for
F-10
<PAGE> 93
BRANDED BUSINESS OF RALSTON FOODS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS)
the six months ended September 30, 1994. Tax payments due on income earned prior
to the 1994 Spin-off Date are the responsibility of Ralston Purina.
7. PENSION PLAN
Ralcorp, on behalf of the Company, sponsors a noncontributory defined
benefit pension plan which covers substantially all regular employees. The plan
provides retirement benefits based on years of service and final-average or
career-average earnings. It is Ralcorp's practice to fund pension liabilities in
accordance with the minimum and maximum limits imposed by the Employee
Retirement Income Security Act of 1974, as amended (ERISA) and federal income
tax laws. Plan assets consist primarily of investments in commingled employee
benefit trusts consisting of marketable equity securities, corporate and
government debt securities and real estate.
Prior to the 1994 Spin-off, the Company participated in Ralston Purina's
defined benefit pension plans and certain jointly-administered multiemployer
defined benefit plans and recorded pension costs as allocated by Ralston Purina.
The amount of such costs were $0.4 for the six months ended March 31, 1994,
which includes the Company's expenses related to the multiemployer plans. The
components of the Company's net pension costs for the period subsequent to the
1994 Spin-off include the following:
<TABLE>
<CAPTION>
SIX
MONTHS
YEAR YEAR ENDED
ENDED ENDED SEPT. 30,
SEPT. 30, SEPT. 30, 1994
1996 1995 -----------
--------- --------- (UNAUDITED)
<S> <C> <C> <C>
Defined benefit plan
Service cost (benefits earned during the period).............. $ 0.8 $ 0.7 $ 0.3
Interest cost on projected benefit obligation................. 1.9 1.7 0.8
Return on plan assets......................................... (2.3) (2.1) (1.0)
Net amortization and deferral................................. 0.5 0.4 0.2
----- ----- -----
Total.................................................... $ 0.9 $ 0.7 $ 0.3
===== ===== =====
</TABLE>
The following table presents the funded status of the Company's defined
benefit plan and amounts recognized in the Combined Balance Sheets at September
30, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Actuarial present value of:
Vested benefits........................................................... $(17.7) $(16.1)
Nonvested benefits........................................................ (2.4) (2.2)
------ ------
Accumulated benefit obligation....................................... (20.1) (18.3)
Effect of projected future salary increases................................. (4.9) (4.2)
------ ------
Projected benefit obligation................................................ (25.0) (22.5)
Plan assets at fair value................................................... 27.2 23.8
------ ------
Plan assets in excess of projected benefit obligation....................... 2.2 1.3
Unrecognized net gain....................................................... (4.9) (4.4)
Unrecognized prior service cost............................................. 2.6 3.6
Unrecognized net asset at transition........................................ -- --
------ ------
(Accrued) prepaid pension costs included in the Combined Balance Sheets... $ (0.1) $ 0.5
====== ======
</TABLE>
F-11
<PAGE> 94
BRANDED BUSINESS OF RALSTON FOODS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS)
The key actuarial assumptions used in determining net pension costs and the
projected benefit obligation were as follows:
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Discount rate.............................................................. 7.625% 7.625%
Rate of future compensation increases...................................... 5.25% 5.25%
Long-term rate of return on plan assets.................................... 9.50% 9.50%
</TABLE>
In addition, the Company participates in the Ralcorp sponsored defined
contribution plan covering a substantial majority of its employees under which
Ralcorp makes matching contributions of up to 100% of employee contributions
depending on years of service. The matching contribution is capped at a certain
percentage of employee earnings. Prior to the spin-off, most employees of the
Company participated in Ralston Purina's defined contribution plan which
provided benefits on the same basis. Matching contributions for the Branded
Business into Ralcorp's defined contribution plan for the two fiscal years ended
September 30, 1996 and 1995 and the six months ended September 30, 1994 were
$1.0, $1.0 and $0.6, respectively. The costs allocated to the Company related to
its participation in Ralston Purina's defined contribution plan prior to the
1994 Spin-off totaled $0.6 for the six months ended March 31, 1994.
8. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Ralcorp, on behalf of the Company, provides health care and life insurance
benefits for certain groups of retired employees who meet specified age and
years of service requirements. Ralcorp is, however, phasing out its subsidy of
medical benefits for a substantial majority of its future retirees. Retiree
contributions are adjusted periodically in order to share increases in the costs
of providing medical benefits.
Prior to the 1994 Spin-off, Ralston Purina allocated the costs of these
benefits to the Company. The costs of retiree health and life insurance benefits
allocated to the Company by Ralston Purina prior to the 1994 Spin-off were $0.4
for the six months ended March 31, 1994.
The net periodic cost of postretirement benefits for the periods subsequent
to the 1994 Spin-off includes the following components:
<TABLE>
<CAPTION>
SIX
MONTHS
YEAR YEAR ENDED
ENDED ENDED SEPT. 30,
SEPT. 30, SEPT. 30, 1994
1996 1995 -----------
--------- --------- (UNAUDITED)
<S> <C> <C> <C>
Service cost.................................................... $ 0.2 $ 0.1 $ 0.1
Interest cost................................................... 0.5 0.5 0.2
Amortization of unrecognized prior service cost................. -- (0.1) --
---- ----- ----
Net periodic postretirement benefit costs................ $ 0.7 $ 0.5 $ 0.3
==== ===== ====
</TABLE>
F-12
<PAGE> 95
BRANDED BUSINESS OF RALSTON FOODS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS)
The following table sets forth the status of the Company's postretirement
benefit plans at September 30, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
---- -----
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees..................................................................... $1.1 $ 1.0
Fully eligible active plan participants...................................... 3.4 3.0
Other active plan participants............................................... 2.8 2.4
---- -----
Total accumulated postretirement benefit obligation..................... 7.3 6.4
Unrecognized net gain.......................................................... 1.3 1.2
Unrecognized prior service cost................................................ -- (0.1)
---- -----
Accrued postretirement benefit costs included in the Combined Balance
Sheets.................................................................... $8.6 $ 7.5
==== =====
</TABLE>
Actuarial assumptions used to determine the accumulated postretirement
benefit obligation include a discount rate of 7.625% in 1996 and 1995. In 1996
and 1995, the annual increase in per capita costs of covered health care
benefits is assumed to be 6% for all years. If the health care trend rates were
increased one percentage point, the current year postretirement benefit costs
would have increased $0.1 and the accumulated postretirement benefit obligation
as of September 30, 1996 would have increased $1.1.
In 1995, the Company adopted Statement of Financial Accounting Standards
No. 112 (FAS 112), "Employers' Accounting for Postemployment Benefits." FAS 112
requires recognition of benefits provided by an employer to former or inactive
employees after employment but prior to such employees' retirement. The effect
of the adoption of this standard did not have a material impact on the Company's
combined financial position or results of operations.
9. LONG TERM DEBT
Ralcorp has available certain borrowings under credit agreements with a
number of banks (Bank Credit Agreements). Provisions of the Bank Credit
Agreements require that Ralcorp maintain certain financial ratios and a minimum
level of shareholders' equity. There was $300 available under the Bank Credit
Agreements at September 30, 1995 and through an amendment, in March 1996, the
funds available under the Bank Credit Agreements were reduced to $275. The March
1996 amendment also revised the Bank Credit Agreements maturity date to March
12, 2001.
At September 30, 1996 and September 30, 1995, the amount of Ralcorp
long-term debt allocated to the Branded Business consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------
1996 1995
----- -----
<S> <C> <C>
Bank Credit Agreements........................................................ $61.2 $62.8
----- -----
Less Current Portion.......................................................... -- --
----- -----
$61.2 $62.8
===== =====
</TABLE>
Included in the Bank Credit Agreements amount are short-term notes which
have maturities ranging from three days to one month and have been classified as
long-term debt based on the Company's intent and ability to renew the
obligations on a long-term basis. Interest expense has been allocated to the
Company in the amount of $4.2, $4.4 and $1.2 for fiscal years 1996, 1995 and
1994, respectively.
F-13
<PAGE> 96
BRANDED BUSINESS OF RALSTON FOODS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS)
As of September 30, 1996, all of the Company's outstanding long-term debt
matures during the year ending September 30, 2001.
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments include long-term debt. As of September
30, 1996 and 1995, the fair value of long-term debt was approximately equal to
its carry value of $61.2 and $62.8, respectively. The fair value of the
Company's debt has been estimated using quoted market prices obtained through
independent pricing sources for the same or similar types of borrowing
arrangements.
11. RALCORP HOLDINGS' EQUITY INVESTMENT
The following analyzes Ralcorp's investment in the Company for the fiscal
years presented:
<TABLE>
<CAPTION>
1994
1996 1995 -----------
------ ------ (UNAUDITED)
<S> <C> <C> <C>
Balance at beginning of fiscal year.............................. $ 32.9 $ 21.9 $ 80.1
Net earnings..................................................... 31.6 42.8 40.4
Net cash distributions to Ralcorp................................ (41.2) (31.8) (98.6)
------ ------ ------
Balance at end of fiscal year.................................. $ 23.3 $ 32.9 $ 21.9
====== ====== ======
</TABLE>
Ralcorp's equity investment includes the net intercompany payable from the
Company reflecting transactions described in Note 5, including net cash
management services, certain general and administrative services and inclusion
in consolidated federal and state income tax returns.
12. COMMITMENTS AND CONTINGENCIES
The Company is a party to a number of legal proceedings in various state
and federal jurisdictions. These proceedings are in varying stages and many may
proceed for protracted periods of time. Some proceedings involve highly complex
questions of fact and law and may proceed for protracted periods of time.
The operations of the Company, like those of similar businesses, are
subject to various federal, state, and local laws and regulations intended to
protect public health and the environment, including air and water quality and
waste handling and disposal. The Company's cereal plant has received notices
from the U.S. Environmental Protection Agency, state agencies, and/or private
parties seeking contribution, that they have been identified as a "potentially
responsible party" (PRP) at one cleanup site under the Comprehensive
Environmental Response, Compensation and Liability Act, and the Company may be
required to share in the cost of cleanup with respect to the cleanup site. The
Company's ultimate liability in connection with environmental matters may depend
on many factors including, but not limited to, the volume of material
contributed to a site, the existence of other parties responsible for
remediation and their financial viability, reports of experts (internal or
external), and the remediation methods and technology to be used.
The amount of alleged liability, if any, from pending legal proceedings
cannot be determined with certainty; however, in the opinion of Company
management, based upon the information presently known as well as upon the
limitation of its liabilities set forth in the 1994 Reorganization Agreement,
the ultimate liability of the Company, if any, arising from the pending legal
proceedings, as well as from asserted legal claims and known potential legal
claims which are probable of assertion, taking into account established accruals
for estimated liabilities, should not be material to the Company's combined
financial position or results of operations. In addition, while it is difficult
to quantify with certainty the potential financial impact of actions regarding
expenditures for environmental matters, in the opinion of management, based upon
the
F-14
<PAGE> 97
BRANDED BUSINESS OF RALSTON FOODS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS)
information currently available, the ultimate liability arising from such
environmental matters should not be material to the Company's combined financial
position or results of operations.
Other Contingencies
At September 30, 1996, the Company's primary concentration of credit risk
related to approximately $0.8 of trade accounts receivable due from several
highly leveraged or "at risk" customers. Consideration was given to the
financial position of these customers when determining the appropriate allowance
for doubtful accounts.
Lease Commitments
Future minimum rental commitments under noncancellable operating leases in
effect as of September 30, 1996 were:
<TABLE>
<S> <C>
1997................................................................... $0.5
1998................................................................... $0.5
1999................................................................... $0.5
2000................................................................... $0.4
2001................................................................... $ --
</TABLE>
Total rental expense for all operating leases was $0.6 in 1996, $0.2 in
1995 and $0.2 in 1994.
13. SUPPLEMENTAL EARNINGS INFORMATION
<TABLE>
<CAPTION>
1994
1996 1995 -----------
----- ----- (UNAUDITED)
<S> <C> <C> <C>
Maintenance and repairs............................. $7.3 $6.6 $ 5.8
Research and development............................ 2.2 2.4 1.9
</TABLE>
14. SUPPLEMENTAL CASH FLOW STATEMENT INFORMATION
<TABLE>
<CAPTION>
1994
1996 1995 -----------
----- ----- (UNAUDITED)
<S> <C> <C> <C>
Interest paid....................................... $ 4.2 $ 4.4 $ 1.0
Income taxes paid................................... 19.1 27.0 25.2
</TABLE>
Interest payments for 1996, 1995 and the six month period ended September
30, 1994 were the responsibility of Ralcorp. Interest payments for the six month
period ended March 31, 1994 and all prior fiscal years were the responsibility
of Ralston Purina. Tax payments due on income earned prior to the 1994 Spin-off
Date are the responsibility of Ralston Purina.
F-15
<PAGE> 98
BRANDED BUSINESS OF RALSTON FOODS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS)
15. SUPPLEMENTAL BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
1996 1995
----- ------
<S> <C> <C>
Receivables (current):
Trade...................................................................... $27.5 $ 43.1
Allowance for customer promotions and doubtful accounts.................... (3.7) (10.6)
----- ------
$23.8 $ 32.5
===== ======
Inventories:
Raw materials and supplies................................................. $ 7.3 $ 7.5
Finished products.......................................................... 18.4 21.1
----- ------
$25.7 $ 28.6
===== ======
Prepaid Expenses:
Deferred income tax benefits............................................... $ 1.6 $ 1.9
Prepaid expenses........................................................... 2.4 2.3
----- ------
$ 4.0 $ 4.2
===== ======
Accounts Payable and Accrued Liabilities:
Trade accounts payable..................................................... $12.1 $ 18.0
Advertising and promotions................................................. 6.9 3.3
Incentive compensation, salaries and vacations............................. 2.7 2.7
Other items................................................................ 3.3 2.3
----- ------
$25.0 $ 26.3
===== ======
</TABLE>
16. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The results of any single quarter are not necessarily indicative of the
Company's results for the full fiscal year. Net earnings of the Company are
seasonal, primarily due to seasonal Chex party mix promotions which increase
sales volume during the first fiscal quarter of the year.
<TABLE>
<CAPTION>
FISCAL 1996 (OCTOBER 1, 1995 - SEPTEMBER 30,
1996)
--------------------------------------------
FIRST SECOND THIRD FOURTH
------ ------ ----- ------
<S> <C> <C> <C> <C>
Net sales............................ $145.2 $67.5 $93.1 $80.9
Gross profit......................... 105.2 45.0 65.4 57.0
Net earnings......................... 11.6 5.0 5.7 9.3 (a)
</TABLE>
<TABLE>
<CAPTION>
FISCAL 1995 (OCTOBER 1, 1994 - SEPTEMBER 30,
1995)
--------------------------------------------
FIRST SECOND THIRD FOURTH
------ ------ ----- ------
<S> <C> <C> <C> <C>
Net sales............................ $137.0 $58.3 $88.5 $87.8
Gross profit......................... 102.3 40.5 62.8 62.5
Net earnings......................... 16.2 6.5 9.9 10.2 (b)
</TABLE>
(a) Advertising and promotion expenses for the fourth quarter of fiscal
1996 were $27.3 compared to $31.4 for the fourth quarter of fiscal 1995. This
decrease in advertising and promotion expense in the fourth quarter, despite an
overall increase of $14.7 for the fiscal year, is attributed to the adjustment
made to the related accruals in the fourth quarter of fiscal 1996. This
adjustment had a favorable impact on net earnings for the fourth quarter of
fiscal 1996 and became necessary when it was determined that redemption levels
for
F-16
<PAGE> 99
BRANDED BUSINESS OF RALSTON FOODS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS)
in-ad coupon programs and cereal sales volumes were below management's
expectations that were used to record advertising and promotion expense in the
first three quarters of fiscal 1996.
(b) Net earnings for the fourth quarter of 1995 were negatively affected by
the write-off of small dollar accounts receivable ($0.5 million after taxes)
related to prior periods for which the Company decided not to pursue collection.
F-17
<PAGE> 100
BRANDED BUSINESS OF RALSTON FOODS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
On August 14, 1996, Ralcorp announced the sale of the Branded Business to
General Mills for General Mills Common Stock and the assumption of debt and
accrued interest not to exceed $300 million, together valued at $570 million.
Currently, Ralcorp estimates that the debt assumed will be between $210 and $240
million. The transaction will involve the merger of the Branded Business with a
subsidiary of General Mills and the spin-off of Ralcorp's remaining private
label ready-to-eat and hot cereals, baby food and private label cracker and
cookie businesses to Ralcorp's shareholders. Subsequent to the close of the
transaction, shareholders of Ralcorp will hold shares of General Mills Common
Stock and shares of the spun-off company. The completion of the transaction is
subject to various government approvals and the approval by Ralcorp
shareholders, which may or may not be received.
The following discussion is provided solely for the purpose of providing
disclosure with respect to the financial position and results of operations of
the Branded Business which will be owned by General Mills. Consequently, the
following discussion includes only limited forward-looking information. The
accompanying combined financial statements do not reflect any business
organization that exists or is intended to exist as a stand-alone company.
OPERATING RESULTS
FISCAL 1996 COMPARED TO FISCAL 1995
Branded Business sales increased 4.1% in fiscal 1996 to $386.7 million. The
increase was driven by significantly higher Chex Mix snack volume -- which
continued to realize the positive effects of a successful restage -- increased
branded cereal prices taken in advance of category-wide pricing declines and
improved volumes in children's cereals, partially offset by significantly lower
branded cereal volumes. The volume improvement in children's cereal is
attributable to Spider-Man, although at a rate significantly below expectations.
The Spider-Man cereal product has been discontinued. Dramatic price decreases
and significant promotional activities by major branded competitors during
fiscal 1996, directly and negatively effected the Company's cereal volumes.
Overall branded cereal volume declined approximately 10% in fiscal 1996.
Although minor branded cereal products volumes were down significantly, the
mainline Chex franchise continued to perform reasonably well, down only slightly
from a year ago. Sales of branded cereal are somewhat seasonal because of the
Company's Chex Party Mix holiday promotion.
Operating profit for the Branded Business decreased 20.8% in 1996, falling
from $75.5 million in fiscal 1995 to $59.0 million in fiscal 1996, excluding a
pre-tax restructuring charge of $2.5 million ($1.6 million after tax) taken in
the third quarter of fiscal 1996. Operating profit declined on the lower cereal
volumes, higher advertising and promotion expense, the continued increase in
ingredient costs and higher information systems costs, partially offset by the
strong performance of Chex Mix snacks and cereal pricing increases taken in
advance of the category-wide pricing decline. Spider-Man cereal, introduced in
the fourth quarter of fiscal 1995, continued to be an earnings disappointment
with volumes significantly below expectations.
Overall volume decline in the branded cereal category is expected to remain
modest. This category remains highly competitive in both pricing and promotion.
Cost of products sold in the Branded Business depends to a significant extent on
commodity prices which may fluctuate widely due to weather conditions,
government regulations, economic climate or other unforeseen circumstances.
Significant increases in the market prices of grain commodities and packaging
materials during fiscal 1996 had an adverse affect on the cost of products sold.
The Branded Business in the past has attempted to minimize exposure to
unexpected cost increases related to these factors primarily through advance
commitments and, from time to time, by taking positions in futures markets.
F-18
<PAGE> 101
The cost of products sold as a percentage of sales increased to 29.5% in
fiscal 1996 compared to 27.9% in fiscal 1995. This unfavorable fluctuation in
cost of products sold between fiscal years is due to higher ingredient costs and
additional fixed costs allocated on lower branded cereal volumes. Selling,
general and administrative expenses increased to 13.6% of sales in fiscal 1996
compared to 12.6% of sales in fiscal 1995 primarily due to higher information
systems costs. Advertising and promotion expense as a percentage of sales
increased to 42.0% for the year ended September 30, 1996 compared to 39.8% in
the prior year. The majority of the increase is due to spending associated with
Spider-Man, a new branded cereal introduced in late fiscal 1995. Income taxes,
which include federal and state taxes, were 37.9% in 1996 compared to 38.1% in
fiscal 1995. Tax provisions generally reflect statutory tax rates.
FISCAL 1995 COMPARED TO FISCAL 1994
Branded Business net sales increased 2.7% in fiscal 1995 to $371.6 million
due to higher net sales in all businesses. The increase was driven by
significantly higher Chex Mix cereal-based snack volume following a successful
product restage and higher branded cereal prices, partially offset by lower
branded cereal volumes. In cereals, volumes in mainline Chex again increased
compared to the prior year while sales of Cookie Crisp dropped after a strong
year ago increase and smaller share brands continued to decline. Sales of the
Branded Business tend to be somewhat seasonal due to strong first quarter
performance associated with the Chex Party Mix holiday promotion.
Operating profit for the Branded Business increased 12.0% in 1995 to $75.5
million compared to $67.4 million in the previous year. Operating profit for the
Branded Business increased primarily on higher branded cereal prices and
improved Chex Mix snack volume, partially offset by cereal volume declines,
primarily in the fractional share brands, increased costs related to the
accelerated cost reduction initiative and higher information systems costs.
The cost of products sold as a percentage of net sales declined slightly to
27.9% in fiscal 1995 compared to 28.3% in 1994. Selling, general and
administrative expenses increased to 12.6% of net sales in 1995 compared to
10.6% of net sales in 1994 due primarily to higher information systems costs in
fiscal 1995 and the increased allocated costs associated with completing a full
year as part of a stand-alone company. Advertising and promotion expense as a
percentage of net sales declined to 39.8% for the fiscal year ended September
30, 1995 compared to 42.6% in the prior year through the utilization of more
efficient programs. Income taxes, which include federal and state taxes, were
38.1% in 1995 compared to 38.0% in 1994. Tax provisions generally reflect
statutory tax rates.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW FROM OPERATIONS
The Branded Business' primary source of liquidity is cash flow from
operations, which increased to $54.4 million in 1996 compared to $24.5 million
in 1995 due primarily to reduced working capital needs, partially offset by
reduced earnings. The $39.4 million decrease in operating cash flow in 1995
compared to 1994 was due primarily to heavier investments in inventories, higher
year-end receivables associated with new product introductions and the decreased
level of accrued promotional liabilities, classified as contra-receivables on
the accompanying Combined Balance Sheet, at September 30, 1995. Working capital
was $28.5 million at September 30, 1996 compared to $39.0 million at September
30, 1995. The Branded Business had no cash balances at September 30, 1996 and
1995. The liquidity afforded the Branded Business under Ralcorp's centrally
managed revolving credit facility eliminates the need for the Branded Business
to maintain large cash reserves.
INVESTING ACTIVITIES
Net capital expenditures were $11.6 million, $11.7 million and $1.9 million
in fiscal years 1996, 1995 and 1994, respectively.
F-19
<PAGE> 102
FINANCING ACTIVITIES
Prior to Ralcorp's spin-off from Ralston Purina, the excess or deficiency
of cash generated over internal needs was transferred to or financed by Ralston
Purina. There was no allocation of Ralston Purina's borrowings to Ralcorp or the
Branded Business, and amounts due to or from Ralston Purina were substantially
non-interest bearing. At the 1994 Spin-off, Ralcorp assumed from Ralston Purina
$370 million of debt in a long-term bank credit agreement comprised of $120
million outstanding under a $200 million revolving credit arrangement and a $250
million term loan facility. During fiscal 1994, Ralcorp issued $150 million in
8 3/4% notes due 2004, the proceeds of which were used to reduce borrowings
under the credit agreement. During 1995, Ralcorp amended the credit agreement,
eliminating the term loan and placing the reduced $300 million total amount
available under the credit agreement in the revolving credit facility. Through
an additional amendment, in March 1996, the amount available under the revolving
credit facility was further reduced to $275 million, and the related maturity
date was moved to March 12, 2001. After the Merger, the Branded Business will
utilize financing arrangements maintained or arranged by General Mills.
The amount of Ralcorp debt allocated to the Branded Business, as reflected
on the accompanying Combined Balance Sheets, was $61.2 million and $62.8 million
at September 30, 1996 and 1995, respectively. Management believes that the
Branded Business maintained sufficient flexibility, through cash flow from
operations, which totaled $142.8 million for the three years ended September 30,
1996, and allocated bank credit facility debt to finance cash needs during the
past three fiscal years.
Prior to the 1994 Spin-off, Ralston Purina sold certain of its trade
accounts receivable, including amounts attributable to certain operations of the
Branded Business, to third party purchasers, subject to defined limited recourse
provisions. During fiscal 1994, this program was discontinued, which had the
effect of reducing cash flow from financing activities by $7.2 million.
ENVIRONMENTAL MATTERS
The operations of the Branded Business, like those of similar businesses,
are subject to various federal, state and local laws and regulations with
respect to environmental matters, including air and water quality, underground
fuel storage tanks, waste handling and disposal and other regulations intended
to protect public health and the environment. The Branded Business' cereal plant
has received notices from the U.S. Environmental Protection Agency, state
agencies, and/or private parties seeking contribution, that they have been
identified as a "potential responsible party" (PRP) at one cleanup site under
the Comprehensive Environmental Response, Compensation and Liability Act, as
amended (CERCLA), and the Branded Business may be required to share in the cost
of cleanup with respect to the one cleanup site. Under applicable law, the
liability, if any, for the cleanup of the disposal site may be joint and several
with all PRPs at this site. Based upon management's investigation of whether the
Branded Business contributed hazardous material to the disposal site, management
believes the Branded Business is only a de minimis contributor to the site.
Management reviews a number of items to determine if the remediation associated
with environmental matters is expected to be material to the Branded Business
including, but not limited to, the stage of each proceeding; whether other
parties have been designated as possibly responsible (including other PRPs) and
the financial strength of such other parties; the nature and volume of hazardous
material alleged to be located at a site; the Branded Business' alleged
volumetric contribution to a site; the contemplated remedy for a site; any
defenses or third party claims the Branded Business may have; indemnification
arrangements with third parties; the number of years over which remediation
costs will be distributed; reports of experts (internal or external); and
appropriate governmental opinions on the remediation of a site. While it is
difficult to quantify with certainty the potential financial impact of actions
regarding expenditures for environmental matters, in the opinion of management,
based upon the information currently available, the ultimate liability arising
from such environmental matters, taking into account established accruals for
estimated liabilities, should not have a material effect on the Branded
Business' combined financial condition.
F-20
<PAGE> 103
ACCOUNTING PRONOUNCEMENTS
In March 1995, the FASB issued Statement of Financial Accounting Standards
No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" (FAS 121) which established accounting standards for
recognizing the impairment of long-lived assets, identifiable intangibles and
goodwill, whether to be disposed of or to be held and used. In general, FAS 121
requires recognition of an impairment loss when the sum of undiscounted expected
future cash flows is less than the carrying amount of such assets. Consequently,
management of the Branded Business must continue to evaluate the recoverability
of the carrying value of all Branded Business-related long-lived assets, as
events or circumstances warrant.
In October 1995, the FASB issued Statement of Financial Accounting
Standards No. 123 "Accounting for Stock-Based Compensation" (FAS 123). This
statement established financial accounting and reporting standards for
stock-based employee compensation plans. The accounting and disclosure
requirements of FAS 123 are effective during the Branded Business' fiscal year
ended September 30, 1997. The Branded Business will adopt the disclosure
provisions of FAS 123, but will continue to account for compensation costs based
on the provisions of Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees." Therefore, there will be no impact on the Branded
Business financial condition or results of operations as a result of FAS 123.
INFLATION
Management recognizes that inflationary pressures may have an adverse
effect on the Branded Business through higher asset replacement costs, related
depreciation and higher material costs. The Branded Business tries to minimize
these effects through cost reductions and productivity improvements as well as
price increases to maintain reasonable profit margins. It is management's view,
however, that inflation has not had a significant impact on operations in each
of the three fiscal years ended September 30, 1996.
F-21
<PAGE> 104
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
RALCORP HOLDINGS, INC.,
GENERAL MILLS, INC.
AND
GENERAL MILLS MISSOURI, INC.
AUGUST 13, 1996
<PAGE> 105
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I -- THE MERGER.............................................................. A-2
SECTION 1.1 THE MERGER.......................................................... A-2
SECTION 1.2 CLOSING............................................................. A-2
SECTION 1.3 EFFECTIVE TIME...................................................... A-2
SECTION 1.4 EFFECTS OF THE MERGER............................................... A-2
SECTION 1.5 CERTIFICATE OF INCORPORATION AND BY-LAWS............................ A-2
SECTION 1.6 DIRECTORS........................................................... A-2
SECTION 1.7 OFFICERS............................................................ A-2
ARTICLE II -- EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES................................. A-3
SECTION 2.1 EFFECT ON CAPITAL STOCK............................................. A-3
(a) Cancellation of Treasury Stock and Acquiror-Owned Stock............. A-3
(b) Conversion of Company Common Stock.................................. A-3
(c) Shares of Dissenting Stockholders................................... A-4
SECTION 2.2 EXCHANGE OF CERTIFICATES............................................ A-4
(a) Exchange Agent...................................................... A-4
(b) Exchange Procedures................................................. A-4
(c) Distributions with Respect to Unexchanged Shares.................... A-4
(d) No Further Ownership Rights in Company Common Stock................. A-5
(e) No Fractional Shares................................................ A-5
(f) Termination of Exchange Fund........................................ A-5
(g) No Liability........................................................ A-5
SECTION 2.3 NET ASSETS ADJUSTMENT............................................... A-5
ARTICLE III -- REPRESENTATIONS AND WARRANTIES........................................ A-6
SECTION 3.1 CERTAIN DEFINITIONS................................................. A-6
SECTION 3.2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................... A-6
(a) Organization, Standing, Corporate Power and Subsidiaries............ A-6
(b) Capital Structure................................................... A-6
(c) Authority; Noncontravention......................................... A-7
(d) SEC Documents; Undisclosed Liabilities; Press Releases.............. A-8
(e) Information in Disclosure Documents and Registration Statements..... A-8
(f) Absence of Certain Changes or Events................................ A-9
(g) Litigation.......................................................... A-9
(h) Compliance with Applicable Laws..................................... A-9
(i) Brokers or Finders.................................................. A-9
(j) The Branded Business................................................ A-10
(k) Material Contracts.................................................. A-10
(l) Absence of Changes in Benefit Plans................................. A-10
(m) Benefit Plans, Employment and Labor Relations....................... A-11
(n) Rights Agreement; Antitakeover Statutes............................. A-12
(o) Intellectual Property............................................... A-12
(p) Taxes............................................................... A-13
(q) Branded Financial Statements........................................ A-13
(r) Properties.......................................................... A-13
(s) Capacity of Branded Plant........................................... A-13
(t) Actions Affecting 1994 Spinoff...................................... A-13
(u) Real Property....................................................... A-13
(v) Environmental Matters............................................... A-14
(w) Actions Affecting Internal Spin-off or Distribution................. A-14
</TABLE>
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<TABLE>
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SECTION 3.3 REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGER SUB........... A-14
(a) Organization, Standing and Corporate Power.......................... A-14
(b) Capital Structure................................................... A-14
(c) Authority; Noncontravention......................................... A-15
(d) SEC Documents; Undisclosed Liabilities.............................. A-16
(e) Information in Disclosure Documents and Registration Statements..... A-16
(f) Absence of Certain Changes or Events................................ A-16
(g) Litigation.......................................................... A-17
(h) Compliance with Applicable Laws..................................... A-17
(i) Consummation of Transactions........................................ A-17
(j) Voting Requirements................................................. A-17
(k) Brokers............................................................. A-17
ARTICLE IV -- COVENANTS.............................................................. A-17
SECTION 4.1 COVENANTS OF THE COMPANY............................................ A-17
(a) Ordinary Course..................................................... A-17
(b) Changes in Stock.................................................... A-18
(c) Issuance of Securities.............................................. A-18
(d) Governing Documents................................................. A-19
(e) No Acquisitions..................................................... A-19
(f) No Dispositions..................................................... A-19
(g) Indebtedness........................................................ A-19
(h) Benefit Plans; Collective Bargaining Agreement...................... A-19
(i) Filings............................................................. A-19
(j) Accounting Policies and Procedures.................................. A-19
(k) Liens............................................................... A-20
(l) Actions Affecting Merger, Internal Spin-off or Distribution......... A-20
(m) Delivery of Certain Information..................................... A-20
(n) Exclusivity......................................................... A-20
(o) New Contracts....................................................... A-21
(p) Confidentiality and Standstill Agreements........................... A-21
(q) Broker Transition................................................... A-21
(r) Pending Actions..................................................... A-21
(s) No Agreement to Prohibited Actions.................................. A-21
SECTION 4.2 COVENANTS OF ACQUIROR............................................... A-21
(a) Actions Affecting Merger............................................ A-21
(b) Filings............................................................. A-21
(c) Acquiror Common Stock............................................... A-22
(d) Tax Free Status of Merger and Spin-Offs............................. A-22
SECTION 4.3 MUTUAL COVENANTS.................................................... A-22
ARTICLE V -- ADDITIONAL AGREEMENTS................................................... A-23
SECTION 5.1 PREPARATION OF FORM S-4, FORM S-1, FORM 10 AND THE PROXY STATEMENT;
STOCKHOLDERS MEETING................................................ A-23
SECTION 5.2 ACCESS TO INFORMATION; CONFIDENTIALITY.............................. A-23
SECTION 5.3 LEGAL CONDITIONS TO DISTRIBUTION AND MERGER; LEGAL COMPLIANCE....... A-24
SECTION 5.4 RIGHTS AGREEMENT.................................................... A-24
SECTION 5.5 EMPLOYMENT MATTERS.................................................. A-24
(a) Employment with Branded Business.................................... A-24
(b) Severance and Other Benefits on Termination......................... A-24
(c) Data to be Furnished................................................ A-25
(d) Cooperation......................................................... A-25
</TABLE>
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<TABLE>
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SECTION 5.6 FEES AND EXPENSES................................................... A-25
SECTION 5.7 DISTRIBUTION........................................................ A-25
SECTION 5.8 PUBLIC ANNOUNCEMENTS................................................ A-25
SECTION 5.9 PRIVATE LETTER RULING AND TAX OPINIONS.............................. A-25
SECTION 5.10 AFFILIATES.......................................................... A-25
SECTION 5.11 STOCK EXCHANGE LISTING.............................................. A-25
SECTION 5.12 TITLE INSURANCE..................................................... A-25
ARTICLE VI -- CONDITIONS PRECEDENT................................................... A-26
SECTION 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.......... A-26
(a) Stockholder Approval................................................ A-26
(b) Stock Exchange Listing.............................................. A-26
(c) Regulatory Approvals................................................ A-26
(d) Private Letter Ruling............................................... A-26
(e) Joint Tax Opinion or Tax Opinions................................... A-26
(f) No Injunctions or Restraints........................................ A-26
(g) Form S-4............................................................ A-27
(h) Consummation of the Distribution.................................... A-27
(i) Tax Legislation..................................................... A-27
SECTION 6.2 CONDITIONS TO OBLIGATIONS OF ACQUIROR AND MERGER SUB................ A-27
(a) Representations and Warranties...................................... A-27
(b) Performance of Obligations of the Company........................... A-27
(c) Opinion of the Company's Counsel.................................... A-27
(d) No Material Adverse Change.......................................... A-28
(e) Ancillary Agreements................................................ A-28
(f) Amendments to SEC Documents......................................... A-28
(g) Rule 145 Letters.................................................... A-28
(h) Scheduled Agreements................................................ A-28
(i) Certificate of Trustee.............................................. A-28
(j) Dissenters.......................................................... A-29
SECTION 6.3 CONDITIONS TO OBLIGATION OF THE COMPANY............................. A-29
(a) Representations and Warranties...................................... A-29
(b) Performance of Obligations of Acquiror.............................. A-29
(c) Opinion of Acquiror's Counsel....................................... A-29
(d) Amendments to SEC Documents......................................... A-30
(e) Ancillary Agreements................................................ A-30
(f) Dissenters.......................................................... A-30
ARTICLE VII -- TERMINATION, AMENDMENT AND WAIVER..................................... A-30
SECTION 7.1 TERMINATION......................................................... A-30
SECTION 7.2 EFFECT OF TERMINATION............................................... A-31
SECTION 7.3 AMENDMENT........................................................... A-31
SECTION 7.4 EXTENSION; WAIVER................................................... A-31
SECTION 7.5 PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR WAIVER........... A-31
ARTICLE VIII -- GENERAL PROVISIONS................................................... A-32
SECTION 8.1 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES....................... A-32
SECTION 8.2 NOTICES............................................................. A-32
SECTION 8.3 CERTAIN DEFINITIONS................................................. A-32
SECTION 8.4 INTERPRETATION...................................................... A-33
SECTION 8.5 COUNTERPARTS........................................................ A-33
SECTION 8.6 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES...................... A-33
</TABLE>
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<TABLE>
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SECTION 8.7 GOVERNING LAW....................................................... A-33
SECTION 8.8 ASSIGNMENT.......................................................... A-33
SECTION 8.9 ENFORCEMENT......................................................... A-33
</TABLE>
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG RALCORP HOLDINGS, INC.,
GENERAL MILLS, INC. AND GENERAL MILLS MISSOURI, INC.
This Agreement and Plan of Merger is dated as of August 13, 1996 (as
amended, supplemented or otherwise modified from time to time, this
"AGREEMENT"), by and among Ralcorp Holdings, Inc., a Missouri corporation (the
"COMPANY"), General Mills, Inc., a Delaware corporation (the "ACQUIROR"), and
General Mills Missouri, Inc., a Missouri corporation and a wholly owned
subsidiary of Acquiror ("MERGER SUB").
WHEREAS, the Board of Directors of the Company has approved a plan of
distribution and reorganization as described in the Reorganization Agreement
attached hereto as Exhibit A (the "REORGANIZATION AGREEMENT"), which will be
entered into prior to the Effective Time (as defined in Section 1.3), subject to
the issuance of a private letter ruling from the Internal Revenue Service (the
"SERVICE") as described in Section 6.1(d) hereof in response to a ruling request
to be made by the Company (the "RULING REQUEST") or, alternatively, the issuance
of an opinion or opinions of counsel as described in Section 6.1(e) hereof,
pursuant to which (a) certain of the assets and liabilities of the branded
cereals and branded snacks business (the "BRANDED BUSINESS") currently operated
by the Company's wholly-owned subsidiary, Ralston Foods, Inc. ("FOODS"), will be
contributed by Foods to a newly-formed subsidiary (the "BRANDED SUBSIDIARY") as
provided in the Reorganization Agreement, (b) all the stock of the Branded
Subsidiary will be distributed by Foods to the Company pursuant to the
Reorganization Agreement (the "INTERNAL SPINOFF"), and (c) all of the shares of
capital stock of a Missouri corporation to be formed as a wholly-owned
subsidiary of the Company and the parent of Foods ("NEW HOLDINGS") will be
distributed on a pro rata basis to the Company's stockholders as provided in the
Reorganization Agreement (the "DISTRIBUTION");
WHEREAS, the respective Boards of Directors of Acquiror, Merger Sub and the
Company have determined that, following the Distribution, the merger of Merger
Sub with and into the Company (the "MERGER") with the Company as the surviving
corporation (the "SURVIVING CORPORATION") would be advantageous and beneficial
to their respective corporations and stockholders; and
WHEREAS, for Federal income tax purposes, it is intended that (a) the
Distribution and the Internal Spinoff shall each qualify as tax-free
distributions within the meaning of Section 355 of the Internal Revenue Code of
1986, as amended (the "CODE"), and (b) the Merger shall qualify as a
reorganization under Section 368(a)(1)(B) of the Code, and this Agreement is
intended to be and is adopted as a plan of reorganization.
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NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties hereto agree
as follows:
ARTICLE I
THE MERGER
SECTION 1.1 THE MERGER. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the General and Business
Corporation Law of Missouri (the "GBCL"), Merger Sub shall be merged with and
into the Company at the Effective Time. Following the Merger, the separate
corporate existence of Merger Sub shall cease and the Company shall continue as
the Surviving Corporation and shall succeed to and assume all the rights and
obligations of Merger Sub in accordance with the GBCL.
SECTION 1.2 CLOSING. Subject to the next sentence, the closing of the
Merger (the "CLOSING") will take place as promptly as practicable after the
satisfaction or waiver of the conditions set forth in Article VI (other than,
but subject to, those conditions to be performed at the Closing), at the offices
of Bryan Cave LLP, 211 No. Broadway, Suite 3600, St. Louis, Missouri, or on such
other date or at such other place is agreed to in writing by the parties hereto.
The parties agree to use reasonable efforts to cause the Closing to occur at the
end of a month. The date of the Closing is referred to herein as the "CLOSING
DATE."
SECTION 1.3 EFFECTIVE TIME. As soon as practicable following the
satisfaction or waiver of the conditions set forth in Article VI, the parties
shall file articles of merger or other appropriate documents (in any such case,
the "CERTIFICATE OF MERGER") executed in accordance with the relevant provisions
of the GBCL, and shall make all other filings or recordings required under the
GBCL. The Merger shall become effective immediately following the Distribution
upon the filing of the Certificate of Merger with the Missouri Secretary of
State or at such other time as the Company and Acquiror shall agree should be
specified in the Certificate of Merger (the time the Merger becomes effective
being the "EFFECTIVE TIME").
SECTION 1.4 EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in Section 351.450 of the GBCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the properties,
rights, privileges, powers and franchises of Merger Sub and the Company shall
vest in the Surviving Corporation, and all debts, liabilities, obligations and
duties of Merger Sub and the Company shall become the debts, liabilities and
duties of the Surviving Corporation.
SECTION 1.5 CERTIFICATE OF INCORPORATION AND BY-LAWS.
(a) The certificate of incorporation of Merger Sub as in effect at the
Effective Time shall be the certificate of incorporation of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law.
(b) The by-laws of Merger Sub as in effect at the Effective Time shall be
the by-laws of the Surviving Corporation until thereafter changed or amended as
provided therein or by applicable law.
SECTION 1.6 DIRECTORS. The directors of Merger Sub at the Effective Time
shall be the directors of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
SECTION 1.7 OFFICERS. The officers of Merger Sub at the Effective Time
shall be the officers of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
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ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.1 EFFECT ON CAPITAL STOCK. As of the Effective Time, by virtue of
the Merger and without any action on the part of the holder of any shares of
Common Stock, par value $.01 per share, of the Company ("COMPANY COMMON STOCK"):
(a) Cancellation of Treasury Stock and Acquiror-Owned Stock. Each share of
Company Common Stock that is owned by the Company or by any wholly owned
subsidiary of the Company (but not any Benefit Plan (as defined in Section
3.2(m)) of the Company or any of its subsidiaries) and each share of Company
Common Stock that is owned by Acquiror, Merger Sub or any other wholly owned
subsidiary of Acquiror, excluding, in each case, any such share held by the
Company, Acquiror or any of their wholly owned subsidiaries in a fiduciary,
custodial or similar capacity, shall automatically be canceled and retired and
shall cease to exist, and no common stock, par value $.10 per share, of Acquiror
("ACQUIROR COMMON STOCK") or other consideration shall be delivered in exchange
therefor.
(b) Conversion of Company Common Stock. Subject to Section 2.2(e), each
issued and outstanding share of Company Common Stock, other than (i) shares to
be canceled in accordance with Section 2.1(a) and (ii) as set forth in paragraph
(c) below, shares that have not been voted in favor of the approval of this
Agreement and with respect to which dissenters' rights shall have been perfected
in accordance with Section 351.455 of the GBCL ("DISSENTERS' SHARES"), shall be
converted into the right to receive a fraction of a fully paid and nonassessable
share of Acquiror Common Stock equal to the Conversion Number (the "MERGER
CONSIDERATION"). The term "CONVERSION NUMBER" shall mean a number, expressed to
three decimal places, equal to the fraction of (i) $570,000,000 less (A) the
amount of any Funded Debt of the Company and the Branded Subsidiary as of the
Effective Time and (B) the amount required to be paid by the Company to the
holders of the Rights to redeem the Rights, to the extent such amount remains
unpaid at the Effective Time (the "RIGHTS PAYMENT"), divided by (ii) the product
of (A) the Average Value of Acquiror Common Stock multiplied by (B) the number
of shares of Company Common Stock outstanding immediately before the Effective
Time. The term "FUNDED DEBT OF THE COMPANY" shall mean, without duplication, (i)
the Company's 8 3/4% Notes due September 15, 2004 (the "NOTES") (which shall be
valued at their face value, plus any accrued and unpaid interest thereon as of
the Closing Date), (ii) any amounts outstanding under any bank credit facility
of the Company or the Branded Subsidiary, (iii) all other indebtedness of the
Company or the Branded Subsidiary for borrowed money, and (iv) any other
indebtedness of the Company or the Branded Subsidiary that is evidenced by a
note, bond or similar security. The amount of any Funded Debt of the Company
referred to in the foregoing clauses (ii), (iii) and (iv) shall be the face
value thereof, plus any accrued and unpaid interest thereon as of the Closing
Date, plus an amount, if any, on an after-tax basis, equal to (i) the face value
thereof, multiplied by (ii)(A) the number of days, if any, following the
Effective Time during which such Funded Debt of the Company is not payable or
prepayable without premium or penalty divided by (B) 365, multiplied by (iii)(A)
the applicable annual interest rate of such Funded Debt minus (B) the annual
interest rate applicable to debt of Acquiror having a maturity equal to the
number of days referred to in clause (ii)(A) of this sentence (such rate to be
reasonably agreed upon by Lehman Brothers Inc. and Dillon Read & Co., Inc.). The
term "AVERAGE VALUE OF ACQUIROR COMMON STOCK" shall mean the volume-weighted
average of the prices per share of Acquiror Common Stock for all trades reported
on the New York Stock Exchange Inc. ("NYSE") during the 10 trading days
immediately preceding the last business day before the date of the Effective
Time; provided, however, that if, on any such day, there has been any suspension
of trading, the imposition of any NYSE market circuit breakers or any delay in
the opening of trading, in any such case affecting the trading of the Acquiror
Common Stock on the NYSE, such day shall be excluded and the measurement period
for the determination of the Average Value of Acquiror Common Stock shall be the
10 trading days immediately preceding the last business day before the date of
the Effective Time on which no such event shall have occurred. As of the
Effective Time, all such shares of Company Common Stock shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each holder of a certificate formerly representing any such shares of
Company Common Stock shall cease to have any
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rights with respect thereto, except the right to receive the shares of Acquiror
Common Stock and any cash in lieu of fractional shares of Acquiror Common Stock
to be issued or paid in consideration therefor upon surrender of such
certificate in accordance with Section 2.2, without interest thereon.
(c) Shares of Dissenting Stockholders. Notwithstanding anything in this
Agreement to the contrary, no Dissenters' Shares shall be converted as described
in Section 2.1(b) but shall become the right to receive such consideration from
the Surviving Corporation as may be determined to be due in respect of such
Dissenters' Shares pursuant to the laws of the State of Missouri; provided,
however, that any Dissenters' Shares outstanding immediately prior to the
Effective Time and held by a stockholder who shall, after the Effective Time,
lose or withdraw his or her dissenter's rights pursuant to the GBCL, shall be
deemed to be converted as of the Effective Time into the right to receive the
Merger Consideration.
SECTION 2.2 EXCHANGE OF CERTIFICATES.
(a) Exchange Agent. As of the Effective Time, Acquiror shall deposit with
Norwest Bank Minnesota, N.A. (the "EXCHANGE AGENT"), for the benefit of the
holders of shares of Company Common Stock, for exchange through the Exchange
Agent in accordance with this Article II, certificates representing the shares
of Acquiror Common Stock (such shares of Acquiror Common Stock, together with
any dividends or distributions with respect thereto, being hereinafter referred
to as the "EXCHANGE FUND") issuable pursuant to Section 2.1 in exchange for
certificates formerly representing outstanding shares of Company Common Stock.
Acquiror shall or shall cause the Surviving Corporation to provide to the
Exchange Agent, on a timely basis, funds necessary to pay any cash payable in
lieu of fractional shares of Acquiror Common Stock in accordance with Section
2.2(e).
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Surviving Corporation shall cause the Exchange Agent to mail
to each holder of record of a certificate or certificates which immediately
prior to the Effective Time represented outstanding shares of Company Common
Stock (the "CERTIFICATES") whose shares were converted into the right to receive
shares of Acquiror Common Stock pursuant to Section 2.1, (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as Acquiror may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of Acquiror Common Stock and cash in lieu of any fractional
share. Upon surrender of a Certificate for cancellation to the Exchange Agent or
to such other agent or agents as may be appointed by Acquiror, together with
such letter of transmittal, duly executed, and such other documents as may
reasonably be required by the Exchange Agent, the holder of such Certificate
shall be entitled to receive in exchange therefor a certificate representing
that number of whole shares of Acquiror Common Stock, and cash in lieu of any
fractional share, which such holder has the right to receive pursuant to the
provisions of this Article II, and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of Company Common
Stock which is not registered in the transfer records of the Company, a
certificate representing the proper number of shares of Acquiror Common Stock
and cash in lieu of any fractional share may be issued to a person other than
the person in whose name the Certificate so surrendered is registered, if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such issuance and payment shall pay any
transfer or other taxes required by reason of the issuance of shares of Acquiror
Common Stock and payment of cash in lieu of any fractional share to a person
other than the registered holder of such Certificate or establish to the
satisfaction of Acquiror that such tax has been paid or is not applicable. Until
surrendered as contemplated by this Section 2.2, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the certificate representing shares of Acquiror
Common Stock and cash in lieu of any fractional shares of Acquiror Common Stock
as contemplated by this Section 2.2. No interest will be paid or will accrue on
any shares of Acquiror Common Stock or cash payable in lieu of any fractional
shares of Acquiror Common Stock.
(c) Distributions with Respect to Unexchanged Shares. No dividends or other
distributions with respect to Acquiror Common Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate with
respect to the shares of Acquiror Common Stock represented thereby and no
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cash payment in lieu of fractional shares shall be paid to any such holder
pursuant to Section 2.2(e) until the surrender of such Certificate in accordance
with this Article II. Subject to the effect of applicable laws, following
surrender of any such Certificate, there shall be paid to the holder of the
certificate representing whole shares of Acquiror Common Stock issued in
exchange therefor, without interest, (i) at the time of such surrender, the
amount of any cash payable in lieu of a fractional share of Acquiror Common
Stock to which such holder is entitled pursuant to Section 2.2(e) and the amount
of dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of Acquiror Common Stock and
(ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time but prior to such
surrender and a payment date subsequent to such surrender payable with respect
to such whole shares of Acquiror Common Stock.
(d) No Further Ownership Rights in Company Common Stock. All shares of
Acquiror Common Stock issued upon the surrender for exchange of Certificates in
accordance with the terms of this Article II and any cash paid pursuant to
Section 2.2(c) or 2.2(e) shall be deemed to have been issued and paid in full
satisfaction of all rights pertaining to the shares of Company Common Stock
theretofore represented by such Certificates, and there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Company Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Exchange Agent
for any reason, they shall be canceled and exchanged as provided in this Article
II.
(e) No Fractional Shares.
(i) No certificates or scrip representing fractional shares of
Acquiror Common Stock shall be issued upon the surrender for exchange of
Certificates, and such fractional share interests will not entitle the
owner thereof to vote or to any other rights as a stockholder of Acquiror.
(ii) Notwithstanding any other provision of this Agreement, each
holder of shares of Company Common Stock exchanged pursuant to the Merger
who would otherwise have been entitled to receive a fraction of a share of
Acquiror Common Stock (after taking into account all Certificates
registered to such holder) shall receive, in lieu thereof, cash (without
interest) in an amount equal to such fractional part of a share of Acquiror
Common Stock multiplied by the Average Value of Acquiror Common Stock.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the holders of the Certificates for six months after
the Effective Time shall be delivered to Acquiror, upon demand, and any holders
of the Certificates who have not theretofore complied with this Article II shall
thereafter look only to the Surviving Corporation or Acquiror for payment of
their claim for Acquiror Common Stock, any cash in lieu of fractional shares of
Acquiror Common Stock and any dividends or distributions with respect to
Acquiror Common Stock.
(g) No Liability. None of Acquiror, Merger Sub, the Company, the Surviving
Corporation or the Exchange Agent shall be liable to any person in respect of
any shares of Acquiror Common Stock (or dividends or distributions with respect
thereto) or cash from the Exchange Fund delivered to a public official pursuant
to any applicable abandoned property, escheat or similar law.
SECTION 2.3 NET ASSETS ADJUSTMENT.
(a) If the value of the combined total assets minus the total liabilities
of the Company and the Branded Subsidiary on the Closing Date, as calculated in
the manner set forth on Schedule 2.3 ("CLOSING DATE NET ASSET VALUE"), is less
than $41,900,000, then Foods shall pay to the Surviving Corporation an amount
equal to such shortfall in the manner as provided on Schedule 2.3.
(b) If the Closing Date Net Asset Value is more than $41,900,000, then the
Surviving Corporation shall pay to Foods an amount equal to such excess in the
manner as provided on Schedule 2.3.
(c) Schedule 2.3 sets forth (i) the manner in which the Closing Date Net
Asset Value shall be calculated and (ii) the manner in which any payment
required by Sections 2.3(a) or 2.3(b) shall be made. The payments made under
this Section 2.3 shall not be deemed to be an adjustment of the consideration
paid for the Company Common Stock.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 CERTAIN DEFINITIONS. As used in Section 3.2, unless
specifically provided otherwise, any reference to the Company shall be a
reference to the Company and the Branded Subsidiary, assuming that the
contribution of the Branded Business to the Branded Subsidiary, the Internal
Spinoff and the Distribution had occurred immediately prior to the date hereof
on the terms and conditions set forth in the Reorganization Agreement. As used
in this Agreement, any reference to any event, change or effect having a
material adverse effect on or with respect to an entity (or group of entities
taken as a whole) means such event, change or effect is reasonably expected to
be materially adverse to the business, properties, assets, results of operations
or consolidated financial condition of such entity (or, if with respect thereto,
of such group of entities taken as a whole) or on the ability of such entity or
group of entities to consummate the transactions contemplated hereby, including
the Distribution and the Merger. As used in this Agreement, any reference to the
knowledge of the Company or the best knowledge of the Company means the actual
knowledge after reasonable inquiry of the relevant facts and circumstances of
the individuals listed on Schedule 3.1, and not any other person or entity.
SECTION 3.2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to Acquiror and Merger Sub as follows:
(a) Organization, Standing, Corporate Power and Subsidiaries. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted. The Company is duly qualified or licensed to do
business and in good standing in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification or licensing necessary, except where the failure to be so
duly qualified or licensed and in good standing would not have a material
adverse effect on the Company. True, accurate and complete copies of the
Articles of Incorporation and Bylaws of the Company, as in effect on the date
hereof, including all amendments thereto, have heretofore been delivered to
Acquiror. The Company has made available to legal counsel for Acquiror true,
accurate and complete copies of the minute books of the Company as maintained by
the Company, and such minute books contain minutes of all meetings of the boards
of directors and stockholders of the Company. At the Effective Time, except for
the Branded Subsidiary, the Company will not, directly or indirectly, own or
have the right to acquire any capital stock or other equity interest in any
other corporation, partnership, joint venture or other entity. At the Effective
Time, the Company will own all right, title and interest in and to all capital
stock and all rights with respect to all capital stock of the Branded
Subsidiary. The capitalization and the state, country or other jurisdiction of
incorporation of the Branded Subsidiary is accurately described and identified
on Schedule 3.2(a).
(b) Capital Structure. The authorized capital stock of the Company consists
of 300,000,000 shares of Company Common Stock and 10,000,000 shares of preferred
stock, par value $0.01 per share ("COMPANY PREFERRED STOCK"). At the close of
business on July 31, 1996, (i) 32,924,347 shares of Company Common Stock and no
shares of Company Preferred Stock were issued and outstanding, (ii) 1,000,501
shares of Company Common Stock were held by the Company in its treasury, (iii)
2,610,086 shares of Company Common Stock were reserved for issuance pursuant to
the Benefit Plans and (iv) 35,534,433 shares of Company Common Stock were
reserved for issuance in connection with the rights (the "RIGHTS") issued
pursuant to the Rights Agreement dated as of March 24, 1994 (as amended from
time to time, the "RIGHTS AGREEMENT"), between the Company and Boatmen's Trust
Company, as Rights Agent. Except as set forth above, at the close of business on
July 31, 1996, no shares of capital stock or other voting securities of the
Company were issued, reserved for issuance or outstanding. All outstanding
shares of capital stock of the Company are, and all shares which may be issued
pursuant to the Benefit Plans will be, when issued, duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights. There
are not any bonds, debentures, notes or other indebtedness of the Company having
the right to vote (or convertible into, or exchangeable for, securities having
the right to vote) on any matters on which stockholders of the Company may vote.
Except as set forth above, there are not, and immediately prior to the Effective
Time there will not
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be, any securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which the Company is a party or by
which it is bound obligating the Company to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of capital stock or other voting
securities of the Company or of the Branded Subsidiary or obligating the Company
or the Branded Subsidiary to issue, grant, extend or enter into any such
security, option, warrant, call, right, commitment, agreement, arrangement or
undertaking. There are not any outstanding contractual obligations of the
Company to repurchase, redeem or otherwise acquire any shares of capital stock
of the Company. The Company has delivered to Acquiror a complete and correct
copy of the Rights Agreement as amended and supplemented to the date of this
Agreement.
(c) Authority; Noncontravention. The Company has, and, in the case of any
Ancillary Agreements (as defined in the Reorganization Agreement) executed at a
later time, the Company will have, the requisite corporate power and authority
(subject to the approvals described in the next sentence) to enter into this
Agreement and the Ancillary Agreements and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Ancillary Agreements and the consummation by the Company of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of the Company, other than, with respect
to the Merger, the approval and adoption of this Agreement by the affirmative
vote of the holders of Company Common Stock representing two-thirds of the
shares entitled to vote (such holders of two-thirds of such shares, the
"REQUISITE STOCKHOLDERS"), and formal declaration of the Distribution by the
Company's Board of Directors (which will occur prior to the Closing Date). This
Agreement has been duly executed and delivered by the Company (excluding the
Branded Subsidiary) and, assuming this Agreement constitutes a valid and binding
obligation of Acquiror, constitutes a valid and binding obligation of the
Company (excluding the Branded Subsidiary), enforceable against the Company
(excluding the Branded Subsidiary) in accordance with its terms. Each of the
Ancillary Agreements has been, or prior to the Merger and the other transactions
contemplated thereby will be, duly executed and delivered by each of the Company
and the Branded Subsidiary, as the case may be, and constitutes, or upon such
execution and delivery will constitute, a valid and binding obligation of each
of the Company and the Branded Subsidiary, enforceable against it in accordance
with its terms. Except as set forth on Schedule 3.2(c), none of the execution
and delivery of this Agreement and the Ancillary Agreements or the consummation
of the transactions contemplated hereby or thereby and compliance with the
provisions of this Agreement and the Ancillary Agreements will conflict with, or
result in any violation of, or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or the loss of a benefit under, or result in the
creation of any adverse claim, restriction on voting or transfer, pledge, claim,
lien, charge, encumbrance or security interest of any kind or nature whatsoever
(collectively, "LIENS") upon any of the properties or assets of the Company (i)
under its Articles of Incorporation or Bylaws, (ii) under any Contract (as
defined in the Reorganization Agreement) to which the Company is a party or by
which the Company or any of its assets are bound, or (iii) subject to the
governmental filings and other matters referred to in the following sentence,
under any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Company, or any of its properties or assets, other than, in
the case of clauses (ii) and (iii), any such conflicts, violations, defaults,
rights, losses or Liens that individually or in the aggregate would not (A) have
a material adverse effect on the Company, (B) materially impair the ability of
the Company to perform its obligations under this Agreement or any of the
Ancillary Agreements to which the Company is a party or (C) prevent or
materially delay the consummation of any of the transactions contemplated by
this Agreement or any of the Ancillary Agreements. No consent, approval, order
or authorization of, or registration, declaration or filing with, any Federal,
state or local government or any court, administrative agency or commission or
other governmental authority or agency, or self-regulatory organization,
domestic or foreign (a "GOVERNMENTAL ENTITY"), is required by or with respect to
the Company in connection with the execution and delivery of this Agreement and
any of the Ancillary Agreements to which it is a party or the consummation by
the Company of the transactions contemplated hereby or thereby, except for (i)
the filing with the Securities and Exchange Commission ("SEC") of (x) a proxy
statement relating to the approval by the Company's stockholders of this
Agreement (as amended or supplemented from time to time, the "PROXY STATEMENT"),
(y) potentially, a registration statement on Form S-1 relating to the
Distribution
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and (z) a registration statement on Form 10 (the "FORM 10") under, and such
reports under Section 13(a) of, the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT"), as may be required in connection with this Agreement, the
Ancillary Agreements and the transactions contemplated hereby and thereby, (ii)
the filing of the Certificate of Merger with the Missouri Secretary of State and
appropriate documents with the relevant authorities of other states in which the
Company or the Branded Subsidiary is qualified to do business, (iii) expiration
of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR ACT"), (iv) such consents, approvals, orders,
authorizations, registrations, declarations and filings as are set forth on
Schedule 3.2(c) and (v) such other consents, approvals, orders, authorizations,
registrations, declarations and filings, the absence of which could not
reasonably be expected to have a material adverse effect on the Company.
(d) SEC Documents; Undisclosed Liabilities; Press Releases.
(i) The Company has filed all required reports, schedules, forms,
statements and other documents with the SEC since March 31, 1994 (the
"COMPANY SEC DOCUMENTS"). As of their respective dates (as amended), the
Company SEC Documents complied in all material respects with the
requirements of the Securities Act of 1933, as amended (the "SECURITIES
ACT"), or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such Company
SEC Documents, and none of the Company SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading.
The financial statements of the Company included in the Company SEC
Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with generally
accepted accounting principles (except as permitted by Form 10-Q of the SEC
in the case of unaudited statements) applied on a consistent basis during
the periods involved (except as may be indicated in the notes thereto) and
fairly present the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
(ii) None of the press releases issued by the Company since March 31,
1994 contained at the time of issuance any untrue statement of a material
fact or omitted to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
(e) Information in Disclosure Documents and Registration Statements. None
of the information supplied or to be supplied in writing by the Company or its
representatives for inclusion or incorporation by reference in (i) the
registration statement on Form S-4 to be filed with the SEC by Acquiror in
connection with the issuance of shares of Acquiror Common Stock in the Merger
(the "FORM S-4") or in a registration statement (if any) on Form S-1 or any
other applicable form to be filed with the SEC by New Holdings in connection
with the distribution of shares of Common Stock, par value $0.01 per share, of
New Holdings ("NEW HOLDINGS COMMON STOCK") in the Distribution (the "FORM S-1")
will, at the time such Registration Statements become effective under the
Securities Act and at the Effective Time, in the case of the Form S-4, and at
the time of the meeting of stockholders of the Company to be held in connection
with the Merger and the Distribution and at the time of the Distribution, in the
case of the Form S-1, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading and (ii) the Proxy Statement will, at the date mailed to the
Company's stockholders and at the time of the meeting of stockholders to be held
in connection with the Merger, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The Proxy Statement will comply as to form in
all material respects with the provisions of the Exchange Act and the rules and
regulations thereunder, and the Form S-1 will comply as to form in all material
respects with the provisions of the Securities Act or the Exchange Act, as
applicable, and the rules and regulations thereunder, except that no
representation is made by the Company with respect to statements made therein
based on information supplied by Acquiror or its representatives for inclusion
in the Proxy Statement or the Form S-1,
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respectively, or with respect to information concerning Acquiror or any of its
subsidiaries incorporated by reference in the Proxy Statement.
(f) Absence of Certain Changes or Events. On the date of this Agreement,
except as disclosed in the Company SEC Documents filed and publicly available
prior to the date of this Agreement (the "FILED COMPANY SEC DOCUMENTS") or as
set forth in Schedule 3.2(f), and at the Closing Date, except as disclosed in
the Company SEC Documents filed and publicly available before the Closing Date
or in Schedule 3.2(f) or in the Company Bring Down Certificate (as defined in
Section 6.2(a)), since September 30, 1995, the Company has conducted its
business only in the ordinary course, consistent with past practice, and there
has not been (i) any material adverse change in the Company or any event that
could reasonably be expected to have a material adverse effect on the Company,
(ii) any split, combination or reclassification of any of its capital stock or
any issuance or the authorization of any issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock, (iii)
any damage, destruction or loss, whether or not covered by insurance, that has
had or could reasonably be expected to have a material adverse effect on the
Company and the Branded Subsidiary taken as a whole, (iv) any change in
accounting methods, principles or practices by the Company, or any of its
subsidiaries, except insofar as may have been required (in the opinion of the
Company's independent accountants) by a change in generally accepted accounting
principles (which change is set forth in Schedule 3.2(f) or will be set forth in
the Company Bring Down Certificate), (v) any acquisition or any sale or
disposition of any material assets or properties by the Company, except in the
ordinary course of business, consistent with past practice, or (vi) any entry
into any agreement, arrangement or commitment to take any of the actions set
forth in this Section.
(g) Litigation. Except as set forth in Schedule 3.2(g) or as disclosed in
the Filed Company SEC Documents or, with respect to claims, investigations,
suits, actions or proceedings arising, or to the knowledge of the Company first
expressly threatened, between the date hereof and the Closing Date, as disclosed
in the Company Bring Down Certificate, there is no claim, investigation, suit,
action or proceeding pending or, to the knowledge of the Company, expressly
threatened, against the Company before or by any Governmental Entity or
arbitrator that, individually or in the aggregate, could reasonably be expected
to (i) have a material adverse effect on the Company and the Branded Subsidiary
taken as a whole, (ii) materially impair the ability of the Company or Foods to
perform any obligation under this Agreement or any of the Ancillary Agreements
or (iii) prevent or materially delay or alter the consummation of any or all of
the transactions contemplated hereby or thereby. There are no unpaid judgments,
injunctions, orders, arbitration decisions or awards, or, except as set forth in
Schedule 3.2(g), other judicial or administrative mandates outstanding against
the Company.
(h) Compliance with Applicable Laws. Except as set forth in Schedule
3.2(h), the Company holds all permits, licenses, variances, exemptions, orders
and approvals of, and has made all filings, applications and registrations with,
all Governmental Entities which individually or in the aggregate are material to
the operation of the business of the Company and the Branded Subsidiary taken as
a whole (the "COMPANY PERMITS"). All Company Permits are in full force and
effect in all material respects. The Company is in compliance with the terms of
the Company Permits, except where the failure so to comply would not have a
material adverse effect on the Company and the Branded Subsidiary taken as a
whole. Except as disclosed in the Filed Company SEC Documents, the business of
the Company is not being conducted in violation of any law, ordinance or
regulation of any Governmental Entity, except for violations, if any, that
individually or in the aggregate do not, and could not reasonably be expected
to, have a material adverse effect on the Company and the Branded Subsidiary
taken as a whole.
(i) Brokers or Finders. No broker, investment banker, financial advisor or
other person, other than Lehman Brothers, Inc., the fees and expenses of which
will be paid by Foods, is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated by this Agreement and the Ancillary Agreements based upon
arrangements made by or on behalf of the Company.
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(j) The Branded Business.
(i) At the Effective Time, except as contemplated by the Technology
Agreement, the Trademark Agreement and the Supply Agreement and except as
set forth on Schedule 3.2(j), neither New Holdings, Foods nor any of their
respective subsidiaries will use in the conduct of its business or own or
have rights to use any material assets or property, whether tangible,
intangible or mixed, which have also been heretofore used in the conduct of
the business of the Branded Business. At the Effective Time, neither Foods
nor any of its subsidiaries will be a party to any contract, agreement,
arrangement or understanding with the Company (other than the Ancillary
Agreements and the agreements specifically contemplated thereby) relating
to the business or operations of the Company or pursuant to which the
Company may have any obligation or liability. After the Effective Time, the
Company, the Surviving Corporation, the Branded Subsidiary and Acquiror and
its other subsidiaries will not have any liability whatsoever, direct or
indirect, contingent or otherwise, in any way relating to the business,
operations, indebtedness, assets or liabilities of New Holdings, Foods or
any of their respective subsidiaries, except as contemplated by the
Reorganization Agreement or any of the other Ancillary Agreements.
(ii) Except as set forth on Schedule 3.2(j), the Branded Assets (as
defined in the Reorganization Agreement) and the rights under the
Technology Agreement, the Trademark Agreement and the Supply Agreement are
sufficient to permit Acquiror and the Surviving Corporation to operate the
Branded Business from and after the Effective Time in substantially the
same manner as currently conducted.
(k) Material Contracts. On the date of this Agreement, except as set forth
in Schedule 3.2(k) and, at the Closing Date, except as set forth in Schedule
3.2(k) or as disclosed in the Company Bring Down Certificate, (i) all Material
Contracts (as defined below), together with all modifications and amendments
thereto, are valid and binding obligations of the parties thereto and in full
force and effect, and (ii) the Company is not in breach or default under any
Material Contract, except for such breaches or defaults in the ordinary course
of business that do not, and will not with the passage of time or the giving of
notice, or both, individually or in the aggregate, have a material adverse
effect on the Company and the Branded Subsidiary taken as a whole and, to the
knowledge of the Company, no other party is in material default thereunder.
Except as set forth on Schedule 3.2(k), the Company is not a party to any
Material Contracts. True and complete copies of each Material Contract to which
the Company is a party have been made available to the Acquiror. As used herein,
the term "MATERIAL CONTRACT," shall mean any contract, agreement, arrangement or
understanding to which the Company is a party or by which the Company or any of
its assets is bound, that is or contains any of the following: (A) a contract of
employment that is other than at will or any arrangement binding on the Company
providing any employee with termination benefits other than those available
under the Company's generally applicable severance plan; (B) a contract with any
labor union or association; (C) a contract with any affiliate of the Company
(including, without limitation, Foods and its subsidiaries); (D) a contract
containing a covenant not to compete; (E) a loan or similar agreement relating
to the borrowing of money or any guarantee of indebtedness of any other person
in excess of $100,000; (F) any lease or sublease relating to real property; (G)
any contract not fully performed for the purchase of any commodity, material,
services or equipment, including without limitation fixed assets, for a price in
excess of $100,000 in the aggregate over the life of the contract; (H) any
license agreement (as licensor or licensee) providing for future payments in
excess of $100,000; (I) any other contract which creates future payment
obligations in excess of $100,000; (J) any contract that obligates the Company
to obtain all or a substantial portion of its requirements of any goods or
services from, or supply all or a substantial portion of the requirements for
any goods or services of, any other person; (K) any contract with Ralston Purina
Company or any of its affiliates; (L) any guarantee of any obligation of Foods
or its subsidiaries (other than the Branded Subsidiary); or (M) any contract
that does not permit the Company to terminate the contract upon less than 90
days' notice or expressly requires it to pay liquidated damages of more than
$100,000 upon early termination.
(l) Absence of Changes in Benefit Plans. Except as set forth in Schedule
3.2(l) or as disclosed in the Filed Company SEC Documents, since the date of the
most recent audited financial statements included in the Filed Company SEC
Documents, there has not been any adoption or amendment in any material respect
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by the Company of any collective bargaining agreement or any Benefit Plan other
than any adoption or amendment of a Benefit Plan permitted under Section 4.1(h).
(m) Benefit Plans, Employment and Labor Relations.
(i) Schedule 3.2(m) contains a list of all "employee pension benefit
plans" (as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) (sometimes referred to herein
as "PENSION PLANS"), "employee welfare benefit plans" (as defined in
Section 3(1) of ERISA) and all other plans, agreements, policies or
arrangements relating to stock options, stock purchases, compensation,
deferred compensation, severance, and other employee benefits, in each case
maintained or contributed to as of the date of this Agreement by the
Company for the benefit of any current or former employees, officers or
directors of the Company or for which the Company is or could be liable, as
a result of its status as an ERISA Affiliate (as defined below)
(collectively, the "BENEFIT PLANS"), except that Schedule 3.2(m) does not
list any Benefit Plan of any ERISA Affiliate of the Company that ceased to
be an ERISA Affiliate of the Company on or prior to April 1, 1994. The
Company has made available to Acquiror true, complete and correct copies of
(a) each Benefit Plan (or, in the case of any unwritten Benefit Plans,
descriptions thereof), (b) the most recent annual report on Form 5500 filed
with the Internal Revenue Service with respect to each Benefit Plan (if any
such report was required), (c) the most recent summary plan description for
each Benefit Plan for which such summary plan description is required and
(d) each trust agreement or group annuity contract relating to any Benefit
Plan. The Company shall update Schedule 3.2(m) and the information shall be
made available to the Acquiror through the Distribution Date. "ERISA
AFFILIATE" means, with respect to any entity, trade or business, any other
entity, trade or business that is a member of a group described in Section
414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that
includes the first entity, trade or business, or that is a member of the
same "controlled group" as the first entity, trade or business pursuant to
Section 4001(a)(14) of ERISA, at any time.
(ii) Each Benefit Plan has been administered in all material respects
in accordance with its terms and is in compliance in all material respects
with the applicable provisions of ERISA, the Code and other applicable law.
(iii) Except as set forth on Schedule 3.2(m), the Company does not now
sponsor, maintain, contribute to or have an obligation to contribute to,
and has not at any time since September 2, 1974, sponsored, maintained,
contributed to, or been obligated to contribute to, any single employer,
multiple employer or multiemployer pension plan subject to the provisions
of Section 302 or Title IV of ERISA or Section 412 or 4971 of the Code. No
liability currently exists, and under no circumstances could the Company or
any of its ERISA Affiliates incur a liability pursuant to the provisions of
Title I, II or IV of ERISA or Section 412, 4971 or 4980B of the Code that
could become a liability of the Surviving Corporation or Acquiror after the
consummation of the transactions contemplated by this Agreement. Without
limiting the generality of the foregoing, neither the Company nor any of
its ERISA Affiliates has engaged in any transaction described in Section
4069 or Section 4204 of ERISA for the purpose of evading liability under
subtitle D of Title IV of ERISA. The Company has not incurred a "complete
withdrawal" or a "partial withdrawal" (as such terms are defined in Section
4203 and Section 4205, respectively, of ERISA) with respect to any
"multiemployer plan" (within the meaning of Section 4001(a)(3) of ERISA)
that has led to or could lead to the imposition of a material withdrawal
liability under Section 4201 of ERISA that remains unpaid as of the date
hereof; and the Company does not maintain or contribute to, nor is it
obligated to maintain or contribute to, any such multiemployer plan.
(iv) The Company has not incurred any material liability, nor has any
event occurred that could reasonably result in any material liability,
under Title I or Title IV of ERISA (other than to a Pension Plan for
contributions not yet due or to the Pension Benefit Guaranty Corporation
for payment of premiums not yet due) or under Section 412 or Chapter 43 of
the Code that has not been fully paid as of the date hereof.
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(v) As of the most recent valuation date for any Pension Plan subject
to Section 412 of the Code or Title IV of ERISA, other than any
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA, the
fair market value of the assets of such Pension Plan exceed the present
value (determined on the basis of reasonable assumptions employed by the
independent actuary for such Pension Plan) of the "benefit liabilities"
(within the meaning of Section 4001(a)(16) of ERISA) of such Pension Plan.
(vi) Except as set forth in Schedule 3.2(m), the Company is not a
party to, or bound by, any Contract with any labor union or association,
including, without limitation, any collective bargaining, labor or similar
agreement. Neither the execution and delivery of this Agreement, the
Reorganization Agreement or the other Ancillary Agreements, nor the
consummation of the transactions contemplated hereby or thereby will
constitute a breach or default under any such agreement or give rise to any
right to terminate, amend or modify any such agreement. The Company is in
compliance with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours and is
not engaged in any unfair labor practices, except where the failure to so
comply or the result of such unfair labor practice, as the case may be,
would not have a material adverse effect on the Company.
(vii) As of the date of this Agreement, there are no employees who
have been laid off from the Branded Plant (as defined in the Reorganization
Agreement) and who have recall rights.
(n) Rights Agreement; Antitakeover Statutes.
(i) The Company has taken, or prior to the Effective Time will take,
all necessary action to:
A. redeem the Rights pursuant to Section 23 of the Rights
Agreement; and
B. render inapplicable to the Merger, the Distribution and the
other transactions contemplated by this Agreement and the Ancillary
Agreements any "fair price," "moratorium," "control share acquisition"
or similar anti-takeover statute or regulation enacted under the state
or federal law in the United States.
(ii) The Company has delivered, or will deliver prior to the Closing,
to Acquiror a true and correct copy of the Board resolutions and any other
action taken to accomplish the foregoing.
(o) Intellectual Property.
(i) Schedule 3.2(o) sets forth a complete list of all Intellectual
Property applications and registrations therefor which are unexpired or
uncancelled as of the date hereof. Except for the matters set forth on
Schedule 3.2(o) and except for such matters that individually or in the
aggregate have not had and could not reasonably be expected to have a
material adverse effect on the Company and the Branded Subsidiary taken as
a whole, (A) the Intellectual Property owned by the Company is valid and
enforceable, free and clear of all Liens; (B) the Company has taken all
reasonable actions necessary to maintain and protect the Company's rights
to the Intellectual Property; (C) the owners of the Intellectual Property
licensed to the Company have taken all reasonable actions necessary to
maintain and protect the Intellectual Property subject to such licenses;
(D) there has been no claim made against the Company asserting the
invalidity, misuse, unregistrability or unenforceability of any of the
Intellectual Property or challenging the Company's right to use or
ownership of any of the Intellectual Property; (E) the Company has no
knowledge of any infringement or misappropriation of any of the
Intellectual Property; (F) the conduct of the Branded Business has not
infringed or misappropriated and does not infringe or misappropriate any
intellectual property or proprietary right of any other entity; (G) no loss
of any of the Intellectual Property is pending or to the knowledge of the
Company threatened; (H) the Intellectual Property is sufficient to operate
the Branded Business as it is currently conducted; (I) the consummation of
the transactions contemplated by this Agreement will not alter, impair or
extinguish any of the Intellectual Property; and (J) the Company has not
licensed or in any other way authorized any other party to use the
Intellectual Property.
(ii) For purposes of this Agreement, "INTELLECTUAL PROPERTY" shall
mean all of the following (in whatever form or medium) which are owned by
or licensed to the Company and are used in
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the conduct of the Branded Business as conducted currently: (A) patents,
trademarks, service marks, trade dress and copyrights, (B) applications for
patents and for registration of trademarks, service marks, trade dress and
copyrights, (C) trade secrets and trade names, and (D) know how,
manufacturing, research and other technical information. Intellectual
Property shall not include any widely available off-the-shelf software.
(p) Taxes. The Company has filed all income tax returns and all other
material returns and reports required to be filed by it and has paid all taxes
required to be paid by it except for taxes which in the aggregate are not
material, and the most recent financial statements contained in the Filed
Company SEC Documents reflect an adequate reserve for all taxes payable by the
Company for all taxable periods and portions thereof through the date of such
financial statements. Except as disclosed in Schedule 3.2(p), no deficiencies
for any taxes have been proposed, asserted or assessed against the Company, and
no requests for waivers of the time to assess any such taxes are pending. The
Federal income tax returns of the Company have not been examined by and settled
with the Service. As used in this Agreement, "TAXES" shall include all Federal,
state, local and foreign income, property, sales, excise and other taxes,
tariffs or governmental charges of any nature whatsoever, including interest and
penalties thereon.
(q) Branded Financial Statements. Attached as Schedule 3.2(q)(i) hereto are
the statement of assets and liabilities as of March 31, 1996 (the "BRANDED
BALANCE SHEET") and statement of profit and loss (to a brand contribution level
of detail only) for the period October 1, 1995 through March 31, 1996 for the
Company and the Branded Subsidiary on a combined basis (collectively, the
"BRANDED FINANCIAL STATEMENTS"). The Branded Financial Statements were prepared
in accordance with the accounting principles and procedures set forth on
Schedule 3.2(q)(ii), consistently applied, and fairly present the financial
condition and results of operations (to the brand contribution level) of the
Company and the Branded Subsidiary on a combined basis as of March 31, 1996 and
for the period then ended. Neither this Section 3.2(q) nor any other provision
in this Agreement shall be construed as a representation or warranty as to the
accuracy or completeness of any budgets or projections relating to or reflecting
the Company as the Branded Subsidiary.
(r) Properties. Except (A) as may be reflected in the Branded Balance
Sheet, (B) for any Lien for current taxes not yet delinquent, and (C) for such
other Liens as do not materially affect the value of the property reflected in
the Branded Balance Sheet or acquired since the date of the Branded Balance
Sheet and which do not, individually or in the aggregate, materially interfere
with or impair the present and continued use of such property, the Company has
good title, free and clear of any Liens, to all of the property reflected in the
Branded Balance Sheet, and all property acquired since the date of the Branded
Balance Sheet, except such property as has been disposed of (or, in the case of
receivables, collected or paid) in the ordinary course of business consistent
with past practice. As of the date of the Branded Balance Sheet, all the
material tangible personal property owned or leased by the Company was in good
working condition (normal wear and tear excepted) and was suitable in all
material respects for the purposes for which it was being used.
(s) Capacity of Branded Plant. The production capacity per eight hour shift
of the Branded Plant (by production line, type of product which is run thereon
and package size) is set forth on Schedule 3.2(s).
(t) Actions Affecting 1994 Spinoff. The Company and its subsidiaries have
complied in all material respects with all of the terms and obligations of all
of the agreements between the Company or its subsidiaries and Ralston Purina
Company or its affiliates relating to or arising out of the spin-off of the
Company by Ralston Purina Company effective March 31, 1994 (the "1994 SPINOFF"),
and the Company has not taken, and has not permitted any of its subsidiaries to
take, any action that would disqualify the 1994 Spinoff as a tax-free
transaction within the meaning of Section 355 of the Code.
(u) Real Property.
(i) Owned Real Property. Schedule 3.2(u) attached hereto sets forth a
true and complete legal description of the Real Property (as defined
below). Except as set forth in attached Schedule 3.2(u), the Company has
good and marketable title to the Real Property, free and clear of any
Liens. Except as set forth in attached Schedule 3.2(u), all buildings and
improvements located thereon are in good operating
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condition and repair, ordinary wear and tear excepted, and do not violate
any zoning or building regulations or ordinances where located, except for
violations that do not materially impair the use of the Real Property. The
term "REAL PROPERTY" means the Branded Plant, appurtenant land, and
fixtures and improvement thereon operated by Foods on the date hereof.
(ii) Leased Real Property. Except as set forth on Schedule 3.2(u), the
Company is not a party to any lease of real property that is primarily used
in the Branded Business.
(iii) Real Property Documents. True, correct and complete copies of
title reports, surveys and leases in the Company's possession relating to
such Real Property have been furnished or made available to Acquiror.
(iv) Takings. Since March 31, 1994, neither the whole nor any portion
of any Real Property has been condemned, requisitioned or otherwise taken
by any public authority, and, to the Company's knowledge, no such
condemnation, requisition or taking is threatened.
(v) Environmental Matters. (i) Except as set forth in attached Schedule
3.2(v), (A) the Company, with respect to the Branded Business and the Real
Property, is in material compliance with all applicable laws and regulations for
the protection of the environment, and the Company, with respect to the Branded
Business and the Real Property, has received no notices of unremedied violations
from any Governmental Entity and there are no governmental investigations or
audits, whether pending, threatened or otherwise with respect thereto, other
than notices of matters set forth in attached Schedule 3.2(v), the violation of
which could result in the imposition of a material fine, penalty, liability,
cost or expense; and (B) the Company, with respect to the Branded Business, has
obtained or has made or will, before Closing, make application and pay for all
permits, licenses, orders and approvals of governmental or administrative
authorities required by applicable environmental protection laws or regulations
to permit it to carry on the Branded Business in substantially the same manner
as currently conducted, or which is applicable to the Real Property, and is in
material compliance with the requirements set out in such permits, licenses,
orders and approvals.
(ii) Hazardous Waste Disposal. Set forth in attached Schedule 3.2(v)
hereto is a summary description of current procedures of the Branded
Business with respect to the disposal of hazardous waste materials. Except
as set forth in attached Schedule 3.2(v), such procedures comply in all
material respects with all municipal, state or federal requirements
applicable thereto with respect to which non-compliance could result in the
imposition of a fine, penalty, liability, cost or expense.
(w) Actions Affecting Internal Spin-off or Distribution. The Company has
not taken, and has not permitted any of its subsidiaries to take, any action
that would disqualify the Internal Spinoff or the Distribution as tax-free
transactions within the meaning of Section 355 of the Code.
SECTION 3.3 REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGER
SUB. Acquiror and Merger Sub represent and warrant to the Company as follows:
(a) Organization, Standing and Corporate Power. Each of Acquiror and Merger
Sub is a corporation duly organized, validly existing and in good standing under
the laws of its state of incorporation and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. Each of Acquiror and Merger Sub is duly qualified or
licensed to do business and in good standing in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary, except where the failure
to be so duly qualified or licensed and in good standing would not in the
aggregate have a material adverse effect on Acquiror and its subsidiaries taken
as a whole. True, accurate and complete copies of Acquiror's certificate of
incorporation and by-laws, as in effect on the date hereof, including all
amendments thereto, have heretofore been made available to the Company.
(b) Capital Structure. The authorized capital stock of Acquiror consists of
1,000,000,000 shares of Acquiror Common Stock and 5,000,000 shares of preferred
stock, without par value ("ACQUIROR PREFERRED STOCK"). At the close of business
on August 1, 1996, (i) 157,157,501 shares of Acquiror Common Stock and no shares
of Acquiror Preferred Stock were issued and outstanding, (ii) 46,995,831
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shares of Acquiror Common Stock were held by Acquiror in its treasury, and (iii)
2,000,000 shares of Acquiror Preferred Stock were reserved for issuance in
connection with the Rights Agreement dated as of December 11, 1995, between
Acquiror and Norwest Bank Minnesota, N.A., as Rights Agent. Except as set forth
above and except for shares issuable pursuant to employee stock options and
benefit plans, at the close of business on August 1, 1996, no shares of capital
stock or other voting securities of Acquiror were issued, reserved for issuance
or outstanding. All outstanding shares of capital stock of Acquiror are, and all
shares which may be issued pursuant to this Agreement will be, when issued, duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights. There are not any bonds, debentures, notes or other
indebtedness of Acquiror having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
stockholders of Acquiror may vote. Except as set forth above or in connection
with Acquiror's dividend reinvestment plan, as of the date of this Agreement,
there are not any securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which Acquiror or any of
its subsidiaries is a party or by which any of them is bound obligating Acquiror
or any of its subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other voting securities
of Acquiror or obligating Acquiror or any of its subsidiaries to issue, grant,
extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking.
(c) Authority; Noncontravention. Each of Acquiror and Merger Sub has all
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the Ancillary Agreements to which it is a party and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of each of Acquiror and
Merger Sub. This Agreement has been duly executed and delivered by each of
Acquiror and Merger Sub and, assuming this Agreement constitutes a valid and
binding obligation of the Company, constitutes a valid and binding obligation of
each of Acquiror and Merger Sub, enforceable against it in accordance with its
terms. None of the execution and delivery of this Agreement, the Ancillary
Agreements to which Acquiror or Merger Sub is a party or the consummation of the
transactions contemplated hereby and thereby and compliance with the provisions
of this Agreement or such Ancillary Agreements will conflict with, or result in
any violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or the loss of a benefit under, or result in the creation of any
Lien upon any of the properties or assets of Acquiror or Merger Sub under, (i)
the certificate of incorporation or by-laws of Acquiror or Merger Sub or the
comparable charter or organizational documents of any other subsidiary of
Acquiror, (ii) any loan or credit agreement, note, bond, mortgage, indenture,
lease or other agreement, instrument, permit, concession, franchise or license
to which Acquiror or any of its subsidiaries is a party or by which Acquiror or
any of its subsidiaries or any of their respective assets are bound or (iii)
subject to the governmental filings and other matters referred to in the
following sentence, any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to Acquiror, or any of its subsidiaries or their
respective properties or assets other than, in the case of clauses (ii) and
(iii), any such conflicts, violations, defaults, rights or Liens that
individually or in the aggregate would not (x) have a material adverse effect on
Acquiror and its subsidiaries taken as a whole, (y) materially impair the
ability of Acquiror to perform its obligations under this Agreement or the
Ancillary Agreements to which it is a party or (z) prevent or materially delay
the consummation of any of the transactions contemplated by this Agreement or
such Ancillary Agreements to which it is party. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity is required by or with respect to Acquiror or any subsidiary of Acquiror
in connection with the execution and delivery of this Agreement and any of the
Ancillary Agreements to which it is a party, or the consummation by Acquiror or
any of its subsidiaries of any of the transactions contemplated hereby and
thereby, except for (i) the filing with the SEC of the Form S-4 and such reports
under Sections 13 and 16(a) of the Exchange Act as may be required in connection
with this Agreement and the transactions contemplated by this Agreement, (ii)
the filing of the Certificate of Merger with the Missouri Secretary of State and
appropriate documents with the relevant authorities of other states in which the
Company is qualified to do business, (iii) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
the "takeover" or "blue sky" laws of various states, (iv) expiration of the
waiting period under the HSR
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Act, (v) such consents, approvals, orders, authorizations, registrations,
declarations and filings as are set forth on Schedule 3.3(c), and (vi) such
other consents, approvals, orders, authorizations, registrations, declarations
and filings, the failure of which to obtain or make could not reasonably be
expected to have a material adverse effect on Acquiror and its subsidiaries
taken as a whole.
(d) SEC Documents; Undisclosed Liabilities.
(i) Acquiror has filed all required reports, schedules, forms,
statements and other documents with the SEC since January 1, 1994 (the
"ACQUIROR SEC DOCUMENTS"). As of their respective dates, the Acquiror SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such Acquiror
SEC Documents, and none of the Acquiror SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading.
The financial statements of Acquiror included in the Acquiror SEC Documents
comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles (except as permitted by Form 10-Q of the SEC in the
case of unaudited statements) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and
fairly present the consolidated financial position of Acquiror and its
consolidated subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
(ii) None of the press releases issued by Acquiror since March 31,
1994 contained at the time of issuance any untrue statement of a material
fact or omitted to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
(e) Information in Disclosure Documents and Registration Statements. None
of the information supplied or to be supplied in writing by Acquiror or its
representatives for inclusion or incorporation by reference in (i) the Form S-4
will, at the time the Form S-4 becomes effective under the Securities Act and at
the Effective Time, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading and (ii) the Proxy Statement will, at the date mailed to stockholders
and at the time of the meeting of the Company's stockholders to be held in
connection with the Merger, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. The Form S-4 will comply as to form in all
material respects with the provisions of the Securities Act and the rules and
regulations thereunder, except that no representation is made by Acquiror with
respect to statements made therein based on information supplied by the Company
or its representatives for inclusion in the Form S-4 or with respect to
information concerning the Company or any of its subsidiaries incorporated by
reference in the Form S-4.
(f) Absence of Certain Changes or Events. On the date of this Agreement,
except as disclosed in the Acquiror SEC Documents filed and publicly available
prior to the date of this Agreement (the "FILED ACQUIROR SEC DOCUMENTS") or as
set forth in Schedule 3.3(f), and at the Closing Date, except as disclosed in
the Acquiror SEC Documents filed and publicly available before the Closing Date
or in Schedule 3.3(f) or in the Acquiror Bring Down Certificate (as defined in
Section 6.3(a)), since May 28, 1995, (i) there has not been any material adverse
change in Acquiror and its subsidiaries taken as a whole or any event affecting
Acquiror and its subsidiaries that could reasonably be expected to have such a
material adverse effect, and (ii) there has not been (A) any split, combination
or reclassification of any of Acquiror's capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for shares of its capital stock, (B) any damage, destruction
or loss, whether or not covered by insurance, that has had or could reasonably
be expected to have a material adverse effect on Acquiror and its subsidiaries
taken as a whole, or (C) any change in accounting methods, principles or
practices by Acquiror
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materially affecting its assets, liabilities or business, except insofar as may
have been required (in the opinion of the Acquiror's independent accountants) by
a change in generally accepted accounting principles.
(g) Litigation. Except as disclosed in the Filed Acquiror SEC Documents or,
with respect to claims, investigations, suits, actions or proceedings arising,
or to the knowledge of Acquiror, first expressly threatened, between the date
hereof and the Closing Date, as disclosed in Acquiror SEC Documents filed and
publicly available before the Closing Date or in the Acquiror Bring Down
Certificate, there is no claim, investigation, suit, action or proceeding
pending or, to the knowledge of Acquiror, expressly threatened, against any of
Acquiror or any of its subsidiaries before or by any Governmental Entity or
arbitrator that, individually or in the aggregate, could reasonably be expected
to (i) have a material adverse effect on Acquiror and its subsidiaries taken as
a whole, (ii) materially impair the ability of Acquiror to perform its
obligations under this Agreement or any of the Ancillary Agreements to which it
is a party or (iii) prevent or materially delay or alter the consummation of any
or all of the transactions contemplated hereby or thereby.
(h) Compliance with Applicable Laws. Acquiror and its subsidiaries hold all
permits, licenses, variances, exemptions, orders and approvals of, and have made
all filings, applications and registrations with, all Governmental Entities
which individually or in the aggregate are material to the operation of the
businesses of Acquiror and its subsidiaries taken as a whole (the "ACQUIROR
PERMITS"). All Acquiror Permits are in full force and effect in all material
respects. Acquiror and its subsidiaries are in compliance with the terms of the
Acquiror Permits, except where the failure so to comply would not have a
material adverse effect on Acquiror and its subsidiaries taken as a whole.
Except as disclosed in the Filed Acquiror SEC Documents, the businesses of
Acquiror and its subsidiaries are not being conducted in violation of any law,
ordinance or regulation of any Governmental Entity, except for violations, if
any, which individually or in the aggregate do not, and could not reasonably be
expected to, have a material adverse effect on Acquiror and its subsidiaries
taken as a whole.
(i) Consummation of Transactions. As of the date of this Agreement,
Acquiror has not received written notice from any Federal or state governmental
agency or authority indicating that such agency or authority would oppose or
refuse to grant or issue its consent or approval, if required, with respect to
the transactions contemplated by this Agreement.
(j) Voting Requirements. No action by the stockholders of Acquiror is
required to approve this Agreement and the transactions contemplated by this
Agreement.
(k) Brokers. No broker, investment banker, financial advisor or other
person, other than Dillon, Read & Co. Inc., the fees and expenses of which will
be paid by Acquiror, is entitled to any broker's, finder's, financial advisor's
or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Acquiror.
ARTICLE IV
COVENANTS
SECTION 4.1 COVENANTS OF THE COMPANY. During the period from the date of
this Agreement and continuing until the Effective Time, the Company agrees as to
itself and its subsidiaries that, except for the Distribution and the other
transactions expressly provided for in the Reorganization Agreement, as
expressly contemplated or permitted by this Agreement, or to the extent that
Acquiror shall otherwise consent in writing:
(a) Ordinary Course. The Company and its subsidiaries shall conduct the
Branded Business in the ordinary course, including, without limitation, using
reasonable efforts to preserve beneficial relationships between the Branded
Business and its distributors, brokers, lessors, suppliers, employees and
customers in connection with the Branded Business, it being understood that the
Company and its subsidiaries may comply with their respective contractual
obligations under the contracts to which they are parties (so long as the
execution of such contracts by the Company or the applicable subsidiary does not
constitute a breach of, or
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default under, this Agreement). Without limiting the generality of the
foregoing, the Company and its subsidiaries will, with respect to the Branded
Business:
(i) not commence or commit to any capital projects having an
individual cost of $100,000 or more, or with an aggregate cost for all such
projects of $1,000,000 or more, and will continue the consolidation at the
Branded Plant in substantially the manner contemplated on the date hereof;
(ii) not enter into any contracts or agreements other than in the
ordinary course of the Branded Business relating to or obligating the
Branded Business, that involve amounts in excess of $100,000 individually
or $500,000 in the aggregate unless such contracts or agreements are
cancelable on 30 days or less notice without penalty or premium;
(iii) maintain overall broker sales incentive programs for all of the
Company's and its subsidiaries' products of the Branded Business handled by
brokers that will provide compensation to brokers at a rate that is at
least equal to those maintained by the Company during the comparable period
during the last fiscal year;
(iv) on a fiscal quarterly basis, and cumulatively, maintain direct
and indirect trade, consumer promotions (including coupon expense and
sampling) and advertising expenditures (excluding broker sales incentives)
relating to the Branded Business at such level as the Company may determine
necessary, in its reasonable judgment, to preserve the health of the
Branded Business;
(v) not take any action to intentionally (i) build excessive inventory
levels at the trade or factory level or (ii) permit factory inventory
levels to fall below reasonably expected requirements; and
(vi) not transfer or reassign any of the marketing and/or research and
development employees presently associated primarily with the Branded
Business (all of such persons being identified on Schedule 4.1(a)(vi)), or
any employees to or from the Branded Plant, or recall laid-off employees at
the Branded Plant other than in the ordinary course of business consistent
with past practice, it being understood that, in addition to the employees
at the Branded Plant, Acquiror shall have the opportunity to interview such
identified marketing and/or research and development employees prior to the
Effective Time and to discuss the possibility of employing or causing the
Surviving Corporation to employ those persons from and after the Effective
Time.
(b) Changes in Stock. The Company shall not (i) split, combine or
reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock or (ii) other than in connection with the
exercise of stock options outstanding as of
the date of this Agreement under any Benefit Plan, repurchase, redeem or
otherwise acquire, or permit any subsidiary to repurchase, redeem or otherwise
acquire, any shares of capital stock of the Company or any of its subsidiaries.
(c) Issuance of Securities. The Company shall not, nor shall the Company
permit the Branded Subsidiary to, issue, transfer or sell, or authorize or
propose or agree to the issuance, transfer or sale by the Company or the Branded
Subsidiary of, any shares of its capital stock of any class or other equity
interests or any securities convertible into, or any rights, warrants, calls,
subscriptions, options or other rights or agreements, commitments or
understandings to acquire, any such shares, equity interests or convertible
securities, other than: (i) the issuance of shares of Company Common Stock (w)
upon the exercise of stock options outstanding as of the date of this Agreement
pursuant to any Benefit Plan, (x) to make any payment under any Benefit Plan
that is required as of the date of this Agreement to be made in the form of
shares of Company Common Stock or (y) to make acquisitions of capital stock or
assets of, or in connection with a merger with, another entity provided that
such transaction is permitted pursuant to paragraph (e) of this Section 4.1; or
(z) the grant of stock options pursuant to Benefit Plans consistent with past
practices (provided that any such newly granted options will by their terms be
converted into options to acquire New Holdings Common Stock at or prior to the
Effective Time); and (ii) issuances by the Branded Subsidiary of its capital
stock to its parent.
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(d) Governing Documents. The Company shall not, nor shall it permit the
Branded Subsidiary to, amend or propose to amend its articles of incorporation
(or, if applicable, its certificate of incorporation or other charter document)
or by-laws.
(e) No Acquisitions. The Company shall not, nor shall it permit the Branded
Subsidiary to, (i) acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial equity interest in or substantial portion of the
assets of, or by any other manner, any business or any corporation or other
business organization that would be directly or indirectly acquired by Acquiror
in the Merger or that would create liabilities or obligations that would be
binding upon Acquiror or its subsidiaries, the Branded Subsidiary or the
Surviving Corporation following the Effective Time, or (ii) except for
investments by the Company in its existing wholly owned subsidiaries or any
investments by or in any Benefit Plan, make any other investment in any person
(whether by means of loan, capital contribution, purchase of capital stock,
obligations or other securities, purchase of all or any integral part of the
business of the person or any commitment or option to make an investment or
otherwise) that would be directly or indirectly acquired by Acquiror in the
Merger or that would create liabilities or obligations that would be binding
upon Acquiror or its subsidiaries, the Branded Subsidiary or the Surviving
Corporation following the Effective Time.
(f) No Dispositions. The Company shall not, nor shall it permit any of its
subsidiaries to, sell, lease, license, encumber or otherwise dispose of, or
agree to sell, lease, license, encumber or otherwise dispose of, any of the
assets of the Branded Business (including, without limitation, any real
property, inventory, equipment or Intellectual Property) other than (except with
respect to Intellectual Property) in the ordinary course of business consistent
with past practice and the sale or other disposition of obsolete equipment.
(g) Indebtedness. The Company shall take such action as may be necessary so
that, as of the Effective Time, the Company and the Branded Subsidiary, taken as
a whole, shall not have any indebtedness for borrowed money or any obligation
evidenced by a promissory note or other instrument or guarantee other than: (i)
the Notes, not to exceed $150,000,000 in face value in the aggregate, plus
accrued and unpaid interest thereon, (ii) other indebtedness other than that
described in clause (i) or (iii) below, not to exceed $150,000,000 in principal
amount in the aggregate, plus accrued and unpaid interest thereon (provided that
such indebtedness shall not contain, as of the Effective Time, any terms which
are more restrictive in any material respect on the Company or the Branded
Subsidiary than the terms of the existing indebtedness of the Company on the
date hereof and provided that such indebtedness can be paid without penalty or
premium within thirty (30) days after the Effective Time), and (iii)
indebtedness incurred pursuant to a written agreement that provides that such
indebtedness will be assumed by Foods or a subsidiary of Foods at or prior to
the Effective Time and that, upon such assumption, the Company and its
subsidiaries shall have no obligation or liability in respect of such
indebtedness.
(h) Benefit Plans; Collective Bargaining Agreement. Except as contemplated
by the Reorganization Agreement, the Company shall not, nor shall it permit the
Branded Subsidiary to: (i) adopt any Benefit Plan or amend any Benefit Plan to
the extent such adoption or amendment (x) would create or increase any liability
or obligation on the part of the Company or the Branded Subsidiary that will not
either (A) be fully performed or satisfied prior to the Effective Time or (B) be
assumed by Foods pursuant to the Reorganization Agreement with no remaining
obligation on the part of the Company or the Branded Subsidiary, or (y) would
increase the number of shares of Company Common Stock (if any) to be issued
under such Benefit Plan; (ii) except for normal increases in the ordinary course
of business consistent with past practice, increase the base salary of any
employee of the Branded Business; or (iii) enter into or modify in any material
respect any collective bargaining agreement governing employees of the Branded
Business.
(i) Filings. The Company shall promptly provide counsel for Acquiror copies
of all filings (other than those filings, or portions thereof, which Acquiror
has no reasonable interest in obtaining in connection with the Merger or the
transactions contemplated hereby) made by the Company or any of its subsidiaries
with any Federal, state or foreign Governmental Entity in connection with this
Agreement, the Reorganization Agreement and the transactions contemplated hereby
and thereby.
(j) Accounting Policies and Procedures. The Company will not and will not
permit the Branded Subsidiary to change any of its accounting principles,
policies or procedures, except such changes as may be
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required, in the opinion of the Company's independent accountants, by generally
accepted accounting principles or changes that in the opinion of said
accountants are not material to the Company's consolidated financial statements
(as to which changes and opinion the Company shall promptly notify Acquiror).
(k) Liens. The Company shall not, and shall not permit the Branded
Subsidiary to, create, incur or assume any Lien on the Branded Assets (as
defined in the Reorganization Agreement), except for Liens created, incurred or
assumed in the ordinary course of business consistent with the past practices of
the Company and its subsidiaries, which Liens would not have a material adverse
effect on the Company and the Branded Subsidiary, taken as a whole.
(l) Actions Affecting Merger, Internal Spin-off or Distribution. The
Company shall not, and shall not permit any of its subsidiaries to, take any
action that would or is reasonably likely to result in any of the conditions to
the Merger set forth in Article VI not being satisfied or that would materially
impair the ability of the Company to consummate the Internal Spinoff or the
Distribution in accordance with the terms of the Reorganization Agreement, or
the Merger in accordance with the terms hereof, or would materially delay such
consummation or that would disqualify the Internal Spinoff or the Distribution
as tax-free transactions within the meaning of Section 355 of the Code.
(m) Delivery of Certain Information. The Company shall furnish to Acquiror
as soon as available and in any event within 20 days after the end of each
month, (i) a balance sheet as of the end of each month for the Company and the
Branded Subsidiary on a combined basis substantially in the form of the Branded
Balance Sheet, (ii) statements of profits and loss (at a brand contribution
level) for the Company and the Branded Subsidiary on a combined basis for each
such month, substantially in the form of Schedule 3.2(q)(i), and (iii) monthly
operating reports, including inventory levels, sales volume, marketing spending
by brand and promotional spending plans for forward periods as and when
developed (but excluding any information that the Company is advised by legal
counsel is not appropriate information to be exchanged under applicable law).
(n) Exclusivity. Neither the Company nor any of its directors, officers or
employees shall, and the Company shall use its best efforts to ensure that none
of its representatives shall, directly or indirectly, solicit, initiate or
encourage any inquiries or proposals from or with any person (other than
Acquiror) or such person's directors, officers, employees, representatives and
agents that constitute, or could reasonably be expected to lead to a Third Party
Acquisition. For purposes of this Agreement, a "THIRD PARTY ACQUISITION" shall
mean (i) the acquisition by any person of more than twenty percent of the total
assets of the Branded Business, (ii) the acquisition by any person (other than
an acquisition by a person in connection with a transaction permitted by Section
4.1(e), provided such person agrees to vote the Company Common Stock acquired in
such transaction in favor of the Merger) of twenty percent or more of (A) the
Company Common Stock or (B) the total number of votes that may be cast in the
election of directors of the Company at any meeting of shareholders of the
Company assuming all shares of Company Common Stock and all other securities of
the Company, if any, entitled to vote generally in the election of directors
were present and voted at such meeting, or (iii) any merger, amalgamation or
other combination of the Company with any person. The Company has, upon
execution of this Agreement, immediately ceased or caused to be terminated any
existing discussions or negotiations with any parties other than Acquiror
conducted prior to the date hereof with respect to any Third Party Acquisition.
The Company may furnish or cause to be furnished information (pursuant to
confidentiality arrangements no less favorable to the Company than the
Confidentiality Agreement (as hereinafter defined), unless already in existence
on the date hereof) and may participate in such discussions and negotiations
directly or through its representatives if (i) the failure to provide such
information or participate in such negotiations and discussions would, in the
opinion of its outside counsel, reasonably be deemed to cause the members of the
Company's Board of Directors to breach their fiduciary duties under applicable
law or (ii) another corporation, partnership, person or other entity or group
makes a written offer or written proposal which, based upon the identity of the
person or entity making such offer or proposal and the terms thereof, and the
availability of adequate financing therefor, the Company's Board of Directors
believes, in the good faith exercise of its business judgment and based upon
advice of its outside legal and financial advisors, would reasonably be expected
to be consummated and represents a transaction more favorable to its
shareholders than the transactions contemplated by this Agreement (a "Higher
Offer"). The Company shall notify Acquiror as soon as practicable if any such
inquiries or proposals are received by,
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any such information is requested from, or any such negotiations or discussions
are sought to be initiated or continued with it, which notice shall provide the
identity of the third party or parties and the terms of any such proposal or
proposals. The Company's Board of Directors may fail to recommend or fail to
continue to recommend this Agreement in connection with any vote of its
shareholders, or withdraw, modify, or change any such recommendation, or
recommend any other offer or proposal, if the Company's Board of Directors,
based on the opinion of its outside counsel, determines that making such
recommendation, or the failure to recommend any other offer or proposal, or the
failure to so withdraw, modify, or change its recommendation, or the failure to
recommend any other offer or proposal, would reasonably be deemed to cause the
members of the Company's Board of Directors to breach their fiduciary duties
under applicable law in connection with a Higher Offer. In such event,
notwithstanding anything contained in this Agreement to the contrary, any such
failure to recommend, withdrawal, modification, or change of recommendation or
recommendation of such other offer or proposal, or the entering by the Company
into an agreement with respect to a Higher Offer (provided that the Company
shall have provided Acquiror with at least six business days' notice of its
intention to so enter, the terms of the Higher Offer and the identity of the
other party thereto), shall not constitute a breach of this Agreement by the
Company. Notwithstanding the foregoing, the Company shall not enter into an
agreement with a third party with respect to, or waive, modify or redeem the
Rights or take any action to approve such transaction under any antitakeover
provision of the Company's certificate of incorporation or state law in
connection with, any Third Party Acquisition unless and until this Agreement is
terminated in accordance with the provisions of Article VII.
(o) New Contracts. Other than in the ordinary course of the Branded
Business and consistent with past practice, the Company will not and will not
permit any of its subsidiaries to enter into any new contract, agreement,
arrangement or understanding that would or could reasonably be expected to
impose any new obligations or liabilities on the Company from and after the
Effective Time.
(p) Confidentiality and Standstill Agreements. The Company will not amend,
waive or modify any provision of any confidentiality or standstill agreement
entered into with any other party in connection with such party's interest in
acquiring the Company or the Branded Business or any substantial portion of the
Branded Business.
(q) Broker Transition. The Company will reasonably cooperate, at Acquiror's
expense, with Acquiror to facilitate such post-Closing transition arrangements
between Acquiror or its subsidiaries and brokers distributing products of the
Branded Business as Acquiror may determine necessary or advisable.
(r) Pending Actions. The Company will continue to defend in the ordinary
course, consistent with past practice, the litigation and other proceedings set
forth in Schedule 1.1(c) to the Reorganization Agreement, including resolving
any such litigation and other proceedings as can be resolved prior to the
Effective Time on a commercially reasonable basis and consistent with past
practice.
(s) No Agreement to Prohibited Actions. The Company will not, and will not
permit any of its subsidiaries to, agree or commit to take any action that is
prohibited under this Section 4.1.
SECTION 4.2 COVENANTS OF ACQUIROR. During the period from the date of this
Agreement and continuing until the Effective Time, Acquiror agrees as to itself
and its subsidiaries that:
(a) Actions Affecting Merger. Acquiror shall not, and shall not permit
any of its subsidiaries to, take any action that would or is reasonably
likely to result in any of the conditions to the Merger set forth in
Article VI not being satisfied, or that would materially impair the ability
of Acquiror to consummate the Merger in accordance with the terms hereof or
materially delay such consummation.
(b) Filings. Acquiror shall promptly provide the Company (or its
counsel) copies of all filings (other than those filings, or portions
thereof, which the Company has no reasonable interest in obtaining in
connection with the Merger or the transactions contemplated hereby) made by
Acquiror with any Federal, state or foreign Governmental Entity in
connection with this Agreement and the transactions contemplated hereby.
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(c) Acquiror Common Stock. Except at a time and in a manner which will not
increase the Average Value of Acquiror Common Stock, Acquiror shall not split,
combine or reclassify any of the Acquiror Common Stock or authorize the (i)
making of any in-kind distribution or extraordinary cash dividend with respect
to the Acquiror Common Stock or (ii) issuance of any other securities in respect
of or in exchange for shares of the Acquiror Common Stock.
(d) Tax Free Status of Merger and Spin-Offs. Acquiror shall not, and shall
not permit any of its subsidiaries to, take any action that would disqualify the
Merger as a tax-free reorganization under Section 368(a)(1)(B) of the Code, or
any other action that would disqualify the Internal Spinoff or the Distribution
as tax-free transactions within the meaning of Section 355 of the Code.
SECTION 4.3 MUTUAL COVENANTS.
(a) The Company and Acquiror shall use their reasonable best efforts not
to, and not to permit any of their respective subsidiaries to, take any action
that would, or that could reasonably be expected to, result in (i) any of the
representations and warranties of such party set forth in this Agreement that
are qualified as to materiality becoming untrue, (ii) any of such
representations and warranties that are not so qualified becoming untrue in any
material respect or (iii) the failure to satisfy any of the conditions to the
Merger set forth in Article VI.
(b) The Company and Acquiror shall promptly advise the other party orally
and in writing of any change or event having, or which, insofar as can
reasonably be foreseen, could reasonably be expected to have, a material adverse
effect on such party and its subsidiaries taken as a whole.
(c) (i) Subject to the terms and conditions herein provided, the parties
hereto agree to use their reasonable best efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement and to cooperate with each other in
connection with the foregoing, including, but not limited to, (A) defending all
lawsuits or other legal proceedings challenging this Agreement, or the
transactions contemplated hereby, (B) attempting to lift or rescind any
injunction or restraining order or other order adversely affecting the ability
of the parties to consummate the transactions contemplated hereby, and (C)
effecting all necessary filings and submissions of information requested by
governmental authorities.
(ii) Without limiting the foregoing, the parties hereto shall, as soon
as reasonably practicable, make their filing under the HSR Act, shall
endeavor to obtain early termination of the waiting period thereunder, and
shall promptly make any further filings requested pursuant thereto or which
may be necessary to consummate the transactions contemplated herein. Each
party shall furnish to the other, upon request, such information as shall
reasonably be required in connection with the preparation of the requesting
party's filings under the HSR Act.
(iii) Notwithstanding the foregoing or any other provision of this
Agreement, (A) neither the Company nor any of its subsidiaries will,
without Acquiror's prior written consent, agree or commit to any
divestiture, hold-separate order or other restriction relating to the
Branded Business and (B) neither Acquiror nor any of its subsidiaries will
be required to agree or commit to any divestiture, hold-separate order or
other restriction relating to the Branded Business or to any of its
existing businesses or any other governmental order or obligation that
otherwise imposes any conditions or limitations in connection with
Acquiror's acquisition of the Branded Business.
(d) The Company will use reasonable efforts to reach an agreement prior to
the Effective Time with Ralston Purina Company ("RPCo."), reasonably
satisfactory in form and substance to Acquiror, providing for (i) the
termination or other resolution of Foods' obligations under the Distributorship
Agreement (as defined in the Reorganization Agreement) as of the Effective Time
and (ii) the substitution of Foods for the Company, with a novation of the
Company, effective as of the Effective Time, with respect to any liabilities of
the Company to RPCo. under the agreements entered into between the Company and
RPCo. in connection with the 1994 spinoff of the Company from RPCo., except for
any liabilities assumed or retained by the Company or the Branded Subsidiary
pursuant to this Agreement and the Ancillary Agreements. In connection with and
subject to the execution of an agreement with RPCo. as contemplated by the
preceding sentence, to
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the extent such agreement does not provide for termination of the
Distributorship Agreement, Acquiror will use its reasonable efforts to reach a
mutually satisfactory arrangement under which the Company, effective as of the
Effective Time, would supply Foods with Branded Business products for Foods to
supply to RPCo. for distribution under the Distributorship Agreement (subject to
limitations to be determined by Acquiror and Foods). The foregoing covenants
shall not be construed to require payments by any of Acquiror, the Company or
Foods to RPCo. in exchange for RPCo.'s execution of such agreement.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 PREPARATION OF FORM S-4, FORM S-1, FORM 10 AND THE PROXY
STATEMENT; STOCKHOLDERS MEETING.
(a) As soon as practicable following the date of this Agreement, the
Company and Acquiror shall prepare and file with the SEC the Form S-4, the Form
S-1 (if required), the Form 10 and the Proxy Statement. Each of the Company and
Acquiror shall use its reasonable best efforts to have the Form S-4 and Form S-1
(if required) declared effective under the Securities Act, and the Form 10
declared effective under the Exchange Act, as promptly as practicable after such
filing. The Company will use its reasonable best efforts to cause the Proxy
Statement to be mailed to the Company's stockholders as promptly as practicable
after the Form S-4, Form S-1 (if required) and Form 10 are declared effective
under the Securities Act and the Exchange Act, as the case may be. Acquiror
shall also use its reasonable best efforts to take any action required to be
taken under any applicable state securities laws in connection with the issuance
of Acquiror Common Stock in the Merger and the Company shall furnish all
information concerning the Company and the holders of the Company Common Stock
and rights to acquire Company Common Stock pursuant to the Benefit Plans as may
be reasonably requested in connection with any such action.
(b) The Company shall, as soon as practicable following the date on which
the Form S-4, Form S-1 (if required) and Form 10 are declared effective, duly
call, give notice of, convene and hold a meeting of its stockholders (the
"STOCKHOLDERS MEETING") for the purpose of voting upon the approval and adoption
of this Agreement and, if the Company determines it to be necessary or
appropriate, upon the Distribution. Subject to the provisions of Section 4.1(n),
the Company shall, through its Board of Directors, recommend to its stockholders
approval of this Agreement and the transactions contemplated by this Agreement.
SECTION 5.2 ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) The Company shall, and shall cause its subsidiaries to, afford to
Acquiror and its officers, employees, accountants, counsel, financial advisors
and other representatives of Acquiror, reasonable access during the period prior
to the Effective Time to all its properties, books, contracts, commitments,
personnel and records relating to the Branded Business. During the period prior
to the Effective Time, the Company shall, and shall cause its subsidiaries to,
furnish promptly to Acquiror (i) a copy of each report, schedule, registration
statement and other document filed by it during such period pursuant to the
requirements of Section 13(a) and 15(d) of the Exchange Act, (ii) each press
release issued by it, and (iii) all other information relating to the Branded
Business as Acquiror may reasonably request; provided that the Company shall not
be required to provide information regarding Foods unless such information
relates to liabilities or obligations that could reasonably be expected to be
incurred by or imposed on the Company and that would remain in effect after the
Effective Time. The Company shall not be obligated to provide any aforementioned
access or information to Acquiror if the Company's legal counsel advises the
Company that such action would violate any law, regulation, rule, order or
decree or a confidentiality agreement.
(b) During the period prior to the Effective Time, Acquiror shall furnish
promptly to the Company a copy of each report, schedule, registration statement
and other document filed by it during such period pursuant to the requirements
of Section 13(a) and 15(d) of the Exchange Act (other than Forms 11-K).
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(c) Except as required by law, each of the Company and Acquiror will hold,
and will cause its respective officers, employees, accountants, counsel,
financial advisors and other representatives and affiliates to hold, any
nonpublic information in confidence in accordance with the confidentiality
agreement, dated June 17, 1996 (the "CONFIDENTIALITY AGREEMENT"), between
Acquiror and the Company.
SECTION 5.3 LEGAL CONDITIONS TO DISTRIBUTION AND MERGER; LEGAL COMPLIANCE.
(a) Subject to the terms and conditions hereof, including, without
limitation, Section 4.3(c)(iii), (i) Acquiror shall use reasonable best efforts
to comply promptly with all legal and regulatory requirements which may be
imposed on itself or its subsidiaries with respect to the Merger and (ii)
Acquiror will, and will cause its subsidiaries to, promptly use its reasonable
best efforts to obtain any consent, authorization, order or approval of, or any
exemption by, and to satisfy any condition or requirement imposed by, any
Governmental Entity or other public or private third party, required to be
obtained, made or satisfied by Acquiror or any of its subsidiaries in connection
with the Merger or the taking of any action contemplated thereby or by this
Agreement or the Reorganization Agreement.
(b) Subject to the terms and conditions hereof, including, without
limitation, Section 4.3(c)(iii), (i) the Company will use its reasonable best
efforts to comply promptly with all legal and regulatory requirements which may
be imposed on itself or its subsidiaries with respect to the Distribution and
the Merger and (ii) the Company will, and will cause its subsidiaries to,
promptly use its reasonable best efforts to obtain any consent, authorization,
order or approval of, or any exemption by, and to satisfy any condition or
requirement imposed by, any Governmental Entity or other public or private third
party, required to be obtained, made or satisfied by the Company or any of its
subsidiaries in connection with the Distribution or the Merger or the taking of
any action contemplated thereby or by this Agreement or the Reorganization
Agreement.
(c) Each of the Company and Acquiror will promptly cooperate with and
furnish information to each other in connection with any such requirements
imposed upon any of them or any of their respective subsidiaries in connection
with the Distribution or the Merger.
SECTION 5.4 RIGHTS AGREEMENT. The Board of Directors of the Company shall
take all further action (in addition to that referred to in Section 3.2(n))
requested in writing by Acquiror (including, if necessary, redeeming the Rights
immediately prior to the Effective Time or amending the Rights Agreement) in
order to render the Rights inapplicable to the Merger and the other transactions
contemplated by this Agreement and the Reorganization Agreement.
SECTION 5.5 EMPLOYMENT MATTERS.
(a) Employment with Branded Business. Acquiror agrees to cause the Company
or the Branded Subsidiary to offer to retain all Branded Employees (as defined
in the Reorganization Agreement) as of 12:01 a.m. on the Closing Date. The offer
of continuing employment to be made hereunder shall include provision for the
payment of base salary to each such employee at a rate at least equal to the
rate of base salary in effect for such employee immediately prior to the
Closing. Notwithstanding the foregoing, nothing contained herein shall be
construed as obligating Acquiror, the Surviving Corporation or any of its
affiliates (x) to offer employment after the Closing to any employee whose
employment with the Company terminates for any reason prior to the Closing, (y)
to maintain any term or condition of employment (including base salary) for any
period following the Effective Time, except as provided in Section 5.5(b), or
(z) to recall any employee who does not have recall rights.
(b) Severance and Other Benefits on Termination. With respect to Branded
Employees who are terminated by the Surviving Corporation or the Branded
Subsidiary after the Effective Time, the Surviving Corporation shall be
responsible for severance benefits payable pursuant to severance plans, policies
and practices of the Surviving Corporation applicable to Branded Employees at
the time of their termination. The Surviving Corporation further agrees to
provide any required notice under federal, state and local laws, regulations or
rules for any termination of Branded Employees after the Effective Time.
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(c) Data to be Furnished. Prior to Closing, the Company shall furnish
Acquiror with information as to (i) the rate of base salary in effect for each
Branded Employee immediately before the Closing, (ii) each Branded Employee's
position with the Company immediately before the Closing and (iii) each Branded
Employee's prior service.
(d) Cooperation. Prior to the Closing, the Company will reasonably
cooperate with Acquiror in conducting a review of the Benefit Plans, including
jointly engaging (with Acquiror and Foods) a firm or firms, as promptly as
practicable after the date hereof, selected by Acquiror and at Acquiror's sole
expense, to conduct such review. The Company and Foods will provide such firm or
firms with such documents and other information relating to the Benefit Plans as
such firm or firms may reasonably request. Following such review, the Company
will, as promptly as practicable, take any actions that Acquiror and the Company
may reasonably, mutually determine to be necessary or advisable in light of such
review.
SECTION 5.6 FEES AND EXPENSES. Except as provided in Section 7.2(b)(iii),
all fees and expenses incurred in connection with the Merger, the Distribution,
this Agreement, the Reorganization Agreement and the transactions contemplated
by this Agreement and the Ancillary Agreements shall be paid by the party
incurring such fees or expenses, whether or not the Merger is consummated,
except that expenses incurred in connection with printing and mailing the Proxy
Statement, the Form S-4, the Form S-1 (if required) and the Form 10, shall be
shared equally by Acquiror and the Company. Any such fees or expenses incurred
by the Company or its subsidiaries but not paid prior to the Effective Time
shall be accrued and reflected as liabilities of the Company and taken into
account in calculating the Closing Date Net Assets as set forth in Section 2.3.
SECTION 5.7 DISTRIBUTION. Prior to the Closing, the Company will (a) enter
into the Reorganization Agreement and each of the Ancillary Agreements to which
the Company is to be a party and (b) cause Foods and any other applicable
subsidiaries to enter into the Reorganization Agreement and each of the other
Ancillary Agreements to which it is to be a party. The Company will, and will
cause Foods to, take all action necessary to effect the Distribution immediately
prior to the Effective Time, pursuant to the terms of the Reorganization
Agreement and the Ancillary Agreements. Prior to the Effective Time, the Company
will not agree to or permit any modification, amendment, supplement or waiver of
the Reorganization Agreement or any of the Ancillary Agreements without the
prior written consent of Acquiror.
SECTION 5.8 PUBLIC ANNOUNCEMENTS. Acquiror and the Company will consult
with each other before issuing, and provide each other the opportunity to review
and comment upon, any press release or other public statements (it being
understood that discussions by the parties with financial analysts or other
advisors shall not constitute public statements) with respect to the
transactions contemplated by this Agreement and the Ancillary Agreements,
including the Merger, and shall not issue any such press release or make any
such public statement prior to such consultation, except as may be required by
applicable law, court process or by obligations pursuant to any listing
agreement with any national securities exchange.
SECTION 5.9 PRIVATE LETTER RULING AND TAX OPINIONS. The Company and
Acquiror each hereby agree to cooperate with the other party and to use their
reasonable best efforts to obtain from the Internal Revenue Service (or tax
counsel) the private letter ruling (or tax opinions) contemplated by Section
6.1(d) or (e) of this Agreement.
SECTION 5.10 AFFILIATES. Prior to the Closing Date, the Company shall
deliver to Acquiror a letter identifying all persons who are, at the time this
Agreement is submitted for approval to the stockholders of the Company,
"affiliates" of the Company for purposes of Rule 145 under the Securities Act.
The Company shall use its reasonable best efforts to cause each such person to
deliver to Acquiror on or prior to the Closing Date a written agreement
substantially in the form attached as Exhibit B hereto.
SECTION 5.11 STOCK EXCHANGE LISTING. Acquiror shall use its reasonable best
efforts to cause the shares of Acquiror Common Stock to be issued in the Merger
to be approved for listing on the NYSE, subject to official notice of issuance,
prior to the Closing Date.
SECTION 5.12 TITLE INSURANCE. In the event Acquiror shall elect at Closing
to purchase an A.L.T.A. Owner's Title Insurance Policy with standard extended
coverage for the Real Property, to the extent
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reasonably required by the issuer of such title insurance, the Company will and
will cause Foods to cooperate reasonably in the execution of documents
customarily required by an issuer of title insurance to provide extended title
insurance coverage.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. This Agreement shall have been approved and
adopted by the affirmative vote or consent of the Requisite Stockholders of the
Company.
(b) Stock Exchange Listing. The shares of Acquiror Company Stock issuable
to the Company's stockholders pursuant to this Agreement and under the Benefit
Plans shall have been approved for listing on the NYSE, subject to official
notice of issuance.
(c) Regulatory Approvals. Each of Acquiror and the Company shall have
obtained all requisite approvals of, or satisfied all requisite filing
requirements with, Governmental Entities in connection with the transactions
contemplated hereby and by the Ancillary Agreements, including all requisite
approvals under, and the expiration of all waiting periods in respect of, the
HSR Act.
(d) Private Letter Ruling. Unless otherwise agreed upon by the Company and
the Acquiror as set forth in paragraph (e) below, the Company shall have
received from the Service a private letter ruling (the "PRIVATE LETTER RULING"),
reasonably satisfactory in form and substance to Acquiror, substantially to the
effect that, on the basis of the facts, representations, and applicable law
existing at the Effective Time:
(i) The transfer by Foods to the Branded Subsidiary of its Branded
Business assets and liabilities, and the distribution of the Branded
Subsidiary stock to the Company, as contemplated by the Reorganization
Agreement, will qualify for Federal income tax purposes as a reorganization
within the meaning of Sections 368(a)(1)(D) of the Code and 355(a) of the
Code; and that, among other consequences of such qualification, no taxable
gain, loss or income will be realized by Foods, the Branded Subsidiary or
the Company as a result of such transaction.
(ii) The pro rata distribution of the stock of New Holdings to the
holders of the Company Common Stock will be non-taxable for Federal income
tax purposes, to both the Company's stockholders and the Company, under
Sections 355(a) and (c) of the Code.
(iii) The Merger will be treated for Federal income tax purposes as a
reorganization within the meaning of Section 368(a)(1)(B) of the Code; and
that, among other consequences of such qualification, no taxable gain, loss
or income will be realized by the Company, Acquiror or the Company's
shareholders as a result of the Merger.
(e) Joint Tax Opinion or Tax Opinions. In the event that the Company and
Acquiror agree to complete the transactions contemplated by this Agreement
without obtaining the Private Letter Ruling, Acquiror shall have received a
jointly rendered opinion of Wachtell, Lipton, Rosen & Katz, counsel to Acquiror,
and Bryan Cave LLP, counsel to the Company, or separate opinions of each such
firm, in each case reasonably satisfactory in form and substance to Acquiror, to
the same effect as set forth in clauses (i), (ii) and (iii) of the foregoing
paragraph (d).
(f) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger, the Internal Spinoff or the Distribution shall be in
effect; provided, however, that subject to the terms and conditions of this
Agreement including, without limitation, Section 4.3(c)(iii), each of the
parties shall have used its reasonable efforts to prevent the entry of any such
injunction or other order and to appeal as promptly as possible any such
injunction or other order that may be entered. No action,
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suit or other proceeding shall be pending by any Governmental Entity that, if
successful, would restrict or prohibit the consummation of the Merger, the
Internal Spinoff or the Distribution; provided, however, that the Company will
not unreasonably withhold its waiver of the condition set forth in this sentence
upon Acquiror's request in the event such an action, suit or other proceeding is
pending with respect to the Merger alone.
(g) Form S-4. The Form S-4 shall have become effective under the Securities
Act and shall not be the subject of any stop order or pending proceedings by a
Governmental Entity seeking a stop order.
(h) Consummation of the Distribution. The Distribution shall have become
effective in accordance with the terms of the Reorganization Agreement and each
of the agreements contemplated thereby.
(i) Tax Legislation. There shall be no proposed legislation introduced in
bill form and pending congressional action which, if passed, would have the
effect of amending the Internal Revenue Code so as to alter in any materially
adverse respect any of the tax consequences prescribed by the Private Letter
Ruling or the tax opinions contemplated by paragraphs (d) and (e) above.
SECTION 6.2 CONDITIONS TO OBLIGATIONS OF ACQUIROR AND MERGER SUB. The
obligation of Acquiror and Merger Sub to effect the Merger is further subject to
the following conditions, unless waived in writing by Acquiror:
(a) Representations and Warranties. The representations and warranties of
the Company set forth in this Agreement that are qualified as to materiality
shall be true and correct, and the representations and warranties of the Company
set forth in this Agreement that are not so qualified shall be true and correct
in all material respects, in each case as of the date of this Agreement and as
of the Closing Date as though made on and as of the Closing Date, except as
otherwise contemplated by this Agreement, except to the extent that any
representation or warranty shall be as of a specific date, in which case such
representation and warranty shall be true and correct as of such date, and
Acquiror shall have received a certificate signed on behalf of the Company by
the chief executive officer and the chief financial officer of the Company to
the effect of this sentence. The Company shall have delivered to Acquiror a
certificate (the "COMPANY BRING DOWN CERTIFICATE"), dated as of the Closing Date
and reasonably satisfactory in form to Acquiror, that sets forth each event that
has occurred and each condition that exists that (i) had not occurred or was not
in existence as of the date of this Agreement and (ii) if it had occurred or was
in existence as of the date of this Agreement would be required to be disclosed
pursuant to Section 3.2.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement and the Reorganization Agreement at or prior to the
Closing Date, and Acquiror shall have received a certificate signed on behalf of
the Company by the chief executive officer and the chief financial officer of
the Company to such effect.
(c) Opinion of the Company's Counsel. Acquiror shall have received an
opinion dated the Closing Date of Bryan Cave LLP, counsel to the Company, and/or
R. W. Lockwood, General Counsel of the Company, to the effect that:
(i) the Company, Foods and the Branded Subsidiary (collectively, the
"COMPANY PARTIES") are each corporations validly existing and in good
standing under the laws of the states of their respective incorporation;
(ii) each of the Company Parties has the power and authority to
execute each Document to which it is a party and to consummate the
transactions contemplated hereby and thereby; the execution and delivery of
this Agreement and the Ancillary Agreements and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by
requisite corporate action on the part of each Company Party that is a
party thereto and the stockholders of each such Company Party and each
Document has been duly executed and delivered by the Company Parties that
are party thereto and constitutes a legal, valid and binding obligation of
each such Company Party, enforceable in accordance with its terms, subject
to applicable bankruptcy, insolvency, receivership or other similar laws
affecting the enforcement of creditors' rights generally and subject, as to
enforceability, to general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law; and
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(iii) the execution, delivery and performance of the Ancillary
Agreements by each Company Party thereto will not (x) violate any
applicable Federal law or the laws of the states of their respective
incorporation or (y) conflict with any provision of the articles of
incorporation or by-laws of the applicable Company Party. Such counsel will
express no opinion, however, as to any violation of any law or regulation
which may have become applicable to any Company Party as a result of the
involvement of Acquiror or any of its subsidiaries in the transactions
contemplated by this Agreement because of Acquiror's or any of its
subsidiaries' legal or regulatory status or because of any other facts
specifically pertaining to Acquiror or any of its subsidiaries.
(d) No Material Adverse Change. Whether or not any event or change is
reflected in the Company Bring Down Certificate, since March 31, 1996, there
shall have been no material adverse change, and no event that could reasonably
be expected to result in a material adverse change, to the business, properties,
assets, results of operations, or financial condition of the Company and the
Branded Subsidiary taken as a whole; provided, however, that "material adverse
change" for this purpose shall not include (i) any adverse change resulting from
economic or market conditions generally affecting businesses engaged in the same
or substantially similar activities as the Company and the Branded Subsidiary or
(ii) any adverse change resulting directly from any action taken by Acquiror or
any subsidiary of Acquiror except an action specifically permitted or
contemplated by this Agreement; provided, further, that regardless of cause
(including as a result of any condition or action referred to in the foregoing
proviso), "material adverse change" for this purpose shall include (i) a 10% or
greater decline in the ACV grocery distribution of mainline CHEX, multi-grain
CHEX and COOKIE CRISP cereals in the aggregate for the last reported 12-week
period ending at the end of the last reported week prior to the Closing compared
to the comparable period in the prior year (reported on a consistent basis) or
(ii) a 15% or greater decline in the IRI-reported pound market share of mainline
CHEX, multi-bran CHEX and COOKIE CRISP cereals in the aggregate for the last
reported 12-week period ending at the end of the last reported week prior to the
Closing compared to the comparable period in the prior year (reported on a
consistent basis), except that if such a 15% or greater decline is due to
differences in timing of trade promotions relating to such cereals during such
12-week period compared to the prior year, such decline shall not be considered
a material adverse change unless there has been a 15% or greater decline in the
IRI-reported pound market share of mainline CHEX, multi-bran CHEX and COOKIE
CRISP cereals in the aggregate for the last reported 16-week period ending at
the end of the last reported week prior to the Closing compared to the
comparable period in the prior year (reported on a consistent basis).
(e) Ancillary Agreements. Each of the Ancillary Agreements shall have been
executed substantially in the forms attached as Exhibits hereto or to the
Reorganization Agreement or, if not included as Exhibits, in the form reasonably
agreed to by the Acquiror and the Company and shall have become effective in
accordance with its terms. The Company shall have delivered to Acquiror true,
correct and complete copies of each such agreement to which Acquiror is not a
party.
(f) Amendments to SEC Documents. Since the effective date of the Form S-4
or the Proxy Statement, as applicable, no event with respect to the Company, any
subsidiary of the Company or any security holder of the Company shall have
occurred which should have been set forth in an amendment to the Form S-4 or a
supplement to the Proxy Statement which has not been set forth in such an
amendment or supplement.
(g) Rule 145 Letters. The Company shall have delivered letters regarding
Rule 145 of the Securities Act, substantially in the form of Exhibit B hereto,
executed by each affiliate of the Company who will acquire shares of Acquiror
Common Stock in connection with the Merger.
(h) Scheduled Agreements. Each agreement set forth on a schedule hereto or
on a schedule to the Reorganization Agreement or any of the other Ancillary
Agreements, and required to be assigned or terminated by the Company pursuant to
the provisions hereof or thereof, shall have been so assigned or terminated,
except where the failure to do so could not reasonably be expected to have a
material adverse effect on the Company and the Branded Subsidiary.
(i) Certificate of Trustee. The Company shall have delivered to Acquiror a
certificate from the indenture trustee with respect to the Notes, in form and
substance reasonably satisfactory to Acquiror, to the
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effect that the Trustee has not, as of the Closing Date, received any notice of
and is not aware of any default or event of default with respect to the Notes.
(j) Dissenters. Holders of no more than 5% of the aggregate number of
outstanding shares of Company Common Stock shall have exercised dissenters'
rights with respect to the Merger or, if available, the value of the Company
Common Stock before giving effect to the Distribution.
SECTION 6.3 CONDITIONS TO OBLIGATION OF THE COMPANY. The obligation of the
Company to effect the Merger is further subject to the following conditions,
unless waived in writing by the Company:
(a) Representations and Warranties. The representations and warranties of
Acquiror and Merger Sub set forth in this Agreement that are qualified as to
materiality shall be true and correct, and the representations and warranties of
Acquiror set forth in this Agreement that are not so qualified shall be true and
correct in all material respects, in each case as of the date of this Agreement
and as of the Closing Date as though made on and as of the Closing Date, except
as otherwise contemplated by this Agreement, except to the extent that any
representation or warranty shall be as of a specific date, in which case such
representation and warranty shall be true and correct as of such date, and the
Company shall have received a certificate signed on behalf of Acquiror by the
chief executive officer and the chief financial officer of Acquiror to the
effect of this sentence. Acquiror shall have delivered to the Company a
certificate (the "ACQUIROR BRING DOWN CERTIFICATE"), dated as of the Closing
Date and reasonably satisfactory in form to the Company, that sets forth each
event that has occurred and each condition that exists that (i) had not occurred
or was not in existence as of the date of this Agreement and (ii) if it had
occurred or was in existence as of the date of this Agreement would be required
to be disclosed pursuant to Section 3.3.
(b) Performance of Obligations of Acquiror. Acquiror shall have performed
in all material respects all obligations required to be performed by it under
this Agreement at or prior to the Closing Date, and the Company shall have
received a certificate signed on behalf of Acquiror by the chief executive
officer and the chief financial officer of Acquiror to such effect.
(c) Opinion of Acquiror's Counsel. The Company shall have received an
opinion dated the Closing Date of Wachtell, Lipton, Rosen & Katz, special
counsel to Acquiror, and/or in-house Counsel of Acquiror, to the effect that:
(i) Each of Acquiror and Merger Sub is a corporation validly existing
and in good standing under the laws of its state of incorporation;
(ii) Each of Acquiror and Merger Sub have the requisite power and
authority to execute this Agreement and the Reorganization Agreement and to
consummate the transactions contemplated hereby and thereby; the execution
and delivery of this Agreement and the Reorganization Agreement and the
consummation of the transactions contemplated hereby and thereby has been
duly authorized by all requisite corporate action on the part of Acquiror
and Merger Sub; and this Agreement and the Reorganization Agreement have
been duly executed and delivered by Acquiror and Merger Sub and constitute
valid and binding obligations of Acquiror and Merger Sub enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
receivership or other similar laws affecting the enforcement of creditors'
rights generally and subject, as to enforceability, to general principles
of equity, regardless of whether such enforceability is considered in a
proceeding in equity or at law; and
(iii) the execution, delivery and performance of this Agreement and
the Reorganization Agreement by Acquiror and Merger Sub will not (x)
violate any applicable Federal law or any law of the states of their
respective incorporation or (y) conflict with any provision of the
certificate of incorporation or bylaws of Acquiror or Merger Sub. Such
counsel will express no opinion, however, as to any violation of any law or
regulation which may have become applicable to Acquiror or Merger Sub as a
result of the involvement of any Company Party and any subsidiary of such
party in the transactions contemplated by this Agreement because of such
party's legal or regulatory status or because of any other facts
specifically pertaining to any such party.
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(d) Amendments to SEC Documents. Since the effective date of the Form S-4
or the Proxy Statement, as applicable, no event with respect to Acquiror, any
subsidiary of Acquiror or any security holder of Acquiror shall have occurred
which should have been set forth in an amendment to the Form S-4 or a supplement
to the Proxy Statement which has not been set forth in such an amendment or
supplement.
(e) Ancillary Agreements. Each of the Ancillary Agreements to which
Acquiror is a party shall have been executed substantially in the forms attached
as Exhibits hereto or to the Reorganization Agreement and shall have become
effective in accordance with its terms.
(f) Dissenters. Holders of no more than 5% of the aggregate number of
outstanding shares of Company Common Stock shall have exercised dissenters'
rights, if available, with respect to the value of the Company Common Stock
before giving effect to the Distribution.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 TERMINATION. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after approval of matters presented in
connection with the Merger by the stockholders of the Company:
(a) by mutual written consent of Acquiror and the Company; or
(b) by either Acquiror or the Company:
(i) if, upon a vote at a duly held Stockholders Meeting or any
adjournment thereof, any required approval of the stockholders of the
Company shall not have been obtained;
(ii) if the Merger shall not have been consummated on or before August
31, 1997, unless the failure to consummate the Merger is the result of a
wilful and material breach of this Agreement by the party seeking to
terminate this Agreement; provided, however, that the passage of such
period shall be tolled for any part thereof (but in no event for more than
an additional three months) during which any party shall be subject to a
nonfinal order, decree, ruling or action restraining, enjoining or
otherwise prohibiting the consummation of the Merger or the calling or
holding of the Stockholders Meeting;
(iii) if any Governmental Entity shall have issued an order, decree or
ruling or taken any other action permanently enjoining, restraining or
otherwise prohibiting the Merger and such order, decree, ruling or other
action shall have become final and nonappealable; or
(iv) if prior to the Effective Time, the Internal Revenue Code is
amended so as to alter in any materially adverse respect any of the tax
consequences prescribed by the Private Letter Ruling (or tax opinions)
described in Section 6.1(d) (or (e)); or
(c) by Acquiror if (i) the Board of Directors of the Company shall have
withdrawn, or modified or changed, in a manner adverse to Acquiror, its approval
or recommendation of the Merger or the other transactions contemplated by this
Agreement and the Ancillary Agreements or shall have recommended another offer
or proposal with respect to a Third Party Acquisition, or (ii) a Third Party
Acquisition has occurred or any person shall have entered into a definitive
agreement with the Company with respect to a Third Party Acquisition; or
(d) by the Company if (i) the Company's Board of Directors shall have
failed to recommend to its shareholders the approval of the transactions
contemplated hereby, or shall have withdrawn, modified or changed such
recommendation, in a manner permitted by the penultimate sentence of Section
4.1(n), or (ii) the Company shall have entered into an agreement with respect to
a Higher Offer in a manner permitted by the penultimate sentence of Section
4.1(n).
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SECTION 7.2 EFFECT OF TERMINATION.
(a) In the event of termination of this Agreement by either the Company or
Acquiror as provided in Section 7.1, this Agreement shall forthwith become void
and have no effect, without any liability or obligation on the part of Acquiror
or the Company, other than the provisions of Section 3.2(i), Section 3.3(k),
Section 5.2(c), Section 5.6, this Section and Article VIII and except to the
extent that such termination results from the wilful and material breach by a
party of any of its representations, warranties, covenants or agreements set
forth in this Agreement, the Reorganization Agreement, or any agreement
contemplated hereby or thereby.
(b) If the transactions contemplated by this Agreement are terminated as
provided herein:
(i) Acquiror shall return all documents and other material received
from the Company or its representatives relating to the transactions
contemplated hereby, whether so obtained before or after the execution
hereof, to the Company; and
(ii) all confidential information received by Acquiror with respect to
the businesses of the Company shall be treated in accordance with the
Confidentiality Agreement, which shall remain in full force and effect
notwithstanding the termination of this Agreement.
(c) In the event that: (i) Acquiror terminates this Agreement pursuant to
Section 7.1(c), (ii) the Company terminates this Agreement pursuant to Section
7.1(d) or (iii) this Agreement shall be terminated pursuant to Section 7.1(b)(i)
and, at the time of the meeting called for the approval of the Company's
shareholders referred to in Section 7.1(b)(i), there shall have been made a
proposal relating to a Third Party Acquisition that has become public and,
within six months following such termination, the Company shall enter into a
definitive agreement with respect to the sale of the Branded Business; then the
Company shall promptly pay to Acquiror (by wire transfer to an account
designated by the Acquiror for this purpose) an amount equal to the sum of (i)
$20 million and (ii) notwithstanding the provisions of Section 5.6, the fees and
expenses actually incurred by the Acquiror in connection with the negotiation
and preparation of this Agreement and the Ancillary Agreements to which the
Acquiror is a party, the performance of the Acquiror's covenants herein and
therein, and the transactions contemplated hereby and thereby, including,
without limitation, all fees and disbursements of the Acquiror's financial
advisors, legal counsel, accountants and other advisors, up to a maximum of an
additional $2.5 million.
SECTION 7.3 AMENDMENT. This Agreement may be amended by the parties at any
time before or after any required approval of matters presented in connection
with the Merger by the stockholders of the Company; provided, however, that
after any such approval, there shall be made no amendment that by law requires
further approval by such stockholders without the further approval of such
stockholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties.
SECTION 7.4 EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties may (a) extend the time for the performance of any of the obligations or
other acts of the other party, (b) waive any inaccuracies in the representations
and warranties of the other party contained in this Agreement or in any document
delivered pursuant to this Agreement, or (c) subject to the proviso of Section
7.3, waive compliance by the other party with any of the agreements or
conditions contained in this Agreement. Any agreement on the part of a party to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of such rights.
SECTION 7.5 PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR WAIVER. A
termination of this Agreement pursuant to Section 7.1, an amendment of this
Agreement pursuant to Section 7.3 or an extension or waiver pursuant to Section
7.4 shall, in order to be effective, require in the case of Acquiror or the
Company, action by its Board of Directors or the duly authorized designee of its
Board of Directors.
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ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as and to
the extent provided in the Reorganization Agreement, none of the representations
and warranties in this Agreement or in any instrument delivered pursuant to this
Agreement shall survive the Effective Time. This Section 8.1 shall not limit any
covenant or agreement of the parties which by its terms contemplates performance
after the Effective Time.
SECTION 8.2 NOTICES. Any notice, request, instruction or other document to
be given hereunder by any party to any other party shall be in writing and shall
be deemed to have been duly given (a) on the first business day occurring on or
after the date of transmission if transmitted by facsimile (upon confirmation of
receipt by journal or report generated by the facsimile machine of the party
giving such notice), (b) on the first business day occurring on or after the
date of delivery if delivered personally, or (c) on the first business day
following the date of dispatch if dispatched by Federal Express or other
next-day courier service. All notices hereunder shall be given as set forth
below, or pursuant to such other instructions as may be designated in writing by
the party to receive such notice:
(a) if to Acquiror or Merger Sub, to
General Mills, Inc.
Number One General Mills Boulevard
Minneapolis, Minnesota 55426
Attention: Siri S. Marshall
with a copy (which shall not constitute notice) to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd St.
New York, New York 10019
Attention: Steven A. Rosenblum
(b) if to the Company, to
Ralcorp Holdings, Inc.
800 Market Street, Suite 2900
St. Louis, Missouri 63101
Attention: Robert W. Lockwood
with a copy (which shall not constitute notice) to:
Bryan Cave LLP
One Metropolitan Square
211 North Broadway, Suite 3600
St. Louis, Missouri 63102
Attention: William F. Seabaugh
SECTION 8.3 CERTAIN DEFINITIONS. For purposes of this Agreement:
(a) an "AFFILIATE" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person;
(b) "PERSON" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity; and
(c) a "SUBSIDIARY" of any person means another person, an amount of the
voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which) is owned directly or indirectly by such first
person.
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SECTION 8.4 INTERPRETATION. When a reference is made in this Agreement to a
Section, Exhibit or Schedule, such reference shall be to a Section of, or an
Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
SECTION 8.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
SECTION 8.6 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement,
the Ancillary Agreements and the agreements referred to herein and therein or
required to be delivered in connection with the transactions contemplated by the
Ancillary Agreements constitute the entire agreement, and supersede all prior
agreements (other than the Confidentiality Agreement) and understandings, both
written and oral, among the parties with respect to the subject matter of this
Agreement, and except for the provisions of Article II, this Agreement is not
intended to confer upon any person other than the parties hereto any rights or
remedies.
SECTION 8.7 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Missouri, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 8.8 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and permitted assigns.
SECTION 8.9 ENFORCEMENT. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement, this being in addition to any other
remedy to which they are entitled at law or in equity. In addition, each of the
parties hereto (a) consents to submit itself to the personal jurisdiction of any
Federal court located in the State of Missouri or the State of Minnesota in the
event any dispute arises out of this Agreement or any of the transactions
contemplated by this Agreement, (b) agrees that it will not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from any
such court, and (c) agrees that it will not bring any action relating to this
Agreement or any of the transactions contemplated by this Agreement in any court
other than a Federal court (or if such court does not have subject matter
jurisdiction, in a state court) sitting in the State of Missouri or the State of
Minnesota. THE PARTIES HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO
ANY DISPUTE ARISING HEREUNDER.
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IN WITNESS WHEREOF, Acquiror, Merger Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
GENERAL MILLS, INC.
By: /s/ T.J. BROWN
--------------------------------------
Name: T.J. Brown
Title: Vice President
GENERAL MILLS MISSOURI, INC.
By: /s/ T.J. BROWN
--------------------------------------
Name: T.J. Brown
Title: Vice President
RALCORP HOLDINGS, INC.
By: /s/ RICHARD A. PEARCE
--------------------------------------
Name: Richard A. Pearce
Title: Chief Executive Officer and
President
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<PAGE> 143
AMENDMENT TO
AGREEMENT AND PLAN OF MERGER
BY AND AMONG RALCORP HOLDINGS, INC.,
GENERAL MILLS, INC. AND GENERAL MILLS MISSOURI, INC.
This Amendment to Agreement and Plan of Merger is dated as of October 25,
1996 by and among Ralcorp Holdings, Inc., a Missouri corporation (the
"Company"), General Mills, Inc., a Delaware corporation (the "Acquiror"), and
General Mills Missouri, Inc., a Missouri corporation and a wholly-owned
subsidiary of Acquiror ("Merger Sub").
WHEREAS, the parties hereto are parties to an Agreement and Plan of Merger
dated as of August 13, 1996 (the "Merger Agreement");
WHEREAS, pursuant and subject to the terms and conditions of the Merger
Agreement and the Reorganization Agreement attached thereto as Exhibit A (the
"Reorganization Agreement"), which will be entered into prior to the effective
time of the merger contemplated thereby, the parties hereto have agreed to
consummate the following transactions: (a) certain of the assets and liabilities
of the branded cereals and branded snacks business (the "Branded Business")
currently operated by the Company's wholly-owned subsidiary, Ralston Foods, Inc.
("Foods"), will be contributed by Foods to a newly-formed subsidiary (the
"Branded Subsidiary"); (b) all the stock of the Branded Subsidiary will be
distributed by Foods to the Company; (c) all of the shares of capital stock of a
Missouri corporation to be formed as a wholly-owned subsidiary of the Company
and the parent of Foods ("New Holdings") will be distributed on a pro rata basis
to the Company's stockholders; and (d) Merger Sub will be merged into the
Company, with the Company as the surviving corporation; and
WHEREAS, the parties desire to amend the Merger Agreement and the exhibits
thereto (the "Transaction Documents") to reflect the following revised version
of the transactions recited above: (a) the Company will form a wholly-owned
Missouri subsidiary ("New Ralcorp"), into which Foods will be merged (the
"Internal Merger"), with New Ralcorp as the surviving corporation; (b) the
Branded Business will be contributed by New Ralcorp (as successor to Foods) to
the Branded Subsidiary (the "Branded Contribution"); (c) all the stock of the
Branded Subsidiary will be distributed by New Ralcorp to the Company; (d) all of
the shares of the capital stock of New Ralcorp will be distributed on a pro rata
basis to the Company's stockholders; and (d) Merger Sub will be merged into the
Company, with the Company as the surviving corporation; and
WHEREAS, these revisions are structural only and are not intended to affect
the substantive rights or obligations of the parties to the Merger Agreement and
the related agreements.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in the Merger Agreement and this Amendment,
the parties hereto agree as follows:
1. Section 2.1 of the Reorganization Agreement is hereby amended in its
entirety as follows:
2.1 INTERNAL MERGER; SPINOFF TO RALCORP. Prior to the transactions
contemplated by Article III, Ralcorp shall merge Foods into New Ralcorp
with New Ralcorp surviving the Internal Merger. After the Internal Merger
and the transactions contemplated by Article III but prior to the
Distribution Date, New Ralcorp shall distribute all of the issued and
outstanding shares of capital stock of the Branded Subsidiary to Ralcorp.
2. The parties acknowledge and agree that the Internal Merger will occur
prior to the Branded Contribution. The parties further acknowledge and agree
that New Ralcorp will take the place of New Holdings and, after the Internal
Merger, Foods in the transactions contemplated by the Merger Agreement and the
Ancillary Agreements (as defined in the Reorganization Agreement). Accordingly,
the parties hereby agree that each of the Merger Agreement and the Ancillary
Agreements is hereby amended to (a) substitute New Ralcorp for New Holdings in
each instance, and (b) substitute New Ralcorp for Foods in each instance to the
extent the context refers to Foods after the Internal Merger.
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<PAGE> 144
3. The parties agree that, prior to their execution, the Ancillary
Agreements will be revised to reflect the foregoing amendments and will be
executed and delivered, as so revised, at the Closing.
4. Except as expressly amended hereby, the Merger Agreement shall remain in
full force and effect.
IN WITNESS WHEREOF, Acquiror, Merger Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
GENERAL MILLS, INC.
By: /s/ T. J. BROWN
------------------------------------
Name: T. J. Brown
Title: Vice President
GENERAL MILLS MISSOURI, INC.
By: /s/ T. J. BROWN
------------------------------------
Name: T. J. Brown
Title: Vice President
RALCORP HOLDINGS, INC.
By: /s/ J.R. MICHELETTO
------------------------------------
Name: J.R. Micheletto
Title: Chief Executive Officer and
President
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APPENDIX B
REORGANIZATION AGREEMENT
This Reorganization Agreement (the "Agreement"), dated as of January ,
1997, by and among Ralcorp Holdings, Inc., a Missouri corporation ("Ralcorp"),
New Ralcorp Holdings, Inc., a Missouri corporation ("New Ralcorp"), Ralston
Foods, Inc., a Nevada corporation ("Foods"), Chex Inc., a Delaware corporation
wholly owned by New Ralcorp (the "Branded Subsidiary"), and General Mills, Inc.,
a Delaware corporation ("Acquiror").
WITNESSETH:
WHEREAS, Ralcorp holds all of the issued and outstanding capital stock of
Foods and all of the issued and outstanding capital stock of New Ralcorp; and
WHEREAS, New Ralcorp holds all of the issued and outstanding capital stock
of the Branded Subsidiary; and
WHEREAS, Ralcorp's Board of Directors has approved, and on August 13, 1996
Ralcorp entered into, an Agreement and Plan of Merger (as amended on October 25,
1996, the "Merger Agreement") among Ralcorp, Acquiror and General Mills
Missouri, Inc., a Missouri corporation ("Merger Sub"), pursuant to which this
Agreement and certain other related agreements will be executed to accomplish
the following transactions:
(i) Ralcorp will cause Foods to be merged with and into New Ralcorp, with
New Ralcorp as the surviving corporation of the merger (the "Internal
Merger").
(ii) Ralcorp will cause New Ralcorp to contribute, as a capital
contribution, the assets and liabilities specified or described
herein to the Branded Subsidiary.
(iii) Ralcorp will contribute, as a capital contribution, the assets and
liabilities specified or described herein to New Ralcorp.
(iv) New Ralcorp will distribute all of the issued and outstanding shares
of the capital stock of the Branded Subsidiary to Ralcorp (the
"Internal Spinoff").
(v) Ralcorp will distribute (the "Distribution") all of the issued and
outstanding shares of capital stock of New Ralcorp (the "Common
Stock") to the holders of Ralcorp's $.01 par value common stock (the
"Ralcorp Stock").
(vi) Acquiror will acquire Ralcorp (and the Branded Subsidiary) by virtue
of a merger of Merger Sub with and into Ralcorp pursuant to the
Merger Agreement.
WHEREAS, the transfer of assets and liabilities of the Branded Business to
the Branded Subsidiary, the Internal Merger and the Internal Spinoff, are
intended to qualify for non-recognition treatment under Sections 368(a)(1)(D)
and 355(a) of the Code;
WHEREAS, in order to effect the Distribution, the Ralcorp Board (as
hereinafter defined) has determined that it is necessary and desirable to
distribute the outstanding shares of Common Stock on a pro rata basis to the
holders of Ralcorp Stock;
WHEREAS, the Distribution is intended to qualify for non-recognition
treatment under Section 355 of the Code (as hereinafter defined);
WHEREAS, in preparation for the Distribution, Ralcorp and New Ralcorp have
prepared and filed with the SEC (as hereinafter defined), and the SEC has
declared effective, a Registration Statement on Form 10 ("Form 10") pursuant to
Section 12(b) of the Exchange Act with respect to the Common Stock and
associated Rights; and
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WHEREAS, the parties hereto have determined that it is necessary and
desirable to set forth the principal corporate transactions required to effect
the Distribution and the other transactions contemplated hereby and to set forth
other agreements that will govern certain other matters relating to the
Distribution and such other transactions and the relationship of the parties
following the Distribution.
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained and intending to be legally bound thereby, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
1.1 GENERAL. As used in this Agreement, the following terms shall have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):
ACQUIROR: as defined in the recitals to this Agreement.
ACTION: any action, claim, suit, arbitration, inquiry, proceeding or
investigation by or before any court, governmental or other regulatory or
administrative agency or commission or any arbitration or other tribunal.
AFFILIATE: with respect to any specified Person, an "affiliate" as defined
in Rule 405 promulgated pursuant to the Securities Act (as hereinafter defined);
provided, however, that for purposes of this Agreement (i) Affiliates of Foods
or New Ralcorp shall not be deemed to include Ralcorp or the Branded Subsidiary,
and (ii) Affiliates of Ralcorp shall not be deemed to include Foods, New Ralcorp
or any of their direct or indirect subsidiaries (except the Branded Subsidiary).
ANCILLARY AGREEMENTS: all of the agreements, instruments, understandings,
assignments and other arrangements (excluding the Merger Agreement) entered into
in connection with the transactions contemplated hereby, including, without
limitation, this Agreement, the Supply Agreement, the Tax Sharing Agreement, the
Technology Agreement and the Trademark Agreement.
ASSET: any and all assets and properties, tangible or intangible, including
the following: (i) certificates of deposit, bankers' acceptances, stock,
debentures, evidences of indebtedness, certificates of interest or participation
in profit-sharing agreements, collateral-trust certificates, preorganization
certificates, investment contracts, voting-trust certificates; (ii) except as
otherwise provided in the following sentence, trade secrets, confidential
information, registered and unregistered trademarks, service marks, service
names, trade styles and trade names and associated goodwill; statutory, common
law and registered copyrights; applications for any of the foregoing, rights to
use any of the foregoing and other rights in, to and under any of the foregoing;
(iii) rights under Contracts and permits; (iv) real estate and buildings and
other improvements thereon and timber and mineral rights of every kind; (v)
leasehold improvements, fixtures, trade fixtures, machinery, equipment
(including transportation and office equipment), tools, dies and furniture; (vi)
office supplies, production supplies, spare parts, other miscellaneous supplies
and other tangible property of any kind; (vii) raw materials, work-in-process,
finished goods, consigned goods and other inventories; (viii) prepayments or
prepaid expenses; (ix) claims, causes of action, choses in action, rights of
recovery and rights of set-off of any kind; (x) the right to receive mail and
other communications; (xi) lists of advertisers, records pertaining to
advertisers and accounts, lists and records pertaining to suppliers and agents,
and books, ledgers, files and business records of every kind; (xii) advertising
materials and other recorded, printed or written materials; (xiii) except as
otherwise provided in the following sentence, goodwill as a going concern and
other intangible properties; (xiv) personnel records and employee contracts,
including any rights thereunder to restrict an employee from competing in
certain respects; and (xv) licenses and authorizations issued by any
governmental authority. Notwithstanding the foregoing definition, "Assets" shall
not include (i) any of the intellectual and proprietary property, rights and
obligations that are the subjects of the Technology Agreement and the Trademark
Agreement (which shall be governed by the Technology Agreement and the Trademark
Agreement, respectively), or (ii) any cash, notes and trade and customer
accounts receivable (whether current or non-current and including all rights
with respect thereto).
ASSIGNMENT AND ASSUMPTION AGREEMENT: as defined in Section 6.2 of this
Agreement.
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BRANDED ASSETS: all of the Assets listed on Schedule 1.1(a).
BRANDED BALANCE SHEET: as defined in the Merger Agreement.
BRANDED BUSINESS: the business of manufacturing, distributing and selling
branded ready-to-eat cereal (excluding Non-Branded Cereals) and branded
cereal-based snacks and snack mixes, as conducted by any member of either Group
immediately prior to the Distribution Date.
BRANDED EMPLOYEE: any individual who on the Distribution Date is an officer
or employee of any member of either Group and (a) who is actively employed at
the Branded Plant, or (b) who is set forth on Schedule 1.1(b) (which Schedule
will be updated by mutual agreement of New Ralcorp and Acquiror prior to the
Effective Time), or (c) who is on leave or layoff (with recall rights) from
active employment but who, immediately prior to commencement of such leave or
layoff, was employed at the Branded Plant, except that a Branded Employee shall
not include any individual who, as of the Distribution Date, (i) has been
determined to be disabled under the Ralcorp Holdings Long Term Disability Plan
("LTD Plan"), the Ralcorp Holdings Group Life Insurance Plan or the Ralcorp
Holdings Retirement Plan for Sales, Administrative, Clerical and Production
Employees, or (ii) is on leave during a waiting period prior to a determination
of disability under the LTD Plan.
BRANDED INDIVIDUAL: any individual who is a Branded Employee or a
beneficiary of a Branded Employee.
BRANDED LIABILITIES: (i) all of the Liabilities arising out of, relating to
or resulting from the ownership, use or possession of the Branded Assets or the
operation of the Branded Business other than those portions of the Branded
Business that are not conveyed to or retained by Ralcorp and the Branded
Subsidiary hereunder as of immediately after the Distribution Time, whether
arising prior to or after the Closing Date, (ii) the Scheduled Branded
Litigation, and (iii) the Known Branded Liabilities. For purposes of
clarification, the Liabilities referred to in clause (i) shall include product
liability claims relating to Branded Business products produced prior to the
Distribution Time regardless of whether such products were produced at the
Branded Plant, but shall not include employee, environmental, occupational
safety, health and similar liabilities related to any facility other than the
Branded Plant.
BRANDED PLANT: the manufacturing facility located at 11301 Mosteller Road,
Sharonville, Ohio.
BRANDED SUBSIDIARY: as defined in the recitals to this Agreement.
BUSINESS DAY: any day other than a Saturday, a Sunday or a day on which
banking institutions located in the State of Missouri are obligated by law or
executive order to close.
CLOSING: as defined in the Merger Agreement.
CLOSING DATE: as defined in the Merger Agreement.
CLOSING DATE BALANCE SHEET: as defined in Schedule 2.3 to the Merger
Agreement.
CODE: the Internal Revenue Code of 1986, as amended, or any successor
legislation.
COLLECTIVE BARGAINING AGREEMENT: any collective bargaining or other labor
agreement to which any member of either Group is a party, including those listed
on Schedule 8.9.
COMMON STOCK: as defined in the recitals to this Agreement.
CONTRACT: any written or oral contract, agreement, lease, indenture or
evidence of indebtedness.
CONTROL BRAND: as defined in the Trademark Agreement.
CURRENT PLAN YEAR: the plan year or fiscal year, to the extent applicable
with respect to any Plan, during which the Distribution Date occurs.
DELAYED ASSET: as defined in Section 3.5 of this Agreement.
DELAYED LIABILITY: as defined in Section 3.5 of this Agreement.
DISTRIBUTION: as defined in the recitals to this Agreement.
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DISTRIBUTION DATE: the date, to be determined by the Ralcorp Board
consistent with the Merger Agreement, as of which the Distribution shall be
effected.
DISTRIBUTION TIME: 11:59 p.m. on the Distribution Date.
DISTRIBUTORSHIP AGREEMENT: as defined in Section 10.4 of this Agreement.
EFFECTIVE TIME: as defined in the Merger Agreement.
ERISA: the Employee Retirement Income Security Act of 1974, as amended, or
any successor legislation.
EXCHANGE ACT: the Securities Exchange Act of 1934, as amended, together
with the rules and regulations promulgated thereunder.
FOODS: as defined in the recitals to this Agreement.
FORM 10: as defined in the recitals to this Agreement.
GROUP: the New Ralcorp Group or the Ralcorp Group.
INDEMNIFIABLE LOSS: with respect to any claim by an Indemnitee for
indemnification hereunder, any and all losses, liabilities, claims, damages,
obligations, payments, costs and expenses (including, without limitation, the
costs and expenses of any and all Actions, demands, claims and assessments, and
any and all judgments, settlements and compromises related thereto and
reasonable attorney's fees and expenses in connection therewith) incurred or
suffered by such Indemnitee with respect to such claim.
INDEMNITEE: as defined in Section 9.3 of this Agreement.
INDEMNITOR: as defined in Section 9.3 of this Agreement.
INFORMATION: as defined in Section 7.2 of this Agreement.
INTERNAL MERGER: as defined in the recitals to this Agreement.
INTERNAL SPINOFF: as defined in the recitals to this Agreement.
IRS: the Internal Revenue Service.
ISP: the Ralcorp Holdings Incentive Stock Plan.
KNOWN BRANDED LIABILITIES: the Branded Liabilities included in the Closing
Date Balance Sheet (but not the notes thereto), regardless of the sufficiency of
the amount of any accrual thereon, and the Branded Liabilities set forth on
Schedule 1.1(c).
LIABILITIES: all claims, debts, liabilities, royalties, license fees,
losses, costs, expenses, deficiencies, litigation proceedings, taxes, levies,
imposts, duties, deficiencies, assessments, attorneys' fees, charges,
allegations, demands, damages, judgments or obligations, whether absolute or
contingent, matured or unmatured, liquidated or unliquidated, accrued or
unaccrued, known or unknown and whether or not the same would properly be
reflected on a balance sheet, including all costs and expenses relating thereto.
MERGER: as defined in the Merger Agreement.
MERGER AGREEMENT: as defined in the recitals to this Agreement.
MERGER SUB: as defined in the recitals to this Agreement.
NEW RALCORP: as defined in the recitals to this Agreement.
NEW RALCORP ASSETS: all of the Assets used or held by any member of either
Group immediately prior to the Closing Date, except for the Branded Assets.
NEW RALCORP BILL OF SALE: as defined in Section 6.2 of this Agreement.
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NEW RALCORP BUSINESS: any business conducted by any member of either Group,
except for the Branded Business.
NEW RALCORP DEFERRED COMPENSATION PLANS: as defined in Section 8.5 of this
Agreement.
NEW RALCORP DOCUMENTS: as defined in Section 5.1(b) of this Agreement.
NEW RALCORP EMPLOYEE: any individual who at any time is or was an officer
or employee of any member of either Group, other than a Branded Employee.
NEW RALCORP GROUP: New Ralcorp and all other direct and indirect
subsidiaries of Ralcorp other than the Branded Subsidiary.
NEW RALCORP INDIVIDUAL: any individual who is a New Ralcorp Employee or a
beneficiary of a New Ralcorp Employee.
NEW RALCORP LIABILITIES: all of the Liabilities of any member of either
Group, except for the Branded Liabilities.
NEW RALCORP OBLIGATIONS: as defined in Article XI of this Agreement.
NEW RALCORP OFFICERS: the individuals listed on Schedule 4.2 to this
Agreement.
NEW RALCORP RETIREMENT PLAN: as defined in Section 8.1 of this Agreement.
NEW RALCORP SHARE PURCHASE RIGHTS AGREEMENT: as defined in Section 2.2 of
this Agreement.
NON-BRANDED CEREALS: Cereals sold exclusively under Control Brands or
Private Label Trademarks.
NOTICE OF CLAIM: as defined in Section 9.3 of this Agreement.
NYSE: the New York Stock Exchange.
PERSON: an individual, a partnership, a joint venture, a corporation, a
trust or other entity, an unincorporated organization or a government or any
department or agency thereof.
PLAN: any plan, policy, arrangement, contract or agreement providing
benefits (including salary, bonuses, deferred compensation, incentive
compensation, savings, stock purchases, pensions, profit sharing, welfare
benefits or retirement or other retiree benefits, including retiree medical
benefits) for any group of employees or former employees or individual employee
or former employee, or the beneficiary or beneficiaries of any such employee or
former employee, whether formal or informal or written or unwritten and whether
or not legally binding, and including any means, whether or not legally
required, pursuant to which any benefit is provided by an employer to any
employee or former employee or the beneficiary or beneficiaries of any such
employee or former employee.
POST-CLOSING BRANDED LIABILITIES: all Branded Liabilities relating to or
arising from the ownership, use or possession of the Branded Assets or the
operation of the Branded Business after the Effective Time.
PRIVATE LABEL TRADEMARK: as defined in the Trademark Agreement.
QUALIFIED PLAN: a Plan which is an employee pension benefit plan (within
the meaning of Section 3(2) of ERISA) and which constitutes or is intended in
good faith to constitute a qualified plan under Section 401(a) of the Code.
RALCORP: as defined in the recitals to this Agreement.
RALCORP BILL OF SALE: as defined in Section 6.2 of this Agreement.
RALCORP BOARD: the Board of Directors of Ralcorp and their duly elected or
appointed successors.
RALCORP DEFERRED COMPENSATION PLANS: as defined in Section 8.5 of this
Agreement.
RALCORP DOCUMENTS: as defined in Section 5.2(b) of this Agreement.
RALCORP GROUP: Ralcorp and the Branded Subsidiary.
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RALCORP OPTIONS: as defined in Section 8.4 of this Agreement.
RALCORP RETIREMENT PLAN: as defined in Section 8.1 of this Agreement.
RALCORP STOCK: as defined in the recitals to this Agreement.
RECORD DATE: the date to be determined by the Ralcorp Board, as the record
date for determining shareholders of Ralcorp Stock entitled to receive the
Distribution.
RIGHTS: the rights to be issued by New Ralcorp pursuant to the New Ralcorp
Share Purchase Rights Agreement.
RIGHTS PAYMENT: as defined in the Merger Agreement.
RIP: as defined in Section 8.1 of this Agreement.
SEC: the Securities and Exchange Commission.
SCHEDULED BRANDED LITIGATION: the Liabilities listed on Schedule 1.1(d).
SECURITIES ACT: the Securities Act of 1933, as amended, together with the
rules and regulations promulgated thereunder.
SUBSIDIARY: with respect to any specified Person, any corporation or other
legal entity of which such Person or any of its Subsidiaries controls or owns,
directly or indirectly, more than 50% of the stock or other equity interest
entitled to vote on the election of members to the board of directors or similar
governing body of such corporation or other legal entity.
SUPPLY AGREEMENT: as defined in Section 6.2 of this Agreement.
TAX SHARING AGREEMENT: as defined in Section 6.2 of this Agreement.
TECHNOLOGY AGREEMENT: as defined in Section 6.2 of this Agreement.
THIRD PARTY CLAIM: any Action or claim by a third party against or
otherwise involving an Indemnitee for which indemnification may be sought
pursuant to Article IX hereof.
TRADEMARK AGREEMENT: as defined in Section 6.2 of this Agreement.
UNKNOWN BRANDED LIABILITIES: all Branded Liabilities other than (i) the
Known Branded Liabilities, (ii) the Scheduled Branded Litigation and (iii) the
Post-Closing Branded Liabilities.
WELFARE PLAN: any Plan, including but not limited to the Plans listed on
Schedule 8.3, which is not a Qualified Plan and which provides medical, health,
disability, accident, life insurance, death, dental or other welfare benefits,
including any post-employment benefits or retiree medical benefits.
1.2 REFERENCES TO TIME. All references to times of the day in this
Agreement shall refer to St. Louis, Missouri time.
ARTICLE II
CERTAIN TRANSACTIONS PRIOR TO THE DISTRIBUTION
2.1 INTERNAL MERGER; SPINOFF TO RALCORP. Prior to the transactions
contemplated by Article III, Ralcorp shall merge Foods into New Ralcorp with New
Ralcorp surviving the Internal Merger. After the Internal Merger and the
transactions contemplated by Article III but prior to the Distribution Date, New
Ralcorp shall distribute all of the issued and outstanding shares of capital
stock of the Branded Subsidiary to Ralcorp.
2.2 ISSUANCE OF STOCK. Prior to the Distribution Date, Ralcorp shall take
all steps necessary so that immediately prior to the Distribution Date the
number of shares of Common Stock outstanding and held by Ralcorp shall equal the
number of shares necessary to effect the Distribution. The Distribution shall be
effected as described in Article IV.
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2.3 NEW RALCORP SHARE PURCHASE RIGHTS AGREEMENT; ARTICLES OF INCORPORATION;
BYLAWS. Prior to the Distribution Date, Ralcorp shall cause New Ralcorp to adopt
a New Ralcorp Share Purchase Rights Agreement in substantially the form filed
with the SEC as an exhibit to the Form 10, and Ralcorp shall cause the Board of
Directors of New Ralcorp to authorize a distribution of one Right to every share
of outstanding Common Stock, such distribution to occur prior to the
Distribution. Ralcorp shall take all action necessary so that, at the
Distribution Date, the Articles of Incorporation and Bylaws of New Ralcorp shall
be substantially in the forms filed with the SEC as exhibits to the Form 10.
ARTICLE III
CONTRIBUTION AND ASSUMPTION OF ASSETS AND LIABILITIES
3.1 CONTRIBUTION OF THE BRANDED ASSETS. Upon the terms and subject to the
conditions of this Agreement, New Ralcorp shall assign, transfer, convey and
contribute to the Branded Subsidiary, effective immediately prior to the
Distribution Time, all of New Ralcorp's right, title and interest in, to and
under the Branded Assets.
3.2 ASSUMPTION OF THE BRANDED LIABILITIES. Upon the terms and subject to
the conditions of this Agreement, effective immediately prior to the
Distribution Time, the Branded Subsidiary shall assume and agree to pay, perform
and discharge when due the Branded Liabilities, subject to the indemnification
obligations of New Ralcorp set forth in Section 9.1(b) hereof.
3.3 CONTRIBUTION OF THE NEW RALCORP ASSETS. Upon the terms and subject to
the conditions of this Agreement, Ralcorp shall assign, transfer, convey and
contribute to New Ralcorp, effective immediately prior to the Distribution Time,
all of Ralcorp's right, title and interest in, to and under the New Ralcorp
Assets.
3.4 ASSUMPTION OF THE NEW RALCORP LIABILITIES. Upon the terms and subject
to the conditions of this Agreement, effective immediately prior to the
Distribution Time, New Ralcorp shall assume and agree to pay, perform and
discharge when due the New Ralcorp Liabilities.
3.5 DELAYED ASSETS AND LIABILITIES.
(a) To the extent that any required consent or waiver with respect to
a Contract or other instrument included in the Branded Assets or the New
Ralcorp Assets has not been obtained on or prior to the Closing Date, such
Contract or instrument (a "Delayed Asset") shall not be transferred
hereunder, and any related liability that constitutes a Branded Liability
or New Ralcorp Liability, as the case may be (a "Delayed Liability"), shall
not be assumed hereunder by the Branded Subsidiary or New Ralcorp, as the
case may be, unless and until such required consent or waiver has been
obtained. Notwithstanding the foregoing, if such a required consent or
waiver is not obtained, the party required to transfer such Delayed Asset
will reasonably cooperate with the party entitled to receive such Delayed
Asset to attempt to provide such party with the benefits under or of any
such Delayed Asset as long as the party entitled to receive such Delayed
Asset shall assume, pay and perform any corresponding Delayed Liabilities.
Ralcorp, the Branded Subsidiary and New Ralcorp each agrees that, in any
such event, they shall work in good faith to cause such arrangement to
reflect as nearly as possible the respective benefits and obligations that
would have been in effect had such consent or waiver been obtained.
(b) At such time and on each occasion after the Closing Date that a
required consent or waiver shall be obtained with respect to a Delayed
Asset, such Delayed Asset shall forthwith be transferred and assigned to
the party entitled to receive it hereunder, and all related Delayed
Liabilities shall be simultaneously assumed by such party hereunder,
whereupon (i) such Delayed Asset shall constitute for all purposes an Asset
acquired hereunder and (ii) such Delayed Liabilities shall constitute for
all purposes Liabilities assumed hereunder.
3.6 ACCOUNTS RECEIVABLE. The customer accounts receivable (including for
any products of the Branded Business shipped but not invoiced, which products
shall be relieved from inventory) outstanding at the close of business on the
Distribution Date shall remain assets of New Ralcorp. New Ralcorp shall be
entitled to collection and receipt of all such receivables, provided that (a) to
the extent that a customer takes a justifiable
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deduction against an invoice related to products of the Branded Business
invoiced prior to the close of business on the Distribution Date, which
deduction is related to products of the Branded Business shipped after the close
of business on the Distribution Date, the Branded Subsidiary will promptly
reimburse New Ralcorp for any such deduction and (b) to the extent that a
customer takes a justifiable deduction against an invoice relating to products
of the Branded Business shipped and invoiced by the Branded Subsidiary after the
close of business on the Distribution Date, which deduction is related to
products of the Branded Business shipped prior to the close of business on the
Distribution Date, New Ralcorp will promptly reimburse the Branded Subsidiary
for any such deduction, except to the extent the deduction constitutes a Known
Branded Liability. New Ralcorp and the Branded Subsidiary shall cooperate in
good faith in order to ensure that New Ralcorp receives payment of the customer
accounts receivable outstanding immediately prior to the close of business on
the Distribution Date, that the Branded Subsidiary receives payment of accounts
receivable of the Branded Business issued from and after the close of business
on the Distribution Date, and in order to determine whether any deductions from
invoices are justifiable. To the extent that either receives payment of
receivables owned by the other party, the Branded Subsidiary and New Ralcorp
agree to promptly (within ten Business Days) remit the proceeds to the
designated bank account of New Ralcorp or the Branded Subsidiary, as applicable.
New Ralcorp shall direct all trade debtors to make payment on such customer
account receivables outstanding as of the close of business on the Distribution
Date to New Ralcorp's specified address and/or account.
ARTICLE IV
THE DISTRIBUTION
4.1 DISTRIBUTION DATE. Subject to the satisfaction of the conditions set
forth in Article XIV, the Distribution shall be effective as of the Distribution
Time.
4.2 MECHANICS OF THE DISTRIBUTION. Effective at the Distribution Time,
Ralcorp shall distribute all outstanding shares of Common Stock to holders of
record of Ralcorp Stock on the Record Date on the basis of one share of Common
Stock for each share of Ralcorp Stock outstanding on the Record Date, subject to
the treatment of fractional shares as set forth in Section 4.3. All shares of
Common Stock issued in the Distribution shall be duly authorized, validly
issued, fully paid and nonassessable. To the extent feasible, the Rights Payment
shall be included in the mailing of Common Stock to such record holders. The
parties acknowledge that Ralcorp is responsible for the issuance of checks and
the payment of the Rights Payment and New Ralcorp is responsible for the costs
of the distribution of such payment.
4.3 PAYMENT IN LIEU OF FRACTIONAL SHARES. No fractional shares of Common
Stock shall be issued in the Distribution. In lieu thereof, New Ralcorp shall
remit to each holder of Ralcorp Stock who would otherwise be entitled to receive
such fractional shares, an amount of cash equal to the average of the high and
low sales prices of the Common Stock during the first three days of trading
following the Distribution Date multiplied by such holders fractional interest
in such shares (after making appropriate deductions of the amount required for
Federal tax withholding purposes).
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 REPRESENTATIONS AND WARRANTIES OF NEW RALCORP AND FOODS. Each of New
Ralcorp and Foods hereby represents and warrants, as to itself, to Ralcorp and
the Branded Subsidiary as follows:
(a) Organization, Standing and Power. Each of New Ralcorp and Foods is
a corporation duly organized, validly existing and in good standing under
the laws of its state of incorporation. Each of New Ralcorp and Foods has
all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted.
(b) Authority. Each of New Ralcorp and Foods has all requisite power
and authority to execute this Agreement and the Ancillary Agreements to
which it is or will be party (collectively, the "New
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Ralcorp Documents") and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and the other New
Ralcorp Documents and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all necessary action on the
part of New Ralcorp and Foods and, to the extent required, by the
stockholder of New Ralcorp and Foods. This Agreement has been duly executed
and delivered by each of New Ralcorp and Foods and constitutes, and each of
the other New Ralcorp Documents will be duly executed and delivered by New
Ralcorp on or prior to the Closing Date, and when so executed and delivered
will constitute, a legal, valid and binding obligation of New Ralcorp
and/or Foods, as the case may be, enforceable against it in accordance with
its terms.
(c) No Conflict. (i) The execution, delivery and performance by each
of New Ralcorp and Foods of this Agreement and by New Ralcorp of the other
New Ralcorp Documents will not contravene, violate, result in a breach of
or constitute a default under (x) any provision of applicable law or of the
articles of incorporation or by-laws of New Ralcorp or Foods or any other
member of the New Ralcorp Group or (y) any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to New Ralcorp or
Foods or any other member of the New Ralcorp Group or any of their
properties or assets.
(d) Approvals. No consent, approval, order, authorization of, or
registration, declaration or filing with, any governmental entity is
required in connection with the making or performance by New Ralcorp or
Foods of this Agreement or the other New Ralcorp Documents.
ARTICLE VI
CERTAIN ADDITIONAL COVENANTS
6.1 NEW RALCORP BOARD. Prior to the Distribution Date, Ralcorp shall take
such actions as are necessary such that New Ralcorp's Board of Directors is
comprised of those individuals named as directors in the Form 10.
6.2 CONTRACTUAL ARRANGEMENTS.
(a) At the Closing, effective as of the Distribution Time, Ralcorp and
New Ralcorp shall enter into the Tax Sharing Agreement, substantially in
the form attached to this Agreement as Exhibit 6.2(a) ("Tax Sharing
Agreement");
(b) At the Closing, effective as of the Distribution Time, Ralcorp,
New Ralcorp and the Branded Subsidiary shall enter into the Trademark
Agreement, substantially in the form attached to this Agreement as Exhibit
6.2(b) ("Trademark Agreement");
(c) At the Closing, effective as of the Distribution Time, Ralcorp,
New Ralcorp and the Branded Subsidiary shall enter into the Technology
Agreement, substantially in the form attached to this Agreement as Exhibit
6.2(c) ("Technology Agreement");
(d) At the Closing, effective as of the Distribution Time, Ralcorp and
New Ralcorp shall enter into the Transition Services -- Supply Agreement,
substantially in the form attached to this Agreement as Exhibit 6.2(d)
("Supply Agreement");
(e) At the Closing, effective immediately prior to the Effective Time,
New Ralcorp and the Branded Subsidiary shall enter into the Assignment and
Assumption Agreement, in a form mutually reasonably agreed to between New
Ralcorp and Acquiror ("Assignment and Assumption Agreement");
(f) At the Closing, effective immediately prior to the Effective Time,
New Ralcorp shall execute and deliver to the Branded Subsidiary a Bill of
Sale, in a form mutually reasonably agreed to between New Ralcorp and
Acquiror (the "New Ralcorp Bill of Sale"); and
(g) At the Closing, effective as of the Effective Time, Ralcorp shall
execute and deliver to New Ralcorp a Bill of Sale, in a form mutually
reasonably agreed to between New Ralcorp and Acquiror (the "Ralcorp Bill of
Sale").
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(h) Notwithstanding the foregoing, the parties have agreed that the
Trademark Agreement, the Technology Agreement and the Supply Agreement are
each to be conditionally amended as set forth in Exhibits 6.2(b)(i),
6.2(c)(i) and 6.2(d)(i), respectively. These amendments shall become final
upon final acceptance by the Federal Trade Commission of the Consent
Agreement between Acquiror and the Federal Trade Commission dated December
24, 1996; provided, however, if this should not occur, then all of these
amendments shall be revoked, canceled and of no force or effect ten (10)
business days after the Federal Trade Commission withdraws its provisional
acceptance of this Consent Agreement regardless of whether the Trademark
Agreement, the Technology Agreement and the Supply Agreement have been
executed by the parties and the Closing has occurred. In such event, the
Trademark Agreement, the Technology Agreement and the Supply Agreement
shall each be executed or re-executed, as the case may be, by the parties
in their original form, without giving effect to the amendments reflected
in Exhibits 6.2(b)(i), 6.2(c)(i) and 6.2(d)(i).
6.3 INTERCOMPANY ACCOUNTS. All intercompany services provided by the New
Ralcorp Group to the Ralcorp Group or by the Ralcorp Group to the New Ralcorp
Group shall terminate as of the Distribution Time unless otherwise provided in
any Ancillary Agreement. Effective as of the close of business on the
Distribution Date, all intercompany receivables or payables and loans then
existing between any member of one Group and any member of the other Group shall
be written off by means of cancellation, capital contribution or dividend, as
the case may be.
ARTICLE VII
ACCESS TO INFORMATION
7.1 PROVISION OF CORPORATE RECORDS.
(a) Prior to or as promptly as practicable after the Distribution
Date, Ralcorp shall deliver to New Ralcorp all corporate books and records
of the New Ralcorp Group as well as copies or, to the extent not
detrimental in the reasonable opinion of Ralcorp to the interests of
Ralcorp, originals, of all books, records and data relating exclusively to
the New Ralcorp Assets, the New Ralcorp Business, or the New Ralcorp
Liabilities, including, but not limited to, all books, records and data
relating to the purchase of materials, supplies and services, financial
results, sale of products, records of the New Ralcorp Employees, commercial
data, research done by or for New Ralcorp or Foods, catalogues, brochures,
training and other manuals, sales literature, advertising and other sales
and promotional materials, maintenance records and drawings, all active
agreements, active litigation files and government filings. All such
documents located at locations other than the Branded Plant shall be deemed
delivered to New Ralcorp as of the Distribution Date. To the extent that
originals of such books, records and data are provided to New Ralcorp, New
Ralcorp shall provide Ralcorp copies thereof as reasonably requested in
writing by Ralcorp. Notwithstanding the above, Ralcorp shall provide copies
of customer information, invoices and credit information only to the extent
reasonably requested in writing by New Ralcorp, and Ralcorp shall provide
such copies of all books, records and data only to the extent that such
action is not prohibited by the terms of any agreements pertaining to such
information or is not prohibited by law. From and after the Distribution
Date, all books, records and copies so delivered shall be the property of
New Ralcorp. Notwithstanding the above, Ralcorp shall not be required to
make copies, other than pursuant to Section 7.2 of this Agreement, of any
portion of any books, records or data to the extent such portion relates
exclusively to the Branded Assets, the Branded Business or to Liabilities
assumed or retained by the Branded Subsidiary or Ralcorp.
(b) Prior to or as promptly as practicable after the Distribution
Date, New Ralcorp shall deliver to Ralcorp all corporate books and records
of the Ralcorp Group as well as copies or, to the extent not detrimental in
the reasonable opinion of New Ralcorp to the interests of New Ralcorp,
originals, of all books, records and data relating exclusively to the
Branded Assets, the Branded Business, or the Branded Liabilities,
including, but not limited to, all books, records and data relating to the
purchase of materials, supplies and services, financial results, sale of
products, records of the Branded Employees, commercial data, research done
by or for Ralcorp, catalogues, brochures, training and other manuals, sales
literature,
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advertising and other sales and promotional materials, maintenance records
and drawings, all active agreements, active litigation files and government
filings. All such documents located at the Branded Plant shall be deemed
delivered to Ralcorp as of the Distribution Date. To the extent that
originals of such books, records and data are provided to Ralcorp, Ralcorp
shall provide New Ralcorp copies thereof as reasonably requested in writing
by New Ralcorp. Notwithstanding the above, New Ralcorp shall provide copies
of customer information, invoices and credit information only to the extent
reasonably requested in writing by Ralcorp, and New Ralcorp shall provide
such copies of all books, records and data only to the extent that such
action is not prohibited by the terms of any agreements pertaining to such
information or is not prohibited by law. From and after the Distribution
Date, all books, records and copies so delivered shall be the property of
Ralcorp. Notwithstanding the above, New Ralcorp shall not be required to
make copies, other than pursuant to Section 7.2 of this Agreement, of any
portion of any books, records or data to the extent such portion relates
exclusively to the New Ralcorp Assets, the New Ralcorp Business or to
Liabilities assumed or retained by New Ralcorp.
7.2 ACCESS TO INFORMATION. From and after the Distribution Date, each of
Ralcorp and New Ralcorp shall afford to the other and to the other's agents,
employees, accountants, counsel and other designated representatives, reasonable
access and duplicating rights during normal business hours to all records,
books, contracts, instruments, computer data and other data and information
("Information") within such party's possession relating to such other party's
businesses, assets or liabilities, insofar as such access is reasonably required
by such other party. Without limiting the foregoing, such Information may be
requested under this Section for audit, accounting, claims, litigation and tax
purposes, as well as for purposes of fulfilling disclosure and reporting
obligations.
7.3 RETENTION OF RECORDS. Except as otherwise required by law or agreed in
writing, or as otherwise provided in the Tax Sharing Agreement, each of Ralcorp
and New Ralcorp shall retain, for a period of at least seven years following the
Distribution Date, all significant Information in such party's possession or
under its control relating to the business, assets or liabilities of the other
party and, after the expiration of such seven-year period, prior to destroying
or disposing of any of such Information, (a) the party proposing to dispose of
or destroy any such Information shall provide no less than 30 days prior written
notice to the other party, specifying the Information proposed to be destroyed
or disposed of, and (b) if, prior to the scheduled date for such destruction or
disposal, the other party requests in writing that any of the Information
proposed to be destroyed or disposed of be delivered to such other party, the
party proposing to dispose of or destroy such Information promptly shall arrange
for the delivery of the requested Information to a location specified by, and at
the expense of, the requesting party.
7.4 CONFIDENTIALITY. From and after the Distribution Date, each Group shall
hold, in strict confidence, all Information obtained from the other Group prior
to the Distribution Date or furnished to it pursuant to this Agreement or any
other agreement referred to herein which relates to or concerns the business
conducted by such other Group, and such Information shall not be used by it to
the detriment of the other Group, or disclosed by it or its agents, officers,
employees or directors without the prior written consent of such other Group
unless and to the extent that (a) disclosure is compelled by judicial or
administrative process or, in the opinion of such Group's counsel, by other
requirements of law, or (b) such Group can show that such Information was (i)
available to such Group on a nonconfidential basis prior to its disclosure by
the other Group, (ii) in the public domain through no fault of such Group, (iii)
lawfully acquired by such Group from other sources after the time that it was
furnished to such Group pursuant to this Agreement or any other agreement
referred to herein, or (iv) independently developed by such Group.
Notwithstanding the foregoing, each Group shall be deemed to have satisfied its
obligations of confidentiality under this Section with respect to any
Information concerning or supplied by the other Group if it exercises
substantially the same care with regard to such Information as it takes to
preserve confidentiality for its own similar Information.
7.5 REIMBURSEMENT. Each member of any Group providing Information pursuant
to Sections 7.2 or 7.3 to any member of the other Group shall be entitled to
receive from the recipient, upon presentation of an invoice therefor, payment of
all out-of-pocket costs and expenses as may reasonably be incurred in providing
such Information.
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ARTICLE VIII
EMPLOYEE BENEFITS; LABOR MATTERS
8.1 RALCORP RETIREMENT PLAN.
(a) Ralcorp shall take, or cause to be taken, all action necessary and
appropriate to amend the Ralcorp Holdings, Inc. Retirement Plan for Sales,
Administrative, Clerical, and Production Employees (the "Ralcorp Retirement
Plan") to remove Ralcorp as sponsor and a named fiduciary and shall name
New Ralcorp as successor sponsor and named fiduciary of the plan after the
consummation of the Internal Merger and prior to the Distribution Date.
Acquiror shall take, or cause to be taken, all action necessary and
appropriate to establish, effective as of the day after the Distribution
Date, and administer, a defined benefit pension plan which is a qualified
plan ("New Retirement Plan") and to provide benefits thereunder for all
Branded Employees other than administrative employees who are not covered
by a collective bargaining agreement and who, on the Distribution Date,
were participants in the Ralcorp Retirement Plan. With respect to all
Branded Employees participating thereunder, the New Retirement Plan shall
be the same as the Ralcorp Retirement Plan in all material respects and
shall preserve all protected benefits within the meaning of Code Section
411(d)(6). Acquiror shall take, or cause to be taken, all action necessary
and appropriate to amend, effective as of the day after the Distribution
Date, the Retirement Income Plan of General Mills, Inc. (the "RIP") to
provide benefits thereunder for all Branded Employees who, on the
Distribution Date, were administrative employees of the Branded Business,
were not covered by a collective bargaining agreement and were participants
in the Ralcorp Retirement Plan. New Ralcorp agrees to provide Acquiror, as
soon as practicable after the Distribution Date, with a list of the Branded
Employees who were, to the best knowledge of New Ralcorp, participants in
or otherwise entitled to benefits under the Ralcorp Retirement Plan as of
the Distribution Date, together with a listing of each such Branded
Employee's term of service for eligibility, accrual and vesting purposes
under the Ralcorp Retirement Plan on such Distribution Date and a listing
of each such Branded Employee's accrued benefit thereunder on such
Distribution Date, along with all other records necessary to effectively
administer such benefits. Ralcorp shall, as soon as practicable after the
Distribution Date, provide New Ralcorp with such additional information (to
the extent in the possession of Ralcorp and not already in the possession
of the New Ralcorp Group) as may be reasonably requested by New Ralcorp and
necessary for New Ralcorp to effectively administer the Ralcorp Retirement
Plan.
(b) New Ralcorp agrees, as soon as practicable following the
Distribution Date, to direct the trustees of the Ralcorp Retirement Trust
to transfer to the trustee of the RIP, in cash, securities and other
property, or a combination thereof, as reasonably determined by New Ralcorp
and as agreed to by Acquiror, an amount determined according to the
following formula, with respect to administrative Branded Employees not
covered by a collective bargaining agreement on the Distribution Date: (X)
less (Y), as adjusted by (Z) where (X) equals the projected benefit
obligations (within the meaning of Statement No. 87 of the Financial
Accounting Standards Board) determined as described in (c) below of such
administrative Branded Employees as of the Distribution Date pursuant to
the benefit provisions of the Ralcorp Retirement Plan in effect as of the
Distribution Date, where (Y) equals aggregate payments made from the
Ralcorp Retirement Trust relating to the Ralcorp Retirement Plan in respect
of the accrued benefits of such administrative Branded Employees from the
Distribution Date through the date of complete transfer; and where (Z)
equals the amount of the net earnings or losses, as the case may be, from
the Distribution Date through the date of complete transfer, on the average
of the daily balances of (X) and (Y) and based upon the Frank Russell Trust
Co. short term interest fund rate during such period.
New Ralcorp agrees, as soon as practicable following the Distribution
Date, to direct the trustees of the Ralcorp Retirement Trust to transfer to
the trustee of the New Retirement Plan, in cash, securities and other
property, or a combination thereof, as reasonably determined by New Ralcorp
and as agreed to by Acquiror, an amount determined according to the
following formula, with respect to Branded Employees other than
administrative employees not covered by a collective bargaining agreement,
on the Distribution Date: (X) less (Y), as adjusted by (Z) where (X) equals
the projected benefit obligations
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(within the meaning of Statement No. 87 of the Financial Accounting
Standards Board) determined as described in (c) below of such Branded
Employees, as of the Distribution Date pursuant to the benefit provisions
of the Ralcorp Retirement Plan in effect as of Distribution Date, where (Y)
equals aggregate payments made from the Ralcorp Retirement Trust relating
to the Ralcorp Retirement Plan in respect of the accrued benefits of such
Branded Employees, from the Distribution Date through the date of complete
transfer; and where (Z) equals the amount of the net earnings or losses, as
the case may be, from the Distribution Date through the date of transfer,
on the average of the daily balances of (X) and (Y) and based upon the
Frank Russell Trust Co. short term interest rate Ralcorp Retirement Plan
during such period.
(c) New Ralcorp shall cause the calculation of the projected benefit
obligation and the amounts to be transferred pursuant to this Section to be
completed by Kwasha Lipton, based on the actuarial assumptions used for the
Ralcorp Retirement Plan for financial disclosure purposes for the fiscal
year in which the Distribution Date occurs; provided however, that (i) the
discount rate shall be equal to (A) the average of the 30-year U.S.
Treasury rate as of thirty days prior to the Distribution Date, on the
Distribution Date and thirty days after the Distribution Date, plus (B) 75
basis points and (ii) the salary scale shall be 5.25%. Acquiror shall cause
the calculation of such amounts to be reviewed by William M. Mercer. New
Ralcorp and Acquiror shall use their best efforts to resolve any dispute
arising in connection with the calculation of the amounts to be transferred
and to effect the actual transfer of such funds. Notwithstanding the
foregoing provisions of this Section, such transfers shall be adjusted, if
and to the extent necessary, to comply with applicable law and regulations,
including Section 414(l) of the Code and the regulations promulgated
thereunder and Pension Benefit Guaranty Corporation Regulations Section
2619.41 through 2619.65 (including Appendices A through D).
(d) In connection with the transfers described in this Section,
Ralcorp and New Ralcorp shall cooperate in making any and all appropriate
filings required under the Code or ERISA, and the regulations thereunder,
and any applicable securities laws and take all such action as may be
necessary and appropriate to cause such transfers to take place as soon as
practicable after the Distribution Date; provided, however, that no
transfer shall take place until as soon as practicable after the later of
(i) the expiration of a 30-day period following the date of filing any
required Forms 5310-A (or any successor form thereto) with the IRS and (ii)
with respect to each of the New Retirement Plan transfer and the RIP
transfer, the receipt of a favorable IRS determination letter with respect
to the qualification of the transferee plan (i.e., the New Retirement Plan
and the RIP respectively) as amended through the date of transfer, under
Code Sections 401(a) and 501(a) or the receipt by New Ralcorp of an opinion
of counsel retained by Ralcorp and reasonably satisfactory in form and
substance to New Ralcorp to the effect that such counsel believes the
transferee plan as amended through the date of transfer, to be qualified
under Code Section 401(a) and that the trust established thereunder is
exempt from federal tax under Code Section 501(a). Ralcorp and New Ralcorp
agree to provide to such counsel such information in the possession of the
Ralcorp Group and the New Ralcorp Group, respectively, as may be reasonably
requested by such counsel in connection with the issuance of such opinion.
New Ralcorp agrees, during the period ending with the date of complete
transfer of assets and liabilities to the RIP and the New Retirement Plan,
to administer the Ralcorp Retirement Plan in the ordinary course, in
accordance with its plan provisions, the Code and ERISA, except as
otherwise set forth in this Agreement. In connection with this transaction,
Ralcorp and New Ralcorp shall cooperate in making any and all appropriate
filings required by the Pension Benefit Guaranty Corporation and the
regulations so governing.
(e) Except as specifically set forth in this Section, from and after
the Distribution Date, Ralcorp shall cease to have any liability whatsoever
with respect to the Ralcorp Retirement Plan other than liability for the
accrued benefits related to the asset transfer made on behalf of Branded
Employees from the Ralcorp Retirement Plan ("Transfer Obligations"), and
New Ralcorp shall assume and shall be solely responsible for all other
liabilities whatsoever under the Ralcorp Retirement Plan, including
liabilities with respect to Branded Employees other than Transfer
Obligations.
8.2 401(K) PLAN. Ralcorp shall take, or cause to be taken, all action
necessary and appropriate to amend the Ralcorp Holdings, Inc. Savings Investment
Plan (the "SIP") to remove Ralcorp as sponsor and named
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fiduciary and shall name New Ralcorp as sponsor and named fiduciary of the plan
prior to the Distribution Date. Ralcorp shall also take such action as necessary
to fully vest as of the Distribution Date each participant who is a Branded
Employee in his or her account balance under the SIP. Acquiror shall take, or
cause to be taken, such action as necessary to amend the General Mills Savings
Plan (the "Savings Plan") to permit participation by the Branded Employees of
Ralcorp immediately following the Distribution Date. The Savings Plan will
accept direct rollovers of the eligible taxable distributions which could
otherwise be made to the Ralcorp Group employees. The acceptance of direct
rollovers will be subject to the procedures of the Savings Plan. New Ralcorp
agrees to provide such information (to the extent in the possession of the New
Ralcorp Group or of any party providing services to the SIP) as may be
reasonably required by Ralcorp in order for the Acquiror to effectively
administer the Savings Plan, including, without limitation, information
necessary to determine the appropriate Code Section 415 limits of each Branded
Employee and to determine the qualified status of the SIP.
8.3 WELFARE PLANS.
(a) Ralcorp shall take, or cause to be taken, all action necessary and
appropriate to amend each and every welfare plan covering its employees
(Ralcorp Welfare Plans) to remove Ralcorp as sponsor and named fiduciary
and shall name New Ralcorp as sponsor and named fiduciary of each such plan
after the consummation of the Internal Merger and prior to the Distribution
Date. Acquiror shall take, or cause to be taken, all action necessary and
appropriate to cause either (i) its existing welfare plans to be amended,
or (ii) new welfare plans to be adopted which will cover Branded Employees
(and their dependents as appropriate) immediately following the
Distribution Date (the "New Welfare Plans"). Acquiror shall cause the New
Welfare Plans to provide benefits of substantially the same, or greater,
type and value as the benefits which the Branded Employees (other than
administrative employees who are not covered by a collective bargaining
agreement) enjoyed under the Ralcorp Welfare Plans, on the date immediately
preceding the Distribution Date. Acquiror shall also cause the New Welfare
Plans, to the extent applicable, to credit such Branded Employees with the
term of service credited to such employees as of the Distribution Date
under the terms of the applicable Ralcorp Welfare Plan. Acquiror will cause
Branded Employees to receive credit for payments made under the Ralcorp
Comprehensive and Well-Med Plan during the plan year in which the
Distribution Date occurs for purposes of satisfying the applicable
deductibles and maximum out-of-pocket limits of the applicable New Welfare
Plans during the plan year in which the Distribution Date occurs.
(b) Except as otherwise noted in this Section, Ralcorp shall cause one
or more members of the New Ralcorp Group to assume and be solely
responsible for, or cause its insurance carriers or agents to be
responsible for, all liabilities for welfare benefit claims incurred under
the welfare plans on or before the Distribution Date. For purposes of this
Section, disability claims are incurred on the date on which the disability
was incurred or, in the case of a disability which is not incurred on a
single, identifiable date, the date on which the disability was diagnosed;
medical and dental services are incurred when an individual is provided
with medical or dental care; death benefit claims are incurred at the time
of death of the insured notwithstanding any other provision of any welfare
benefit plan to the contrary. At the Distribution Date, Branded Employees
will cease participation in Ralcorp Welfare Plans, except to the extent (i)
that a Branded Employee or a covered dependent of a Branded Employee is
hospitalized on the Distribution Date, in which case such individual shall
continue to be covered under the appropriate Ralcorp Welfare Plan until the
individual is discharged from the hospital or (ii) they elect continued
coverage under such plans pursuant to COBRA or other provisions of the
plans. New Ralcorp shall be responsible for all qualifying events under
COBRA and COBRA claims incurred under the Ralcorp Welfare Plans on or
before the Distribution Date.
(c) New Ralcorp and the New Ralcorp Group shall be responsible for any
retiree medical and life insurance benefits payable under any welfare plan
with respect to any former employee of Ralcorp or one of its Affiliates who
retired from the New Ralcorp Group or the Ralcorp Group on or before the
Distribution Date and who met the eligibility requirements for such
benefits at that time. Branded Employees who retire from Ralcorp or
Acquiror after the Distribution Date shall not be entitled to retiree
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medical and life insurance benefits from the Ralcorp Welfare Plans, but
shall be eligible for coverage as provided by the New Welfare Plans.
8.4 STOCK OPTIONS AND RESTRICTED STOCK.
[(a) On or prior to the Closing Date, Ralcorp shall take such action
as may be necessary in order to obtain any required consents to insure that
at the Effective Time, all rights to acquire Ralcorp Common Stock pursuant
to the ISP (the "Ralcorp Options") held by Branded Employees, which are
outstanding at the Effective Time, whether or not then exercisable, shall
be converted into and become rights with respect to Acquiror Common Stock,
and Acquiror shall assume each such Ralcorp Option, in accordance with the
stock option agreement by which it is evidenced, so that from and after the
Effective Time, (i) each such Ralcorp Option assumed by Acquiror may be
exercised solely for shares of Acquiror Common Stock, (ii) the number of
shares of Acquiror Common Stock subject to each such Ralcorp Option shall
be equal to the number of shares of Ralcorp Common Stock subject to such
Ralcorp Option immediately prior to the Effective Time multiplied by the
Merger Agreement Ratio (as defined below), rounded down to the nearest
share and (iii) the per share exercise price under each such Ralcorp Option
shall be adjusted by dividing the per share exercise price under each such
option by the Merger Adjustment Ratio, rounded down to the nearest cent;
provided, however, each such Ralcorp Option shall otherwise be subject to
the same terms and conditions as in effect immediately prior to the
Effective Time, including restrictions on exercisability.
The "Merger Adjustment Ratio" shall mean the ratio of (i) the average
of the daily average of the high and low sale prices on the NYSE Composite
Index for the Ralcorp Stock, [trading regular way with due bills] for the
Common Stock, for the ten trading day period prior to Distribution Date to
(ii) the Average Value of Acquiror Common Stock (as defined in the Merger
Agreement).
(b) On or prior to the Distribution Date, Ralcorp shall take such
action as may be necessary in order to obtain any required consents to
insure that at the Distribution Date, all rights to acquire Ralcorp Common
Stock pursuant to the Ralcorp Options (other than Ralcorp Options held by
Branded Employees), which are outstanding at the Distribution Date, whether
or not then exercisable, shall be waived by such employees.
(c) Prior to the Distribution, Ralcorp shall accelerate or pay in cash
the value of restricted shares of Ralcorp Stock awarded pursuant to the
Ralcorp ISP and held by New Ralcorp Employees, immediately prior to the
Distribution.
8.5 CHANGE OF PLAN SPONSOR. After the consummation of the Internal Merger
and prior to the Distribution Date, Ralcorp shall take such action as necessary
to remove Ralcorp as sponsor and named fiduciary of the plans listed in Schedule
8.5, and name New Ralcorp as the sponsor and named fiduciary of such plans.
8.6 LIFE INSURANCE PROGRAMS. On the Distribution Date, Ralcorp shall
relinquish all rights under any Split Dollar Second-To-Die Life Insurance
policies currently insuring the lives of any New Ralcorp Employee and his or her
spouse, including but not limited to rights to any portion of the cash value or
death benefits under such policies, created in accordance with the terms of the
Split Dollar Agreement and Collateral Assignment between Ralcorp and such
employee regarding such policies, and will take all reasonable steps necessary
to assign such rights to New Ralcorp. Prior to the Distribution Date, Ralcorp
shall perform any and all obligations required of it under the terms of such
Split Dollar Agreement and Collateral Assignment with respect to such policies.
8.7 VACATION PAY. Ralcorp shall assume all liability for unpaid vacation
pay accrued by Branded Employees, to the extent it has been properly accrued for
on the books of the Branded Business. New Ralcorp will assume all liability for
unpaid vacation pay accrued by New Ralcorp Employees, prior to the Distribution
Date. Except as set forth in the first sentence hereof, after the Distribution
Date, Ralcorp will have no liability for vacation pay.
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8.8 SEVERANCE PAY.
(a) Ralcorp and New Ralcorp agree that, with respect to individuals
who, in connection with the Distribution, cease to be employees of the
Ralcorp Group and become employees of the New Ralcorp Group, such cessation
shall not be deemed a severance of employment from either Group for
purposes of any Plan that provides for the payment of severance, salary
continuation or similar benefits and shall, in connection with the
Distribution, if and to the extent appropriate obtain waivers from
individuals against any such assertion.
(b) The Ralcorp Group shall assume and be solely responsible for all
liabilities and obligations whatsoever in connection with claims made by or
on behalf of Branded Employees. New Ralcorp shall assume and be responsible
for any severance pay with respect to any individuals other than the
Branded Employees, including, without limitation, any individuals who, in
connection with the Distribution, cease to be employees of the Ralcorp
Group, whether or not such individuals accept employment with the New
Ralcorp Group.
8.9 COLLECTIVE BARGAINING AGREEMENTS. As of the Distribution Date, Ralcorp
and the Ralcorp Group shall cease to have any liability or obligation whatsoever
with respect to any employee or former employees under any of the collective
bargaining agreements listed on Schedule 8.9.
8.10 OTHER BALANCE SHEET ADJUSTMENTS. To the extent not otherwise provided
in this Agreement, Ralcorp, New Ralcorp and Foods shall take such action as is
necessary to effect an adjustment to the books of Ralcorp, New Ralcorp and Foods
so that, as of the Distribution Date, the prepaid expense balances and accrued
employee liabilities with respect to any employee liability or obligation
assumed or retained as of the Distribution Date by the Ralcorp Group or the New
Ralcorp Group are appropriately reflected on the consolidated balance sheets as
of the Distribution Date of Ralcorp and New Ralcorp, respectively, and are taken
into account in calculating the Closing Date Net Asset Value (as defined in the
Merger Agreement).
8.11 PRESERVATION OF RIGHTS TO AMEND OR TERMINATE PLANS. Subject to the
provisions of this Article, no provision of this Agreement, including the
agreement of Ralcorp or New Ralcorp that it, or any member of the Ralcorp Group
or the New Ralcorp Group, will make a contribution or payment to or under any
Plan herein referred to for any period, shall be construed as a limitation on
the right of Ralcorp or New Ralcorp or any member of the Ralcorp Group or the
New Ralcorp Group to amend such Plan or terminate its participation therein
which Ralcorp or New Ralcorp or any member of the Ralcorp Group or the New
Ralcorp Group would otherwise have under the terms of such Plan or otherwise,
and no provision of this Agreement shall be construed to create a right in any
employee or former employee or beneficiary of such employee or former employee
under a Plan which such employee or former employee or beneficiary would not
otherwise have under the terms of the Plan itself. Notwithstanding the above,
however, New Ralcorp agrees that it shall not make or cause to be made any
amendments to any Plan, nor shall it terminate any Plan, in a manner which would
violate the covenants set forth in this Agreement, except as may be required to
comply with applicable law, but subject to the provisions of this Article.
8.12 REIMBURSEMENT; INDEMNIFICATION. Each of the parties hereto
acknowledges that the Ralcorp Group, on the one hand, and the New Ralcorp Group,
on the other hand, may incur costs and expenses (including contributions to
Plans and the payment of insurance premiums) arising from or related to any of
the Plans which are, as set forth in this Agreement, the responsibility of the
other party hereto. Notwithstanding anything in this Section to the contrary,
(1) New Ralcorp shall reimburse Ralcorp and, as applicable, the trustees of the
Ralcorp Retirement Plan, for costs and expenses or other liabilities they may
incur after the Distribution Date which arise out of action taken by the Pension
Benefit Guaranty Corporation (PBGC) or an agreement reached between Ralcorp or
the trustees of the Ralcorp Retirement Plan and the PBGC relating to the funded
status of, or payment of benefits by, the New Ralcorp Retirement Plan or any
successor plan or plans; and (2) costs and expenses or other recovery arising
from any challenge by the IRS pursuant to Section 414(l) of the Code, in
connection with the calculation of assets and liabilities to be transferred as
set forth in Section 8.1, shall not be subject to reimbursement or
indemnification under this Agreement. Ralcorp and New Ralcorp agree to reimburse
each other, as soon as practicable but in any event within 30 days of receipt
from the other party of appropriate verification, for all such costs and
expenses. Except as specifically
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assumed or retained by Ralcorp pursuant to this Article, New Ralcorp will
indemnify and hold Ralcorp, the Branded Subsidiary and their respective
Affiliates harmless from and against any and all Liabilities or other
Indemnifiable Losses (including, without limitation, taxes, penalties, interest,
claims for benefits, legal fees and other costs and expenses) arising out of or
related to (w) the Ralcorp Plans (as defined below), (x) the employment of any
Branded Employee on or before the Distribution Date, (y) the employment of any
New Ralcorp Employee whether before, on or after the Distribution Date, or (z)
the breach of any covenant of New Ralcorp in this Article. Ralcorp Plans means
any Plan sponsored or maintained by Ralcorp or an Affiliate, or to which Ralcorp
or an Affiliate contributed or was obligated to contribute.
8.13 FURTHER TRANSFERS. For a period of six months following the
Distribution Date, no member of either Group shall, directly or indirectly,
without the prior written consent of a corporate officer of the other Group,
solicit or attempt to solicit any exempt employee or officer of such other Group
for the purpose of obtaining his or her services for hire, or otherwise causing
such exempt employee to leave employment with such other Group, and no member of
either Group, without the prior written consent of a corporate officer of the
other Group, will, for such period of six months, hire such exempt employee or
officer; provided, however, if the employment of any officer or exempt employee
of one Group is terminated by that Group at any time following the Distribution,
a member of the other Group may employ such person without the consent of the
other Group. Subject to the above sentence, Ralcorp and New Ralcorp recognize
that there may be New Ralcorp Employees who will, after the Distribution, become
employed by Ralcorp and there may be Branded Employees who become employed,
after the Distribution Date, by New Ralcorp.
8.14 OTHER LIABILITIES. As of the Distribution Date, New Ralcorp shall
assume and be solely responsible for all Liabilities whatsoever of the Ralcorp
Group with respect to claims made by individuals other than Branded Individuals
relating to any Liability not otherwise expressly provided for in this
Agreement, including earned salaries, wages, severance payments or other
compensation, regardless of whether such Liability was incurred before or after
the Distribution Date.
8.15 COMPLIANCE. Notwithstanding anything to the contrary in this Article,
to the extent any actions of the parties contemplated in this Article are
determined prior to the Distribution to violate law or result in unintended tax
liability for Branded Individuals or New Ralcorp Individuals, such action may be
modified to avoid such violation of law or unintended tax liability.
ARTICLE IX
INDEMNIFICATION
9.1 INDEMNIFICATION.
(a) From and after the Effective Time, Acquiror, Ralcorp and the
Branded Subsidiary jointly and severally agree to indemnify and hold
harmless New Ralcorp against any and all Indemnifiable Losses for or on
account of or arising from or in connection with or otherwise with respect
to:
(i) any and all Branded Liabilities (except for the Scheduled
Branded Litigation and the Unknown Branded Liabilities, to the extent
that New Ralcorp is obligated to indemnify Ralcorp and the Branded
Subsidiary therefor under Section 9.1(b)(ii)) assumed by the Branded
Subsidiary pursuant to Section 3.2 of this Agreement;
(ii) any breach or violation of any covenant made in the Merger
Agreement, this Agreement or any other Ancillary Agreement by Acquiror,
or, with respect to covenants to be performed after the Effective Time,
by Ralcorp or the Branded Subsidiary (including Ralcorp's obligations
under Section 9.1(c));
(iii) subject to the limitations set forth in Section 9.2, any
breach or violation of any representation or warranty (without regard to
materiality qualifications contained therein) made by Acquiror and/or
Merger Sub in the Merger Agreement; or
(iv) as provided in Section 9.1(c).
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Any indemnification provided for under this Section shall be deemed to also
extend to other members of the New Ralcorp Group, Affiliates of New Ralcorp and
to New Ralcorp Employees, directors, Plan fiduciaries, shareholders, agents,
consultants, representatives, successors, transferees and assigns of New Ralcorp
or members of the New Ralcorp Group.
(b) From and after the Distribution Date, New Ralcorp agrees to indemnify
and hold harmless Ralcorp and the Branded Subsidiary against any and all
Indemnifiable Losses for or on account of or arising from or in connection with
or otherwise with respect to:
(i) any and all New Ralcorp Liabilities assumed by New Ralcorp
pursuant to Section 3.4 of this Agreement;
(ii) subject to the limitations set forth in Section 9.2, any and all
Unknown Branded Liabilities and the Scheduled Branded Litigation;
(iii) any breach or violation of any covenant made in the Merger
Agreement, this Agreement or any other Ancillary Agreement by New Ralcorp
or Foods or, with respect to covenants to be performed before the Effective
Time, by Ralcorp or the Branded Subsidiary (including New Ralcorp's
obligations under Section 9.1(c));
(iv) the ownership, use or possession of the New Ralcorp Assets or the
operation of the New Ralcorp Business, whether relating to or arising out
of occurrences prior to or after the Effective Time, except to the extent
liability therefor is assumed by the Branded Subsidiary pursuant to Section
3.2 of this Agreement;
(v) subject to the limitations set forth in Section 9.2, any breach or
violation of any representation or warranty (without regard to materiality
qualifications contained therein) made by Ralcorp in the Merger Agreement
or made by New Ralcorp or Foods in this Agreement;
(vi) any Third Party Claim to the extent relating to the actions of
the Ralcorp Board in authorizing the Distribution or the Merger;
(vii) any Third Party claim arising out of the disclosures contained
in the Form 10 or the S-1, if required, other than disclosures based on
information provided by or on behalf of Acquiror for inclusion therein; or
(viii) as provided in Section 9.1(c).
Any indemnification provided for under this Section shall also be deemed to
extend to other members of the Ralcorp Group, Affiliates of New Ralcorp, Branded
Employees, directors, Plan fiduciaries, shareholders, agents, consultants,
representatives, successors, transferees and assigns of Ralcorp or members of
the Ralcorp Group.
(c) In the event an appraisal award is paid to any holder of shares of
Ralcorp Stock as a result of such holder's exercise of dissenters' rights with
respect to the Merger and/or the Distribution, the liability for such appraisal
award shall be allocated as follows:
(i) if such appraisal award is based on the value of the Ralcorp Stock
before giving effect to the Distribution and such award does not allocate
the portions thereof attributable to the value of the Branded Business and
the value of the New Ralcorp Business, respectively, Ralcorp shall be
responsible for and shall indemnify New Ralcorp and its Affiliates against
such award in the amount per share equal to the value of the Merger
Consideration (as defined in the Merger Agreement), as calculated based on
the Average Value of Acquiror Common Stock (as defined in the Merger
Agreement), and New Ralcorp shall be responsible for and shall indemnify
Ralcorp and its Affiliates against such award to the extent such award
exceeds the value of the per share Merger Consideration as described above.
(ii) if such appraisal award is based on the value of the Ralcorp
Stock before giving effect to the Distribution and such award allocates the
portions thereof attributable to the value of the Branded Business and the
value of the New Ralcorp Business, respectively, Ralcorp and New Ralcorp
shall each
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be responsible for and shall indemnify the other (and the other's
Affiliates) against the portion of the award allocated to the value of the
Branded Business and the value of the New Ralcorp Business, respectively.
(iii) if such appraisal award is based on the value of the Ralcorp
Stock after giving effect to the Distribution, Ralcorp shall be responsible
for and shall indemnify New Ralcorp and its Affiliates against all of such
award.
(iv) each of Ralcorp and New Ralcorp shall bear their own respective
costs and expenses incurred in connection with any appraisal proceeding
relating to the Merger and/or the Distribution.
(v) Ralcorp and New Ralcorp each agree to cooperate with each other
reasonably in the event of any appraisal proceeding involving the value of
the Ralcorp Stock before giving effect to the Distribution in order to
minimize the appraisal award granted as a whole and, to the extent
reasonably feasible without prejudicing its own interests in such appraisal
proceeding, minimize the portion of the appraisal award that would be
payable by the other party.
9.2 LIMITATIONS ON INDEMNIFICATION.
(a) Notwithstanding the expiration of the representations and
warranties in the Merger Agreement or anything else to the contrary in the
Merger Agreement, the indemnification obligations set forth in Sections
9.1(a)(iii) and (b)(v) above shall survive the Distribution Date for
eighteen months, at which time such indemnification obligations shall
expire automatically, except with respect to written claims for
indemnification made in good faith prior to such expiration (which claims
will survive such expiration).
(b) The indemnification obligations set forth in Section 9.1(b)(ii)
above shall survive the Distribution Date for five years, at which time
such indemnification obligation shall expire automatically, except with
respect to written claims for indemnification made in good faith prior to
such expiration (which claims will survive such expiration).
(c) The indemnification obligation set forth in Section 9.1(a)(iii)
above shall apply only to the extent Indemnifiable Losses under such
Section exceed $6 million in the aggregate.
(d) The indemnification obligations set forth in Sections 9.1(b)(ii)
and (v) above shall apply only to the extent Indemnifiable Losses under
such Sections combined exceed $6 million in the aggregate.
9.3 INSURANCE AND THIRD PARTY OBLIGATIONS. Any indemnification otherwise
payable pursuant to Section 9.1 shall be reduced by the amount of any insurance
or other amounts (net of deductibles and allocated paid loss retropremiums)
received from a third party by the Indemnitee or paid by a third party on the
Indemnitee's behalf. It is expressly agreed that no insurer or any other third
party shall be (i) entitled to a benefit it would not be entitled to receive in
the absence of the foregoing indemnification provisions, (ii) relieved of the
responsibility to pay any claims for which it is obligated, or (iii) entitled to
any subrogation rights with respect to any obligation hereunder.
9.4 ACTIONS AND CLAIMS OTHER THAN THIRD PARTY CLAIMS; NOTICE AND
PAYMENT. Promptly upon obtaining knowledge of any Action, Liabilities or claim,
other than Third Party Claims, which any Person entitled to indemnification (the
"Indemnitee") believes may give rise to any Indemnifiable Loss, the Indemnitee
shall promptly notify the party liable for such indemnification (the
"Indemnitor") in writing of such Action or claim (such written notice being
hereinafter referred to as a "Notice of Claim"); provided, however, that failure
of an Indemnitee timely to give a Notice of Claim to the Indemnitor shall not
release the Indemnitor from its indemnity obligations set forth in this Article
except to the extent that such failure materially increases the amount of
indemnification which the Indemnitor is obligated to pay hereunder, in which
event the amount of indemnification which the Indemnitee shall be entitled to
receive shall be reduced to an amount which the Indemnitee would have been
entitled to receive had such Notice of Claim been timely given. A Notice of
Claim shall specify in reasonable detail the nature and estimated amount of any
such Action, Liabilities or claim giving rise to a right of indemnification. The
Indemnitor shall have thirty Business Days after receipt of a Notice of Claim to
notify the Indemnitee whether or not it disputes its liability to the Indemnitee
with respect to such Action, Liabilities or claim or the amount thereof, and
setting forth the basis
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for such objection. If the Indemnitor fails to respond to the Indemnitee within
such thirty Business Day period, the Indemnitor shall be deemed to have
acknowledged its responsibility for such Indemnifiable Loss. The Indemnitor
shall pay and discharge any such Indemnifiable Loss which is not contested
within forty-five Business Days after the later of its receipt of a Notice of
Claim or the determination of the amount of such Indemnifiable Loss.
9.5 THIRD PARTY CLAIMS; NOTICE, DEFENSE AND PAYMENT. Promptly following the
earlier of (i) receipt of notice of the commencement of a Third Party Claim or
(ii) receipt of information from a third party alleging the existence of a Third
Party Claim, any Indemnitee who believes that it is or may be entitled to
indemnification by any Indemnitor under Section 9.1 with respect to such Third
Party Claim shall deliver a Notice of Claim to the Indemnitor. Failure of an
Indemnitee timely to give a Notice of Claim to the Indemnitor shall not release
the Indemnitor from its indemnity obligations set forth in this Article except
to the extent that such failure adversely affects the ability of the Indemnitor
to defend such Action, Liabilities or claim or materially increases the amount
of indemnification which the Indemnitor is obligated to pay hereunder, in which
event the amount of indemnification which the Indemnitee shall be entitled to
receive shall be reduced to an amount which the Indemnitee would have been
entitled to receive had such Notice of Claim been timely given. Indemnitee shall
not settle or compromise any Third Party Claim in an amount in excess of $25,000
prior to giving a Notice of Claim to Indemnitor. In addition, if an Indemnitee
settles or compromises any Third Party Claims for an amount equal to or less
than $25,000 prior to giving a Notice of Claim to an Indemnitor, the Indemnitor
shall be released from its indemnity obligations to the extent that such
settlement or compromise was not made in good faith and was not commercially
reasonable. Within thirty Business Days after receipt of Notice of Claim, the
Indemnitor may (i) by giving written notice thereof to the Indemnitee,
acknowledge liability for, and at its option elect to assume, the defense of
such Third Party Claim at its sole cost and expense or (ii) object to the claim
of indemnification set forth in the Notice of Claim delivered by the Indemnitee;
provided that if the Indemnitor does not within the same thirty Business Day
period give the Indemnitee written notice either objecting to such claim and
setting forth the grounds therefor or electing to assume the defense, the
Indemnitor shall be deemed to have acknowledged its responsibility to accept the
defense and its ultimate liability, if any, for such Third Party Claim. Any
contest of a Third Party Claim as to which the Indemnitor has elected to assume
the defense shall be conducted by attorneys employed by the Indemnitor and
reasonably satisfactory to the Indemnitee; provided that the Indemnitee shall
have the right to participate in such proceedings and to be represented by
attorneys of its own choosing at the Indemnitee's sole cost and expense. If the
Indemnitor assumes the defense of a Third Party Claim, the Indemnitor may settle
or compromise the Third Party Claim without the prior written consent of
Indemnitee; provided that the Indemnitor may not agree to any such settlement
pursuant to which any such remedy or relief, other than monetary damages for
which the Indemnitor shall be responsible hereunder, shall be applied to or
against the Indemnitee, without the prior written consent of the Indemnitee,
which consent shall not be unreasonably withheld. If the Indemnitor does not
assume the defense of a Third Party Claim for which it has acknowledged
liability for indemnification under Section 9.1, the Indemnitee may require the
Indemnitor to reimburse it on a current basis for its reasonable expenses of
investigation, reasonable attorney's fees and reasonable out-of-pocket expenses
incurred in defending against such Third Party Claim and the Indemnitor shall be
bound by the result obtained with respect thereto by the Indemnitee, provided
that the Indemnitor shall not be liable for any settlement effected without its
consent, which consent shall not be unreasonably withheld. The Indemnitor shall
pay to the Indemnitee in cash the amount for which the Indemnitee is entitled to
be indemnified (if any) within ten Business Days after the final resolution of
such Third Party Claim (whether by settlement, a final nonappealable judgment of
a court of competent jurisdiction or otherwise) or, in the case of any Third
Party Claim as to which the Indemnitor has not acknowledged liability, within
fifteen days after such Indemnitor's objection has been resolved pursuant to the
provisions of Article XII of this Agreement. Pending acknowledgment or
determination of the liability of Indemnitor with respect to any Third Party
Claim, Indemnitee may defend such Third Party Claim and any Liability arising
out of such Third Party Claim (including all costs and expenses of such defense)
shall be allocated in accordance with such acknowledgment or determination.
9.6 REMEDIES CUMULATIVE; SURVIVAL OF INDEMNITIES. The remedies provided in
this Article shall be cumulative and shall not preclude assertion by any
Indemnitee of any other rights or the seeking of any and all
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other remedies against any Indemnitor. The obligations of each of Ralcorp and
the Branded Subsidiary, on the one hand, and New Ralcorp, on the other hand,
under this Article shall survive the sale or other transfer by it of any assets
or businesses or the assignment by it of any Liabilities, with respect to any
claim of the other for any Indemnifiable Losses related to such assets,
businesses or Liabilities.
ARTICLE X
OTHER POST-DISTRIBUTION OBLIGATIONS
10.1 NEW RALCORP'S POST-DISTRIBUTION OBLIGATIONS. New Ralcorp shall, and
shall cause each member of the New Ralcorp Group to, comply with each
representation and statement made, or to be made, to the IRS (or, if applicable,
tax counsel) in connection with any ruling (or tax opinion) obtained, or to be
obtained, by Ralcorp, from the IRS (or tax counsel) with respect to any
transaction contemplated by this Agreement or the Merger Agreement. Neither New
Ralcorp nor any member of the New Ralcorp Group shall for a period of two years
following the Distribution Date engage in any of the following transactions,
unless either (a) an opinion in form and substance reasonably satisfactory to
Ralcorp is obtained from counsel to New Ralcorp, or (b) a supplemental ruling is
obtained from the IRS, in either case to the effect that such transaction(s)
would not adversely affect the tax consequences of the transactions described in
this Agreement or the Merger Agreement to (1) Ralcorp or any member of the
Ralcorp Group, (2) New Ralcorp or any member of the New Ralcorp Group, or (3)
the Ralcorp shareholders as of the Record Date. The transactions subject to this
provision are: (i) making a material disposition (including transfers from one
member of the New Ralcorp Group to another member of the New Ralcorp Group), by
means of a sale or exchange of assets or capital stock, a distribution to
shareholders, or otherwise, of any of its assets (other than the transactions
contemplated by this Agreement) except in the ordinary course of business; (ii)
repurchasing any New Ralcorp capital stock, unless such repurchase satisfies the
requirements of Section 4.05(1)(b) of Revenue Procedure 96-30; (iii) issuing any
New Ralcorp capital stock that in the aggregate exceeds ten percent (10%) of the
issued and outstanding stock of New Ralcorp immediately following the
Distribution; (iv) liquidating or merging with any other corporation (including
a member of the New Ralcorp Group); or (v) causing New Ralcorp to cease
conducting directly the New Ralcorp Business in the ordinary course. New Ralcorp
hereby represents that neither New Ralcorp nor any member of the New Ralcorp
Group has any present intention to undertake any of the transactions set forth
in (i), (ii), (iii), (iv) or (v) above.
10.2 RALCORP'S AND ACQUIROR'S POST-DISTRIBUTION OBLIGATIONS. Acquiror and
Ralcorp shall, and shall cause each member of the Ralcorp Group to, comply with
each representation and statement made, or to be made, to the IRS (or, if
applicable, tax counsel) in connection with any ruling (or tax opinion) obtained
by Ralcorp from the IRS (or tax counsel) with respect to any transaction
contemplated by this Agreement or the Merger Agreement. Acquiror shall not,
during the two-year period following the Merger, (i) reduce its stock ownership
interest in Ralcorp to a level that does not constitute "control" of Ralcorp
within the meaning of Section 368(c) of the Code; (ii) cause Ralcorp to be
liquidated (including via a statutory merger); (iii) cause Ralcorp to reduce its
stock ownership interest in the Branded Subsidiary to a level that does not
constitute "control" of the Branded Subsidiary within the meaning of Section
368(c) of the Code; (iv) engage in or cause to occur any transaction(s) which
will result in the Branded Subsidiary ceasing to conduct directly the Branded
Business in the ordinary course or cause Ralcorp's stock ownership interest in
the Branded Subsidiary to represent less than 90% of the fair market value of
Ralcorp's gross assets; or (v) cause the Branded Subsidiary to dispose of a
material portion of its assets other than in the ordinary course of business,
unless (a) an opinion in form and substance reasonably satisfactory to New
Ralcorp is obtained from counsel to Acquiror; or (b) a supplemental ruling is
obtained from the IRS, in either case to the effect that such transaction(s)
would not adversely affect the tax consequences of the Internal Merger, the
Internal Spinoff or the Distribution. Acquiror represents that it presently has
no plan or intention, and will have no plan or intention at the time of the
Merger, to engage in or cause to occur any of the transactions or events
described in items (i) through (v) of this Section.
10.3 PERFORMANCE BY NEW RALCORP OF CERTAIN MERGER AGREEMENT COVENANTS. New
Ralcorp, as successor to Foods subsequent to the Internal Merger, hereby
covenants and agrees that it will (a) perform in all
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respects the covenants applicable to Foods in Section 2.3 of the Merger
Agreement and (b) pay the fees and expenses of Lehman Brothers, Inc. referred to
in Section 3.2(i) of the Merger Agreement.
10.4 DISTRIBUTORSHIP AGREEMENT. From and after the Effective Time, New
Ralcorp, as successor to Foods subsequent to the Internal Merger, will exercise
its rights under the Exclusive Distribution Agreement for Cereals, dated as of
April 1, 1994 (the "Distributorship Agreement"), between Foods and Ralston
Purina Company ("RPCo.") so as (a) to prevent RPCo. from continuing to use any
trademarks used in the Branded Business in connection with RPCo.'s sale of
Products (as defined in the Distributorship Agreement), and (b) to terminate the
Distributorship Agreement, as to Products that are included in the Branded
Business, at the earliest time permitted under such agreement.
10.5 NET WORTH.
(a) For a period of two years following the Distribution Date, New
Ralcorp and its subsidiaries, on a consolidated basis, will maintain at all
times a net worth (determined in accordance with generally accepted
accounting principles, consistently applied) of not less than $100 million.
(b) Except as provided in paragraph (c) below, for a period of two
years commencing on the second anniversary of the Distribution Date, New
Ralcorp and its subsidiaries, on a consolidated basis, will maintain at all
times a net worth (determined in accordance with generally accepted
accounting principles, consistently applied) of not less than the lesser of
(i) the sum of $25 million plus the aggregate of all claims for
indemnification made in good faith under Section 9.1(b) hereof (subject to
the limitations provided in Section 9.2) unresolved and pending on the
second anniversary of the Distribution Date, and (ii) $100 million.
(c) Notwithstanding the foregoing paragraph (b), in the event an
agreement between Ralcorp and RPCo. as contemplated by Section 4.3(d)(ii)
of the Merger Agreement is not entered into prior to the second anniversary
of the Distribution Date, for a period of three years commencing on the
second anniversary of the Distribution Date, New Ralcorp and its
subsidiaries, on a consolidated basis, will maintain at all times a net
worth (determined in accordance with generally accepted accounting
principles, consistently applied) of not less than the amounts specified
below:
(i) during the first year of such three-year period, the lesser of
(A) the sum of $75 million plus the aggregate of all claims for
indemnification made in good faith under Section 9.1(b) hereof (subject
to the limitations provided in Section 9.2) unresolved and pending on
the second anniversary of the Distribution Date, and (B) $100 million;
(ii) during the second year of such three-year period, the lesser
of (A) the sum of $50 million plus the aggregate of all claims for
indemnification made in good faith under Section 9.1(b) hereof (subject
to the limitations provided in Section 9.2) unresolved and pending on
the third anniversary of the Distribution Date, and (B) the amount
specified in clause (i) of this paragraph (c); and
(iii) during the third year of such three-year period, the lesser
of (A) the sum of $25 million plus the aggregate of all claims for
indemnification made in good faith under Section 9.1(b) hereof (subject
to the limitations provided in Section 9.2) unresolved and pending on
the fourth anniversary of the Distribution Date, and (B) the amount
specified in clause (ii) of this paragraph (c).
In the event an agreement between Ralcorp and RPCo. as contemplated by
Section 4.3(d)(ii) of the Merger Agreement is entered into after the
second anniversary of the Distribution Date, upon execution of such
agreement this paragraph (c) will be of no further force or effect and
the provisions of paragraph (b) will apply instead.
(d) During the foregoing periods, New Ralcorp will provide to Ralcorp,
within 45 days following the end of each of New Ralcorp's fiscal quarters,
a certificate of the Chief Financial Officer of New Ralcorp certifying New
Ralcorp's continuing compliance with the foregoing covenants.
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ARTICLE XI
GUARANTEES AND SURETY BONDS OF THE RALCORP GROUP
New Ralcorp agrees that as soon as practicable following the Distribution
Date it will substitute surety bonds obtained by it for each of the surety bonds
of any member of the Ralcorp Group, if any, relating to any New Ralcorp Asset,
the New Ralcorp Business or any New Ralcorp Liability. New Ralcorp agrees that
it shall enter indemnification agreements in its name with each provider of a
surety bond obtained with respect to the New Ralcorp Assets, the New Ralcorp
Business or any New Ralcorp Liability. New Ralcorp shall use its reasonable best
efforts to obtain the complete release and discharge of any member of the
Ralcorp Group from all obligations (including any obligations upon any renewal
or extension) related to the New Ralcorp Assets, the New Ralcorp Business or any
New Ralcorp Liability on which any member of the Ralcorp Group is directly or
contingently obligated as a guarantor or assignor or otherwise contingently
liable (including, without limitation, any letter of credit, guaranties with
respect to workers' compensation liabilities, and guarantees issued in
connection with Resorts' Conference Center (the "New Ralcorp Obligations")). In
the event that New Ralcorp is unable to obtain any such release, New Ralcorp
agrees that (i) it shall not extend the term or otherwise modify any such New
Ralcorp Obligation in a manner which would expand Ralcorp's financial exposure
under such New Ralcorp Obligation, (ii) it shall use its reasonable best efforts
to substitute itself or another member of the New Ralcorp Group as primary
guarantor of such New Ralcorp Obligations, and (iii) New Ralcorp or any member
of the New Ralcorp Group shall not (other than, in connection with the Resorts
Conference Center, through a sale of all or substantially all of Ralston
Resorts, Inc., a wholly owned subsidiary of Foods) assign any such New Ralcorp
Obligation or transfer, sell or assign any assets securing such New Ralcorp
Obligation or comprising all or any substantial portion of a project, the
financing of which gave rise to such New Ralcorp Obligation, unless Ralcorp or
the appropriate member of the Ralcorp Group, as the case may be, is released and
discharged of all liabilities with respect to such New Ralcorp Obligation.
Without limiting any other obligation of indemnification under this Agreement or
any agreement described herein, New Ralcorp shall defend, indemnify and hold
harmless each member of the Ralcorp Group and their respective Affiliates,
Subsidiaries, directors, officers and employees against any and all Liabilities
whatsoever incurred or suffered by any of them as a result of any New Ralcorp
Obligation. The term "reasonable best efforts" as used in this paragraph shall
not be deemed to require New Ralcorp to (i) prepay any such New Ralcorp
Obligation, (ii) agree to any increase in amount of principal payments or
interest with respect thereto or (iii) extend or accelerate the term of any such
New Ralcorp Obligation.
ARTICLE XII
MEDIATION
12.1 RESOLUTION BY NEGOTIATION; MEDIATION. If any question shall arise in
regard to the interpretation of any provision of this Agreement or any Ancillary
Agreement or as to the rights or obligations of either Group hereunder or
thereunder, each Group shall designate a senior executive within its
organization or other individual with decision-making authority regarding the
dispute who shall, within thirty days after such question arises, meet with each
other to negotiate and attempt to resolve such question in good faith. Such
individuals may, if they so desire, consult outside advisors for assistance in
arriving at such a resolution. In the event that a resolution is not achieved
within such thirty day period, then the parties will submit the dispute to
mediation in accordance with the Model Procedure for Mediation of Business
Disputes of the Center for Public Resources or such other procedures as the
parties may agree and will bear equally the costs of the mediation. The parties
will jointly appoint a mutually acceptable mediator, seeking assistance in such
regard from JAMS/Endispute or the Center for Public Resources if they have been
unable to agree upon such appointment and the procedures within 20 days from the
conclusion of the negotiation period. The parties agree to participate in good
faith in the mediation and negotiations related thereto for a period of 30 days.
If the parties are not successful in resolving the dispute through the
mediation, then the parties may agree to submit the matter to binding
arbitration or a private adjudicator, or either party may seek an adjudicated
resolution through the appropriate court. The foregoing shall not be construed
to prevent any party from
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seeking such preliminary injunctive relief, without compliance with the
foregoing provisions, as may be necessary to preserve the status quo pending
resolution of any such dispute.
12.2 JURISDICTION; WAIVER OF JURY TRIAL. Subject to Section 12.1, each of
the parties hereto (a) consents to submit itself to the personal jurisdiction of
any Federal court located in the State of Missouri or the State of Minnesota in
the event any dispute arises out of this Agreement or any other Ancillary
Agreement or any of the transactions contemplated hereby or thereby, (b) agrees
that it will not attempt to deny or defeat such personal jurisdiction by motion
or other request for leave from any such court, and (c) agrees that it will not
bring any action relating to this Agreement or any other Ancillary Agreement or
any of the transactions contemplated hereby or thereby in any court other than a
Federal court (or if such court does not have subject matter jurisdiction, in a
state court) sitting in the State of Missouri or the State of Minnesota. THE
PARTIES HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY DISPUTE
ARISING UNDER THIS AGREEMENT OR ANY OTHER ANCILLARY AGREEMENT.
ARTICLE XIII
MISCELLANEOUS
13.1 FURTHER ASSURANCES. Each party hereto shall cooperate reasonably with
the other parties, and execute and deliver, or use its reasonable best efforts
to cause to be executed and delivered, all instruments, including instruments of
conveyance, assignment and transfer, and to make all filings with, and to obtain
all consents, approvals or authorizations of, any governmental or regulatory
authority or any other Person under any permit, license, agreement, indenture or
other instrument, and take all such other actions as such party may reasonably
be requested to take by any other party hereto from time to time, consistent
with the terms of this Agreement, in order to effectuate the provisions and
purposes of this Agreement and the transfers of Assets and Liabilities and the
other transactions contemplated hereby or in any of the Ancillary Agreements.
13.2 SURVIVAL OF AGREEMENTS. All covenants and agreements of the parties
hereto contained in this Agreement shall survive the Distribution Date.
13.3 ENTIRE AGREEMENT. This Agreement, the Exhibits and Schedules hereto,
the Merger Agreement and the Ancillary Agreements shall constitute the entire
agreement between the parties hereto with respect to the subject matter hereof,
superseding all previous negotiations, commitments and writings with respect to
such subject matter.
13.4 EXPENSES. Except as provided in Section 7.2(b) of the Merger Agreement
and Section 10.3 of this Agreement, all fees and expenses incurred in connection
with the Merger, the Distribution, this Agreement, the Merger Agreement and the
transactions contemplated by this Agreement, the Merger Agreement and the
Ancillary Agreements shall be paid by the party incurring such fees or expenses,
whether or not the Distribution is consummated, except that expenses incurred in
connection with printing and mailing the Proxy Statement, the Form S-4, the Form
S-1 (if required) and the Form 10, shall be shared equally by Acquiror and
Ralcorp, subject to the provisions of Section 5.6 of the Merger Agreement.
13.5 GOVERNING LAW. This Agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of Missouri, without regard
to its conflicts of law principles, as to all matters, including matters of
validity, construction, effect, performance and remedies.
13.6 NOTICES. All notices, requests, claims, demands and other
communications hereunder (collectively, "Notices") shall be in writing and shall
be given (and shall be deemed to have been duly given upon receipt)
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by delivery in person, by cable, telegram, telex, facsimile or other standard
form of telecommunications, or by registered or certified mail, postage prepaid,
return receipt requested, addressed as follows:
If to a member of the Ralcorp Group or Acquiror:
General Mills, Inc.
Number One General Mills Boulevard
Minneapolis, Minnesota 55426
Attention: Siri S. Marshall
If to a member of the New Ralcorp Group:
R.W. Lockwood
General Counsel
800 Market Street, Suite 2900
St. Louis, Missouri 63101
Facsimile: (314) 877-7748
or to such other address as either Group may have furnished to the other
Group by a notice in writing in accordance with this Section.
13.7 AMENDMENT AND MODIFICATION. This Agreement may be amended, modified or
supplemented, and rights hereunder may be waived, only by a written agreement
signed by Ralcorp, New Ralcorp, Foods and Acquiror. No waiver of any term,
provision or condition of or failure to exercise or delay in exercising any
rights or remedies under this Agreement, in one or more instances, shall be
deemed to be, or construed as, a further or continuing waiver of such term,
provision, condition, right or remedy or as a waiver of any other term,
provision or condition of, or right or remedy under, this Agreement.
13.8 SUCCESSORS AND ASSIGNS; NO THIRD-PARTY BENEFICIARIES. This Agreement
and all of the provisions hereof shall be binding upon and inure to the benefit
of each party hereto and each of their respective successors and permitted
assigns, but neither this Agreement nor any of the rights, interests and
obligations hereunder shall be assigned by (i) the New Ralcorp Group without the
prior written consent of Acquiror or the Ralcorp Group (which consent shall not
be unreasonably withheld) and (ii) the Ralcorp Group or Acquiror, as the case
may be, without the prior written consent of the New Ralcorp Group (which
consent shall not be unreasonably withheld). This Agreement is solely for the
benefit of each Group and is not intended to confer upon any other Person any
rights or remedies hereunder.
13.9 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13.10 INTERPRETATION.
(a) The Article and Section headings contained in this Agreement are
solely for the purpose of reference, are not part of the agreement of the
parties hereto and shall not in any way affect the meaning or
interpretation of this Agreement.
(b) The parties hereto intend that, for federal income tax purposes,
the contributions, transfers, assumptions, Distribution and Merger
contemplated hereby shall each qualify for non-recognition treatment under
the applicable provisions of subchapter C of the Code.
13.11 LEGAL ENFORCEABILITY. Any provision of this Agreement or any of the
Ancillary Agreements which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions hereof. Any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. Each party
acknowledges that money damages would be an inadequate remedy for any breach of
the provisions of this Agreement or any of the Ancillary Agreements and agrees
that the obligations of the parties hereunder and thereunder shall be
specifically enforceable.
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13.12 REFERENCES; CONSTRUCTION. References to any "Article," "Exhibit,"
"Schedule" or "Section," without more, are to Articles, Exhibits, Schedules and
Sections to or of this Agreement. Unless otherwise expressly stated, clauses
beginning with the term "including" set forth examples only and in no way limit
the generality of the matters thus exemplified.
13.13 TERMINATION. In the event the Merger Agreement is terminated,
notwithstanding any provision hereof, this Agreement may be terminated and the
Distribution abandoned at any time prior to the Distribution Date by and in the
sole discretion of the Ralcorp Board without the approval of any other party
hereto or of Ralcorp's shareholders. In the event of such termination, no party
hereto shall have any Liability to any Person by reason of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
RALCORP HOLDINGS, INC.
By:
-----------------------------------
Name:
Title:
NEW RALCORP HOLDINGS, INC.
By:
-----------------------------------
Name:
Title:
RALSTON FOODS, INC.
By:
-----------------------------------
Name:
Title:
CHEX INC.
By:
-----------------------------------
Name:
Title:
GENERAL MILLS, INC.
By:
-----------------------------------
Name:
Title:
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APPENDIX C
[LEHMAN BROTHERS LETTERHEAD]
August 13, 1996
Board of Directors
Ralcorp Holdings, Inc.
800 Market Street
29th Floor
St. Louis, MO 63101
Members of the Board:
We understand that the Board of Directors of Ralcorp Holdings, Inc.
("Ralcorp") has approved a Contribution Agreement and Plan of Distribution
pursuant to which (a) substantially all of the assets and liabilities of the
branded cereals and branded snacks business (the "Branded Business") currently
operated by Ralcorp's wholly-owned subsidiary, Ralston Foods, Inc. ("Foods"),
will be contributed by Foods to a newly-formed subsidiary (the "Branded
Subsidiary"), (b) all of the stock of the Branded Subsidiary will be distributed
by Foods to Ralcorp pursuant to the internal spinoff outlined in the
Contribution Agreement, and (c) all of the stock of Foods will be distributed on
a pro rata basis to Ralcorp's shareholders (the "Spin-off") . The Board of
Directors of Ralcorp also has approved an Agreement and Plan of Merger, dated as
of August 13, 1996 (the "Merger Agreement"), among Ralcorp, General Mills, Inc.
("General Mills") and a wholly owned subsidiary of General Mills, pursuant to
which General Mills will acquire Ralcorp and the Branded Subsidiary by means of
a merger of its subsidiary with and into Ralcorp whereby, subject to adjustments
as set forth in the Merger Agreement, General Mills will issue shares of its
common stock valued at $356 million to the shareholders of Ralcorp and will
assume $214 million of long-term debt of Ralcorp and the Branded Subsidiary (the
"Merger" and together with the Spin-off, the "Proposed Transaction"). In
accordance with the Merger Agreement, if the value of the net assets of the
Branded Business on the Closing Date is less than $41.9 million, Foods will pay
General Mills an amount equal to such shortfall and if the value of the net
assets of the Branded Business on the Closing Date is more than $41.9 million,
General Mills will pay Foods an amount equal to such excess. For the purposes of
this opinion, the consideration to be received by the shareholders of Ralcorp in
the Proposed Transaction shall include the shares of Foods to be received in the
Spin-off and the shares of common stock of General Mills to be received in the
Merger. The terms and conditions of the Proposed Transaction are set forth in
more detail in the Contribution Agreement, dated as of August 13, 1996, by and
between Ralcorp and Foods (the "Contribution Agreement"), the Distribution
Agreement, dated as of August 13, 1996, by and between Ralcorp and Foods (the
"Distribution Agreement"), and the Merger Agreement (together, the
"Agreements").
We have been requested by the Board of Directors of Ralcorp to render our
opinion with respect to the fairness, from a financial point of view, to the
shareholders of Ralcorp of the consideration to be received by such shareholders
in the Proposed Transaction. We have not been requested to opine as to, and our
opinion does not in any manner address, Ralcorp's underlying business decision
to proceed with or effect the Proposed Transaction.
In arriving at our opinion, we reviewed and analyzed: (1) the Agreements
and the specific terms of the Proposed Transaction, (2) publicly available
information concerning Ralcorp that we believe to be relevant to our inquiry,
(3) financial and operating information with respect to the business, operations
and prospects of Ralcorp, the Branded Business and Foods furnished to us by
Ralcorp, (4) a trading history of Ralcorp's common stock from January 1, 1995 to
the present and a comparison of that trading history with those of other
companies that we deemed relevant, (5) a comparison of the historical financial
results and present financial condition of Ralcorp and the Branded Business with
those of other companies that we deemed relevant, (6) a comparison of the
financial terms of the Proposed Transaction with the financial terms of
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certain other transactions that we deemed relevant, (7) publicly available
information with respect to the business, operations and financial condition of
General Mills that we believe to be relevant to our inquiry, (8) a trading
history of General Mills' common stock from January 1, 1995 to the present and a
comparison of General Mills' common stock price and valuation multiples with
those of other companies that we deemed relevant, and (9) research analysts'
reports and earnings estimates regarding the business, financial condition and
future financial performance of General Mills. In addition, we have had
discussions with the management of Ralcorp concerning the businesses,
operations, assets, financial condition and prospects of Ralcorp, the Branded
Business and Foods and with the management of General Mills concerning its
business, operations, assets, financial conditions and prospects, and undertook
such other studies, analyses and investigations as we deemed appropriate.
In arriving at our opinion, we have assumed and relied upon the accuracy
and completeness of the financial and other information used by us without
assuming any responsibility for independent verification of such information and
have further relied upon the assurances of management of Ralcorp that they are
not aware of any facts that would make such information inaccurate or
misleading. With respect to the future financial performance of Foods, upon
advice of Ralcorp we have assumed that such projections have been reasonably
prepared on a basis reflecting the best currently available estimates and
judgments of the management of Ralcorp as to the future financial performance of
Foods and that Foods will perform substantially in accordance with such
projections. However, with respect to the future financial performance of
Ralcorp and the Branded Business, we were not provided with and did not review
any financial forecasts or projections prepared by management of Ralcorp. With
respect to the proposed disposition of Ralston Resorts, we have relied upon the
Ralcorp's operating projections and valuation of the consideration to be
received in such transaction. In arriving at our opinion, we also have not
conducted a physical inspection of the properties and facilities of Ralcorp and
have not made or obtained any evaluations or appraisals of the assets or
liabilities of Ralcorp. In addition, in arriving at our opinion, with your
consent, we were not provided with and did not review any projections prepared
by management of General Mills regarding its future financial performance.
However, upon advice of General Mills we have assumed that the publicly
available earnings estimates of research analysts are a reasonable basis to
evaluate and analyze the future financial performance of General Mills and that
General Mills will perform substantially in accordance with such estimates. Upon
advice of Ralcorp and its legal and accounting advisors, we have assumed the
Proposed Transaction will qualify as a tax-free transaction whereby the
Distribution and the Internal Spinoff shall each qualify as tax-free
distributions within the meaning of Section 355 of the Internal Revenue Code of
1986 (the "Code"), and the Merger shall qualify as a reorganization under
Section 368(a)(1)(B) of the Code, as amended, and therefore represents a
tax-free transaction for the shareholders of Ralcorp. Our opinion necessarily is
based upon market, economic and other conditions as they exist on, and can be
evaluated as of, the date of this letter.
In addition, we express no opinion as to the prices at which shares of
common stock of Foods or General Mills actually will trade following the
consummation of the Spin-off and the Merger and this opinion should not be
viewed as providing any assurance that the combined market value of the shares
of common stock of Foods and the shares of common stock of General Mills to be
received by a shareholder of Ralcorp pursuant to the Proposed Transaction will
be in excess of the market value of the shares of common stock of Ralcorp owned
by such shareholder at any time prior to announcement or consummation of the
Proposed Transaction.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, the consideration to be
received by shareholders of Ralcorp in the Proposed Transaction is fair to such
shareholders.
We have acted as financial advisor to Ralcorp in connection with the
Proposed Transaction and will receive a fee for our services, a substantial
portion of which is contingent upon the consummation of the Proposed
Transaction. In addition, Ralcorp has agreed to indemnify us for certain
liabilities that may arise out of the rendering of this opinion. We also have
performed various investment banking services for Ralcorp in the past and have
received customary fees for such services. In the ordinary course of our
business, we actively trade in the securities of Ralcorp and General Mills for
our own account and for the accounts of our customers and, accordingly, may at
any time hold a long or short position in such securities.
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This opinion is for the use and benefit of the Board of Directors of
Ralcorp and is rendered to the Board of Directors in connection with its
consideration of the Proposed Transaction. This opinion is not intended to be
and does not constitute a recommendation to any stockholder of Ralcorp as to how
such stockholder should vote with respect to the Proposed Transaction.
Very truly yours,
LEHMAN BROTHERS
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APPENDIX D
SECTION 351.455 OF THE MISSOURI
GENERAL BUSINESS AND CORPORATION LAW
351.455 SHAREHOLDER WHO OBJECTS TO MERGER MAY DEMAND VALUE OF SHARES, WHEN.
- -- 1. If a shareholder of a corporation which is a party to a merger or
consolidation shall file with such corporation, prior to or at the meeting of
shareholders at which the plan of merger or consolidation is submitted to a
vote, a written objection to such plan of merger or consolidation, and shall not
vote in favor thereof, and such shareholder, within twenty days after the merger
or consolidation is effected, shall make written demand on the surviving or new
corporation for payment of the fair value of his shares as of the day prior to
the date on which the vote was taken approving the merger or consolidation, the
surviving or new corporation shall pay to such shareholder, upon surrender of
his certificate or certificates representing said shares, the fair value
thereof. Such demand shall state the number and class of the shares owned by
such dissenting shareholder. Any shareholder failing to make demand within the
twenty day period shall be conclusively presumed to have consented to the merger
or consolidation and shall be bound by the terms thereof.
2. If within thirty days after the date on which such merger or
consolidation was effected the value of such shares is agreed upon between the
dissenting shareholder and the surviving or new corporation, payment therefor
shall be made within ninety days after the date on which such merger or
consolidation was effected, upon the surrender of his certificate or
certificates representing said shares. Upon payment of the agreed value the
dissenting shareholder shall cease to have any interest in such shares or in the
corporation.
3. If within such period of thirty days the shareholder and the surviving
or new corporation do not so agree, then the dissenting shareholder may, within
sixty days after the expiration of the thirty day period, file a petition in any
court of competent jurisdiction within the county in which the registered office
of the surviving or new corporation is situated, asking for a finding and
determination of the fair value of such shares, and shall be entitled to
judgment against the surviving or new corporation for the amount of such fair
value as of the day prior to the date on which such vote was taken approving
such merger or consolidation, together with interest thereon to the date of such
judgment. The judgment shall be payable only upon and simultaneously with the
surrender to the surviving or new corporations of the certificate or
certificates representing said shares. Upon the payment of the judgment, the
dissenting shareholder shall cease to have any interest in such shares, or in
the surviving or new corporation. Such shares may be held and disposed of by the
surviving or new corporation as it may see fit. Unless the dissenting
shareholder shall file such petition within the time herein limited, such
shareholder and all persons claiming under him shall be conclusively presumed to
have approved and ratified the merger or consolidation, and shall be bound by
the terms thereof.
4. The right of a dissenting shareholder to be paid the fair value of his
shares as herein provided shall cease if and when the corporation shall abandon
the merger or consolidation.
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RFG0353
<PAGE> 176
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware (the
"DGCL") sets forth conditions and limitations governing the indemnification of
officers, directors, and other persons.
The Registrant's By-laws provide as follows:
(a) The Registrant shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he or she is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the Registrant as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, suit or proceeding if the
person acted in good faith and in a manner the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe such
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which the person reasonably believed to be
in or not opposed to the best interests of the Registrant, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that such
conduct was unlawful.
(b) The Registrant shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Registrant to procure a judgment in its favor by
reason of the fact that the person is or was a director, officer, employee or
agent of the Registrant, or is or was serving at the request of the Registrant
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees) actually and reasonably incurred by the person in connection with the
defense or settlement of such action or suit if the person acted in good faith
and in a manner the person reasonably believed to be in or not opposed to the
best interests of the Registrant and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Registrant unless and only to the extent that
the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of the
Registrant has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b), or in defense
of any claim, issue or matter therein, the person shall be indemnified or
reimbursed against expenses (including attorneys' fees) actually and reasonably
incurred by such person in connection therewith.
(d) Any indemnification under sub-sections (a) and (b) (unless ordered by a
court) shall be made by the Registrant only as authorized in the specific case
upon a determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because the person has met the applicable
standard of conduct set forth in subsections (a) and (b) of this section. 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 the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or director
in defending a civil, criminal, administrative or investigative action, suit or
proceeding shall be paid by the Registrant in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of such director or officer to repay such amount if it shall ultimately
be determined that such person is not entitled to be
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indemnified by the Registrant as authorized in this section. Such expenses
incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the board of directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or granted
pursuant to, the other subsections of this section shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office.
(g) The Registrant shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Registrant, or is or was serving at the request of the Registrant as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against any liability asserted against any such person
and incurred by any such person in any such capacity, or arising out of his or
her status as such, whether or not the Registrant would have the power to
indemnify such person against such liability under the provisions of this
section.
(h) For purposes of these provisions, references to the Registrant shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under this section with respect to the resulting or surviving
corporation as the person would have with respect to such constituent
corporation if its separate existence had continued.
(i) For purposes of these provisions, references to other enterprises shall
include employee benefit plans; references to fines shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to serving at the request of the Registrant shall include any service
as a director, officer, employee or agent of the Registrant which imposes duties
on, or involves services by, such director, officer, employee, or agent with
respect to an employee benefit plan, its participants, or beneficiaries; and a
person who acted in good faith and in a manner he or she reasonably believed to
be in the interest of the participants and beneficiaries of an employee benefit
plan shall be deemed to have acted in a manner not opposed to the best interests
of the Registrant as referred to in these provisions.
(j) The indemnification and advancement of expenses provided by, or granted
pursuant to, these provisions shall, unless otherwise provided when authorized
or ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
The Registrant's Restated Certificate of Incorporation provides that a
director shall not be personally liable to the Registrant or its stockholders
for monetary damages for any breach of fiduciary duty by such director as a
director; provided, however, that a director shall be liable to the extent
provided by applicable law (i) for breach of the director's duty of loyalty to
the Registrant or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
pursuant to Section 174 of the DGCL (such section relates generally to the
liability of directors for authorizing the unlawful payment of dividends or the
unlawful purchase or redemption of a corporation's stock), or (iv) for any
transaction from which the director derived an improper personal benefit. No
amendment to or repeal of these provisions shall apply to or have any effect on
the liability or alleged liability of any director of the Registrant for or with
respect to any acts or omissions of such director occurring prior to such
amendment.
The Registrant has insurance to indemnify its directors and officers,
within the limits of the Registrant's insurance policies, for those liabilities
in respect of which such indemnification insurance is permitted under the laws
of the State of Delaware.
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ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
<TABLE>
<S> <C>
2.1 Agreement and Plan of Merger, dated as of August 13, 1996 and amended as of October
25, 1996, by and among Ralcorp Holdings, Inc. ("Ralcorp"), the Registrant and General
Mills Missouri, Inc. ("General Mills Missouri"), included as Annex A in the Proxy
Statement/Prospectus included as part of this Registration Statement. The Registrant
agrees to furnish supplementally a copy of any omitted exhibit or schedule to the
Commission upon request.
2.2 Form of Reorganization Agreement by and among Ralcorp, New Ralcorp Holdings, Inc.
("New Ralcorp"), Ralston Foods, Inc. ("Foods"), Chex Inc. ("Branded Subsidiary") and
the Registrant, included as Annex B in the Proxy Statement/Prospectus included as
part of this Registration Statement. The Registrant agrees to furnish supplementally
a copy of any omitted exhibit or schedule to the Commission upon request.
2.3 Form of Tax Sharing Agreement between Ralcorp and New Ralcorp. The Registrant agrees
to furnish supplementally a copy of any omitted exhibit or schedule to the Commission
upon request.
2.4 Form of Transition Services -- Supply Agreement between Ralcorp and New Ralcorp. The
Registrant agrees to furnish supplementally a copy of any omitted exhibit or schedule
to the Commission upon request.
2.5 Form of Technology Agreement by and among Ralcorp, New Ralcorp and the Branded
Subsidiary. The Registrant agrees to furnish supplementally a copy of any omitted
exhibit or schedule to the Commission upon request.
2.6 Form of Trademark Agreement by and among Ralcorp, New Ralcorp and the Branded
Subsidiary. The Registrant agrees to furnish supplementally a copy of any omitted
exhibit or schedule to the Commission upon request.
3.1 Copy of Registrant's Restated Certificate of Incorporation, as amended to date
(incorporated herein by reference to Exhibit 3.1 to Registrant's Annual Report on
Form 10-K for the fiscal year ended May 28, 1995).
3.2 Copy of Registrant's By-Laws, as amended to date (incorporated herein by reference to
Exhibit 3 to Registrant's Report on Form 8-K dated December 11, 1995).
4.1 Copy of Indenture between Registrant and Continental Illinois National Bank and Trust
Company of Chicago, as amended to date by Supplemental Indentures Nos. 1 through 8
(incorporated herein by reference to Exhibit 4 to Registrant's Annual Report on Form
10-K for the fiscal year ended May 31, 1992 and to Exhibit 4(b) to Registrant's
Current Report on Form 8-K filed January 8, 1993).
4.2 Copy of Rights Agreement dated as of December 11, 1995 between Registrant and Norwest
Bank Minnesota, N.A. (incorporated herein by reference to Exhibit 1 to Registrant's
Report on Form 8-K dated December 11, 1995).
4.3 Copy of Indenture between Registrant and First Trust of Illinois, National
Association dated February 1, 1996 (incorporated herein by reference to Exhibit 4.1
to Registrant's Registration Statement on Form S-3 effective February 23, 1996).
5.1 Opinion of Wachtell, Lipton, Rosen & Katz as to the legality of the shares being
issued.
8.1 Opinion of Wachtell, Lipton, Rosen & Katz as to certain tax matters.
8.2 Opinion of Bryan Cave LLP as to certain tax matters.
10.1 Copy of Stock Option and Long-Term Incentive Plan of 1988, as amended to date
(incorporated herein by reference to Exhibit 10.1 to Registrant's Annual Report on
Form 10-K for the fiscal year ended May 29, 1994).
</TABLE>
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<PAGE> 179
<TABLE>
<S> <C>
10.2 Copy of Stock Option and Long-Term Incentive Plan of 1984, as amended to date
(incorporated herein by reference to Exhibit 10.2 to Registrant's Annual Report on
Form 10-K for the fiscal year ended May 29, 1994).
10.3 Distribution Agreement with Darden Restaurants, Inc. dated May 12, 1995 (incorporated
herein by reference to Exhibit 2 to Registrant's Report on Form 8-K dated May 28,
1995).
10.4 Copy of Executive Incentive Plan, as amended to date (incorporated herein by
reference to Appendix B to Registrant's Proxy Statement pursuant to Section 14(a) of
the Securities Exchange Act of 1934, dated August 22, 1996).
10.5 Copy of Management Continuity Agreement (incorporated herein by reference to Exhibit
4 to Registrant's Report on Form 8-K dated December 11, 1995).
10.6 Copy of Supplemental Retirement Plan, as amended to date (incorporated herein by
reference to Exhibit 10.6 to Registrant's Annual Report on Form 10-K for the fiscal
year ended May 29, 1994).
10.7 Copy of Executive Survivor Income Plan, as amended to date (incorporated herein by
reference to Exhibit 10.7 to Registrant's Annual Report on Form 10-K for the fiscal
year ended May 26, 1996).
10.8 Copy of Executive Health Plan, as amended to date (incorporated herein by reference
to Exhibit 10.8 to Registrant's Annual Report on Form 10-K for the fiscal year ended
May 26, 1996).
10.9 Copy of Supplemental Savings Plan, as amended to date (incorporated herein by
reference to Exhibit 10.9 to Registrant's Annual Report on Form 10-K for the fiscal
year ended May 29, 1994).
10.10 Copy of 1996 Compensation Plan for Non-Employee Directors (incorporated herein by
reference to Appendix C to Registrant's Proxy Statement pursuant to Section 14(a) of
the Securities Exchange Act of 1934, dated August 22, 1996).
10.11 Copy of General Mills, Inc. 1995 Salary Replacement Stock Option Plan (incorporated
herein by reference to Exhibit 10.11 to Registrant's Annual Report on Form 10-K for
the fiscal year ended May 26, 1996).
10.12 Copy of Deferred Compensation Plan, as amended to date (incorporated herein by
reference to Exhibit 10.12 to Registrant's Annual Report on Form 10-K for the fiscal
year ended May 28, 1995).
10.13 Copy of Supplemental Benefits Trust Agreement dated February 9, 1987, as amended and
restated as of September 26, 1988 (incorporated herein by reference to Exhibit 10.13
to Registrant's Annual Report on Form 10-K for the fiscal year ended May 29, 1994).
10.14 Copy of Supplemental Benefits Trust Agreement dated September 26, 1988 (incorporated
herein by reference to Exhibit 10.14 to Registrant's Annual Report on Form 10-K for
the fiscal year ended May 29, 1994).
10.15 Copy of Agreements dated November 29, 1989 by and between General Mills, Inc. and
Nestle, S.A. (incorporated herein by reference to Exhibit 10.15 to Registrant's
Annual Report on Form 10-K for the fiscal year ended May 28, 1995).
10.16 Copy of Protocol and Addendum No. 1 to Protocol of Cereal Partners Worldwide
(incorporated herein by reference to Exhibit 10.16 to Registrant's Annual Report on
Form 10-K for the fiscal year ended May 26, 1996).
10.17 Copy of 1990 Salary Replacement Stock Option Plan, as amended to date (incorporated
herein by reference to Exhibit 10.18 to Registrant's Annual Report on Form 10-K for
the fiscal year ended May 29, 1994).
10.18 Copy of Addendum No. 2 dated March 16, 1993 to Protocol of Cereal Partners Worldwide
(incorporated herein by reference to Exhibit 10.19 to Registrant's Annual Report on
Form 10-K for the fiscal year ended May 30, 1993).
</TABLE>
II-4
<PAGE> 180
<TABLE>
<S> <C>
10.19 Copy of Agreement dated July 31, 1992 by and between General Mills, Inc. and PepsiCo,
Inc. (incorporated herein by reference to Exhibit 10.20 to Registrant's Annual Report
on Form 10-K for the fiscal year ended May 30, 1993).
10.20 Copy of Stock Option and Long-Term Incentive Plan of 1993, as amended to date
(incorporated herein by reference to Exhibit 10.21 to Registrant's Annual Report on
Form 10-K for the fiscal year ended May 29, 1994).
10.21 Copy of Standstill Agreement with CPC International, Inc. dated October 17, 1994
(incorporated herein by reference to Exhibit 10(a) to Registrant's Quarterly Report
on Form 10-Q for the period ended February 26, 1995).
10.22 Copy of Addendum No. 3 effective as of March 15, 1993 to Protocol of Cereal Partners
Worldwide (incorporated herein by reference to Exhibit 10(b) to Registrant's
Quarterly Report on Form 10-Q for the period ended February 26, 1995).
11 Statement of Computation of Earnings per Share (incorporated herein by reference to
Exhibit 11 of Registrant's Quarterly Report on Form 10-Q for the quarterly period
ended August 25, 1996).
12 Statement of Ratio of Earnings to Fixed Charges (incorporated herein by reference to
Exhibit 12 of Registrant's Quarterly Report on Form 10-Q for the quarterly period
ended August 25, 1996).
21 List of Subsidiaries of General Mills, Inc. (incorporated herein by reference to
Exhibit 21 to Registrant's Annual Report on Form 10-K for the fiscal year ended May
26, 1996).
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Price Waterhouse LLP.
23.3 Consent of Wachtell, Lipton, Rosen & Katz (included in Exhibit 5.1).
23.4 Consent of Wachtell, Lipton, Rosen & Katz (included in Exhibit 8.1).
23.5 Consent of Bryan Cave LLP (included in Exhibit 8.2).
24.1 Power of Attorney.
24.2 Power of Attorney.
24.3 Power of Attorney.
24.4 Power of Attorney.
24.5 Power of Attorney.
24.6 Power of Attorney.
24.7 Power of Attorney.
24.8 Power of Attorney.
24.9 Power of Attorney.
24.10 Power of Attorney.
24.11 Power of Attorney.
24.12 Power of Attorney.
27 Financial Data Schedule (incorporated herein by reference to Exhibit 27 to
Registrant's Annual Report on Form 10-K for the fiscal year ended May 26, 1996).
</TABLE>
(b) Financial Statement Schedules.
Schedule II -- Valuation and Qualifying Accounts (incorporated by reference
from the Registrant's Annual Report on Form 10-K for the fiscal year ended May
26, 1996).
(c) Report, Opinion or Appraisal.
Opinion of Lehman Brothers, Inc. (included as Appendix C in the Proxy
Statement/Prospectus included as part of this Registration Statement).
II-5
<PAGE> 181
ITEM 22. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions described under Item 20, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(d) The Registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (c) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offering
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(e) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the Registration Statement through the date
of responding to the request.
(f) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
(g) The undersigned Registrant hereby undertakes:
1. To file during any period in which offers and sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement; and
II-6
<PAGE> 182
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement.
2. That for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
3. To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(h) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment to the Registration Statement any opinion of tax
counsel with respect to the tax consequences of the transactions contemplated by
the Registration Statement that is delivered to the Registrant at or prior to
the closing of such transactions.
II-7
<PAGE> 183
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Minneapolis, State of
Minnesota, on December 27, 1996.
GENERAL MILLS, INC.
By: /s/ SIRI S. MARSHALL
------------------------------------
Siri S. Marshall
Senior Vice President, General
Counsel and Secretary
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------ -----------------------------
<C> <S> <C>
Chairman of the Board and
- ------------------------------ Chief Executive Officer
Stephen W. Sanger
Director
- ------------------------------
Richard M. Bressler
Director
- ------------------------------
Livio D. DeSimone
Director
- ------------------------------
William T. Esrey
Director, President
- ------------------------------
Charles W. Gaillard
Director
- ------------------------------
Judith Richards Hope
Director
- ------------------------------
Kenneth A. Macke
Director
- ------------------------------
Michael D. Rose
Director
- ------------------------------
A. Michael Spence
Director
- ------------------------------
Dorothy A. Terrell
Director, Vice Chairman
- ------------------------------ (Principal Financial
Raymond G. Viault Officer)
Director
- ------------------------------
C. Angus Wurtele
/s/ KENNETH L. THOME Senior Vice President, December 27, 1996
- ------------------------------ Financial Operations
Kenneth L. Thome (Principal Accounting
Officer)
/s/ SIRI S. MARSHALL
------------------------------
Siri S. Marshall
Attorney-in-fact
December 27, 1996
</TABLE>
II-8
<PAGE> 184
EXHIBIT INDEX
Exhibits required by S-K item 601:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------ ------------------------------------------------------------------------------------
<C> <S>
2.1 Agreement and Plan of Merger, dated as of August 13, 1996 and amended as of October
25, 1996, by and among Ralcorp Holdings, Inc. ("Ralcorp"), the Registrant and
General Mills Missouri, Inc. ("General Mills Missouri"), included as Annex A in the
Proxy Statement/ Prospectus included as part of this Registration Statement. The
Registrant agrees to furnish supplementally a copy of any omitted exhibit or
schedule to the Commission upon request.
2.2 Form of Reorganization Agreement by and among Ralcorp, New Ralcorp Holdings, Inc.
("New Ralcorp"), Ralston Foods, Inc. ("Foods"), Chex Inc. ("Branded Subsidiary") and
the Registrant, included as Annex B in the Proxy Statement/Prospectus included as
part of this Registration Statement. The Registrant agrees to furnish supplementally
a copy of any omitted exhibit or schedule to the Commission upon request.
2.3 Form of Tax Sharing Agreement between Ralcorp and New Ralcorp. The Registrant agrees
to furnish supplementally a copy of any omitted exhibit or schedule to the
Commission upon request.
2.4 Form of Transition Services -- Supply Agreement between Ralcorp and New Ralcorp. The
Registrant agrees to furnish supplementally a copy of any omitted exhibit or
schedule to the Commission upon request.
2.5 Form of Technology Agreement by and among Ralcorp, New Ralcorp and the Branded
Subsidiary. The Registrant agrees to furnish supplementally a copy of any omitted
exhibit or schedule to the Commission upon request.
2.6 Form of Trademark Agreement by and among Ralcorp, New Ralcorp and the Branded
Subsidiary. The Registrant agrees to furnish supplementally a copy of any omitted
exhibit or schedule to the Commission upon request.
3.1 Copy of Registrant's Restated Certificate of Incorporation, as amended to date
(incorporated herein by reference to Exhibit 3.1 to Registrant's Annual Report on
Form 10-K for the fiscal year ended May 28, 1995).
3.2 Copy of Registrant's By-Laws, as amended to date (incorporated herein by reference
to Exhibit 3 to Registrant's Report on Form 8-K dated December 11, 1995).
4.1 Copy of Indenture between Registrant and Continental Illinois National Bank and
Trust Company of Chicago, as amended to date by Supplemental Indentures Nos. 1
through 8 (incorporated herein by reference to Exhibit 4 to Registrant's Annual
Report on Form 10-K for the fiscal year ended May 31, 1992 and to Exhibit 4(b) to
Registrant's Current Report on Form 8-K filed January 8, 1993).
4.2 Copy of Rights Agreement dated as of December 11, 1995 between Registrant and
Norwest Bank Minnesota, N.A. (incorporated herein by reference to Exhibit 1 to
Registrant's Report on Form 8-K dated December 11, 1995).
4.3 Copy of Indenture between Registrant and First Trust of Illinois, National
Association dated February 1, 1996 (incorporated herein by reference to Exhibit 4.1
to Registrant's Registration Statement on Form S-3 effective February 23, 1996).
5.1 Opinion of Wachtell, Lipton, Rosen & Katz as to the legality of the shares being
issued.
8.1 Opinion of Wachtell, Lipton, Rosen & Katz as to certain tax matters.
8.2 Opinion of Bryan Cave LLP as to certain tax matters.
10.1 Copy of Stock Option and Long-Term Incentive Plan of 1988, as amended to date
(incorporated herein by reference to Exhibit 10.1 to Registrant's Annual Report on
Form 10-K for the fiscal year ended May 29, 1994).
</TABLE>
II-9
<PAGE> 185
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------ ------------------------------------------------------------------------------------
<C> <S>
10.2 Copy of Stock Option and Long-Term Incentive Plan of 1984, as amended to date
(incorporated herein by reference to Exhibit 10.2 to Registrant's Annual Report on
Form 10-K for the fiscal year ended May 29, 1994).
10.3 Distribution Agreement with Darden Restaurants, Inc. dated May 12, 1995
(incorporated herein by reference to Exhibit 2 to Registrant's Report on Form 8-K
dated May 28, 1995).
10.4 Copy of Executive Incentive Plan, as amended to date (incorporated herein by
reference to Appendix B to Registrant's Proxy Statement pursuant to Section 14(a) of
the Securities Exchange Act of 1934, dated August 22, 1996).
10.5 Copy of Management Continuity Agreement (incorporated herein by reference to Exhibit
4 to Registrant's Report on Form 8-K dated December 11, 1995).
10.6 Copy of Supplemental Retirement Plan, as amended to date (incorporated herein by
reference to Exhibit 10.6 to Registrant's Annual Report on Form 10-K for the fiscal
year ended May 29, 1994).
10.7 Copy of Executive Survivor Income Plan, as amended to date (incorporated herein by
reference to Exhibit 10.7 to Registrant's Annual Report on Form 10-K for the fiscal
year ended May 26, 1996).
10.8 Copy of Executive Health Plan, as amended to date (incorporated herein by reference
to Exhibit 10.8 to Registrant's Annual Report on Form 10-K for the fiscal year ended
May 26, 1996).
10.9 Copy of Supplemental Savings Plan, as amended to date (incorporated herein by
reference to Exhibit 10.9 to Registrant's Annual Report on Form 10-K for the fiscal
year ended May 29, 1994).
10.10 Copy of 1996 Compensation Plan for Non-Employee Directors (incorporated herein by
reference to Appendix C to Registrant's Proxy Statement pursuant to Section 14(a) of
the Securities Exchange Act of 1934, dated August 22, 1996).
10.11 Copy of General Mills, Inc. 1995 Salary Replacement Stock Option Plan (incorporated
herein by reference to Exhibit 10.11 to Registrant's Annual Report on Form 10-K for
the fiscal year ended May 26, 1996).
10.12 Copy of Deferred Compensation Plan, as amended to date (incorporated herein by
reference to Exhibit 10.12 to Registrant's Annual Report on Form 10-K for the fiscal
year ended May 28, 1995).
10.13 Copy of Supplemental Benefits Trust Agreement dated February 9, 1987, as amended and
restated as of September 26, 1988 (incorporated herein by reference to Exhibit 10.13
to Registrant's Annual Report on Form 10-K for the fiscal year ended May 29, 1994).
10.14 Copy of Supplemental Benefits Trust Agreement dated September 26, 1988 (incorporated
herein by reference to Exhibit 10.14 to Registrant's Annual Report on Form 10-K for
the fiscal year ended May 29, 1994).
10.15 Copy of Agreements dated November 29, 1989 by and between General Mills, Inc. and
Nestle, S.A. (incorporated herein by reference to Exhibit 10.15 to Registrant's
Annual Report on Form 10-K for the fiscal year ended May 28, 1995).
10.16 Copy of Protocol and Addendum No. 1 to Protocol of Cereal Partners Worldwide
(incorporated herein by reference to Exhibit 10.16 to Registrant's Annual Report on
Form 10-K for the fiscal year ended May 26, 1996).
10.17 Copy of 1990 Salary Replacement Stock Option Plan, as amended to date (incorporated
herein by reference to Exhibit 10.18 to Registrant's Annual Report on Form 10-K for
the fiscal year ended May 29, 1994).
</TABLE>
II-10
<PAGE> 186
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------ ------------------------------------------------------------------------------------
<C> <S>
10.18 Copy of Addendum No. 2 dated March 16, 1993 to Protocol of Cereal Partners Worldwide
(incorporated herein by reference to Exhibit 10.19 to Registrant's Annual Report on
Form 10-K for the fiscal year ended May 30, 1993).
10.19 Copy of Agreement dated July 31, 1992 by and between General Mills, Inc. and
PepsiCo, Inc. (incorporated herein by reference to Exhibit 10.20 to Registrant's
Annual Report on Form 10-K for the fiscal year ended May 30, 1993).
10.20 Copy of Stock Option and Long-Term Incentive Plan of 1993, as amended to date
(incorporated herein by reference to Exhibit 10.21 to Registrant's Annual Report on
Form 10-K for the fiscal year ended May 29, 1994).
10.21 Copy of Standstill Agreement with CPC International, Inc. dated October 17, 1994
(incorporated herein by reference to Exhibit 10(a) to Registrant's Quarterly Report
on Form 10-Q for the period ended February 26, 1995).
10.22 Copy of Addendum No. 3 effective as of March 15, 1993 to Protocol of Cereal Partners
Worldwide (incorporated herein by reference to Exhibit 10(b) to Registrant's
Quarterly Report on Form 10-Q for the period ended February 26, 1995).
11 Statement of Computation of Earnings per Share (incorporated herein by reference to
Exhibit 11 of Registrant's Quarterly Report on Form 10-Q for the quarterly period
ended August 25, 1996).
12 Statement of Ratio of Earnings to Fixed Charges (incorporated herein by reference to
Exhibit 12 of Registrant's Quarterly Report on Form 10-Q for the quarterly period
ended August 25, 1996).
21 List of Subsidiaries of General Mills, Inc. (incorporated herein by reference to
Exhibit 21 to Registrant's Annual Report on Form 10-K for the fiscal year ended May
26, 1996).
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Price Waterhouse LLP.
23.3 Consent of Wachtell, Lipton, Rosen & Katz (included in Exhibit 5.1).
23.4 Consent of Wachtell, Lipton, Rosen & Katz (included in Exhibit 8.1).
23.5 Consent of Bryan Cave LLP (included in Exhibit 8.2).
24.1 Power of Attorney.
24.2 Power of Attorney.
24.3 Power of Attorney.
24.4 Power of Attorney.
24.5 Power of Attorney.
24.6 Power of Attorney.
24.7 Power of Attorney.
24.8 Power of Attorney.
24.9 Power of Attorney.
24.10 Power of Attorney.
24.11 Power of Attorney.
24.12 Power of Attorney.
27 Financial Data Schedule (incorporated herein by reference to Exhibit 27 to
Registrant's Annual Report on Form 10-K for the fiscal year ended May 26, 1996).
</TABLE>
II-11
<PAGE> 1
EXHIBIT 2.3
TAX SHARING AGREEMENT
BETWEEN
RALCORP HOLDINGS, INC.
AND
NEW RALCORP
THIS AGREEMENT (the "Agreement") dated as of _______________, 199__, is made by
and between Ralcorp Holdings, Inc. ("Ralcorp"), a Missouri corporation, and New
Ralcorp Holdings, Inc., a Missouri Corporation ("New Ralcorp"), and each of the
parties listed on the signature page.
WHEREAS, Ralcorp is the common parent of an affiliated group of domestic
corporations, including New Ralcorp (the successor to Ralston Foods, Inc.), for
which a consolidated Federal Income Tax Return is filed;
WHEREAS, Ralcorp proposes to distribute to its shareholders all of its stock in
New Ralcorp (the "Distribution") under the Reorganization Agreement among
Ralcorp, New Ralcorp, Branded Subsidiary and Acquiror dated _________________,
199__, subject to receipt of a favorable ruling from the Internal Revenue
Service or an opinion of counsel that the Distribution qualifies for tax-free
treatment under section 355 of the Code;
WHEREAS, following the Distribution, New Ralcorp will become the common parent
of an affiliated group of domestic corporations for which a consolidated
Federal Income Tax Return will be filed;
WHEREAS, New Ralcorp and its Affiliates will exist independent of Ralcorp and
its Affiliates after the Distribution Date; and
WHEREAS, the parties desire to set forth their agreement relating to their
respective obligations, responsibilities, rights and entitlements with respect
to their Federal, state and local Tax liabilities, as well as certain other Tax
matters, attributable to periods before and after the Distribution;
NOW, THEREFORE, in consideration of the premises and of the agreements herein
set forth, Ralcorp (on its own behalf and on behalf of its Affiliates) and New
Ralcorp (on its own behalf and on behalf of its Affiliates) hereby agree as
follows:
<PAGE> 2
ARTICLE I. GENERAL PROVISIONS
SEC. 1 DEFINITIONS
(a) As used in this Agreement:
"Affiliate" shall have the meaning assigned to it in the Reorganization
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated State Tax" means, with respect to each state, any Income Tax
payable to any such state in which New Ralcorp or any of its Affiliates is or
may be liable for such Tax on a consolidated, combined or unitary basis with
Ralcorp or any of its Affiliates.
"Distribution Date" means the date that the shares of New Ralcorp are
distributed to the Ralcorp shareholders.
"Federal Tax" means any United States net income, environmental, excise,
alternative or add-on minimum Tax.
"Income Taxes" means any Federal Tax, state or local income or franchise tax
or other tax measured by income and all other taxes reported on returns which
include federal, state or local income or franchise taxes or other taxes
measured by income, together with any interest, penalties or additions to tax
imposed with respect thereto, but excluding therefrom any taxes imposed by any
foreign government or subdivision thereof.
"Income Tax Return" means any federal, state or local consolidated or
separate Tax Return which reports Income Taxes of Ralcorp, New Ralcorp or any
Affiliate thereof.
"Other Taxes" means Taxes other than Income Taxes.
"Post-Distribution Tax Period" means a taxable year or other taxable period
beginning after the Distribution Date, including the portion of any Straddle
Period occurring subsequent to the Distribution Date.
"Pre-Distribution Tax Period" means any taxable year or other taxable period
beginning before, and ending on or before, the Distribution Date, including the
portion of any Straddle Period occurring prior to the Distribution Date.
"Ralcorp Consolidated Group" means, with respect to any taxable period, the
corporations which are members of the affiliated group of corporations of which
Ralcorp is the common parent (within the meaning of section 1504 of the Code).
2
<PAGE> 3
"Straddle Period" means any taxable period that includes (but does not end
on) the Distribution Date.
"Tax" means (A) any net income, alternative or add-on minimum, gross income,
gross receipts, sales, use, ad valorem, franchise, profits, license,
withholding, payroll, employment, excise, transfer, recording, severance,
stamp, occupation, premium, property, environmental, custom duty, or other tax,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest and any penalty, addition to tax or additional
amount imposed by any governmental authority responsible for the imposition of
any such domestic or foreign tax (a "Taxing Authority"); and (B) any liability
of Ralcorp, New Ralcorp or any Affiliate (or, in each case, any successor in
interest thereto by merger or otherwise), as the case may be, for (x) the
payment of any amounts of the type described in clause (A) for any taxable
period resulting from the application of Treasury Regulation section 1.1502-6
or, in the case of any Consolidated State Tax, any similar provision applicable
under State law or (y) for any amount of the type described in (A) under any
Tax sharing, Tax indemnity or other such agreement.
"Tax Return" means all reports, estimates, extensions, information
statements and returns relating to or required by law to be filed by either
Ralcorp and its Affiliates or New Ralcorp and its Affiliates in connection with
any Taxes and in the case of consolidated or combined tax returns, by Ralcorp
on behalf of New Ralcorp and its Affiliates, and all information returns (e.g.,
Form W-2, Form 1099) and reports relating to Taxes and employee benefit plans
of either Ralcorp and its Affiliates or New Ralcorp and its Affiliates.
(b) Any term used in this Agreement which is not defined in this Agreement
shall, to the extent the context requires, have the meaning assigned to it in
the Reorganization Agreement, Code or applicable Treasury Regulations
thereunder, as the case may be.
SEC. 2. RESPONSIBILITIES
Except as otherwise provided herein, New Ralcorp is and will be liable for all
Taxes of (1) New Ralcorp or any New Ralcorp Affiliate for any Pre- or
Post-Distribution Tax Period and (2) Ralcorp or any Ralcorp Affiliate for any
Pre-Distribution Tax Period, including any such liabilities
resulting from an audit or other adjustment to previously filed Tax Returns.
Ralcorp will be liable for all Taxes of Ralcorp or any Ralcorp Affiliate
attributable to any Post-Distribution Tax Period.
In the case of any Straddle Period, Taxes shall be allocated to the
Pre-Distribution Tax Period and the Post-Distribution Tax Period in accordance
with the following principles:
(a) periodic Taxes that are not based on income or receipts (e.g., property
Taxes) for the relevant portion of any Straddle Period shall be computed
based upon
3
<PAGE> 4
the ratio of the number of days in the Pre-Distribution Date Tax Period
or Post-Distribution Date Tax Period, as the case may be, and the number
of days in the entire Tax period; and
(b) Taxes for the Pre-Distribution Date Tax Period or Post-Distribution Date
Tax Period, as the case may be (other than Taxes described in clause
(a)) shall be computed as if such taxable period ended as of the close
of business on the Distribution Date, and, in the case of any Taxes
attributable to the ownership of any equity interest in any partnership
or other "flowthrough" entity (other than its Subsidiaries), as if a
taxable period of such partnership or the "flowthrough" entity ended as
of the close of business on the Distribution Date.
SEC. 3. TAX ADJUSTMENTS
New Ralcorp and Ralcorp recognize that since the Distribution Date will occur
on some date during the fiscal year ending _________________, 199_ , and
certain Tax Returns will cover a period which includes the Distribution Date,
there will be certain income and expense items of New Ralcorp and its
Affiliates and Ralcorp and its Affiliates which may require adjustments to be
made for Tax accounting and Tax Return preparation between the portion of the
fiscal year beginning October 1, 199__, and ending with the Distribution Date
and the portion of the fiscal year beginning the day after the Distribution
Date and ending September 30, 199__. These required Tax adjustments may impact
the amount of Taxes due on certain returns and the applicable payment dates to
various government authorities for any type of Tax covered by this Agreement.
Recognizing the extended return preparation periods, and the time needed to
determine such final tax adjustments between New Ralcorp and Ralcorp, the
parties agree that such tax adjustments shall be made and given effect separate
and apart from other adjustments under the Reorganization Agreement as provided
therein. Notice and documentation of such adjustments shall be provided the
other party within 30 days of determination. Any required payment resulting
from such tax adjustments from one party to the other shall be made within
thirty (30) days of the receipt of written request therefor.
SEC. 4. MUTUAL COOPERATION
New Ralcorp and Ralcorp will, and will cause each of their respective
Affiliates to, cooperate with each other in filing any tax return or consent
contemplated by this Agreement and to take such action as the other party may
reasonably request, including but not limited to the following:
(a) provide data for the preparation of Tax Returns, including schedules, and
make elections that may be required by the other party;
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(b) provide required documents and data and cooperate in audits or
investigations of Tax Returns and execute appropriate powers of attorney
in favor of the other party and/or its agents;
(c) file protests or otherwise contest proposed or asserted tax deficiencies,
including filing petitions for redetermination or prosecuting actions for
refund in court and pursuing the appeal of such actions;
(d) take any of the actions of the type described in Treasury Regulation
section 1.1502-77(a) (describing the scope of the agency of the common
parent of a group of affiliated corporations); and
(e) file requests for the extension of time within which to file Tax Returns.
ARTICLE II. FEDERAL INCOME TAXES
SEC. 1. FEDERAL RETURNS
(a) New Ralcorp will join, and will cause each eligible New Ralcorp Affiliate
to join, in the consolidated Federal Tax Income Tax Return to be filed by
Ralcorp for all Pre-Distribution Tax Periods. Ralcorp will not elect to
file separate Federal Tax Income Tax Returns for any such periods;
(b) New Ralcorp hereby designates, and New Ralcorp agrees to cause each of the
New Ralcorp Affiliates to designate, Ralcorp irrevocably as its agent for
the purpose of taking any and all action necessary or incidental to the
filing of consolidated Federal Tax Income Tax Returns, including the
filing of Internal Revenue Service Form 1122 (consent to be included in
the consolidated Federal Tax Return), and New Ralcorp agrees to deliver,
and to cause each of the New Ralcorp Affiliates to deliver, to Ralcorp
executed copies of said Form 1122, if required. New Ralcorp further
agrees to furnish, and to cause each of the New Ralcorp Affiliates to
furnish, Ralcorp with any and all information requested by Ralcorp in
order to carry out the provisions of this Agreement without any charge to
Ralcorp. Ralcorp agrees to furnish to New Ralcorp any and all information
requested by New Ralcorp in order to carry out the provisions of this
Agreement without any charge to New Ralcorp.
(c) New Ralcorp shall prepare, at its expense, and Ralcorp shall review, all
Federal Tax Income Tax Returns of the Ralcorp Consolidated Group in
respect of any Pre-Distribution Period.
(d) Ralcorp, as the common parent of the Ralcorp Consolidated Group, shall be
responsible for filing all Federal Tax Income Tax Returns required to be
filed by or on behalf of Ralcorp or a Ralcorp Affiliate in respect of any
Post-Distribution Tax Period.
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SEC. 2. FEDERAL TAX LIABILITIES
(a) Except as otherwise provided in this Agreement, New Ralcorp and each New
Ralcorp Affiliate shall be liable for, and shall indemnify and hold
Ralcorp and each Ralcorp Affiliate harmless against, any and all
Indemnifiable Losses with respect to Federal Taxes attributable to the
Ralcorp Consolidated Group or any other consolidated group of which New
Ralcorp, Ralcorp or any of their respective Affiliates are or were members
in respect of any Pre-Distribution Tax Period and New Ralcorp shall be
entitled to all refunds of any such Federal Taxes in respect of such
Pre-Distribution Tax Period.
(b) Except as otherwise provided in this Agreement, Ralcorp and each Ralcorp
Affiliate shall be liable for, and shall indemnify and hold New Ralcorp
and each New Ralcorp Affiliate harmless against, any and all Indemnifiable
Losses with respect to Federal Taxes, in respect of any Post-Distribution
Tax Period, attributable to the Ralcorp Consolidated Group or any other
consolidated group of which Ralcorp or any of its Affiliates are or will
be members.
(c) If, as a result of operations in a Post-Distribution Tax Period, New
Ralcorp or any of its Affiliates shall have, for Federal Tax purposes, any
losses or credits which may be carried back to a Pre-Distribution Tax
Period, New Ralcorp shall be entitled to any Tax refunds, as a result of
such carrybacks and any Tax refunds (plus interest) received by Ralcorp or
its Affiliates as a result of such carrybacks shall be remitted to New
Ralcorp. Ralcorp agrees to cooperate with New Ralcorp to obtain such Tax
refunds and New Ralcorp agrees to reimburse Ralcorp for its reasonable
expenses related thereto. In the event any such refund is disallowed to
any extent, such refund (including interest and penalties) shall be
remitted to Ralcorp.
(d) If there are timing differences reflected in the Federal Tax Income Tax
Return of the Ralcorp Consolidated Group as filed for either the taxable
year ended September 30, 199__ or the taxable period ending on the
Distribution Date but that are not included in the deferred income tax
balance on the Closing Date Balance Sheet, and such timing differences
reverse in a Ralcorp or Affiliate Income Tax Returns in a
Post-Distribution Tax Period, then notice and documentation of such
adjustments shall be provided the other party within thirty (30) days of
determination, and
(i) If such timing difference reversal results in an actual increase of
Federal Tax liability of Ralcorp for such subsequent periods, New Ralcorp
shall pay Ralcorp the amount of such liability when due or within thirty
(30) days of the receipt of written request therefore, whichever is later;
or
(ii) If such timing difference reversal results in an actual diminution of
Federal Tax liability of Ralcorp for such subsequent periods, Ralcorp shall
pay New Ralcorp
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the amount of such actual savings within thirty (30) days of written notice
as provided herein.
(e) Anything in this Agreement to the contrary notwithstanding New Ralcorp and
each New Ralcorp Affiliate shall be liable for and shall indemnify and
hold Ralcorp and each Ralcorp Affiliate harmless against any and all
Indemnifiable Losses (as defined in the Reorganization Agreement) with
respect to Taxes directly arising out of or directly resulting from any
transactions set forth in the Reorganization Agreement, the other
Ancillary Agreements or the Merger Agreement unless such Tax liability
arises as a result of a breach of Ralcorp of its obligations under Section
10.2 of the Reorganization Agreement.
SEC. 3. FEDERAL TAX ADJUSTMENTS
(a) New Ralcorp's liability under Section 2 hereto for all Taxes for any
Pre-Distribution Tax Period shall be adjusted consistent with any
adjustments made by the Internal Revenue Service to the taxable income,
loss or tax credits of Ralcorp and its subsidiary. For purposes of this
Agreement, the term "tax credits" shall include, but shall not be limited
to, any business tax credit available under the Code.
(b) If the Internal Revenue Service shall make an adjustment to the
Consolidated Return of the Ralcorp Consolidated Group for any Pre-
Distribution Tax Period, and such adjustment, consistently applied would
require Ralcorp or a Ralcorp Affiliate to make a corresponding adjustment
to their Federal Tax Income Tax Returns for any Post-Distribution Period,
then
(i) if such corresponding adjustment in the Federal Tax Income Tax
Returns of Ralcorp or any of its Affiliates results in an increase of
Federal Tax liability for such Post-Distribution Tax Period, New
Ralcorp shall pay Ralcorp the amount of such liability, when due,
including any applicable interest, penalties or additions to tax.
Any payment by New Ralcorp to Ralcorp of a refund or additional tax
credit shall be made within ninety (90) days after such adjustment; or
(ii) if such corresponding adjustment in the Federal Tax Income Tax
Returns of Ralcorp or any of its Affiliates would result in an actual
diminution of Federal Tax liability for such Post-Distribution Period,
whether or not an actual amended return is filed, Ralcorp shall pay
New Ralcorp the amount of such actual savings plus interest either (a)
when such refund and related interest are received and required to be
remitted within the period provided in this Agreement, or (b) within
ninety (90) days of written notice by New Ralcorp to Ralcorp that
corresponding adjustments should be made, if an amended return is not
filed.
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(c) Any interest payment shall be calculated from the same date and at the
rate used by the Internal Revenue Service in computing the interest
payable by it or to it. Unless otherwise provided, all payments required
to be made under this Agreement from one party to another shall be made
promptly after the event which gives rise to the requirement for payment
occurs.
SEC. 4. CONTEST OF FEDERAL ADJUSTMENTS
Any Federal Tax deficiencies or refund claims which arise with respect to the
consolidated Federal Tax liability of the New Ralcorp Consolidated Group and
which are attributable to any Pre-Distribution Period shall, be defended or
prosecuted by New Ralcorp at its own cost and expense and with counsel and
accountants of its own selection; provided, however, Ralcorp may participate in
any such proceeding at its own cost and expense (in either event such cost or
expense not to include the amount of any payment of any tax claim, interest or
penalties, or of any compromise settlement or other disposition thereof). New
Ralcorp shall have control of any such proceedings, but New Ralcorp shall not
compromise or settle any deficiency of Federal Tax which may reasonably be
expected to affect Ralcorp or any Ralcorp Affiliate without the prior written
consent of Ralcorp, which consent shall not be unreasonably withheld. New
Ralcorp and Ralcorp and their respective Affiliates also agree to execute and
file such Treasury Department waivers, consents, or other forms, Tax Court or
other petitions, refund claims, complaints, powers of attorney and other
documents needed from time to time in order to defend, prosecute or resolve the
Federal Tax deficiencies or refund claims which are the subject of this Article
II, Section 4. Ralcorp shall have a reasonable opportunity to review and
comment upon any documents to be submitted to a court or governmental agency.
ARTICLE III. STATE AND LOCAL INCOME TAXES
SEC. 1. STATE AND LOCAL RETURNS
(a) Ralcorp and the Ralcorp Affiliates have filed separately, or have been
included in combined or consolidated Income Tax Returns, with New Ralcorp
and various New Ralcorp Affiliates in the various states of the United
States and in certain other local jurisdictions in which they carry on
their trade or businesses.
(b) Ralcorp will file, and New Ralcorp and the New Ralcorp Affiliates consent
to the filing of, all combined or consolidated state and local Income Tax
Returns which include the businesses of New Ralcorp and the New Ralcorp
Affiliates for any Pre-Distribution Tax Period. Such combined or
consolidated state and local Income Tax Returns shall be prepared by New
Ralcorp, unless such Income Tax Returns are for a Straddle Period, in
which case Ralcorp shall prepare the Income Tax Returns subject to the
review and approval of New Ralcorp.
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(c) Ralcorp will be responsible for filing combined or consolidated state or
local Income Tax Returns for Ralcorp and the Ralcorp Affiliates in any
state or local jurisdiction in which such a return is required for any
Post-Distribution Tax Period.
(d) New Ralcorp and its Affiliates will be responsible for filing the separate
state or local Income Tax Returns for New Ralcorp and each New Ralcorp
Affiliate in each state or local jurisdiction in which such a return is
required for any Pre- or Post-Distribution Tax Period.
SEC. 2. STATE AND LOCAL TAX LIABILITY
(a) Except as otherwise provided herein, New Ralcorp shall be responsible for
paying any amount of state and local Income Tax attributable to Ralcorp or
its Affiliates for any Pre-Distribution Tax Period and to New Ralcorp or
its Affiliates for any Pre-Distribution Tax Period or Post-Distribution
Tax Period. Ralcorp or the Ralcorp Affiliates shall be responsible for
paying any state or local Income Tax attributable to Ralcorp or a Ralcorp
Affiliate in respect of any Post-Distribution Tax Period.
(b) If there are timing differences reflected in the state and local Income
Tax Returns of the Ralcorp Consolidated Group as filed for a Pre-
Distribution Tax Period but which are not included in the deferred income
tax balance on the Closing Date Balance Sheet, and such timing differences
should reverse in Ralcorp Consolidated Group state and local Income Tax
Returns in a Post-Distribution Tax Period, then notice and documentation
of such adjustments shall be provided the other party within thirty (30)
days of determination, and
(i) If such timing difference reversal results in an actual increase of
state and local Income Tax liability of Ralcorp for such subsequent
periods, New Ralcorp shall pay Ralcorp the amount of such liability
when due or within thirty (30) days of the receipt of written request
therefore, whichever is later; or
(ii) If such timing difference reversal results in an actual diminution of
state and local Income Tax liability of Ralcorp for such subsequent
periods, Ralcorp shall pay New Ralcorp the amount of such actual
savings within thirty (30) days of written notice as provided herein.
SEC. 3. STATE TAX ADJUSTMENTS
If a state or local Taxing Authority makes an adjustment for an item reported
on a state or local Income Tax Return of Ralcorp or a Ralcorp Affiliate
attributable to a Pre-Distribution Tax Period (including adjustments to tax
basis determination or tax accounting methods with respect to its property and
accounts included in and carried forward from the Distribution Date), any
resulting increase or decrease in the Tax liability of Ralcorp and/or a Ralcorp
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Affiliate shall be accounted for between New Ralcorp and Ralcorp in accordance
with the principles and provisions of Article II, Section 3(b) of this
Agreement.
SEC. 4. STATE TAX REFUNDS
(a) If a state or local Income Tax adjustment for an item reported on a state
or local Income Tax Return results in a refund in a Pre- Distribution Tax
Period, that refund will be for the account of New Ralcorp in accordance
with the principles and provisions of this Agreement on payments under
Article III, Sections 2 and 3.
(b) If, as a result of operations during periods commencing after the
Distribution Date, New Ralcorp or a New Ralcorp Affiliate shall have, for
state or local Income Tax purposes, any losses or credits which may be
carried back to a Pre-Distribution Tax Period, New Ralcorp shall be
entitled to any Tax refunds resulting from such carrybacks and any Tax
refunds (plus interest) received by Ralcorp or a Ralcorp Affiliate
resulting from such carrybacks shall be remitted to New Ralcorp. Ralcorp
agrees to cooperate with New Ralcorp to obtain such refunds and New
Ralcorp agrees to reimburse Ralcorp for expenses related thereto. In the
event any such refund is disallowed, to any extent, such refund (including
interest and penalties) shall be remitted to Ralcorp.
ARTICLE IV. OTHER TAXES
SEC. 1. OTHER TAXES
New Ralcorp shall be liable for all Other Taxes and Tax Returns (other than
those relating to federal, state and local Income Taxes, the treatment of which
has been set forth above) and for all foreign taxes attributable to Ralcorp or
a Ralcorp Affiliate or New Ralcorp or a New Ralcorp Affiliate in respect of any
Pre-Distribution Tax Period. Ralcorp shall be liable for all such Other Taxes
attributable to Ralcorp or a Ralcorp Affiliate in respect of any
Post-Distribution Tax Period.
SEC. 2. TRANSFER TAXES
New Ralcorp shall pay any and all sales, use, real property, real property
gains, transfer, mortgage recording or stock transfer or stamp taxes or similar
charges directly resulting from the Distribution, the Internal Spinoff, or the
transactions set forth in the Reorganization Agreement or any other Ancillary
Agreement imposed by any federal, state or local authorities.
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ARTICLE V. STATE AND LOCAL CONTESTS OF ADJUSTMENTS
SEC. 1. CONTESTS OF ADJUSTMENTS
Any state or local Income Tax or Other Tax liabilities which would result in a
payment under Articles III or IV shall be defended (or prosecuted as a refund
action) by Ralcorp or New Ralcorp, depending on which party is responsible for
such Tax liability under this Agreement, at its own cost and expense and with
counsel and accountants of its own selection. Ralcorp and New Ralcorp agree to
cooperate fully in such defense (or prosecution) and provide promptly such
executed documents as the other party may require from time to time in order to
defend (or prosecute) the tax deficiencies or refund claims which are the
subject of Articles III or IV. Neither party shall compromise or settle any
deficiency of tax which would result in a payment under Article III or IV
without the prior written consent of the other, which consent shall not be
unreasonably withheld.
SEC. 2. PAYMENTS
New Ralcorp agrees to pay to Ralcorp and Ralcorp agrees to pay to New Ralcorp
as the case may be, any amounts determined to be for the account of Ralcorp or
New Ralcorp as finally determined under Articles III or IV. Such payment shall
be made within thirty (30) days after the final adjustment giving rise to such
payment. Any interest payment shall be calculated from the same date and at
the same rate used by the applicable state, local or foreign tax authority in
computing the interest payable by it or to it.
ARTICLE VI. DISPUTE RESOLUTION
For the purposes of this Agreement, all computations or recomputations of
federal, state, local or foreign income and franchise tax liability, and all
computations or recomputations of any amount or any payment (including, but not
limited to, computations of the amount of the tax liability, any loss or credit
or deduction, statutory tax rate for a year, interest payments, and
adjustments) and all determinations of payments or repayments, or determination
of any other nature required to be made pursuant to this Agreement, shall be
based on the assumptions and conclusions of the party making the computations.
If either New Ralcorp or Ralcorp objects thereto in writing, addressed to the
other party, the provisions of Article XII in the Reorganization Agreement
between the parties shall be applicable to resolve any issues under this Tax
Sharing Agreement.
ARTICLE VII. MISCELLANEOUS PROVISIONS
SEC. 1. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Missouri and shall be binding on the
successors and assigns of the parties hereto.
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SEC. 2. ENTIRE AGREEMENT. Unless specified otherwise, this Agreement contains
the entire agreement between the parties hereto with respect to the subject
matter hereof and supersedes all prior written agreements, memoranda,
negotiations and oral understandings, if any.
SEC. 3. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but which together
shall constitute one and the same instrument.
SECTION 4. NOTICES. All notices, demands, claims, or other communications
under this Agreement shall be in writing and shall be deemed to have been given
upon the delivery or mailing thereof, as the case may be, if delivered
personally or sent by certified mail, return receipt requested, postage
prepaid, to the parties at the following addresses (or at such other address as
a party may specify by notice to the other):
If to Ralcorp, to:
General Mills
P.O. Box 1113
Number One General Mills Blvd.
Minneapolis, MN 55440
Attention: Ernest M. Harper, Jr.
cc: General Mills
P.O. Box 1113
Number One General Mills Blvd.
Minneapolis, MN 55440
Attention: Ivy S. Bernhardson
If to New Ralcorp, to:
New Ralcorp Holdings, Inc.
800 Market Streeet, Suite 2900
St. Louis, Missouri 63101
Attention:_______________________
SEC. 5. COSTS AND EXPENSES. Except as expressly set forth in this Agreement,
each party shall bear its own costs and expenses incurred pursuant to this
Agreement.
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SEC. 6. TERMINATION AND SURVIVAL. Notwithstanding anything in this Agreement
to the contrary, this Agreement shall remain in effect and its provisions shall
survive for the full period of all applicable statutes of limitation (giving
effect to any extension, waiver or mitigation thereof).
SEC. 7. SECTION HEADINGS. The section headings contained in this Agreement
are for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
SEC. 8. AMENDMENTS; NO WAIVERS.
(a) Any provision of this Agreement may be amended or waived if, and only
if, such amendment or waiver is in writing and signed, in the case of an
amendment, by Ralcorp and New Ralcorp or, in the case of a waiver, by
the party against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the date first above written.
NEW RALCORP HOLDINGS, INC.
BY_________________________________________________
[NAME]
[TITLE]
RALCORP HOLDINGS, INC.
BY_________________________________________________
[NAME]
[TITLE]
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BREMNER FINANCE, INC.
BY_________________________________________________
[NAME]
[TITLE]
BREMNER, INC.
BY_________________________________________________
[NAME]
[TITLE]
BEECH-NUT NUTRITION CORPORATION
BY_________________________________________________
[NAME]
[TITLE]
NATIONAL OATS COMPANY
BY_________________________________________________
[NAME]
[TITLE]
RALSTON RESORTS, INC.
BY_________________________________________________
[NAME]
[TITLE]
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EXHIBIT 2.4
TRANSITION SERVICES - SUPPLY AGREEMENT
BETWEEN
RALCORP HOLDINGS, INC.
AND
NEW RALCORP HOLDINGS, INC.
FOR
"CHEX" AND "COOKIE CRISP" CEREALS
<PAGE> 2
TABLE OF CONTENTS
TRANSITION SERVICES - SUPPLY AGREEMENT
PART I SUPPLY AGREEMENT
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SECTION 1 DEFINITIONS 1
SECTION 2 TERM 3
SECTION 3 PERFORMANCE 3
SECTION 4 PRODUCTION SYSTEM 4
SECTION 5 MATERIALS 4
SECTION 6 SAMPLING AND TESTING 4
SECTION 7 STORAGE 5
SECTION 8 REJECTION 5
SECTION 9 INSPECTION 6
SECTION 10 SUPPLY; QUANTITIES 7
SECTION 11 PAYMENT 8
SECTION 12 WARRANTIES AND COVENANTS 9
SECTION 13 INSURANCE 10
SECTION 14 INDEMNIFICATION 11
SECTION 15 CONFIDENTIAL INFORMATION 13
SECTION 16 INTELLECTUAL PROPERTY 14
SECTION 17 BREACH 14
SECTION 18 TERMINATION 15
SECTION 19 RALCORP PRICING 15
SECTION 20 RIGHTS RESERVED TO RALCORP 15
SECTION 21 ASSIGNMENT 16
SECTION 22 INTERPRETATIONS 16
SECTION 23 DISCRIMINATION 16
SECTION 24 ENTIRE AGREEMENT 16
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TABLE OF CONTENTS (CONT.)
TRANSITION SERVICES - SUPPLY AGREEMENT
SECTION 25 FORCE MAJEURE 16
SECTION 26 GOVERNING LAW 17
SECTION 27 INDEPENDENT CONTRACTOR 17
SECTION 28 NOTICE 17
SECTION 29 REGULATORY NOTICE 18
SECTION 30 SUCCESSORS AND ASSIGNS 18
SECTION 31 WAIVER 18
SECTION 32 AUTHORIZATION; VALIDITY 18
PART II TRANSITION SERVICES 18
SCHEDULE(S)
SCHEDULE - 1 22
SCHEDULE - 2 26
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TRANSITION SERVICES - SUPPLY AGREEMENT
This Transition Services - Supply Agreement ("Agreement"), dated as of
, 199 , is between RALCORP HOLDINGS, INC., a Missouri corporation
("Ralcorp"), and NEW RALCORP HOLDINGS, INC., a Missouri corporation ("Supplier")
on behalf of itself, its subsidiaries and Affiliates.
WHEREAS, Ralcorp and Supplier possess certain Technical Information for
the manufacture of ready-to-eat (RTE) cereals; and,
WHEREAS, Ralcorp wishes Supplier to produce certain of such products on
behalf of Ralcorp and to provide certain other transition services to Ralcorp;
and
WHEREAS, Supplier is willing to produce those products and provide those
other transition services specified herein.
In consideration of the mutual agreements, promises and covenants herein
contained, the parties hereby agree as follows:
PART I.
SUPPLY AGREEMENT
SECTION 1 DEFINITIONS
A. "FDCA" shall mean the Federal Food, Drug and Cosmetic Act,
including its amendments and regulations.
B. "Laws" shall mean the FDCA and all applicable state and municipal
statutes, rules and regulations substantially similar to the FDCA.
C. "Nonconforming Products" shall mean Products which do not comply
with the FDCA, other Laws or the Specifications referred to below.
D. "Plant" shall mean, for the production of rice-based cereal
packaged using the "CHEX" trademark (i.e. Rice Chex), Supplier's Battle
Creek, Michigan cereal plant, up to its
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capacity as defined in Schedule 1; and for cereal packaged using the
"COOKIE CRISP" trademark, Supplier's Lancaster, Ohio cereal plant, up to
its capacity as defined in Schedule 1; and Supplier's Sparks, Nevada
cereal plant, to the extent Supplier deems reasonably necessary to
utilize such plant for production of Cookie Crisp cereal in lieu of the
Lancaster, Ohio plant.
E. "Product(s)" shall mean Products Of The Type which have been
offered for sale in connection with any form of any CHEX or COOKIE
CRISP trademarks.
F. "Technical Information" shall mean all formulae, information
concerning manufacturing processes and know-how, quality control data,
test data and all other scientific and/or technical data and
information ("data") relating to the development, manufacture,
distribution, sale, or use of the Products and all proprietary rights
embodied therein and related thereto which is licensed by Ralcorp or
its Affiliates to Supplier or its Affiliates, or provided to Supplier
by Ralcorp or which may hereafter be developed by Ralcorp and provided
to Supplier by Ralcorp, whether provided in oral, written or other form
including, but not limited to, any patent or patent application,
formulation, software, product and packaging specifications, trade
secrets and know-how.
G. "Specifications" shall mean the formulas and specifications for the
Products and their production, processing and packaging, which shall
reflect the actual operating conditions and practices of Supplier as of
the date of this Agreement and as such may be amended from time to time
upon reasonable advance written notice by Ralcorp, and other
information relating to quality control, processing, packaging and
administrative procedures as the parties shall mutually agree upon
prior to Closing (the "Other Information"). The parties shall set
forth the terms of the Other Information as an Exhibit hereto (the
"Other Information Exhibit"). The Other Information Exhibit shall be
made a part hereof, and may be amended from time to time by written
agreement of the parties..
H. The term "Products Of The Type" shall mean the identical products
and all products substantially similar in form or in overall appearance
to such products, whether or not they are similar in flavor or are used
in association with other ingredients (e.g. raisins).
I. All other capitalized terms used but not otherwise defined herein
shall have the meanings ascribed thereto in the Reorganization
Agreement dated as of the date hereof, by and
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among Supplier, Ralcorp, Ralston Foods, Inc. ("Foods"), General Mills,
Inc. ("General Mills"), General Mills Missouri, Inc. ("General Mills
Missouri") and the Branded Subsidiary (the "Reorganization
Agreement").
SECTION 2 TERM
This Agreement shall commence immediately after the Closing Date (the
"Closing Date") of the Agreement and Plan of Merger by and among Ralcorp,
General Mills and General Mills Missouri, dated as of August 13, 1996 (as
amended on October ___, 1996, the "Merger Agreement").
This agreement shall expire, with respect to COOKIE CRISP, eighteen months
after the Closing Date; provided that Ralcorp may extend this Agreement,
with respect to COOKIE CRISP, for a second term not to exceed six (6)
months, by notice given not less than sixty (60) days prior to the
expiration of such initial term.
This Agreement shall expire, with respect to RICE CHEX, eighteen months
after the Closing Date.
SECTION 3 PERFORMANCE
A. General Understanding. Supplier agrees to use reasonable efforts
to produce the Products in accordance with the provisions of this
Agreement.
B. Performance. Supplier's performance hereunder, including its
production, packaging and labeling of Products, and handling and
storing ingredients and packaging materials, including stretch wrap,
if any, to be used in connection with Products produced on Ralcorp's
behalf ("Materials"), shall be in accordance with the terms of this
Agreement, including, without limitation, the Specifications. Ralcorp
reserves the right at any time to modify, delete or add to the
Specifications provided that Ralcorp allows Supplier reasonable time
in each instance to implement any changes necessitated by such
revisions in the Specifications so that Product(s) will remain in
compliance with such Specifications. If any such modification(s) as
approved by Supplier result(s) in additional costs to Supplier,
Supplier shall be entitled to a cost increase equal to the reasonable
additional costs resulting therefrom in accordance with Section 11
hereof. Such costs may include the costs of disposing of
Nonconforming Product if Supplier determines, in
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its reasonable discretion, that it will be unable, exercising reasonable
efforts, to consistently meet such revised Specifications, and notifies
Ralcorp accordingly. All Exhibits and Schedules attached hereto or
referred to herein are incorporated by reference herein and form part of
this Agreement.
SECTION 4 PRODUCTION SYSTEM
Supplier's Equipment. Supplier shall provide all equipment and personnel
necessary to produce, package and ship Products in accordance with the terms
hereof without any additional costs to Ralcorp beyond those incorporated
into the respective Product prices and/or rates as described in Section 11A.
SECTION 5 MATERIALS
Securing Materials and loss of yield shall be in accordance with Schedule 1
attached hereto.
SECTION 6 SAMPLING AND TESTING
A. Materials. Supplier shall inspect, sample, analyze and test all
Materials received by Supplier to be used to produce or package
Products in accordance with the Specifications. Any Materials which do
not comply with the requirements of the Specifications shall not be
used by Supplier for any reason in connection with the Products, and
Supplier shall immediately notify Ralcorp of all such nonconforming
Material(s) when such Material(s) were supplied by Ralcorp or purchased
on Supplier's behalf by Ralcorp. The parties shall provide Materials
in accordance with the terms set forth in Schedule 1.
B. Products. Supplier shall sample and test the Products in
accordance with the Specifications. Supplier shall also segregate for
testing by Ralcorp such quantities of packaged Products and Materials
as Ralcorp may from time to time reasonably request and Supplier shall,
at Ralcorp's expense, ship such packages and Materials to such
destinations as specified by Ralcorp.
C. Protection. Supplier shall exercise reasonable care in handling,
storing and protecting the Products and Materials intended for use in
the Products.
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SECTION 7 STORAGE
Supplier shall provide suitable Ralcorp approved storage and warehousing
space ("space") in accordance with Schedule 1.
SECTION 8 REJECTION
A. Supplier shall not knowingly ship any Nonconforming Products to
Ralcorp.
B. Nothing contained in this Agreement shall be deemed to obligate
Ralcorp to inspect any products purchased hereunder.
C. Without limiting any other rights available to Ralcorp with respect
to Nonconforming Products which are in violation of any Laws, unless
otherwise agreed by the parties, in the event that Supplier produces
any Nonconforming Products, Supplier shall promptly replace such
Products at no cost to Ralcorp (including any additional freight costs
incurred), except to the extent such nonconformance was as the result
of Ralcorp's actions, including but not limited to if such
nonconformance was attributable to Materials supplied by Ralcorp or
purchased on Supplier's behalf by Ralcorp. Replacement of
Nonconforming Products by Supplier at no cost to Ralcorp shall be
Ralcorp's sole remedy with respect to Nonconforming Products which are
not in violation of any Laws.
D. Nonconforming Products still within Supplier's possession shall be
destroyed or disposed of pursuant to instructions provided by Ralcorp.
Such disposal shall be at the expense of Supplier, except to the extent
such nonconformance was as the result of Ralcorp's actions, including
but not limited to if such nonconformance was attributable to Materials
supplied by Ralcorp or purchased on Supplier's behalf by Ralcorp. In
no event shall Supplier sell, distribute or ship any Nonconforming
Products in violation of Ralcorp's instructions. Notwithstanding the
above, Supplier may, subject to Ralcorp's consent, donate such Products
provided they are removed from the normal retail packaging prior to
ultimate distribution.
E. Supplier shall code the Products in accordance with the
Specifications.
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SECTION 9 INSPECTION
A. Records. Supplier shall maintain, at the Plant, true, accurate and
complete records in respect of Products production, packaging, storage,
sampling, testing and shipment hereunder ("Records") in accordance with
Supplier's Record Retention Policy, a copy of which will be provided to
Ralcorp. Upon written notice to Supplier from Ralcorp, Supplier shall
permit Ralcorp to (i) inspect the Records at the Plant and at mutually
convenient times and locations, and (ii) take inventory of Materials
and finished Products produced by Supplier for Ralcorp.
B. Inventories. Supplier shall provide Ralcorp access to Supplier's
reports related to Supplier's inventory of Products and Materials in
accordance with the Specifications.
C. Plant. During the period(s) Supplier is performing any of its
services hereunder and upon reasonable advance notice, Ralcorp may
inspect, at Ralcorp's cost, areas of the Plant where Materials or
Products are handled, processed, sampled, tested, packaged or stored
hereunder for the purposes of inspecting the Plant and its facilities,
and the Products, Materials and procedures followed by Supplier;
provided, however, that Supplier shall have the right to accompany
Ralcorp on any such inspections; and provided, further that such
inspection(s) shall not relieve Supplier of any of its obligations
hereunder. Supplier shall, in good faith, explore the possibility and
feasibility of changing its procedure(s) whenever such changes are
determined by Ralcorp as necessary or desirable in order to correct
and/or improve the Products, the conditions of processing and packaging
and the procedures followed hereunder. Supplier has the right to
restrict access to any location, material or equipment that is
proprietary to Supplier's continued production of other products;
provided, however, that such restrictions shall not prevent Ralcorp's
representatives from having access to the areas of the Plant where
Materials or Products are handled, processed, packaged or stored
hereunder, for the purposes of inspecting the Plant and its facilities,
and the Products, Materials and procedures followed by Supplier.
D. Immediate Notice. Supplier shall immediately notify Ralcorp of any
sanitation audits, the results of which indicate the presence of any
food pathogens in the Plant or possible adulteration of the Products.
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SECTION 10 SUPPLY; QUANTITIES
A. To ensure that Ralcorp shall have sufficient Products during the first
18 months of the transition following the above referred to Merger (and
an additional 6 months with respect to COOKIE CRISP in the event that
Ralcorp renews this Agreement in accordance with Section 2), Ralcorp
shall have the sole and exclusive right to Supplier's and its
subsidiaries' and Affiliates' available capacity and rights to make
Products, at all of their plants and facilities, during the term hereof
(i) up to 8,400 cwt. a month of RICE CHEX and 10,000 cwt. a month for
COOKIE CRISP, and (ii) beyond these levels, other than as reasonably
necessary to meet Supplier's requirements for CHEX-type ready to eat
cereal Products to be sold by Supplier under Private Label Trademarks
and Supplier's obligations under its Exclusive Distribution Agreement
with Ralston Purina Company, dated April 1, 1994 (the "RP Agreement"),
with any demands exceeding Supplier's ability to supply allocated
proportionally between Ralcorp and Ralston Purina Company,
based upon total quantities ordered after Supplier first meets
Ralcorp's monthly requirements for RICE CHEX up to 8,400 cwt. a month
and for COOKIE CRISP up to 10,000 cwt. a month and Supplier's
requirements for CHEX type ready to eat cereal Products (after Supplier
has first met Ralcorp's monthly requirements, up to 8,400 cwt. a
month); provided, however, that any production of Products for
Supplier or Ralston Purina Company pursuant to such agreement shall
not include the use of any of the CHEX or COOKIE CRISP trademarks or
any other trademarks or trade dress owned by Ralcorp or its Affiliates
except as otherwise agreed in writing by Ralcorp. Further, it is
understood and acknowledged that the calculation of available capacity
for RICE CHEX production has taken into account Supplier's anticipated
capacity requirements for its store brand hexagon shaped biscuit
product sold under several names, including Crispy Hexagons, among
others, and, in any event, Supplier's obligation to supply Ralcorp
hereunder shall not exceed Supplier's capacity as set forth in
Schedule 1. Ralcorp may order and Supplier shall produce for Ralcorp
Products ordered in accordance with firm orders as set out in Schedule
1. Ralcorp agrees that it will order a minimum of 90,000 cwt. of
Cookie Crisp cereal during the term, and a minimum of 2,000 cwt. in
any given month during the COOKIE CRISP Commitment Period (as defined
in Schedule 1C). Ralcorp agrees that in any month during the term in
which Ralcorp orders Rice Chex cereal, Ralcorp will order a minimum of
6,000 cwt. of Rice Chex cereal in such month.
B. Except for such production of Products (which shall not include the use
of the CHEX or COOKIE CRISP trademarks or other trademarks and trade
dress of Ralcorp or its Affiliates), if any as may be necessary, as set
forth above, for Supplier for CHEX-type ready to eat cereal Products
sold under Private Label Trademarks and for Ralston Purina Company
under the RP Agreement, during the term Supplier shall produce Products
solely and exclusively for Ralcorp.
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SECTION 11 PAYMENT
A. Product Price. Subject to the provisions of Sections 3B and 11B,
Ralcorp shall pay Supplier an amount equal to $37.09 per cwt. of COOKIE
CRISP for the period beginning at the commencement of the term of this
Agreement and ending on September 30, 1997, $38.28 per cwt. of COOKIE
CRISP for the period beginning on October 1, 1997 and ending on
September 30, 1998, and $39.50 per cwt. of COOKIE CRISP thereafter, for
Supplier's manufacturing variable costs, warehouse variable costs,
fixed manufacturing and fixed warehouse costs for COOKIE CRISP produced
and packaged in accordance with this Agreement. Ralcorp shall pay
Supplier an amount equal to actual costs for all Materials provided by
Supplier in connection with COOKIE CRISP produced and packaged in
accordance with this Agreement, subject to yield losses set forth in
Schedule 1E.
Subject to the provisions of Sections 3B and 11B, Ralcorp shall pay
Supplier an amount equal to $38.64 per cwt. of RICE CHEX for the period
beginning at the commencement of the term of this Agreement and ending
on September 30, 1997 and $39.94 per cwt. of RICE CHEX for the remainder
of the term of this Agreement, for Supplier's manufacturing variable
costs, warehouse variable costs, fixed manufacturing and fixed warehouse
costs (excluding depreciation costs with respect to Building 3 of
Supplier's Plant location at Battle Creek, Michigan and the equipment
utilized therein) for RICE CHEX produced and packaged in accordance with
this Agreement. Ralcorp shall pay Supplier an amount equal to actual
costs for all Materials provided by Supplier in connection with RICE
CHEX produced and packaged in accordance with this Agreement, subject to
yield losses set forth in Schedule 1E.
In addition, Ralcorp shall pay Supplier an amount (the "Commitment
Amount") equal to $85,500 for each month in the RICE CHEX Commitment
Period, as such term is defined in Schedule 1C. The Commitment Amount
for any month in the RICE CHEX Commitment Period shall be reduced by an
amount which bears the same ratio to $85,500 as the Supplier Weight (as
defined below) for such month bears to the Aggregate Weight (as defined
below) for such month.
The term "Supplier Weight" means, for any month in the RICE CHEX
Commitment Period, the total weight of all products produced by
Supplier in Building 3 of
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Supplier's Plant location at Battle Creek, Michigan, other than such
Products produced by Supplier for Ralcorp, alone in accordance with
the terms of this Agreement.
The term "Aggregate Weight" means, for any month in the RICE CHEX
Commitment Period, the total weight of all products produced by
Supplier in Building 3 of Supplier's Plant location at Battle Creek,
Michigan.
For each month in the Subsequent Period (as defined below) that Supplier
utilizes Building 3 of Supplier's Plant location at Battle Creek,
Michigan, Supplier shall pay to Ralcorp an amount equal to 50 percent of
the quotient of (x) the sum of the Commitment Amounts for each Non-use
Month (as defined below), divided by (y) the aggregate number of Non-use
Months.
The term "Subsequent Period" means the period of consecutive months
equal in number to the aggregate number of Non-use Months, commencing
upon the termination of the RICE CHEX Commitment Period.
The term "Non-use Month" means any month in the RICE CHEX Commitment
Period during which Building 3 of Supplier's Plant location at Battle
Creek, Michigan is not utilized for the production of RICE CHEX for
Ralcorp in accordance with this Agreement.
Product will be shipped F.O.B. Plant. Supplier will invoice Ralcorp
monthly for all production. Payment terms will be net 11 days.
Yield losses will be addressed as identified in Schedule 1E.
B. Cost Savings. The parties agree to cooperate throughout the term
of this Agreement to identify methods of reducing the cost of the
Products and shall meet periodically to discuss cost savings plans.
SECTION 12 WARRANTIES AND COVENANTS
A. Supplier represents, warrants and covenants that:
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1. Except to the extent arising out of the actions of Ralcorp or
from Materials provided by Ralcorp or purchased on Supplier's behalf
by Ralcorp, Supplier's performance hereunder shall be in accordance
with all the terms of this Agreement, including the Specifications,
and be free of defects in workmanship and materials, except for
defects arising from conformity with the applicable Specifications
to the extent such Specifications were modified per Ralcorp's
request;
2. Supplier shall not cause any of the Products processed,
packaged, stored, labeled and shipped hereunder to be adulterated or
misbranded, within the meaning of Laws, or to be products which may
not, under any of the provisions thereof, be introduced into
interstate commerce, and the Products shall comply with all Laws;
3. Supplier's performance hereunder, including, without
limitation, the maintenance of the Plant, shall at all times be in
compliance with all Laws.
B. Ralcorp's sampling Products and/or approving it for shipment shall
neither relieve Supplier of its warranties hereunder nor be construed
as a waiver of any of Supplier's obligations hereunder.
C. Ralcorp represents and warrants that compliance with the
Specifications of this Agreement, to the extent modified per Ralcorp's
request, shall not cause any of the Products processed, packed and
labeled hereunder to be adulterated or misbranded, within the meaning
of the FDCA, or to be products which may not, under any of the
provisions thereof, be introduced into interstate commerce.
SECTION 13 INSURANCE
On or before execution of this Agreement, Supplier shall obtain:
A. Product liability insurance on an occurrence basis with issuers
acceptable to Ralcorp. The product liability insurance to be
maintained shall provide coverage of Two Million Dollars ($2,000,000)
per occurrence, with a Five Million Dollars ($5,000,000) annual
aggregate;
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<PAGE> 14
B. Public liability insurance, including contractual liability with
limits of not less than Two Million Dollars ($2,000,000);
C. Worker's compensation insurance in accordance with the Laws where
the Plant is located on all employees engaged in any way in the work
pursuant to this Agreement; and
D. Broad form vendor's liability coverage.
Each such policy shall provide that it may not expire or be canceled except
upon thirty (30) days' prior written notice to Ralcorp. Upon the execution
of this Agreement, and upon every insurance renewal during the term of this
Agreement, Supplier shall deliver to Ralcorp (i) a certificate of insurance
evidencing such insurance, (ii) if requested by Ralcorp, a true and complete
copy of the policy as then in effect, and (iii) proof of payment of
premiums. Notwithstanding the foregoing Ralcorp shall not be under a duty to
examine such policy.
Ralcorp does not in any way represent that the insurance coverage specified
herein is sufficient or adequate to protect Supplier's interests or
potential liabilities.
SECTION 14 INDEMNIFICATION
A. Supplier hereby indemnifies Ralcorp and forever holds Ralcorp
(including its parent, subsidiary and Affiliated corporations, and
their respective directors, officers, employees and agents) and its
customers harmless from and against all claims, suits, actions,
proceedings, damages, losses or liabilities, costs or expenses
(including reasonable attorneys' fees, expenses and amounts paid in
settlement) (but excluding consequential damages (which shall include
but not be limited to lost profits))("Claims") incurred by Ralcorp
arising out of, based upon, or in connection with any (i) material
breach of any of Supplier's warranties, representations or agreements
under this Agreement, (ii) injuries or damages to third parties arising
from or in any way related to the use or consumption of any Products
produced by Supplier for Ralcorp pursuant to this Agreement, to the
extent arising out of the condition of such Product(s) as of the date
of shipment to Ralcorp (except to the extent attributable to Materials
supplied by Ralcorp or purchased on Supplier's behalf by Ralcorp),
(iii) actual or alleged injury to person or property or death occurring
to any of Supplier's employees, agents or any individual on Supplier's
premises, (iv) fines and penalties for statutory violations of Laws
attributable to Supplier
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<PAGE> 15
in connection with Supplier's manufacture of Products pursuant to this
Agreement, (v) claim or action by any person alleging that use of any
know-how, machinery, equipment or process employed by Supplier in
connection with the manufacture of the Products produced by Supplier for
Ralcorp pursuant to this Agreement infringes upon any rights of any
third party or violates other rights, and (vi) all reasonable costs of
any recall of Products produced pursuant to the terms hereof as to which
Supplier has consented, such consent not to be unreasonably withheld.
In the event of any Claims made against Ralcorp, Ralcorp shall notify
Supplier of such claim promptly upon a representative of Ralcorp
obtaining knowledge of such Claim, provided that failure to give such
notice shall not relieve Supplier from its indemnity hereunder, except
to the extent Supplier is prejudiced thereby. Thereafter, Supplier, at
its sole cost and expense, may assume the defense of any claim for which
it is required to indemnify Ralcorp pursuant to this Section 14A, using
counsel of its own choice. Notwithstanding anything in this Section 14
to the contrary, Supplier shall not, without Ralcorp's prior written
consent, which consent shall not be unreasonably withheld, settle or
compromise any Claim or consent to entry of any judgment with respect to
any Claim for anything other than money damages paid by Supplier which
would have a material adverse effect on Ralcorp. Supplier may, without
Ralcorp's prior written consent, settle or compromise any Claim or
consent to entry of any judgment with respect to any Claim which
requires solely money damages paid by Supplier and which includes as an
unconditional term thereof the release of Ralcorp and its Affiliates by
the plaintiff from all liability in respect of such Claim. Ralcorp
shall make available to Supplier all records and other materials
reasonably required for use in contesting any Claim and shall cooperate
fully with Supplier in the conduct and defense of any Claim.
B. Ralcorp hereby indemnifies Supplier and forever holds Supplier
(including its parent, subsidiary and Affiliated corporations, and
their respective directors, officers, employees and agents) and its
customers harmless from and against all Claims incurred by Supplier
arising out of, based upon, or in connection with any (i) material
breach of any of Ralcorp's warranties, representations or agreements
under this Agreement, (ii) injuries or damages to third parties arising
from or in any way related to the use of or consumption of any Products
produced by Supplier for Ralcorp to the extent such injuries or damages
are attributable to Materials or premiums supplied by Ralcorp or
purchased on Supplier's behalf by Ralcorp, or from conditions which
arise after Products were made available for shipment to Ralcorp; (iii)
fines, penalties or any other actions or claims arising out of
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<PAGE> 16
alleged violations of any laws or regulations, including Laws, as a
result of any Product claims made by Ralcorp (e.g. health claims) or
other copy, graphics, coupons and promotional offers used in connection
with such Products on packaging or in advertising (except when such
violation arises from Supplier's breach of this Agreement); (iv) claim
or action by any person alleging that use of any know-how, machinery,
equipment or process employed by Supplier at Ralcorp's behest after the
Closing in connection with the manufacture of Products for Ralcorp
infringes upon any rights of any third party.
C. The provisions of this Section 14 shall survive the termination of
this Agreement.
SECTION 15 CONFIDENTIAL INFORMATION
A. Except as expressly provided in the Technology Agreement, Supplier
shall not use the Specifications, Technical Information owned by or
licensed to Ralcorp and all other confidential information of Ralcorp
for any reason other than the production of Products in accordance with
the terms of this Agreement and shall not disclose this information to
any third party and shall keep confidential all such information. The
terms of this provision shall survive the expiration or termination of
this Agreement.
B. Except as expressly provided in the Technology Agreement, Ralcorp
shall not use any confidential information of Supplier that Ralcorp is
not otherwise specifically entitled to use pursuant to the terms of the
Technology Agreement, including but not limited to information
pertaining to the operation of Plants, and production of other products
at such facilities, and Ralcorp shall not disclose this information to
any third party and shall keep confidential all such information. The
terms of this provision shall survive the expiration or termination of
this Agreement.
C. The obligations of nondisclosure, contained in Paragraphs 15A and B
above, shall not apply in the event that any of such information:
(a) was known to the public or generally available to the public
prior to the date it was received from the disclosing party:
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<PAGE> 17
(b) became known to the public or generally available to the
public subsequent to the date it was received from the disclosing
party without any fault of the receiving party; or
(c) is, subsequent to the date of this Agreement, disclosed to
the receiving party from a third party who is under no obligation of
confidentiality regarding the same.
SECTION 16 INTELLECTUAL PROPERTY
Nothing in this Agreement shall be construed to grant to Supplier any right
to or interest in (i) any trademark, trade name, trade dress, copyright and
patent right or (ii) except as may be provided in the Technology Agreement,
any other rights, including any rights to any Technical Information and Know
How which is owned by or licensed to Ralcorp or its Affiliates
("Intellectual Property").
SECTION 17 BREACH
The following actions shall each constitute a breach of this Agreement.
A. The institution by Supplier or Ralcorp of a voluntary case under
any chapter of the Bankruptcy Code (Title 11, United States Code), or
any equivalent or similar action under any other federal or state law
in effect at such time relating to bankruptcy or insolvency, or if a
petition is filed against Supplier or Ralcorp under the Bankruptcy
Code, or if a petition is filed seeking any such equivalent or similar
relief against Supplier or Ralcorp under any other federal or state law
in effect at the time relating to bankruptcy;
B. If Supplier or Ralcorp makes a general assignment for the benefit
of creditors;
C. If Supplier or Ralcorp admits in writing an inability to pay its
debts generally as they become due;
D. If Supplier or Ralcorp has appointed (voluntarily or involuntarily)
a trustee, receiver, custodian or agent under applicable law or under
contract, whose appointment or authority to take charge of property of
Supplier or Ralcorp for the purpose of general administration of such
property for the benefit of Supplier's or Ralcorp's creditors,
respectively; or
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<PAGE> 18
E. If Supplier or Ralcorp commits a material breach of any of the
material terms or provisions of this Agreement and such breach is not
cured within thirty (30) days after written notice to the breaching
party advising of such breach.
SECTION 18 TERMINATION
A. In the event this Agreement expires or is terminated, Supplier
shall promptly provide Ralcorp with all Products and other Materials
owned or provided by Ralcorp which are in Supplier's possession.
B. In the event of the occurrence of any material breach not cured
within thirty (30) days of written notice of such breach, the
non-breaching party may terminate this Agreement effective immediately
upon written notice to the breaching party.
C. Upon termination of this Agreement for any reason Supplier shall
immediately stop the production of any Products then in process which
were to be supplied to Ralcorp and promptly deliver to Ralcorp all
Products manufactured hereunder along with all Specifications,
Technical Information belonging to Ralcorp, artwork, premiums, and
packaging materials purchased by Ralcorp and all other Materials and
supplies provided by Ralcorp. Ralcorp shall purchase from Supplier
reasonable quantities of any packaging materials and any other
Materials purchased by Supplier specifically for use with Products to
be produced for Ralcorp.
D. Upon any change of control of Supplier, Ralcorp may terminate this
Agreement effective immediately upon written notice to Supplier.
SECTION 19 RALCORP PRICING
Ralcorp shall independently determine its prices of the Products to its
customers.
SECTION 20 RIGHTS RESERVED TO RALCORP
Except to the extent otherwise provided herein, Ralcorp reserves to itself
the right to alter the flavors, formulas, ingredients, processing
conditions, labeling or packaging for the Products, provided that Supplier
may reasonably refuse to accept any alteration which adversely affects
Supplier's production of other products in the affected Plant(s).
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<PAGE> 19
SECTION 21 ASSIGNMENT
Other than to a wholly owned subsidiary or to a wholly owned subsidiary of
its parent company, which shall agree to be bound by all the terms and
conditions hereof, neither party shall assign or otherwise transfer in any
manner its rights under this Agreement without the other's prior written
consent. No assignment of this Agreement will act to relieve the Assignor
from any of its duties or obligations hereunder.
SECTION 22 INTERPRETATIONS
The captions contained in this Agreement are for convenience and reference
only and do not define, limit, extend or describe the scope of this
Agreement or the intent of any provision thereof. This Agreement shall be
deemed to have been drafted by each party hereto.
SECTION 23 DISCRIMINATION
Supplier shall not discriminate, in violation of the applicable laws, in its
employment practices and shall comply with all applicable federal, state and
local laws, statutes, ordinances, rules, regulations and orders regarding
employee relations.
SECTION 24 ENTIRE AGREEMENT
This Agreement, including its attached exhibits and schedules specified
herein, together with the Trademark Agreement, the Technology Agreement, the
Reorganization Agreement and the Merger Agreement supersedes all prior or
contemporaneous written or oral agreements and understandings relating to
the subject matter hereof. This Agreement shall not be amended, altered, or
changed unless in writing signed by the parties hereto.
SECTION 25 FORCE MAJEURE
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<PAGE> 20
In the event that a party hereto shall be delayed, hindered in or prevented
from the performance of any act required hereunder by reason of strikes,
lock-outs, labor troubles, inability to procure Materials, failure of power,
riots, insurrection, war or other reasons of a like nature not the fault of,
or under the reasonable control of, the party delayed in performing work or
doing acts required hereunder (a "Casualty"), then performance of such
act(s) shall be excused for the period of the delay and the period for the
performance of any such act shall be extended for a period equal to the
period of such delay, provided such delayed party promptly gives written
notice to the other party of the occurrence giving rise to the delay and
upon cessation of the event causing the delay, promptly resumes performance
of its obligations hereunder.
SECTION 26 GOVERNING LAW
This Agreement shall be governed and construed in accordance with the laws
of the State of Missouri, including all matters of construction, validity,
enforcement and performance.
SECTION 27 INDEPENDENT CONTRACTOR
Supplier agrees that its services are provided as an independent contractor
and that individuals employed by Supplier shall not be deemed employees of
Ralcorp for any reason. Neither party shall have the authority to bind the
other party or to assume or create any obligation or responsibility, express
or implied, on behalf of the other party or in the other party's name.
SECTION 28 NOTICE
All notices, requests and other communications to any party hereunder shall
be in writing (including facsimile or similar writing) and shall be given:
If to Ralcorp, to: Ralcorp Holdings, Inc.
Number One General Mills Boulevard
Minneapolis, MN 55426
Attention: Bruce A. Barquist
Facsimile: (612) 540-4995
Telephone: (612) 540-2374
If to Supplier, to: New Ralcorp Holdings, Inc.
800 Market Street, Suite 2900
St. Louis, Missouri 63101
Attention: Ronald D. Wilkinson
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<PAGE> 21
Facsimile: (314) 877-7694
Telephone: (314) 877-7652
With additional copies as noted in the
Schedule(s).
or such other address or telex or facsimile number as such party may
hereafter specify by written notice to the other party.
SECTION 29 REGULATORY NOTICE
Each party agrees to notify the other immediately by telephone of any action
or inspection by any regulatory agency with respect to the Products covered
by this Agreement, or any of the raw materials or ingredients used to
manufacture Products covered by his Agreement, and shall confirm such notice
promptly in writing. Supplier shall promptly deliver to Ralcorp copies of
all reports pertaining to the Plants (to the extent relevant to Products
produced by Supplier for Ralcorp pursuant to this Agreement) or Products
resulting from an inspection of the Plant made by government organizations.
SECTION 30 SUCCESSORS AND ASSIGNS
Except as limited by the Assignment provisions hereof, this Agreement, its
terms and provisions shall be binding upon and inure to the benefit of the
parties hereto and their respective partners, legal representatives,
successors and assigns.
SECTION 31 WAIVER
Either party's failure to enforce any provision of this Agreement or to
require performance by the other party shall not be construed as a waiver of
such provision nor affect the validity of the Agreement or any part thereof,
or either party's right to enforce any provision thereafter.
SECTION 32 AUTHORIZATION; VALIDITY
The persons executing this Agreement on behalf of the Supplier and Ralcorp
each acknowledge that they are duly authorized to execute this Agreement on
behalf of and bind Supplier or Ralcorp, as the case may be, to the terms
hereof.
PART II.
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<PAGE> 22
OTHER TRANSITION SERVICES
1. Services. Subject to the terms of this part of the Agreement, from and
after the Effective Date of this Agreement, Supplier shall make such Services
available to Ralcorp in accordance with Supplier's normal practice in providing
such services as of the Effective Date or as specifically set forth in Schedule
2 hereto (the "Services"). In consideration for the Services, Ralcorp shall
pay to Supplier an amount equal to the reasonable costs of Supplier (including,
but not limited to labor costs) in providing such Services and each Service
provided will be separately invoiced to Ralcorp. Ralcorp shall give Supplier
written notice of its intent to terminate any one or more of the Services at
least thirty (30) days prior to the termination of the Service. This Agreement
shall continue in full force and effect with respect to any Services not
terminated by any such notices.
2. Knowledge Transfer: Data Separation & Transfer. Supplier and Ralcorp
shall, through their respective information systems departments, work together
to the extent reasonably necessary to facilitate the transfer of knowledge and
data to Ralcorp in accordance with the terms of the Reorganization Agreement
and the Technology Agreement in order to eliminate the need for or to otherwise
discontinue as expeditiously as reasonably possible those Services performed in
accordance with this Agreement. To the extent such Services can reasonably be
eliminated upon the separation and transfer of data, the parties will work
toward executing such transfer immediately following the Closing. Ralcorp
shall pay to Supplier an amount equal to such reasonable costs for all hours
expended by Supplier personnel and actual charges incurred in separating and
converting and/or transferring data and in transferring knowledge associated
therewith.
3. Liability: Indemnification. Supplier shall have no liability to
Ralcorp with respect to its furnishing any of the Services hereunder except for
its willful misconduct or gross negligence. By agreeing to provide the
Services as an accommodation to Ralcorp, Supplier is making no representations
or warranties as to the quality, suitability or adequacy of the Services for
any purpose or use, except that Supplier will use such care in providing
services to Ralcorp as it would use in providing such services for its own use.
In providing the Services, Supplier shall not be obligated to (i) hire any
additional employees; (ii) maintain the employment of any specific employee;
(iii) purchase, lease or license any additional equipment or software; or (iv)
pay any costs related to the transfer or conversion of Ralcorp's data to
Ralcorp or any alternate supplier of administrative services. Except for
Supplier's gross negligence or willful misconduct, the sole remedy of Ralcorp
in the event data owned by it is lost or damaged in any way during processing
by Supplier is the refund to it of any charges paid for the processing of the
damaged data. Supplier agrees to exercise reasonable diligence to correct
errors or deficiencies in the Services. Except for Supplier's gross negligence
or willful misconduct, (i) Supplier shall not be liable to any third party in
any way for any obligation or commitment or for any act or omission in
connection with the provision of Services by Supplier and (ii) Ralcorp shall be
solely liable and responsible for any and all claims, liabilities, obligations,
losses, costs, expenses, litigation, proceedings, taxes, levies, imposts,
duties, deficiencies, assessments, charges, allegations, demands, damages or
judgments of any kind or nature whatsoever ("Liabilities")
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<PAGE> 23
related to, arising from, asserted against or associated with Supplier
furnishing or failing to furnish to Ralcorp any of the Services described
herein. Upon the termination of any of the Services, Ralcorp shall be
obligated to return to Supplier, as soon as reasonably practicable, any
equipment or other property of Supplier relating to the Services which is owned
or leased by it and is or was in Ralcorp's possession or control and which was
or is not part of the assets to be transferred pursuant to the Merger Agreement
or the Reorganization Agreement. Effective as of the date of this Agreement,
Ralcorp shall indemnify and hold Supplier and its affiliates and their
respective directors, shareholders, officers, employees, agents, consultants,
representatives, successors, transferees and assigns harmless from and against
any and all Liabilities (including, without limitation, reasonable fees and
expenses of counsel) of whatever kind and nature related to, arising from,
asserted against or associated with Supplier's furnishing or failing to
furnish the Services provided for in this Agreement, other than Liabilities
arising out of the willful misconduct or gross negligence of Supplier or its
affiliates or their respective directors, shareholders, officers, employees,
agents, consultants, representatives, successors, transferees or assigns.
Nothing herein, however, shall be deemed to affect the right of Ralcorp to seek
damages or other rights of redress against Supplier for breach of the
provisions of this part of the Agreement.
4. Claims. Ralcorp's receipt of any Service performed hereunder shall be
an unqualified acceptance of, and a waiver by it of any and all claims with
respect to such Service unless Ralcorp gives Supplier notice of claim within
thirty (30) days after such receipt; no claim by Ralcorp against Supplier of
any kind, whether as to service performed or for delayed performance or
non-performance, unless such claim is based on gross negligence or willful
misconduct, shall be greater in amount than the fee for the Service in respect
of which such claim is made; and in no event will Supplier be liable to Ralcorp
for any incidental or consequential damages, whether or not caused by or
resulting from gross negligence or willful misconduct or breach of obligations
hereunder.
5. Additional Services. If Ralcorp wants Supplier to provide any service
other than the Services provided for in the Schedule 2, Ralcorp shall notify
Supplier, and within five (5) days following the giving of such notice,
Supplier shall provide such service if such service is reasonably necessary for
the conduct of the Branded Business (as defined in the Reorganization
Agreement) in the ordinary course. Ralcorp shall be invoiced for such services
in accordance with billing practices reasonably determined by Supplier. The
provision by Supplier of any such additional Services shall be subject to all
other provisions of this Agreement, as if those Services had originally been
part of the Schedule 2 to this Agreement.
6. Confidentiality. Any and all information which is not generally known
to the public which is exchanged between the parties in connection with this
Agreement, whether of a technical or business nature, shall be considered to be
confidential. The parties agree that confidential information shall not be
disclosed to any third party or parties without the written consent of the
other party, except to the extent otherwise addressed by the Technology
Agreement, which shall be treated in accordance with the terms of the
Technology Agreement.
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<PAGE> 24
Each party shall take reasonable measures to protect against nondisclosure of
confidential information by its officers and employees. Confidential
information shall not include any information (i) which is or becomes part of
the public domain, (ii) which is obtained from third parties who are not bound
by confidentiality obligations, except to the extent otherwise addressed by the
Technology Agreement or (iii) which is required to be disclosed by law,
regulation, legal process or the rules of any state or federal regulatory
agency or the New York Stock Exchange. The provisions of this section shall
survive the termination of this Agreement.
7. Billing and Payment. Supplier shall bill Ralcorp on a monthly basis
for the amounts due to Supplier for services provided pursuant to the terms of
this Agreement. All such bills shall contain reasonable detail and shall be
due thirty (30) days after receipt. The failure of Ralcorp to pay any bill
within thirty (30) days of receipt shall result in Ralcorp owing Supplier an
additional handling charge equal to 1% per month of the amount due from the
date due to the payment date.
8. Term. It is intended that the Services be provided by Supplier as a
temporary accommodation to Ralcorp. Supplier shall provide the Services for a
period beginning at the commencement of the term of this Agreement. In no
event, however, shall Supplier be obligated to provide any Services identified
pursuant to Part II of this Agreement beyond ninety (90) days from the Closing
Date.
9. Other Provisions. Section 1 and Sections 21 through 32 of Part I of
this Agreement shall be incorporated by reference to this Part II. The
remaining terms of Part I shall in no way govern nor otherwise be applicable to
the services provided pursuant to this Part II.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
RALCORP HOLDINGS, INC. NEW RALCORP HOLDINGS, INC.
By By
----------------------- ----------------------
Title Title
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<PAGE> 25
SCHEDULE 1
A. Supplier's Plant location for each Product to be produced (designate by
product): Battle Creek - RICE CHEX, Lancaster, Ohio - COOKIE CRISP,
Sparks, NV - COOKIE CRISP. The parties agree that Supplier's Plant
location at Sparks, NV shall be utilized for the production of COOKIE
CRISP only to the extent that Supplier's Plant location at Lancaster,
Ohio is unable to produce sufficient quantities of COOKIE CRISP in
accordance with the terms of this Agreement. Notwithstanding the
foregoing, Supplier shall have the right to utilize its Plant location at
Sparks, NV for the production of COOKIE CRISP notwithstanding the fact
that Supplier's Plant location at Lancaster, Ohio is able to produce
sufficient quantities of COOKIE CRISP if Supplier pays Ralcorp an amount
equal to the freight cost that would be incurred if such COOKIE CRISP
were shipped from Sparks, NV to Lancaster, Ohio.
The respective Products may not be manufactured or packaged at any other
location without Ralcorp's prior written consent.
B. "Products" - Products produced shall be as follows:
RICE CHEX 14/12 oz.
RICE CHEX 14/17.5 oz.
COOKIE CRISP 12/11 oz.
COOKIE CRISP 4/35 oz.
C. "Capacity Warranty". (a) Supplier hereby covenants that,
throughout the term of this Agreement, Supplier shall have the capacity
to produce 8,400 cwt. of RICE CHEX on a monthly basis (the "RICE CHEX
Production Commitment"). Notwithstanding the foregoing:
(i) Supplier shall have the right to reduce or terminate the RICE
CHEX Production Commitment (a "Supplier Termination") at any time
after the date that is one year after the commencement of the term
of this Agreement. Such termination shall become effective on the
date that is sixty (60) days after the first day of the month
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<PAGE> 26
immediately following the month in which Supplier provides notice to
Ralcorp of such termination, which notice may be provided to Ralcorp
prior to the date that is one year after the commencement of the term
of this Agreement. Ralcorp and Supplier agree that any such
termination shall become effective not earlier than the date that is
one (1) year after the commencement of the term of this Agreement.
(ii) Ralcorp shall have the right to terminate the RICE CHEX
Production Commitment (a "Ralcorp Termination") at any time during
the term of this Agreement. Such termination shall become effective
on the date that is sixty (60) days after the first day of the month
immediately following the month in which Ralcorp provides notice to
Supplier of such termination. (The period commencing on the first
date of the term of this Agreement and ending upon the earlier of
the expiration of the term of this Agreement or any Supplier
Termination or Ralcorp Termination, shall be referred to herein as
the "RICE CHEX Commitment Period.")
(iii) In the event that the repair costs necessary to remedy the
effects of a Casualty upon the operations of Supplier's Plant
location at Battle Creek, Michigan exceed $250,000, Supplier shall
have the right to immediately terminate the RICE CHEX Production
Commitment (in which case the RICE CHEX Commitment Period will
similarly terminate) unless Ralcorp agrees, within 5 business days
after notification by Supplier of the amount of such repair costs,
to pay Supplier an amount equal to the excess of such repair costs
over $250,000.
(b) Supplier hereby covenants (the "COOKIE CRISP Production Commitment")
that, throughout the term of this Agreement, Supplier shall have the
capacity to produce 120,000 cwt. of COOKIE CRISP on an annual basis and
10,000 cwt of COOKIE CRISP on a monthly basis; provided, however, that
Supplier shall not be required to have the capacity to produce more than
15,000 cwt. of COOKIE CRISP in any 30-day period or more than 3,500 cwt.
in any 7-day period. Notwithstanding the foregoing, Ralcorp shall have
the right to terminate the COOKIE CRISP Production Commitment at any time
after the date that is fourteen (14) months after the commencement of the
term of this Agreement. Such termination shall become effective on the
date that is sixty (60) days after the first day of the month immediately
following the month in which Ralcorp provides notice to Supplier of such
termination, which notice may be provided to
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<PAGE> 27
Supplier prior to the date that is fourteen (14) months after the
commencement of the term of this Agreement. Ralcorp and Supplier agree
that any such termination shall become effective not earlier than the
date that is fourteen (14) months after the commencement of the term of
this Agreement. (The period commencing on the first date of the term of
this Agreement and ending upon the earlier of the expiration of the term
of this Agreement or any termination of the COOKIE CRISP Production
Commitment by Ralcorp, shall be referred to herein as the "COOKIE CRISP
Commitment Period.")
D. Securing Materials, Coupons and Premiums. Ralcorp shall provide
all cartons and containers for RICE CHEX production and all COOKIE
CRISP production. A packaging shrink allowance of 4% will be allowed
during production runs at the Supplier with this shrink being
reconciled on an annual basis. Ralcorp will also supply the ingredient
"rice" for Rice Chex production. Supplier will provide all other
ingredients for the production of Rice Chex and all ingredients for
COOKIE CRISP pursuant to the payment terms as described in Section 11A.
Yield loss will be as outlined in Schedule 1E. Notwithstanding the
foregoing, each of Ralcorp and Supplier may provide such Materials for
RICE CHEX production and COOKIE CRISP production as the parties shall
mutually agree. In the event that Supplier exceeds the maximum yield
losses set forth in Schedule 1E with respect to Materials provided by
Ralcorp, Supplier shall pay to Ralcorp an amount equal to the cost of
such excess Materials utilized in connection with Supplier's exceeding
such maximum yield losses. Ralcorp shall provide and deliver to
Supplier all coupons and premiums Ralcorp wishes to include in RICE
CHEX or COOKIE CRISP. Any reasonable costs actually incurred by
Supplier in connection with any coupon or premium drops requested by
Ralcorp shall be paid by Ralcorp in accordance with terms as the
parties shall mutually agree, and the maximum allowed yield losses
relating to any such coupon or premium drops shall be determined in
accordance with terms as the parties shall mutually agree.
E. Loss of Yield. Supplier shall be allowed a maximum yield loss on
COOKIE CRISP of 30% and on RICE CHEX of 28%. Reconciliations of yield
loss costs will be done on an annual basis with the reconciliation
being done on the average yield loss for the 12 month period. Yield
losses will be calculated consistent with Supplier's current methods
from the CPST inventory accounting system.
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<PAGE> 28
F. Storage and Disposal. Supplier shall provide suitable storage and
warehousing space and disposal services for Materials, and the parties
agree that the cost of such storage, warehousing and disposal are
reflected in the rates set forth in Section 11 of this Agreement;
provided, however, that Ralcorp shall pay Supplier an amount equal to
all reasonable costs actually incurred by Supplier in connection with
the storage, warehousing and disposal of Materials by Supplier which
storage, warehousing and disposal require the utilization of
facilities, services or other resources outside the normal course of
business of Supplier. Ralcorp shall promptly provide Supplier with
instructions with respect to the disposition of unusable Materials.
G. Schedule(s). Firm schedules specifying Supplier's requirements for
production, packaging, labeling and shipping of Products hereunder for
each Ralcorp fiscal month this Agreement is in effect shall be
delivered to Supplier by the tenth (10th) workday of the immediately
preceding Ralcorp fiscal month in which Ralcorp desires Supplier to
pack and ship such Products along with a tentative schedule for the
immediately succeeding two (2) fiscal months. The firm schedule(s) may
only be modified as mutually agreed, provided, however, that the
tentative schedule may be modified by Ralcorp for any reason without
Ralcorp incurring any obligation to Supplier therefor.
H. Shipping Instructions. Supplier shall comply with Ralcorp's written
shipping instructions. All Products shall be shipped, with advance approval of
Ralcorp, in vehicles suitable for transportation of food and otherwise in
compliance with all Laws including, without limitation, Department of
Transportation regulations. It is understood that warehouse space for finished
product is not to be supplied by the Supplier; provided, however, that Supplier
shall provide normal loading and on-site holding services during standard
operating time periods with respect to Products to be shipped in accordance
with the terms of this Agreement.
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<PAGE> 29
SCHEDULE 2
Data Processing
- Sales
- Order Processing
- Invoicing
- Accounts Receivable
- Associated General Ledger
- Cincinnati Plant
- Payroll
- Inventory
- Raw Material
- Finished Product
- Maintenance Storeroom
- Disbursements
- Fixed Assets
- Process Control
- Quality Control
- Associated General Ledger
Finished Product Distribution
- Finished Product Storage and Handling
Services Related to Raw Material Supply
- Commodities
- Other Raw Materials
- Packaging Materials
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<PAGE> 1
EXHIBIT 2.5
TECHNOLOGY AGREEMENT
This Technology Agreement (hereinafter "Agreement") dated as of
____________, 199__ by and among Ralcorp Holdings, Inc., a Missouri corporation
("Ralcorp"), NEW RALCORP HOLDINGS, INC., a Missouri corporation and a wholly
owned subsidiary of Ralcorp ("New Ralcorp"), and CHEX, INC., a Delaware
corporation and a wholly owned subsidiary of New Ralcorp ("Branded Subsidiary").
WITNESSETH THAT:
WHEREAS, Ralcorp, General Mills, Inc., a Delaware corporation
("Acquiror"), and General Mills Missouri, Inc., a Missouri corporation and
wholly owned subsidiary of Acquiror ("Merger Sub"), have heretofore entered into
an Agreement and Plan of Merger dated as of August 13, 1996 (as amended on
October ___, 1996, the "Merger Agreement") pursuant to which Merger Sub is being
merged with and into Ralcorp immediately after the consummation of the
transactions contemplated hereby (the "Merger").
WHEREAS, this Agreement is entered into in conjunction with the Merger
Agreement in order to facilitate the license or transfer of certain technical
information and know how to certain of the parties hereto.
WHEREAS, (i) Ralcorp wishes to assign its rights to certain of this
technical information and know how to New Ralcorp and each of Ralcorp and
Branded Subsidiary wish to license other of this technical information and know
how to New Ralcorp, and New Ralcorp wishes to accept such assignments and
licenses and (ii) New Ralcorp wishes to assign its rights to certain of this
technical information and know how to Branded Subsidiary, and Branded Subsidiary
wishes to accept such assignment, with all such assignments and licenses being
on the terms and conditions as hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I - DEFINITIONS
1. The term "Branded Business" shall mean the business of manufacturing,
distributing and selling branded ready-to-eat cereal (excluding Non-Branded
Cereals) and branded cereal-based snacks and snack mixes, as ever conducted
by Ralcorp, New Ralcorp, Ralston Foods, Inc., the predecessor in interest
to New Ralcorp ("Foods"), or their predecessor in interest, Ralston Purina
Company ("RP Co."), prior to the Distribution Date.
<PAGE> 2
2. The term "Foods Business" shall mean any business (including any of
the same businesses as previously conducted by RP Co.) as ever
conducted by Ralcorp, New Ralcorp, Foods, or any of their Affiliates
prior to the Distribution Date, other than the Branded Business.
3. The term "Technical Information and Know How" shall mean any and all
information owned or licensed from third parties by Ralcorp and its
subsidiaries, and which, as of the date of this Agreement, has been
used or reduced to practice for use by the Branded Business or the
Foods Business or by RP Co. in connection with either of such
businesses, including trade secrets, product formulas, processing and
equipment design and information, specifications, know how,
manufacturing, research, software, inventions, patent applications,
patents and industrial property rights and other technical
information.
4. The term "Assigned Technical Information and Know How" shall mean any
and all Technical Information and Know How that is or has in the past
been used exclusively in, or reduced to practice for use exclusively
by, the Foods Business and that same business as it was previously
conducted by RP Co. The term "Assigned Technical Information and Know
How" shall specifically include, without limitation, the Technical
Information and Know How listed on Schedule A attached hereto (such
information designated on Schedule A referred to as the "Special
Assigned Technical Information and Know How") and shall specifically
exclude both the Branded Technical Information and Know How and the
Shared Technical Information and Know How.
5. The term "Shared Technical Information and Know How" shall mean any
and all Technical Information and Know How that is or has in the past
been used or reduced to practice for use by (a) the Branded Business
and that same business as it was previously conducted by RP Co. for
any products which are not Designated Products and (b) both the
Branded Business and the Foods Business and those same businesses as
they were previously conducted by RP Co. The term Shared Technical
Information and Know How" shall specifically exclude the Assigned
Technical Information and Know How and the Branded Technical
Information and Know How.
6. The term "Branded Technical Information and Know How" shall mean any
and all Technical Information and Know How that is or has in the past
been used exclusively, or reduced to practice for use exclusively, by
Ralcorp, its subsidiaries or RP Co. to produce Designated Products,
including all cereal-based snacks and snack mixes that are Designated
Products, and shall include the technical information, know how and
equipment listed on Schedule B attached hereto, which shall not be
considered or form part of the Shared Technical Information and Know
How. The term "Branded Technical Information and Know How" shall
specifically exclude the Assigned Technical Information and Know How.
7. The term "Designated Products" shall have the meaning set forth in the
Trademark Agreement.
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<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.
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<PAGE> 4
ARTICLE III - LICENSE GRANTS
1. Each of Ralcorp and Branded Subsidiary hereby grants to New Ralcorp,
effective as of the Distribution Date and subject to the terms,
covenants, conditions, and limitations set forth in this Agreement
(including, without limitation, those restrictions set forth in
Article IV hereof), that certain Technology Agreement dated as of
March 31, 1994 by and among RP Co., Ralston Purina International,
Inc., VCS Holding Company Inc. and Ralcorp, which agreement is
attached hereto as Exhibit A (the "Prior Technology Agreement"), the
Merger Agreement, and the Trademark Agreement:
(a) an irrevocable, non-exclusive, royalty-free, license to use,
employ, exercise, apply, or otherwise utilize, the Shared
Technical Information and Know How from and after the date
hereof until March 31, 1999 in the Western Hemisphere, but,
with no rights (except as expressly provided herein) during
the applicable time periods specified in Section 4(a) of
Article IV hereof to produce, have produced, or license to
produce the Designated Products or snack mixes which are not
Designated Products;
(b) an irrevocable, non-exclusive, royalty-free, license to use,
employ, exercise, apply, or otherwise utilize, the Shared
Technical Information and Know How from and after March 31,
1999, worldwide, in perpetuity, but, with no rights (except as
expressly provided herein) during the applicable time periods
specified in Section 4(a) of Article IV hereof to produce,
have produced, or license to produce the Designated Products
or snack mixes which are not Designated Products;
(c) an irrevocable, non-exclusive, royalty free, license to use,
employ, exercise, apply or otherwise utilize the Branded
Technical Information and Know How to produce, but, except as
expressly provided herein, not to disclose or sublicense the
same to third parties (including, without limitation, to
contract manufacturers, other than as is necessary for Foods
Copacking (as defined below)), (i) any products (including,
without limitation, all Designated Products and all
cereal-based snacks and snack mixes) exclusively for Ralcorp
alone or for RP Co. as provided in and in accordance with
Article V, Section 1 hereinbelow, in each case, commencing as
of the Distribution Date; (ii) (A) any products, other than
snack mix products and Designated Products which are COOKIE
CRISP type ready to eat cereals commencing on the Distribution
Date and (B) any Designated Products which are COOKIE CRISP
type ready to eat cereals, commencing eighteen (18) months
after the Distribution Date, in each case (A) and (B) in
the United States, its territories, possessions, military
installations and the Commonwealth of Puerto Rico for any
third parties; (iii) any Products which are Cookie Crisp type
ready to eat cereals, other than snack mix products,
commencing five (5) years after the Distribution Date, in all
other countries for any third parties; (iv) any snack mix
products other than those referred to in Section 4(a)(iii) of
Article IV, commencing two (2) years after the Distribution
Date, worldwide for any third parties; and (v) any snack mix
products referred to in Section 4(a)(iii) of Article IV
hereof, commencing five (5) years after the Distribution Date,
worldwide, for any third parties.
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<PAGE> 5
(d) an irrevocable, non-exclusive, royalty-free, license to use
the invention claimed in U.S. Patent No. 5,188,860 entitled
"Process for the Production for a Fiber Containing Cereal
Product", worldwide, in perpetuity.
For purposes of the foregoing paragraph (c), the term "Foods
Copacking" shall mean the right of New Ralcorp (subject to all of the
restrictions and obligations set forth herein and provided that all use of
Branded Technical Information and Know How and the Shared Technical Information
and Know How by any such contract manufacturer is on the same basis and subject
to the same restrictions as set forth in Section 1 of Article III and Section 4
of Article IV as they apply to New Ralcorp) to have contract manufacturers
pack, or mix with other ingredients and pack, only for New Ralcorp itself,
ready to eat cereals that are Designated Products and cereal based snacks and
snack mix products as described in Section 4(a) of Article IV, but shall not
include any right of any contract manufacturer to produce or make any of such
products for itself or other third parties.
2. New Ralcorp hereby agrees and acknowledges that the Shared Technical
Information and Know How and the Branded Technical Information and
Know How is subject to all limitations, undertakings and liabilities
contained in the Prior Technology Agreement, including, without
limitation, each of the following:
(a) New Ralcorp shall not disclose any of the Shared Technical
Information and Know How and Branded Technical Information and
Know How to any third party during the term of the license
without the written consent of RP Co.; and
(b) New Ralcorp shall obtain a written agreement from each of its
employees, agents, officers and/or directors that the Shared
Technical Information and Know How and the Branded Technical
Information and Know How will be kept confidential at all
times by such parties and that such information will not be
disclosed to any third parties.
ARTICLE IV - OBLIGATIONS OF THE PARTIES
1. New Ralcorp hereby agrees to assume from Ralcorp and fulfill all of
the technical assistance obligations owed to RP Co. by Ralcorp as
described in Article III of the Prior Technology Agreement, and
Ralcorp hereby consents to such assumption by New Ralcorp.
2. Ralcorp, Branded Subsidiary and New Ralcorp each agree to treat as
confidential all Technical Information and Know How, including the
Branded Technical Information and Know How, the Assigned Technical
Information and Know How, the Special Assigned Technical Information
and Know How and the Shared Technical Information and Know How; and
shall not at any time disclose or permit to be disclosed any portion
thereof to any other person, firm, or entity; provided, however, (i)
that New Ralcorp shall have the
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<PAGE> 6
right to license or disclose, in confidence, but only in accordance
with the terms of the Prior Technology Agreement and this Agreement,
the Shared Technical Information and Know How and, as to the Branded
Technical Information and Know How, in accordance with Section 2 of
Article V of this Agreement, and that this provision shall not
otherwise limit or preclude New Ralcorp from doing so and (ii) that
each of Ralcorp and Branded Subsidiary shall have the right to license
or disclose, in confidence, but only in accordance with the terms of
the Prior Technology Agreement, the Shared Technical Information and
Know How and the Branded Technical Information and Know How, and that
this provision shall not otherwise limit or preclude Ralcorp or
Branded Subsidiary from doing so. Notwithstanding the foregoing, New
Ralcorp shall not be under any obligation pursuant to this Agreement
to treat as confidential any of the Assigned Technical Information and
Know How or Special Assigned Technical Information and Know How.
3. The obligation of nondisclosure, contained in Paragraph 2 above, shall
not apply in the event that any of such confidential information:
(a) was known to the public or generally available to the public
prior to the date it was received from the disclosing party;
(b) became known to the public or generally available to the
public subsequent to the date it was received from the
disclosing party without any fault of the receiving party; or
(c) is, subsequent to the date of this Agreement, disclosed to the
receiving party from a third party who is under no obligation
of confidentiality regarding the same.
4. New Ralcorp, on behalf of itself and its successors in interest and
present and future subsidiaries and Affiliates other than Branded
Subsidiary, agrees and shall cause such subsidiaries and Affiliates to
agree, that (except as otherwise provided in the Supply Agreement) New
Ralcorp, its successors and such subsidiaries and Affiliates shall not
directly or indirectly:
(a) make, have made, produce, market, contract pack, sell or
license, or contract with, any third party to produce (except
as provided in and in accordance with Article V, Section 1,
hereinbelow for RP Co. and Article V, Section 3 for Ralcorp):
(i) (A) any ready-to-eat cereals that are COOKIE CRISP-type
Designated Products in the United States, its
territories, possessions, military installations or the
Commonwealth of Puerto Rico for the eighteen (18) month
period commencing upon the Distribution Date and (B) any
ready to eat cereals that are Designated Products
outside of the United States, its territories,
possessions, military installations or the Commonwealth
of Puerto Rico for the five (5) year period commencing
upon the Distribution Date (which shall preclude,
without limitation, any
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sales made to third parties of such Designated Products which
New Ralcorp knows are likely, based on reasonable information
and knowledge, to be sold or resold outside the United
States, its territories, possessions or military
installations, or the Commonwealth of Puerto Rico);
(ii) any snack mix, cereal-based or otherwise, anywhere in the
world for the two (2) year period commencing upon the
Distribution Date; and
(iii) any snack mix containing those products, or a product
substantially similar to, or identical to, products
which have been, prior to the date hereof, offered
for sale in connection with any form of the CHEX
trademark, which shall include products sold under
the Crispy Hexagon designation but which shall not
include those wheat cereals denominated or described
as SHREDDED WHEAT and similar in nature to other
shredded wheat products currently offered by other
cereal manufacturers, for the five (5) year period
commencing upon the Distribution Date; provided,
however, that this Section 4(a)(iii) and Section
4(a)(ii) hereinabove shall not apply to snack mix
products of an enterprise acquired by New Ralcorp in
which the snack mix business generates less than 20%
of the annual gross revenues of such enterprise and
less than seven (7) million dollars in annual sales;
or
(b) use, print, disseminate, display or publish on packaging for
cereals, or in any related advertising, sales or promotional
materials, any snack recipes which are essentially identical
to the snack mix recipes that have been used by Foods or New
Ralcorp in connection with CHEX products in the three (3)
years prior to the Distribution Date.
5. Ralcorp and Branded Subsidiary, and their Affiliates and subsidiaries,
hereby agree that Sections 4(a) and (b) of this Article IV shall not
apply to, and shall not restrict in any manner whatsoever, the
existing business of any third party (including the Affiliates and
subsidiaries of such third party prior to such acquisition) which may
acquire New Ralcorp or any of its Affiliates or subsidiaries, as such
existing business is conducted at the time of such acquisition.
Notwithstanding the foregoing, New Ralcorp, on behalf of itself and
its successors in interest and present and future subsidiaries and
Affiliates, agrees and shall cause such subsidiaries and Affiliates to
agree, that Sections 4(a) and (b) shall prevent any such acquiring
third party from using the Shared Technical Information and Know How
related to snack mixes or the Designated Products and the Branded
Technical Information and Know How in violation of the terms of
Sections 4(a) and (b) of this Article IV.
ARTICLE V - CERTAIN AGREEMENTS
1. Each of Ralcorp and Branded Subsidiary hereby agrees that, except as
set forth in this Section 1, nothing contained in this Agreement shall
interfere with the ability of New
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Ralcorp to meet the obligations of New Ralcorp, if any, to RP Co., as
set forth in the Distributorship Agreement. Each of Ralcorp and
Branded Subsidiary hereby agrees that New Ralcorp shall have the right
to produce ready to eat cereals for RP Co. in accordance with the
terms of the Distributorship Agreement, up to, but not beyond,
September 1, 1999, by which time New Ralcorp agrees that it shall
have terminated the Distributorship Agreement insofar as it may
require the production or sale of any Designated Products. New
Ralcorp also agrees that New Ralcorp shall not use any of the
Branded Trademarks in connection with such production for RP Co.,
unless such usage is specifically authorized in writing by Ralcorp.
2. Each of Ralcorp and Branded Subsidiary hereby agrees that New Ralcorp
shall have the right to license in accordance with the terms of the
Prior Technology Agreement, or, at its option, request that Ralcorp and
Branded Subsidiary each license in accordance with the terms of the
Prior Technology Agreement, if applicable, the Shared Technical
Information and Know How and the Branded Technical Information and Know
How, or any parts thereof, from and after the Distribution Date to any
subsidiaries or Affiliates of New Ralcorp (regardless of when any such
relationship with New Ralcorp may arise), for so long as such entity
continues to be a subsidiary or Affiliate of New Ralcorp, and to any
"Successor Third Party" on the same terms as set forth herein and
specifically subject to the requirement that each such entity shall
assume and be subject to and be bound by all restrictions set forth in
this Agreement and the Trademark Agreement, provided that, upon the
granting of a license of the Shared Technical Information and Know How
and the Branded Technical Information and Know How, or any parts
thereof, by Ralcorp or Branded Subsidiary to a Successor Third Party,
the then existing licenses to New Ralcorp (and its subsidiaries and
Affiliates) relating exclusively to the business transferred or to be
transferred to such Successor Third Party shall be terminated and New
Ralcorp shall only retain, if any, licenses of the Shared Technical
Information and Know How and Branded Technical Information and Know How
relating to that part of the ready to eat cereal, cereal based snack
and cereal based snack mix businesses of which it retains ownership
immediately after such transfer. It is hereby understood that any such
license will (i) provide the licensee with rights no greater than the
rights of New Ralcorp as set forth in this Agreement and (ii) be
subject in all respects to the terms of this Agreement and the Prior
Technology Agreement. Each of Ralcorp and Branded Subsidiary hereby
agrees that it shall, or, if necessary to fulfill its obligations
hereunder, it shall cause its Affiliates and subsidiaries to, promptly
comply with (in no case, more than fourteen (14) days after its receipt
of) any such request by New Ralcorp by providing any such subsidiary or
Affiliate of New Ralcorp with all documentation necessary to provide
such Affiliate or subsidiary with the same rights as transferred to New
Ralcorp by this Agreement. For purposes of this Agreement, "Successor
Third Party" shall mean any entity to whom New Ralcorp transfers (by
way of asset transfer, stock transfer, merger or otherwise) following
the date hereof all or substantially all of (x) its ready to eat
cereal, cereal based snack and cereal based snack mix business as a
whole, (y) substantially all of its assets, title, properties,
interests, rights and privileges, tangible and intangible, to
manufacture and sell cereals that are identical to or substantially
similar in form or overall appearance to cereal products bearing the
CHEX trademark, or (z) after a transfer of the business as described in
(y), the ready to eat cereal, cereal based snack and cereal based snack
mix business then remaining, including any entity that is a subsidiary
or Affiliate of New Ralcorp, and any entity which is a subsequent
transferee of any of the businesses described in (x), (y) or (z) of
this section V.2; it being understood that any license of the Shared
Technical Information and Know How and the Branded Technical
Information and Know How to a subsequent transferee shall be on the
same terms and conditions as set forth in this section V.2.
3. Each of Ralcorp and Branded Subsidiary hereby agrees that nothing
contained in this Agreement shall interfere with the ability of New
Ralcorp to meet its obligations to Ralcorp under the Supply Agreement.
4. After the Distribution Date, none of New Ralcorp, Ralcorp nor Branded
Subsidiary shall have an ongoing obligation to assign, license, share
or provide to the other any Technical Information and Know How created
or developed after the Distribution Date.
5. Ralcorp, Branded Subsidiary and New Ralcorp each hereby acknowledges
that pursuant to the Reorganization Agreement it has agreed to
abide by certain limitations, undertakings and liabilities related to
the Assigned Technical Information and Know How, the Shared Technical
Information and Know How and the Branded Technical Information and
Know How, including those arising out of the Prior Technology
Agreement.
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ARTICLE VI - ASSIGNABILITY
New Ralcorp's rights herein as to the Shared Technical
Information and Know How and the Branded Technical Information and Know How
shall not be assignable except to its successor by operation of law and except
as otherwise expressly provided herein; otherwise, this Agreement and the
rights granted herein shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
ARTICLE VII - MISCELLANEOUS PROVISIONS
1. Should any provision of this Agreement be declared unenforceable for
any reason or found contrary to any law or statute, said provision
shall be adjusted in accordance with such decision or if it cannot be
so adjusted will automatically cease to be a part of this Agreement
without affecting any other provisions or obligation thereof.
2. This Agreement shall be construed and enforced in accordance with the
laws of the State of Missouri.
3. The headings used in this Agreement are for reference only and shall
not be relied upon or used in the interpretation of this Agreement.
4. The dispute resolution provisions contained in Article XII of the
Reorganization Agreement will control in the event of any dispute in
relation to this Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representative effective on the day and year
set forth in this Agreement.
RALCORP HOLDINGS INC.
By:______________________________
Name:____________________________
Title:___________________________
CHEX, INC.
By:______________________________
Name:____________________________
Title:___________________________
NEW RALCORP HOLDINGS, INC.
By:______________________________
Name:____________________________
Title:___________________________
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SCHEDULE A TO THE TECHNOLOGY AGREEMENT
SPECIAL ASSIGNED TECHNICAL INFORMATION AND KNOW HOW
1. Twin screw extrusion technology and equipment currently and
historically associated exclusively with cereals not offered by and
not reduced to practice for use by cereal or snack mixes of the
Branded Business.
2. Cooking, shredding, baking and sugar frosting technology and equipment
at Bremner facility in Princeton, Kentucky currently and historically
associated exclusively with cereals (including cereals not yet in
commercial production) not offered by and not reduced to practice for
use by cereal or snack mixes of the Branded Business.
3. Crispy hexagon forming rolls and related technology currently and
historically associated exclusively with cereals not offered by the
Branded Business.
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SCHEDULE B TO THE TECHNOLOGY AGREEMENT
1. Formulas and processing steps, times and conditions for the Designated
Products
2. To the extent they are exclusively associated with the Designated
Products, the following, as well:
Material specifications
Machine and equipment settings
Equipment and manufacturing specifications and instructions
Plant operating procedures
Testing procedures
Sampling procedures
Safety protocols
Ingredient testing
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EXHIBIT 2.6
TRADEMARK AGREEMENT
THIS TRADEMARK AGREEMENT dated as of the ________ day of ____________
199___, is by and among Ralcorp Holdings, Inc., a Missouri corporation
("Ralcorp"), ____________________, a Missouri corporation wholly owned by
Ralcorp ("New Ralcorp"), and ____________________, a Delaware corporation
("Branded Subsidiary").
W I T N E S S E T H:
WHEREAS, Ralcorp, and General Mills, Inc., a Delaware corporation
("Acquiror"), and General Mills Missouri, Inc., a Missouri corporation and a
wholly owned subsidiary of Acquiror ("Merger Sub"), have entered into an
Agreement and Plan of Merger dated August 13, 1996 (as amended on October ___,
1996, the "Merger Agreement") pursuant to which Merger Sub is being merged with
and into Ralcorp immediately after the consummation of the transactions
contemplated hereby (the "Merger"); and
WHEREAS, in connection with the Merger, the parties hereto desire to
transfer or license certain intellectual property assets to each other on the
terms and conditions set forth in (i) that certain Technology Agreement by and
between Ralcorp, New Ralcorp and Branded Subsidiary dated as of the date hereof
(the "Technology Agreement") and (ii) this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and for other good and valuable consideration, the parties agree as follows:
1. Definitions
a. The term "Trademarks" shall mean and include trademark(s), service
mark(s), trade dress, and copyright(s) and all registrations and
applications for registrations relating thereto; however, the term
"trademark" shall mean only a word, symbol or device registrable as a
trademark under the trademark laws.
b. The term "Designated Products" shall mean cereals, cereal based snacks and
snack mixes, and products which are identical to or substantially similar
in form or in overall appearance to those products, which have been
offered for sale in connection with any form of the CHEX trademark or the
COOKIE CRISP trademark prior to the date hereof, whether or not any of
such products are (i) similar in flavor to those products which have been
offered for sale in connection with such trademarks or (ii) used in
association with ingredients (e.g., raisins) different from the
ingredients used in the products which have been offered for sale
<PAGE> 2
in connection with such trademarks; provided, however, that this term
shall not include the hexagonally shaped products currently sold under the
CRISPY HEXAGON designation or those wheat cereals denominated or described
as SHREDDED WHEAT and similar in nature to other shredded wheat products
currently offered by other cereal manufacturers.
c. The term "Private Label Trademark(s)" shall mean those trademarks and
trade names owned by a grocery retailer, a wholesaler, or broker, which is
not a cereal producer or primarily in the cereal business, which are used
by such persons or entities to identify grocery products sold by such
parties or entities and in which New Ralcorp (as successor by merger to
Ralston Foods, Inc. ("Foods")) and its Affiliates have no rights, except
for the right to produce products utilizing such Trademarks and trade
names for such parties or entities or their licensees, but which shall
not, in any event, include any Trademark or trade name described in
Section 2(d)(i) or Section 2(d)(ii) hereinbelow.
d. The term "Reorganization Agreement" shall mean the Agreement by this name
dated as of the date hereof by and among Ralcorp, New Ralcorp, Foods,
Branded Subsidiary, and Acquiror.
e. The term "Control Brand" shall mean those Trademarks and trade names which
(i) are utilized by New Ralcorp and/or its subsidiaries on a line of
products, the vast majority of which are sold utilizing Private Label
Trademarks, which are typically offered by New Ralcorp to re-sellers of
grocery products who normally do not utilize their own Private Label
Trademarks on such grocery products, in lieu of a Private Label Trademark
on such products and (ii) New Ralcorp and/or its subsidiaries do not
themselves advertise to consumers.
f. All other capitalized terms used but not otherwise defined herein shall
have the meanings ascribed thereto in the Reorganization Agreement.
2. Trademark Assignments and Licenses
a. New Ralcorp on behalf of itself and its subsidiaries, other than Branded
Subsidiary, hereby assigns and agrees to cause any applicable subsidiaries
to assign, effective as of the Distribution Date, to the Branded
Subsidiary all of New Ralcorp's and its subsidiaries' rights, title and
interest, together with all of the goodwill associated therewith, in (i)
the Trademarks and recipe names listed on Schedule 2(a) attached hereto
and registrations and applications for registrations related to the
trademarks listed in Schedule 2(a), and (ii) any other Trademarks, other
than the RALSTON, RALSTON FOODS, and red, stylized R trademarks
(collectively, the "Ralston Trademarks") and the SUN FLAKES and SPIDERMAN
Trademarks, previously used or currently owned by New Ralcorp or licensed
to
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New Ralcorp (as successor by merger to Foods) or its subsidiaries which
are or have been almost always associated with the Branded Business or
intended almost always for use therein (collectively, the Trademarks
described in this Section 2(a) constitute the "Branded Trademarks"). New
Ralcorp hereby grants (without assuming any liability, as to Puerto Rico,
that may arise as a result of or in connection with such grant, including,
without limitation, with respect to the Distributorship Agreement),
effective as of the Distribution Date, to Branded Subsidiary a
non-exclusive royalty free right to use the Ralston Trademarks in the
United States, its territories and possessions and the Commonwealth of
Puerto Rico and military installations on any product packaging,
promotional or advertising materials for a period of one (1) year
following the Distribution Date; provided however, that such term may be
extended (for a period of no more than one (1) additional year) for the
purpose of permitting the Branded Subsidiary to use, sell or otherwise
dispose of product packaging and advertising or promotional materials that
remain on hand on the one year anniversary of the Distribution Date. The
Branded Subsidiary, on behalf of itself and its Affiliates and
subsidiaries, hereby agrees that it will (i) make reasonable efforts to
conclude the use of such product packaging and promotional and advertising
materials by the one year anniversary of the Distribution Date and (ii)
not place any orders for such product packaging and advertising or
promotional materials at any time after the one year anniversary of the
Distribution Date. Nothing herein shall prevent the Branded Subsidiary
from ordering such product packaging and promotional and advertising
materials within the initial one (1) year period following the
Distribution Date.
b. Ralcorp hereby assigns to New Ralcorp all of Ralcorp's rights, title and
interest, together with all the goodwill associated therewith, in and to
(i) the trademarks listed on Schedule 2(b) attached hereto and
registrations and applications for registrations related thereto and (ii)
any other Trademarks owned by Ralcorp, other than the Branded Trademarks
(collectively, the Trademarks described in this Section 2(b) constitute
the "Other Trademarks").
c. Each of Ralcorp and the Branded Subsidiary hereby acknowledge and agree
that New Ralcorp, or its Affiliates and subsidiaries, will retain, and
that neither Ralcorp, nor the Branded Subsidiary will have any rights in
the Other Trademarks, except, as otherwise provided in Section 2(a), with
respect to use of the Ralston Trademarks.
d. New Ralcorp, on behalf of itself and its Affiliates hereby acknowledges
and agrees that neither it nor any of them will retain nor will they have
any rights to the Branded Trademarks. For the respective periods set out
below, New Ralcorp, on behalf of itself and its present and future
Affiliates, further agrees, and shall cause such Affiliates to agree, that
New Ralcorp and such Affiliates shall not directly or indirectly use
(including, without limitation, any use in connection with any Private
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Label Trademark or Control Brand products, any contract packing
arrangement or otherwise in connection with producing product for third
parties), register, seek to register, license or otherwise grant rights in
any of the following Trademarks or statements, as the case may be, in any
state, country or territory anywhere in the world:
(i) the Branded Trademarks and any Trademarks or trade names
confusingly similar to any of such Branded Trademarks, including, with
respect to cereals and snack mixes, without any limitation of the
generality of the foregoing, any one syllable Trademark or trade name
concluding with an "EX" type sound; provided, however, that nothing in
this Agreement shall prevent New Ralcorp or its Affiliates from using
(A) the Branded Trademarks in connection with any legally permissible
comparative advertising or (B) the word "mix" in or in connection with
any Trademark or trade name otherwise permitted to be used hereunder
for any cereal, snack mix or snack mix recipe;
(ii) with respect to the Designated Products, (A) PURINA,
CHECKERBOARD, any checkerboard or checkered logo or symbol, and any
Trademarks or trade names confusingly similar to any of the foregoing
trademarks or (B) any statement which indicates that any CHEX-type
ready to eat cereal Designated Products were produced at any time
prior to the Distribution Date, or that any other Designated Products
were produced at any time prior to the date which is 18 months after
the Distribution Date, in either case, by Ralston Purina Company ("RP
Co.") or New Ralcorp or their Affiliates; and
(iii) with respect to the Designated Products, any trademarks or trade
names, other than Private Label Trademarks.
The obligations set forth in Section 2(d)(i) shall continue and remain in
effect as long as the Branded Subsidiary and its Affiliates, successors in
interest, assigns and licensees shall not have abandoned all use of the
applicable Branded Trademark and all Trademarks confusingly similar
thereto and all registrations for such applicable Branded Trademark and
all Trademarks confusingly similar thereto shall not have expired. The
obligations set forth in Section 2(d)(ii) shall continue and remain in
effect as long as the Branded Subsidiary and its Affiliates, successors in
interest, assigns and licensees shall not have permanently discontinued
(which shall be deemed to have occurred if any such Designated Product
shall not have been offered for sale for a period of two (2) consecutive
years or more unless such discontinuance is a result of a force majeure
event) offering all products which are identical to or substantially
similar to the applicable Designated Product. The obligations set forth
in Section 2(d)(iii) shall continue and remain in effect for a period of
three (3) years from the Distribution Date; provided, however, that (A)
commencing two (2) years after the Distribution Date, New Ralcorp shall
have the
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right to use the Ralston Trademarks as a Control Brand (provided that all
requirements of Section 2(d)(i) and Section 2(d)(ii) are met), and any
other Control Brands which otherwise comply with the requirements of this
Section 2(d), in connection with any Designated Product, and (B)
commencing three (3) years after the Distribution Date, New Ralcorp shall
have the right to use the Ralston Trademarks in connection with the
Designated Products (without limiting its rights to use the Ralston
Trademarks on any other products) only as a house brand in the same manner
as it does for its other cereal products and only on the conditions that
the Ralston Trademarks are less prominently displayed than the primary
trademark or product name in all uses on the principal display panels of
the products and in advertising thereof, and the other requirements of
Section 2(d)(i) and Section 2(d)(ii) are otherwise satisfied and the
Ralston Trademarks shall not be used as part of the product name.
Notwithstanding the foregoing, the restrictions contained in Section
2(d)(iii) hereinabove shall not in and of themselves restrict in any
manner whatsoever, the use of any pre-existing Trademarks or Trademarks
confusingly similar thereto, in the business of any third party which may
acquire New Ralcorp or its Affiliates through a merger, consolidation or
other acquisition transaction. All of the foregoing provisions of this
paragraph (d) are subject to the terms of the Technology Agreement which
shall control in the event of any conflict, difference or ambiguity
existing between this Agreement and the Technology Agreement.
e. All assignments made pursuant to this Trademark Agreement by Ralcorp are
on a quitclaim basis. All grants and assignments made by New Ralcorp are
made on the same basis as set forth in the Merger Agreement and the
Reorganization Agreement with respect to Intellectual Property. The
Branded Subsidiary hereby acknowledges that it has assumed limitations,
undertakings and liabilities related to the Branded Trademarks pursuant
to, and in accordance with, the terms of the Reorganization Agreement,
including, without limitation, such limitations, undertakings and
liabilities arising out of that certain Trademark Agreement dated as of
March 31, 1994 (which has not been amended since such date other than the
amendment dated March 28, 1995) by and between Ralcorp and Ralston Purina
Company (the "Prior Trademark Agreement") which agreement is attached
hereto as Exhibit A. New Ralcorp hereby acknowledges that it has assumed
limitations, undertakings and liabilities related to the Other Trademarks
pursuant to, and in accordance with, the terms of the Reorganization
Agreement, including, without limitation, the limitations, undertakings
and liabilities arising out of the Prior Trademark Agreement.
f. U.S. and Canadian assignments in recordable form, as applicable, relating
to the Branded Trademarks shall be delivered effective as of the
Distribution Date to the Branded Subsidiary at Closing. To the extent
registrations and/or applications relating to the Branded Trademarks exist
in more than one country, a single multi-country assignment shall be
delivered effective as of the Distribution Date to the
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<PAGE> 6
Branded Subsidiary at Closing. At the Branded Subsidiary's request and
expense, separate country-specific assignments will be delivered to the
Branded Subsidiary or its designee at a reasonable time following each
such request. All taxes, transfer fees and other costs required to record
title to the Branded Trademarks shall be borne by the Branded Subsidiary.
g. U.S. and Canadian assignments in recordable form, as applicable, relating
to the Other Trademarks shall be delivered effective as of the
Distribution Date to New Ralcorp at Closing. To the extent registrations
and/or applications relating to the Other Trademarks exist in more than
one country, a single multi-country assignment shall be delivered
effective as of the Distribution Date to New Ralcorp at Closing. At New
Ralcorp's request and expense, separate country-specific assignments will
be delivered to New Ralcorp at a reasonable time following each such
request. All taxes, transfer fees and other costs required to record
title to the Other Trademarks shall be borne by New Ralcorp.
h. If for any reason a Trademark required to be assigned to the Branded
Subsidiary hereunder cannot be assigned without also assigning rights used
in or associated with businesses not related to the Branded Business, the
parties will work together in good faith to accomplish the goal that such
Trademark will reside in the Branded Subsidiary, or its designee, for
Branded Business purposes and, if for any reason, a Trademark required to
be assigned to New Ralcorp hereunder cannot be assigned without also
assigning rights used in or associated with the Branded Business, the
parties will work together in good faith to accomplish the goal that such
Trademark will reside in the Branded Subsidiary for purposes of the
Branded Business and in New Ralcorp or its designee for other purposes.
3. License Agreements and Contracts.
a. To the extent assignable without third-party consent, and, if not, to the
extent such consents have been obtained heretofore, the license agreements
and contracts listed on Schedule 3(a) attached hereto (which Schedule 3(a)
shall include all license agreements and contracts related to the Branded
Trademarks, including those that may have been entered into from and after
August 13, 1996, in accordance with the terms of the Merger Agreement) and
related to the rights in the Branded Trademarks between New Ralcorp and
unaffiliated third parties are hereby assigned, effective as of the
Distribution Date, to the Branded Subsidiary. Branded Subsidiary hereby
acknowledges that, effective as of the Distribution Date, it has assumed
the obligations under the license agreements and other contracts listed on
Schedule 3(a) pursuant to and in accordance with the terms of the
Reorganization Agreement. To the extent they are non-assignable, New
Ralcorp shall use reasonable efforts to place the Branded Subsidiary in
the same position as the
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Branded Subsidiary would have been had the rights under such agreements
been assigned.
b. To the extent assignable without third-party consent, and, if not, to the
extent such consents have been obtained heretofore, the license agreements
and contracts related to the rights in the Other Trademarks between
Ralcorp and unaffiliated third parties are hereby assigned, effective as
of the Distribution Date, to New Ralcorp. New Ralcorp hereby acknowledges
that, effective as of the Distribution Date, it has assumed the
obligations under such license agreements and other contracts pursuant to
and in accordance with the terms of the Reorganization Agreement. To the
extent they are non-assignable, Ralcorp shall use reasonable efforts to
place New Ralcorp in the same position as New Ralcorp would have been had
the rights under such agreements been assigned.
4. Scope and Modification.
Except as set forth in the Technology Agreement, the Merger Agreement and the
Reorganization Agreement, each of which shall control in the event of any
conflict, this Trademark Agreement sets forth the entire agreement between
the parties and supersedes all prior agreements and understandings between
the parties relating to the subject matter hereof. None of the terms of this
Trademark Agreement may be waived or modified except as expressly agreed to,
in writing, by each of the parties or their Affiliates.
5. Successors and Assigns.
This Trademark Agreement and all the provisions hereof shall be binding upon
and inure to the benefit of the parties and each of their respective
successors and assigns.
6. Interpretation.
The section headings contained in this Trademark Agreement are solely for the
purpose of reference, are not part of the agreement of the parties hereto,
and shall not in any way affect the meaning or interpretation of this
Trademark Agreement.
7. Counterparts.
This Trademark Agreement may be executed in two or more counterparts, each of
which may be deemed an original, but all of which together shall constitute
one and the same instrument.
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8. Governing Law.
This Trademark Agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of Missouri.
9. Additional Documents.
The parties agree to execute or cause to be executed such additional
documents as may be reasonably required to give effect to their
undertakings in this Trademark Agreement.
10. Dispute Resolution.
The dispute resolution provisions of Article XII of the Reorganization
Agreement will control in the event of any dispute in relation to this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Trademark Agreement
as of the date first above written.
RALCORP HOLDINGS, INC.
By:_________
Name:_______
Title:________
NEW RALCORP HOLDINGS, INC.
By:_________
Name:_______
Title:________
CHEX, INC.
By:_________
Name:_______
Title:________
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EXHIBIT 5.1
[WACHTELL, LIPTON, ROSEN & KATZ LETTERHEAD]
December 20, 1996
Board of Directors
General Mills, Inc.
Number One General
Mills Boulevard
Minneapolis, MN 55426
Re: Registration Statement on Form S-4
of General Mills, Inc.
Ladies and Gentlemen:
We are acting as special counsel to General Mills, Inc., a Delaware
corporation (the "Corporation"), in connection with the above-captioned
Registration Statement filed by the Corporation with the Securities and
Exchange Commission (the "Registration Statement") with respect to the shares
of Common Stock, par value $0.10 per share, of the Corporation (the
"Corporation Common Stock") proposed to be issued in connection with the merger
(the "Merger") of General Mills Missouri, Inc., a Missouri corporation and a
wholly owned subsidiary of the Corporation ("General Mills Missouri"), with
Ralcorp Holdings, Inc., a Missouri corporation ("Ralcorp") upon the terms and
subject to the conditions set forth in the Agreement and Plan of Merger by and
among Ralcorp, the Corporation and General Mills Missouri, dated as of August
13, 1996 and amended as of October 25, 1996 (the "Merger Agreement").
<PAGE> 2
[WACHTELL, LIPTON, ROSEN & KATZ LETTERHEAD]
General Mills, Inc.
December 20, 1996
Page 2
In connection with this opinion, we have reviewed the Registration
Statement and the exhibits thereto, and we have examined originals or copies,
certified or otherwise identified to our satisfaction, of such corporate
records, agreements, certificates of public officials and of officers of the
Corporation and other instruments, and such matters of law and fact as we have
deemed necessary to render the opinion contained herein.
In giving the opinions contained herein, we have, with your approval,
relied upon representations of officers of the Corporation and certificates of
public officials with respect to the accuracy of the material factual matters
addressed by such representations and certificates. We have, with your
approval, assumed the genuineness of all signatures or instruments submitted to
us, and the conformity of certified copies submitted to us with the original
documents to which such certified copies relate.
Based upon and subject to the foregoing, we are of the opinion that the
Corporation Common Stock being registered under the Registration Statement,
when issued in connection with the Merger pursuant to the terms of the Merger
Agreement, will be validly issued, fully paid, and nonassessable.
We are members of the bar of the State of New York and we express no
opinion as to the laws of any jurisdiction other than the federal laws of the
United States, the General Corporation Law of the State of Delaware and the
laws of the State of New York.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement and to the
reference to our firm under the caption "LEGAL MATTERS" in the Proxy
Statement-Prospectus contained therein. In giving such consent, we do not
hereby admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended.
Very truly yours,
/s/ Wachtell, Lipton, Rosen & Katz
<PAGE> 1
EXHIBIT 8.1
[WACHTELL, LIPTON, ROSEN & KATZ LETTERHEAD]
December 20, 1996
Board of Directors
General Mills, Inc.
Number One General
Mills Boulevard
Minneapolis, MN 55426
Re: Registration Statement on Form S-4
of General Mills, Inc.
Ladies and Gentlemen:
We are acting as special counsel to General Mills, Inc., a Delaware
corporation (the "Corporation"), in connection with the above-captioned
Registration Statement filed by the Corporation with the Securities and Exchange
Commission (the "Registration Statement") with respect to the shares of Common
Stock, par value $0.10 per share, of the Corporation (the "Corporation Common
Stock") proposed to be issued in connection with the merger (the "Merger") of
General Mills Missouri, Inc., a Missouri corporation and a wholly owned
subsidiary of the Corporation ("General Mills Missouri"), with Ralcorp Holdings,
Inc., a Missouri corporation ("Ralcorp"), upon the terms and subject to the
conditions set forth in the Agreement and Plan of Merger by and among Ralcorp,
the Corporation and General Mills Missouri, dated as of August 13, 1996 and
amended as of October 25, 1996 (the "Merger Agreement").
<PAGE> 2
[WACHTELL, LIPTON, ROSEN & KATZ LETTERHEAD]
General Mills, Inc.
December 20, 1996
Page 2
In connection with this opinion, we have reviewed the Registration
Statement and the exhibits thereto, and we have examined originals or copies,
certified or otherwise identified to our satisfaction, of such corporate
records, agreements, certificates of public officials and of officers of the
Corporation and other instruments, and such matters of law and fact as we have
deemed necessary to render the opinion contained herein. We also note that the
Registration Statement sets forth that General Mills and Ralcorp will not
consummate the Merger unless they receive the Tax Opinions (as defined in the
Registration Statement).
Based upon and subject to the foregoing, and assuming that the Merger is a
valid merger under applicable Missouri law, we confirm our opinion set forth
under the heading "The Proposed Transactions -- Material Federal Income Tax
Consequences" in the Registration Statement. We express no opinion as to the
laws of any jurisdiction other than the federal laws of the United States.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement. In giving such
consent, we do not hereby admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended.
Very truly, yours,
/s/ Wachtell, Lipton, Rosen & Katz
<PAGE> 1
EXHIBIT 8.2
[Bryan Cave LLP Letterhead]
December 20, 1996
Ralcorp Holdings, Inc.
P.O. Box 618
St. Louis, Missouri 63188-0618
Re: Registration Statement on Form S-4
of General Mills, Inc.
----------------------------------
Members of the Board:
We are acting as special counsel to Ralcorp Holdings, Inc., a Missouri
corporation (the "Corporation"), in connection with the merger (the "Merger")
of the Corporation with and into General Mills Missouri, Inc., a Missouri
corporation ("General Mills Missouri") and a wholly owned subsidiary of General
Mills, Inc. ("General Mills"), upon the terms and subject to the conditions set
forth in the Agreement and Plan of Merger by and among the Corporation, General
Mills and General Mills Missouri, dated as of August 13, 1996 and amended as of
October 25, 1996 (the "Merger Agreement"). General Mills has filed the
above-referenced Registration Statement with the Securities and Exchange
Commission (the "Registration Statement") with respect to the shares of Common
Stock, par value $0.10 per share, of General Mills proposed to be issued in
connection with the Merger.
We have reviewed the Registration Statement and the exhibits thereto, and
we have examined originals or copies, certified or otherwise identified to our
satisfaction, of such corporate records, agreements, certificates of public
officials and of officers of the Corporation and other instruments, and such
matters of law and fact as we have deemed necessary to render this opinion. We
note that the Registration Statement sets forth that General Mills and the
Corporation will not consummate the Merger unless they receive the Tax Opinions
(as defined in the Registration Statement).
Based upon and subject to the foregoing, and assuming that the Merger is a
valid merger under applicable Missouri law, we confirm our opinion set forth
under the heading "The Proposed Transactions--Material Federal Income Tax
Consequences" in the Registration Statement.
We express no opinion as to the laws of any jurisdiction other than the
federal laws of the United States.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement. In giving
such consent, we do not hereby admit that we are in the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended.
Very truly yours,
/s/ Bryan Cave LLP
<PAGE> 1
EXHIBIT 23.1
Consent of KPMG Peat Marwick LLP
The Board of Directors
General Mills, Inc.:
We consent to the incorporation by reference in this Proxy Statement-Prospectus
of General Mills, Inc. on Form S-4 of our report dated June 26, 1996 relating
to the consolidated balance sheets of General Mills, Inc. as of May 26, 1996
and May 28, 1995 and the related consolidated statements of earnings and cash
flows for each of the years in the three-year period ended May 26, 1996, and
our report on the related financial statement schedule, included or
incorporated by reference in the Company's Form 10-K for the year ended
May 26, 1996, and to the reference to our firm under the headings "Selected
Historical Financial Information General Mills" and "EXPERTS" in the Proxy
Statement-Prospectus of General Mills, Inc. on Form S-4.
Our report covering the basic consolidated financial statements refers to
changes in the method of accounting for investments in debt and equity
securities in fiscal 1995 and postemployment benefits and income taxes in fiscal
1994.
/s/ KPMG Peat Marwick LLP
Minneapolis, Minnesota
December 20, 1996
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of General Mills, Inc. of our report dated
November 22, 1996 relating to the financial statements of the Branded Business
of Ralston Foods, Inc. which appears in such Prospectus. We also consent to the
references to us under the headings "Experts" and "Selected Historical Financial
Information" in such Prospectus. However, it should be noted that Price
Waterhouse LLP has not prepared or certified such "Selected Historical Financial
Information."
/s/ Price Waterhouse LLP
Price Waterhouse LLP
St. Louis, Missouri
December 27, 1996
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS that the undersigned constitutes and appoints
Siri S. Marshall, Leslie M. Frecon and Kenneth L. Thome, and each of them, his
or her true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for and in his or her name, place and stead, in
any and all capacities, to sign a Registration Statement on Form S-4 and any and
all amendments (including post-effective amendments) to the Registration
Statement covering the issuance of the common stock of General Mills, Inc. in
exchange for the shares of common stock of Ralcorp Holdings, Inc., and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as might or could
be done in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their substitute or substitutes
may lawfully do or cause to be done by virtue hereof.
/s/ Kenneth A. Macke
---------------------------
Kenneth A. Macke
Dated: September 30, 1996
<PAGE> 1
EXHIBIT 24.2
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS that the undersigned constitutes and appoints
Siri S. Marshall, Leslie M. Frecon and Kenneth L. Thome, and each of them, his
or her true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for and in his or her name, place and stead, in
any and all capacities, to sign a Registration Statement on Form S-4 and any and
all amendments (including post-effective amendments) to the Registration
Statement covering the issuance of the common stock of General Mills, Inc. in
exchange for the shares of common stock of Ralcorp Holdings, Inc., and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as might or could
be done in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their substitute or substitutes
may lawfully do or cause to be done by virtue hereof.
/s/ Michael D. Rose
---------------------------
Michael D. Rose
Dated: September 30, 1996
<PAGE> 1
EXHIBIT 24.3
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS that the undersigned constitutes and appoints
Siri S. Marshall, Leslie M. Frecon and Kenneth L. Thome, and each of them, his
or her true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for and in his or her name, place and stead, in
any and all capacities, to sign a Registration Statement on Form S-4 and any and
all amendments (including post-effective amendments) to the Registration
Statement covering the issuance of the common stock of General Mills, Inc. in
exchange for the shares of common stock of Ralcorp Holdings, Inc., and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as might or could
be done in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their substitute or substitutes
may lawfully do or cause to be done by virtue hereof.
/s/ Stephen W. Sanger
---------------------------
Stephen W. Sanger
Dated: September 30, 1996
<PAGE> 1
EXHIBIT 24.4
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS that the undersigned constitutes and appoints
Siri S. Marshall, Leslie M. Frecon and Kenneth L. Thome, and each of them, his
or her true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for and in his or her name, place and stead, in
any and all capacities, to sign a Registration Statement on Form S-4 and any and
all amendments (including post-effective amendments) to the Registration
Statement covering the issuance of the common stock of General Mills, Inc. in
exchange for the shares of common stock of Ralcorp Holdings, Inc., and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as might or could
be done in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their substitute or substitutes
may lawfully do or cause to be done by virtue hereof.
/s/ A. Michael Spence
---------------------------
Dr. A. Michael Spence
Dated: September 30, 1996
<PAGE> 1
EXHIBIT 24.5
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS that the undersigned constitutes and appoints
Siri S. Marshall, Leslie M. Frecon and Kenneth L. Thome, and each of them, his
or her true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for and in his or her name, place and stead, in
any and all capacities, to sign a Registration Statement on Form S-4 and any and
all amendments (including post-effective amendments) to the Registration
Statement covering the issuance of the common stock of General Mills, Inc. in
exchange for the shares of common stock of Ralcorp Holdings, Inc., and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as might or could
be done in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their substitute or substitutes
may lawfully do or cause to be done by virtue hereof.
/s/ Dorothy A. Terrell
---------------------------
Dorothy A. Terrell
Dated: September 30, 1996
<PAGE> 1
EXHIBIT 24.6
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS that the undersigned constitutes and appoints
Siri S. Marshall, Leslie M. Frecon and Kenneth L. Thome, and each of them, his
or her true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for and in his or her name, place and stead, in
any and all capacities, to sign a Registration Statement on Form S-4 and any and
all amendments (including post-effective amendments) to the Registration
Statement covering the issuance of the common stock of General Mills, Inc. in
exchange for the shares of common stock of Ralcorp Holdings, Inc., and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as might or could
be done in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their substitute or substitutes
may lawfully do or cause to be done by virtue hereof.
/s/ Raymond G. Viault
---------------------------
Raymond G. Viault
Dated: September 30, 1996
<PAGE> 1
EXHIBIT 24.7
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS that the undersigned constitutes and appoints
Siri S. Marshall, Leslie M. Frecon and Kenneth L. Thome, and each of them, his
or her true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for and in his or her name, place and stead, in
any and all capacities, to sign a Registration Statement on Form S-4 and any and
all amendments (including post-effective amendments) to the Registration
Statement covering the issuance of the common stock of General Mills, Inc. in
exchange for the shares of common stock of Ralcorp Holdings, Inc., and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as might or could
be done in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their substitute or substitutes
may lawfully do or cause to be done by virtue hereof.
/s/ C. Angus Wurtele
---------------------------
C. Angus Wurtele
Dated: September 30, 1996
<PAGE> 1
EXHIBIT 24.8
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS that the undersigned constitutes and appoints
Siri S. Marshall, Leslie M. Frecon and Kenneth L. Thome, and each of them, his
or her true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for and in his or her name, place and stead, in
any and all capacities, to sign a Registration Statement on Form S-4 and any and
all amendments (including post-effective amendments) to the Registration
Statement covering the issuance of the common stock of General Mills, Inc. in
exchange for the shares of common stock of Ralcorp Holdings, Inc., and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as might or could
be done in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their substitute or substitutes
may lawfully do or cause to be done by virtue hereof.
/s/ Richard M. Bressler
---------------------------
Richard M. Bressler
Dated: September 30, 1996
<PAGE> 1
EXHIBIT 24.9
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS that the undersigned constitutes and appoints
Siri S. Marshall, Leslie M. Frecon and Kenneth L. Thome, and each of them, his
or her true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for and in his or her name, place and stead, in
any and all capacities, to sign a Registration Statement on Form S-4 and any and
all amendments (including post-effective amendments) to the Registration
Statement covering the issuance of the common stock of General Mills, Inc. in
exchange for the shares of common stock of Ralcorp Holdings, Inc., and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as might or could
be done in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their substitute or substitutes
may lawfully do or cause to be done by virtue hereof.
/s/ L. D. DeSimone
---------------------------
L. D. DeSimone
Dated: September 30, 1996
<PAGE> 1
EXHIBIT 24.10
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS that the undersigned constitutes and appoints
Siri S. Marshall, Leslie M. Frecon and Kenneth L. Thome, and each of them, his
or her true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for and in his or her name, place and stead, in
any and all capacities, to sign a Registration Statement on Form S-4 and any and
all amendments (including post-effective amendments) to the Registration
Statement covering the issuance of the common stock of General Mills, Inc. in
exchange for the shares of common stock of Ralcorp Holdings, Inc., and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as might or could
be done in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their substitute or substitutes
may lawfully do or cause to be done by virtue hereof.
/s/ William T. Esrey
---------------------------
William T. Esrey
Dated: September 30, 1996
<PAGE> 1
EXHIBIT 24.11
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS that the undersigned constitutes and appoints
Siri S. Marshall, Leslie M. Frecon and Kenneth L. Thome, and each of them, his
or her true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for and in his or her name, place and stead, in
any and all capacities, to sign a Registration Statement on Form S-4 and any and
all amendments (including post-effective amendments) to the Registration
Statement covering the issuance of the common stock of General Mills, Inc. in
exchange for the shares of common stock of Ralcorp Holdings, Inc., and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as might or could
be done in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their substitute or substitutes
may lawfully do or cause to be done by virtue hereof.
/s/ Charles W. Gaillard
---------------------------
Charles W. Gaillard
Dated: September 30, 1996
<PAGE> 1
EXHIBIT 24.12
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS that the undersigned constitutes and appoints
Siri S. Marshall, Leslie M. Frecon and Kenneth L. Thome, and each of them, his
or her true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for and in his or her name, place and stead, in
any and all capacities, to sign a Registration Statement on Form S-4 and any and
all amendments (including post-effective amendments) to the Registration
Statement covering the issuance of the common stock of General Mills, Inc. in
exchange for the shares of common stock of Ralcorp Holdings, Inc., and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as might or could
be done in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their substitute or substitutes
may lawfully do or cause to be done by virtue hereof.
/s/ Judith Richards Hope
---------------------------
Judith Richards Hope
Dated: September 30, 1996
<PAGE> 1
[LOGO] FORM OF PROXY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF SHAREHOLDERS ON JANUARY 31, 1997 AT
8:30 A.M.
HOLIDAY INN, 1000 EASTPORT PLAZA DRIVE, COLLINSVILLE, ILLINOIS
The undersigned hereby appoints Messrs. Joe R. Micheletto and Robert W.
Lockwood, and either of them, as lawful proxies, with full power of
substitution, for and in the name of the undersigned, to vote on behalf of the
undersigned, with all the powers the undersigned would possess, if personally
present at the Special Meeting of Shareholders of Ralcorp Holdings, Inc. on
January 31, 1997, and any adjournments thereof. The above named proxies are
instructed to vote all the undersigned's shares of stock on the proposals set
forth in the Notice of Special Meeting and Proxy Statement/Prospectus as
specified on the reverse side of this proxy and any adjournments thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" THE PROPOSALS LISTED IN ITEMS 1 AND 2.
Proxy # Shares Owned
IMPORTANT - PLEASE SIGN AND DATE ON BACK OF CARD. RETURN PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE; NO POSTAGE NECESSARY.
1. Spin-off of New Ralcorp Holdings, Inc.
[ ] FOR Proposal 1.
[ ] AGAINST Proposal 1.
[ ] ABSTAIN from Proposal 1.
2. Merger of Ralcorp Holdings, Inc. with General Mills Missouri, Inc., a
wholly owned subsidiary of General Mills, Inc.
[ ] FOR Proposal 2.
[ ] AGAINST Proposal 2.
[ ] ABSTAIN from Proposal 2.
Shareholder(s), please sign
below exactly as name(s)
appears hereon; in the case
of joint holders, all should
sign.
-----------------------------
-----------------------------
-----------------------------
Signature(s) (Title(s), if
applicable)
Date
-----------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2 ABOVE.
(Please detach at perforation before mailing)
<PAGE> 2
[LOGO] FORM OF PROXY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF SHAREHOLDERS ON JANUARY 31, 1997 AT
8:30 A.M.
HOLIDAY INN, 1000 EASTPORT PLAZA DRIVE, COLLINSVILLE, ILLINOIS
The undersigned hereby appoints Messrs. Joe R. Micheletto and Robert W.
Lockwood, and either of them, as lawful proxies, with full power of
substitution, for and in the name of the undersigned, to vote on behalf of the
undersigned, with all the powers the undersigned would possess, if personally
present at the Special Meeting of Shareholders of Ralcorp Holdings, Inc. on
January 31, 1997, and any adjournments thereof. The above named proxies are
instructed to vote all the undersigned's shares of stock on the proposals set
forth in the Notice of Special Meeting and Proxy Statement/Prospectus as
specified on the reverse side of this proxy and any adjournments thereof.
THIS PROXY RELATES TO ALL SHARES OWNED OF RECORD BY THE UNDERSIGNED AND ANY
COMMON STOCK SHARES CREDITED TO THE UNDERSIGNED'S ACCOUNT UNDER THE RALCORP
HOLDINGS, INC. SAVINGS INVESTMENT PLAN.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" THE PROPOSALS LISTED IN ITEMS 1 AND 2.
Proxy # Shares Owned SIP Shares
IMPORTANT - PLEASE SIGN AND DATE ON BACK OF CARD. RETURN PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE; NO POSTAGE NECESSARY.
1. Spin-off of New Ralcorp Holdings, Inc.
[ ] FOR Proposal 1.
[ ] AGAINST Proposal 1.
[ ] ABSTAIN from Proposal 1.
2. Merger of Ralcorp Holdings, Inc. with General Mills Missouri, Inc., a
wholly owned subsidiary of General Mills, Inc.
[ ] FOR Proposal 2.
[ ] AGAINST Proposal 2.
[ ] ABSTAIN from Proposal 2.
Shareholder(s), please sign
below exactly as name(s)
appears hereon; in the case
of joint holders, all should
sign.
-----------------------------
-----------------------------
-----------------------------
Signature(s) (Title(s), if
applicable)
Date
-----------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2 ABOVE.
(Please detach at perforation before mailing)
<PAGE> 1
[RALCORP HOLDINGS, INC. LETTERHEAD]
[FORM OF EMPLOYEE LETTER]
December 27, 1996
Dear Shareholder:
Enclosed is a Proxy Statement-Prospectus and Proxy for the Special Meeting
of Shareholders of Ralcorp Holdings, Inc. The enclosed Proxy relates to the
following shares:
- Shares of Ralcorp Stock as to which you are registered with the Company
as the record holder.
- Shares of Ralcorp Stock credited to your account in the Ralcorp Holdings
Savings Investment Plan.
The Trustee of the Ralcorp SIP will vote all shares of Ralcorp Stock held
in the Plan as of the record date, whether or not the shares have been credited
to participants' accounts. For administrative reasons, shares credited to a
participant's account as of a cut-off date of November 25, 1996, will be voted
in accordance with the participant's instructions on the enclosed Proxy card.
Any credited shares for which no instructions are received by the Trustee, and
any shares in the fund which were not credited as of November 25, 1996, will be
voted by the Trustee in the same proportion as the shares for which instructions
were received from all participants in the Plan.
Please complete, sign and date the enclosed Proxy and return it, in the
postage-paid envelope provided, to the Corporation Trust Company, which acts as
Tabulator. In order to provide the Tabulator with time to tabulate the votes, it
has requested that all Proxies be returned as promptly as possible, but no later
than January 24, 1997.
You may also have received additional copies of the Proxy
Statement-Prospectus and Proxies relating to other shares of stock held by you
in street name. These Proxies are not duplicates of the one enclosed and we ask
that they also be completed and returned pursuant to the instructions enclosed
with them.
Robert W. Lockwood
Vice President, General Counsel
and Secretary
