SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1997 COMMISSION FILE NO. 1-4582
RALSTON PURINA COMPANY
INCORPORATED IN MISSOURI - IRS EMPLOYER IDENTIFICATION NO. 43-0470580
CHECKERBOARD SQUARE, ST. LOUIS, MISSOURI 63164
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 314-982-1000
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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Title of each class Name of each exchange on which registered
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RALSTON PURINA COMPANY NEW YORK STOCK EXCHANGE, INC.
COMMON STOCK, PAR VALUE $.10 PER SHARE CHICAGO STOCK EXCHANGE
PACIFIC STOCK EXCHANGE INCORPORATED
RALSTON PURINA COMPANY NEW YORK STOCK EXCHANGE, INC.
COMMON STOCK PURCHASE RIGHTS CHICAGO STOCK EXCHANGE
PACIFIC STOCK EXCHANGE INCORPORATED
5 3/4% CONVERTIBLE SUBORDINATED DEBENTURES NEW YORK STOCK EXCHANGE, INC.
9 1/4% DEBENTURES NEW YORK STOCK EXCHANGE, INC.
9.30% DEBENTURES NEW YORK STOCK EXCHANGE, INC.
8 5/8% DEBENTURES NEW YORK STOCK EXCHANGE, INC.
8 1/8% DEBENTURES NEW YORK STOCK EXCHANGE, INC.
7 7/8 % DEBENTURES NEW YORK STOCK EXCHANGE, INC.
7 3/4% DEBENTURES NEW YORK STOCK EXCHANGE, INC.
7% EXCHANGEABLE NOTES NEW YORK STOCK EXCHANGE, INC.
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Registrant has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months and has
been subject to such filing requirements for the past 90 days.
Yes: X No:
Disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not
contained herein and will not be contained, to the best of registrant's
knowledge, in the definitive proxy statement incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K.
Yes: No: X
AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NONAFFILIATES OF THE
REGISTRANT AS OF THE CLOSE OF BUSINESS ON OCTOBER 31, 1997:$9,232,131,416.
(Excluded from this figure is the voting stock held by Registrant's Directors,
who are the only persons known to Registrant who may be considered to be its
"affiliates" as defined under Rule 12b-2.)
Number of shares of Ralston Purina Company Common Stock ("RAL Stock"), $.10
par value, outstanding as of close of business on December 5, 1997:
106,690,296.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of Ralston Purina Company 1997 Annual Report to Shareholders
(Parts I and II of Form 10-K).
2. Portions of Ralston Purina Company Notice of Annual Meeting and Proxy
Statement dated December 10, 1997 (Part III of Form 10-K).
PART I
ITEM 1. BUSINESS.
The Company, incorporated in Missouri in 1894, is the world's largest producer
of dry dog and dry and soft-moist cat foods. It is also the world's largest
manufacturer of dry cell battery products. The Company is also a major
producer of other pet products, including cat box filler. The Company has a
number of trademarks, such as PURINA, RALSTON, the CHECKERBOARD logo, CHOW,
DOG CHOW, CAT CHOW, GOLDEN CAT, TIDY CAT, EVEREADY and ENERGIZER among others,
which it considers of substantial importance and which it uses individually or
in conjunction with other Company trademarks.
The Company is presently comprised of two Business Segments - Pet Products and
Battery Products. At September 30, 1997, the Company's soy protein
technologies business and its agricultural products business were considered
discontinued businesses for financial reporting purposes.
The Pet Products Segment consists of Ralston Purina's worldwide Pet Products
operations. Pet Products produces and sells dog and cat foods under the
PURINA name, including DOG CHOW, CAT CHOW and numerous other dog and cat food
brands. Pet Products also produces and sells cat box filler and related
products under the GOLDEN CAT name, including TIDY CAT and other brands.
The Battery Products Segment consists of the Company's worldwide battery
products business. The battery products business manufactures and sells
primary batteries, rechargeable batteries and battery-powered lighting
products in the United States and worldwide, principally under the trademarks
EVEREADY and ENERGIZER. The Company's domestic and foreign battery operations
have been organized as Eveready Battery Company, Inc. and Ralston Purina
Overseas Battery Company, respectively, both wholly owned subsidiaries of the
Company.
On December 3, 1997, the Company, in a series of mergers and exchanges, sold
its soy protein technologies business, the world's leading producer and
marketer of high-quality dietary isolated soy protein and fiber food
ingredients and a leading marketer of polymer products, to E.I. du Pont de
Nemours and Company. On March 29, 1996, the Company announced its intention
to separate its agricultural products business in a tax-free spin-off to
shareholders. The agricultural products business, which is conducted almost
exclusively outside of the United States, is one of the world's largest
producers and marketers of formula feeds. Completion is anticipated in early
1998 and is contingent upon a favorable tax ruling from the Internal Revenue
Service and approval by the Company's Board of Directors.
On December 5, 1997, the Company acquired Edward Baker Petfoods, a British pet
food manufacturer and a major supplier of branded and private label pet food
products to the European market.
On July 22, 1995, the Company sold all of the outstanding capital stock of
Continental Baking Company, its subsidiary engaged in the fresh bakery
products business, to Interstate Bakeries Corporation and its wholly owned
subsidiary Interstate Brands Corporation.
The principal raw materials used in the Pet Products Segment are grain and
grain products, protein ingredients, meat by-products and clay; in the Battery
Products Segment, the principal raw materials used are manganese dioxide,
zinc, acetylene black and potassium hydroxide. With respect to discontinued
soy protein operations, the principal raw materials used are processed soy and
other proteins, and in agricultural products, grain and grain products and
protein ingredients. The Company purchases such raw materials from local,
regional, national and international suppliers. The cost of raw materials
used in these products may fluctuate due to weather conditions, government
regulations, economic climate, or other unforeseen circumstances. The Company
manages exposure to changes in the commodities markets as considered necessary
by hedging certain of its ingredient requirements such as soybean meal, corn
or wheat. Sales prices of the Company's agricultural products, a large
portion of the production costs of which are represented by the costs of raw
materials, are adjusted frequently to reflect changes in raw material costs.
Prices of other products are adjusted less frequently. The ability to
substitute ingredients in some of these products, such as agricultural feeds,
provides further protection against fluctuating raw material prices.
Pet products are marketed in the United States primarily through direct sales
forces and food brokers to grocery wholesalers, retail chains and other
customers. Battery products (as well as the discontinued food protein and
industrial polymer products) are marketed in the United States and
internationally primarily through direct sales forces. Agricultural products
are distributed primarily through a network of approximately 3,300 independent
dealers outside the United States.
Competition is intense in both of the Business Segments. In the Pet Products
and Battery Products Segments, the principal competitors are regional,
national and international manufacturers whose products compete with those of
the Company for shelf space and consumer acceptance. In the agricultural
products business, the Company competes with other large feed manufacturers,
cooperatives, single-owner establishments and in the case of many markets,
government feed companies. The business of the Battery Products Segment tends
to be somewhat seasonal, with strong fall and winter sales reflecting the
effect of holiday buying of batteries.
During fiscal years 1995, 1996 and 1997, revenue from the Company's sales of
its products to Wal-Mart Stores, Inc. and its affiliated companies was 6.7%,
10.5% and 11.9%, respectively, of the Company's gross consolidated revenues.
Except for this relationship, the Company was not dependent upon any other
single customer or a few customers, the loss of any one or more of which
would have a material adverse effect on the Company.
The operations of the Company, like those of other companies engaged in
similar businesses, are subject to various federal, state, and local laws and
regulations intended to protect the public health and the environment,
including regulations related to air and water quality, underground fuel
storage tanks and waste handling and disposal. The Company has received
notices from the U.S. Environmental Protection Agency, state agencies, and/or
private parties seeking contribution, that it has been identified as a
"potentially responsible party" (PRP), under the Comprehensive Environmental
Response, Compensation and Liability Act, and may be required to share in the
cost of cleanup with respect to 14 "Superfund" sites. The Company's ultimate
liability in connection with those sites may depend on many factors, including
the volume of material contributed to the site, the number of other PRP's and
their financial viability, and the remediation methods and technology to be
used.
There has been a shift within primary battery products from carbon zinc
batteries to alkaline batteries. As such, the Company has recorded provisions
related to restructuring its world-wide battery production capacity and
certain administrative functions in each of the last three years. Alkaline
batteries are now the dominant primary battery in all world areas with the
exception of Asia and Africa. The rechargeable battery products business is
experiencing rapid technological evolution, particularly within the lithium
area. These emerging rechargeable technologies are expected to play a
predominant role in the future of the rechargeable battery business. The
Company continues to review its battery production capacity and its business
structure in light of pervasive global trends, including the evolution of
technology.
As of September 30, 1997 the Company, as a whole, employed 10,060 employees in
the United States and 20,102 in foreign jurisdictions. The descriptions of
the businesses of, and the summary of selected financial data regarding, the
Company appearing under "Ralston Purina Company Financial Review-Highlights"
on page 16, "Ralston Purina Company Financial Review-Liquidity and Capital
Resources" on page 18, "Ralston Purina Company Financial Review Business
Segment Information" on page 22, "Ralston Purina Company -Business Segment
Information" on pages 24 through 26, and "Ralston Purina Company Notes to
Financial Statements - Summary of Accounting Policies - Research and
Development" on page 34 of the Ralston Purina Company Annual Report to
Shareholders 1997, are hereby incorporated by reference.
ITEM 2. PROPERTIES.
A list of the Company's principal plants and facilities as of December 3, 1997
follows. The Company believes that such plants and facilities, in the
aggregate, are adequate, suitable and of sufficient capacity for purposes of
conducting its current business.
PET PRODUCTS
PET FOOD PLANTS
United States
Atlanta, GA
Clinton, IA (2R)
Davenport, IA
Denver, CO
Dunkirk, NY
Flagstaff, AZ
Mechanicsburg, PA
Oklahoma City, OK
Zanesville, OH
INTERNATIONAL
Cuautitlan, Mexico
Encrucijada, Venezuela (6)(10)
Guatemala City, Guatemala (6)(10)
Innisfail, Alberta, Canada
Mississauga, Ontario, Canada
Monjos, Spain
Montfort-Sur-Risle, France
Mosquera, Colombia (6)(10)
Portogruaro, Italy
Ribeirao Preto, Brazil
San Tome, Argentina
Songtan, Korea (6)(10)
Strathroy, Ontario, Canada (6)
CAT LITTER PLANTS
United States
Bloomfield, MO
King William, VA
Maricopa, CA
Olmsted, IL
PACKAGING FACILITIES
United States
Philadelphia, PA (8)
INTERNATIONAL
Caledonia, Ontario, Canada (8)
BATTERY PRODUCTS
BATTERY AND RELATED PRODUCTS PLANTS
United States
Asheboro, NC (2)(3)
Bennington, VT
Fremont, OH
Gainesville, FL
Garretsville, OH
Marietta, OH
Maryville, MO
St. Albans, VT
INTERNATIONAL
Alexandria, Egypt
Banbury, United Kingdom
Bogang, People's Republic of China
Caudebec Les Elbeuf, France (2)
Cebu, Philippines
Ekala, Sri Lanka
Jakarta, Indonesia
Johor Bahru, Malaysia
Juarez, Mexico
Jurong, Singapore (3)
La Chaux-de-Fonds, Switzerland
Manila, Philippines
Nakuru, Kenya (5)
Newcastle-under-Lyme, United Kingdom
New Territories, Hong Kong
Slany, Czech Republic (8)
Tanfield Lea, United Kingdom
Tecamac, Mexico
Tianjin, People's Republic of China
Walkerton, Ontario, Canada
DISCONTINUED OPERATIONS
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AGRICULTURAL PRODUCTS
FEED PLANTS
International
Addison, Ontario, Canada
Arequipa, Peru (2)
Barcelona, Venezuela
Benavente, Portugal (9)
Benavente, Spain
Bessenay, France (1)
Borgoratto, Italy
Bucaramanga, Colombia (2)
Buga, Colombia
Cabimas, Venezuela (1)(9)
Canoas, Brazil
Cantenhede, Portugal
Carmo do Cajaru, Portugal (2)
Cartagena, Colombia
Chatillon, France (1)
Chiclayo, Peru
Courchelettes, France
Courtice, Ontario, Canada (2)
Cuautitlan, Mexico
Dos Hermanas, Spain
Drummondville, Quebec, Canada
Encrucijada, Venezuela
Fushun, Peoples Republic of China (1)
Gonen, Turkey
Guadalajara, Mexico
Guatemala City, Guatemala
Ibaque, Colombia (2)
Inhumas, Brazil
Kaposvar, Hungary
Karcag, Hungary
Kunsan, Korea
LaCoruna, Spain
Langfang, Peoples Republic of China
Lima, Peru
Limoges, France (1)
Longue, France
Luleburgaz, Turkey
Maracaibo, Venezuela
Maracay, Venezuela (2)
Marcilla, Spain
Maringa, Brazil
Medellin, Colombia (2)
Merida, Mexico (1)
Merida, Spain
Mexicali, Mexico
Monterrey, Mexico
Montvendre, France (1)
Mosquera, Colombia
Nanjing, People's Rep. of China (7)
Obregon, Mexico
Palmerston, Ontario, Canada
Paulinia, Brazil
Pommevic, France
Pulilan, Philippines
Pusan, Korea
Recife, Brazil
St. Romuald, Quebec, Canada
St. Ybard, France (1)
Salamanca, Mexico
San Felice, Italy
Songtan, Korea (3)
Sorcy, France
Sospiro, Italy
Spessa, Italy (2)
Strathroy, Ontario, Canada
Tehuacan, Mexico
Termoli, Italy
Torrejon, Spain
Valencia, Spain
Villasis, Philippines
Volta Redonda, Brazil
Woodstock, Ontario, Canada
Yantai, People's Rep. of China (7)
HATCHERIES
Valencia, Venezuela
SOY PROTEIN
FOOD PROTEIN PLANTS
United States
Memphis, TN
Pryor, OK (2)
INTERNATIONAL
Ieper, Belgium
INDUSTRIAL PROTEIN PLANT
Louisville, KY
POWDERED ALPHA CELLULOSE PLANT
Urbana, OH
DAIRY FOOD SYSTEMS PLANT
Hager City, WI
OTHER PROPERTIES
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RESEARCH FACILITIES
United States
Gray Summit, MO (4)
St. Louis, MO (4A)
Westlake, OH (4B)
INTERNATIONAL
Tanfield Lea, United Kingdom
MACHINE SHOP AND FOUNDRY
St. Louis, MO
MISCELLANEOUS
Thomasville, NC
ADMINISTRATIVE AND EXECUTIVE OFFICES
St. Louis, MO
In addition to the properties identified above, the Company and its
subsidiaries own and/or operate sales offices, regional offices, storage
facilities, distribution centers and terminals and related properties.
(1) 20% to 50% owned interests
(2) Leased; (2R) Leased pursuant to industrial revenue bond financing
(3) Two plants
(4) Provides service for Human and Pet Foods; (4A) Human and Pet Foods
and Soy Protein Products; (4B) Battery Products
(5) Less than 20% owned interest
(6) Also produces feed
(7) Over 50% owned interest in Joint Venture operating facility
(8) Bulk packaging and distribution
(9) Held for sale
(10) Pet Products assets at these locations will be included in spin-off
of Agricultural Products business.
ITEM 3. LEGAL PROCEEDINGS.
The Company is a party to a number of legal proceedings in various state,
federal and foreign 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.
The operations of the Company, like those of other companies engaged in
similar businesses, are subject to various federal, state, and local laws and
regulations intended to protect the public health and the environment,
including regulations related to air and water quality, underground fuel
storage tanks and waste handling and disposal. The Company has received
notices from the U.S. Environmental Protection Agency, state agencies, and/or
private parties seeking contribution, that it has been identified as a
"potentially responsible party" (PRP), under the Comprehensive Environmental
Response, Compensation and Liability Act, and may be required to share in the
cost of cleanup with respect to 14 "Superfund" sites. The Company's ultimate
liability in connection with those sites may depend on many factors, including
the volume of material contributed to the site, the number of other PRP's and
their financial viability, and the remediation methods and technology to be
used.
In the opinion of management, based on the information presently known, the
ultimate liability for all such matters, together with the liability for all
other pending legal proceedings, asserted legal claims and known potential
legal claims which are probable of assertion, taking into account established
accruals of $10.4 million for estimated liabilities, should not be material to
the financial position of the Company, but could be material to results of
operations or cash flows for a particular quarter or annual period.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 4.A. EXECUTIVE OFFICERS OF THE REGISTRANT.
A list of the executive officers of the Company and their business experience
follows:
W. Patrick McGinnis, 50, co-Chief Executive Officer and co-President since
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October 1, 1997 and Corporate Officer since 1984; President and Chief
Executive Officer, Pet Products Group since 1992; President and Chief
Operating Officer, Grocery Products Group 1989-92; Vice President and
President, Branded Foods Group 1987-89; Vice President and Executive Vice
President, Grocery Products Division 1984-87; Division Vice President,
Marketing, Grocery Products Division 1983-84; Executive Vice President and
Director, Grocery Products Division, Ralston Purina Canada, Inc. 1980-83.
Company service, 25 years.
J. Patrick Mulcahy, 53, co-Chief Executive Officer and co-President since
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October 1, 1997 and Corporate Officer since 1984; Chairman of the Board and
Chief Executive Officer, Eveready Battery Company, Inc., and responsible for
Ralston Purina International since 1987; Vice President and Director,
Corporate Strategic Planning and Administration 1984-86; Division Vice
President, Strategic Planning 1981-84; Division Vice President, Director of
Marketing, Grocery Products Group 1980-81. Company service, 29 years.
James R. Elsesser, 53, Vice President and Chief Financial Officer since 1985
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and Corporate Officer since 1985; Vice President, March-September, 1985;
Treasurer, February-September, 1985. Company service, 12 years.
Nancy E. Hamilton, 47, Secretary and Division Vice President since 1996;
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Senior Counsel and Assistant Secretary, 1994 - 1996. Company service, 12
years.
Patrick C. Mannix, 52, Vice President; President, Eveready Battery Company,
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Inc., Specialty Business since 1995; Executive Vice President, Eveready
Battery Company, International 1991 - 1995 and Corporate Officer since 1992;
Area Chairman, Asia Pacific operations, Eveready Battery, 1985-91. Company
service, 34 years, including 23 years with Eveready Battery Division of Union
Carbide Corporation.
James M. Neville, 58, Vice President, General Counsel and Assistant Secretary
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since 1996; Vice President, General Counsel and Secretary 1989 - 1996, and
Corporate Officer since 1983; Vice President and General Counsel 1984-89.
Company service, 13 years.
Ronald D. Winney, 55, Treasurer since 1985; Division Vice President and
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Assistant Treasurer 1984-85; Assistant Treasurer 1977-85. Company service, 28
years.
Anita M. Wray, 43, Vice President and Controller since April 1994; Division
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Vice President and Director of Financial Accounting Services, 1985-1994.
Company service, 18 years.
William P. Stiritz, 63, Chairman of the Board, retired as Chief Executive
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Officer and President on September 30, 1997; Served as Chief Executive Officer
and President since 1982 and as Corporate Officer since 1973; President and
Chief Executive Officer 1981-82; Group Vice President, Grocery Products and
Restaurant Operations 1979-81. Company service, 34 years.
Jay W. Brown, 52, resigned as Vice President on December 1, 1997; Chief
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Executive Officer and President, Protein Technologies International, Inc. 1995
to 1997; Chairman of the Board and Chief Executive Officer, Continental Baking
Company 1985 - 1995 and Corporate Officer since 1984; President, Van Camp
Seafood Division 1983-84; Vice President, Foodmaker, Inc. 1981-83. Company
service, 27 years.
(Ages and years of service as of December 31, 1997.)
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.
The Company's RAL Stock is listed on the New York Stock Exchange, Chicago
Stock Exchange, Pacific Stock Exchange and has unlisted trading privileges on
the Philadelphia, Boston and Cincinnati Stock Exchanges. As of September 30,
1997, there were 21,553 shareholders of record of the Company's RAL Stock.
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The following tables set forth dividends paid and range of market prices for
the RAL Stock (for the year ended September 30):
DIVIDENDS PAID
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1997 1996
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First Quarter $ .30 $ .30
Second Quarter .30 .30
Third Quarter .30 .30
Fourth .30 .30
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MARKET PRICE RANGE
1997 1996
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RAL Stock RAL Stock
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First Quarter $ 78.00 - 65.50 $ 67 - 57.25
Second Quarter 87.375 - 71.125 69 - 57.875
Third Quarter 87.25 - 74.75 67.75 - 56
Fourth Quarter 94.3125 - 80.0625 68.875 - 57.75
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There have been no unregistered offerings of registrant's equity securities
during the period covered by this Annual Report.
ITEM 6. SELECTED FINANCIAL DATA.
The summary of selected financial data regarding Ralston Purina Company
appearing on pages 14 through 15, of the Ralston Purina Company Annual Report
to Shareholders 1997, is hereby incorporated by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Information appearing under "Ralston Purina Company and Subsidiaries Financial
Review" on pages 16 through 23 and the information appearing under "Ralston
Purina Company - Business Segment Information" on pages 24 through 26 of the
Ralston Purina Company Annual Report to Shareholders 1997, is hereby
incorporated by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements of the Company and its subsidiaries
appearing on pages 28 through 48, together with the report thereon of Price
Waterhouse LLP on page 27, and the supplementary data under "Ralston Purina
Company - Quarterly Financial Information" on page 49 of the Ralston Purina
Company Annual Report to Shareholders 1997, are hereby incorporated by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS OF THE REGISTRANT.
The information regarding directors on pages 5 through 12, and
information appearing under "Section 16(a) Beneficial Ownership Reporting
Compliance" on page 22, of the Ralston Purina Company Notice of Annual Meeting
and Proxy Statement dated December 10, 1997 is hereby incorporated by
reference.
ITEM 11. EXECUTIVE COMPENSATION.
Information appearing under "Executive Compensation" on pages 13 through
16, "Compensation Committee Interlocks and Insider Participation" on page 16,
"Human Resources Committee Report on Executive Compensation" on pages 17
through 20, "Performance Graphs" on pages 21 through 22, "Stock Ownership" on
pages 7 through 10, and the remuneration information under "Directors'
Meetings, Committees and Fees" on pages 10 through 12 of the Ralston Purina
Company Notice of Annual Meeting and Proxy Statement dated December 10, 1997
is hereby incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The discussion of the security ownership of certain beneficial owners and
management appearing under "Stock Ownership" on pages 7 through 10 of the
Ralston Purina Company Notice of Annual Meeting and Proxy Statement dated
December 10, 1997 is hereby incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information appearing under "Compensation Committee Interlocks and
Insider Participation" on page 16 of the Ralston Purina Company Notice of
Annual Meeting and Proxy Statement dated December 10, 1997, is hereby
incorporated by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
1. Documents filed with this report:
a. Financial statements previously incorporated by reference under Item 8
hereinabove.
- - Report of Independent Accountants.
- - Consolidated Statement of Earnings -- for years ended September 30, 1997,
1996 and 1995.
- - Consolidated Balance Sheet -- for years ended September 30, 1997 and 1996.
- - Consolidated Statement of Cash Flows -- for years ended September 30, 1997,
1996, and 1995.
- - Consolidated Statement of Shareholders Equity -- for years ended September
30, 1997, 1996 and 1995.
- - Notes to Financial Statements.
b. Exhibits (Listed by numbers corresponding to the Exhibit Table of Item 601
in Regulation S-K).
(3i) The Restated Articles of Incorporation of Ralston Purina Company,
effective as of February 1, 1996 are hereby incorporated by reference to the
Company's Form 10-Q for the quarter ended December 31, 1995.
(3ii) The By-Laws of Ralston Purina Company, as amended July 17, 1997.
(4) The Rights Agreement, effective as of March 28, 1996, is hereby
incorporated by reference to the Company's Form 8-A Registration Statement
filed on March 29, 1996.
(4) The Certificate of Designation of Ralston Purina Company Series A ESOP
Preferred Stock dated as of July 30, 1993, is hereby incorporated by reference
to the Company's Form 10-K for the fiscal year ended September 30, 1993.
(4) Ralston Purina Company agrees to furnish the SEC, upon its request, a
copy of any instrument defining the rights of holders of long-term debt of the
Company and its consolidated subsidiaries and any of its unconsolidated
subsidiaries for which financial statements are required to be filed.
(10) Material Contracts.
(i) The following material contracts are hereby incorporated by reference
to the Company's Form 10-K for the fiscal year ended September 30, 1983.
(a) Form of letter agreement dated June 18, 1982, to certain officers
providing for deferral of bonuses for fiscal year 1982.*
(b) Form of letter agreement to certain officers regarding Deferred Bonus
Plan.*
(ii) The following material contracts are hereby incorporated by reference
to the Company's Form 10-K for the fiscal year ended September 30, 1985.
(a) Form of Agreement for Conversion of Deferred Compensation.*
(b) Form of Agreement for Conversion of Existing Deferrals over $100,000.*
(c) Form of Agreement for Conversion of 1968 Restricted Stock.*
(d) Form of Agreement for Conversion of Benefits under the Supplemental
Death Benefits Plan.*
(e) Form of Agreement for Deferral of 1985 Annual Cash Bonus.*
(f) Form of Agreement for Deferral of 1985 ITIP Award Accruals.*
(iii) The following material contracts are hereby incorporated by
reference to the Company's Form 10-K for the fiscal year ended September 30,
1987.
(a) Form of Agreement for Deferral of 1986 Annual Cash Bonus.*
(b) Form of Agreement for Deferral of 1986 ITIP Award Accruals.*
(iv) The following material contracts are hereby incorporated by reference
to the Company's Form 10-K for the fiscal year ended September 30, 1988.
(a) Executive Life Plan, as amended September 24, 1987.*
(b) Form of Agreements for Deferral of 1987 Annual and Special Cash
Bonuses.*
(c) Form of Agreements for Deferral of 1988 Annual and Special Cash
Bonuses.*
(d) Ralston Purina Company 1988 Incentive Stock Plan, as amended January
21 and March 25, 1988.*
(e) Personal Financial Planning Program, as amended July 21, 1988.*
(f) Form of Non-Qualified Stock Option, effective September 22, 1988.*
(g) Executive Health Plan, as amended April 1, 1985, September 24, 1987
and July 21 and November 17, 1988.*
(v) The following material contracts are hereby incorporated by reference
to the Company's Form 10-K for the fiscal year ended September 30, 1989.
(a) Ralston Purina Company Supplemental Retirement Plan, as amended May
26, 1989.*
(b) Change in Control Severance Compensation Plan, as amended September
21, 1989.*
(c) Executive Long-Term Disability Plan, as adopted September 22, 1989.*
(d) Executive Savings Investment Plan, as amended May 25, 1989.*
(e) Personal Financial Planning Program, as amended May 25, 1989.*
(vi) The following material contracts are hereby incorporated by reference
to the Company's Form 10-K for the fiscal year ended September 30, 1990.
(a) Form of Management Continuity Agreements, as amended September 28,
1990.*
(b) Form of Non-Qualified Stock Option, effective May 24, 1990.*
(c) Form of Agreement for Deferral of 1985, 1986 and 1989 Annual and
Special Cash Bonuses.*
(d) Form of letter amending Restricted Stock Awards and Non- Qualified
Stock Options, as of September 27, 1990.*
(vii) The following material contracts are hereby incorporated by
reference to the Company's Form 10-K for the fiscal year ended September 30,
1991.
(a) Form of Split Dollar Second to Die Insurance Agreement.*
(b) Form of letter amending certain outstanding Restricted Stock Awards
and Non-Qualified Stock Options, as of November 21, 1991.*
(viii) The following material contracts are hereby incorporated by
reference to the Company's Form 10-K for the fiscal year ended September 30,
1992.
(a) Form of letter amending certain outstanding Restricted Stock Awards
and Non-Qualified Stock Options, dated as of September 29, 1992.*
(b) Form of Agreement for Deferral of 1991 Annual and Special Cash
Bonuses.*
(c) Form of Agreement for Deferral of 1991 Annual Cash Bonus.*
(d) Form of 1991 Non-Qualified Stock Option.*
(e) Form of Indemnification Agreement with directors and corporate
officers.*
(ix) The following material contracts are hereby incorporated by reference
to the Company's Form 10-K for the fiscal year ended September 30, 1993.
(a) Form of Agreement for Deferral of 1992 Annual and Special Bonuses.*
(b) Form of Agreement for Deferral of 1992 Annual Cash Bonus.*
(c) Form of Amendment to 1988 Non-Qualified Stock Option.*
(d) Form of Amendment to 1990 Non-Qualified Stock Option.*
(e) Form of Amendment to 1991 Non-Qualified Stock Option.*
(f) Form of letter amending Restricted Stock Awards, dated as of September
24, 1993.*
(x) The following material contracts are hereby incorporated by reference
to the Company's Form 10-K for the fiscal year ended September 30, 1994.
(a) The Agreement and Plan of Reorganization between the Company and
Several of its Subsidiaries and Ralcorp Holdings, Inc. dated March 31, 1994 is
incorporated by reference to the Company's Form 8-K/A dated April 14, 1994.
(b) Trust Agreement between Ralston Purina Company and Wachovia Bank of
North Carolina, N.A., dated as of September 15, 1994.
(c) Leveraged Incentive Plan, adopted as of September 23, 1994.*
(xi) The following material contracts are hereby incorporated by reference
to the Company's Form 10-K for the fiscal year ended September 30, 1995.
(a) Deferred Compensation Plan for Non-Management Directors, as amended
September 25, 1987, July 22, 1988, May 25, 1990, October 27, 1992, July 30,
1993, November 18, 1993 and August 9, 1995.*
(b) Deferred Compensation Plan for Key Employees, as amended September 21,
1989, April 9, 1990, November 21, 1990, December 11, 1992, July 30, 1993,
November 18, 1993, and November 6, 1995.*
(c) Form of March 23, 1995 Non-Qualified Stock Option Contract.*
(d) Form of September 28, 1995 Non-Qualified Stock Option Contract.*
(e) Form of September 28, 1995 Non-Qualified Performance Stock Option
Contract.*
(f) Form of Agreement for Deferral of 1995 Annual Cash Bonus.*
(xii) The following material contracts are hereby incorporated by
reference to the Company's Form 10-K for the fiscal year ended September 30,
1996.
(a) Form of September 26, 1996 Non-Qualified Performance Stock Option
Agreement.*
(b) Form of September 26, 1996 Non-Qualified Stock Option Agreement.*
(c) Deferred Compensation Plan for Non-Management Directors, as amended
September 25, 1987, July 22, 1988, May 25, 1990, October 27, 1992, July 30,
1993, November 18, 1993, August 9, 1995, and September 26, 1996.*
(d) Deferred Compensation Plan for Key Employees, as amended September 21,
1989, April 9, 1990, November 21, 1990, December 11, 1992, July 30, 1993,
November 18, 1993, November 6, 1995, and September 26, 1996.*
(e) Form of Letter for Deferral of 1997 Bonus Award.*
(f) Form of Agreement for Deferral of 1996 Annual Cash Bonus*
(g) Form of Agreement for Deferral of 1996 Annual and Special Cash Bonus.*
(h) Deferral of Potential Fiscal 1997 Protein Sr. Management Incentive
Award.*
(xiii) Agreement and Plan of Merger and Exchange by and among E.I. du Pont
de Nemours and Company, Ralston Purina Company, Protein Technologies
International Holdings, Inc. and Other Parties Named Therein, dated as of
December 2, 1997.
(xiv) Form of November 20, 1997 Non-Qualified Stock Option.*
(xv) Deferred Compensation Plan for Key Employees, as amended, September
21, 1989, April 9, 1990, November 21, 1990, December 11, 1992, July 30, 1993,
November 18, 1993, November 6, 1995, September 26, 1996, and November 13,
1997.*
(xvi) Form of Letter of Deferral of 1998 Bonus Award.*
(xvii) Form of Agreement for Deferral of 1997 Annual Cash Bonus.*
(xviii) Form of Agreement for Deferral of 1997 Annual and Special Cash
Bonus.
(xvix) Form of Split Dollar Agreement.*
(xx) 1996 Leveraged Incentive Plan, adopted as of September 26, 1996 and
amended September 25, 1997.*
(xxi) Resolution adopted September 26, 1996 amending Options granted
September 28, 1995.*
(11) Statement re: Computation of Per Share Earnings.
(13) Pages 14 to 48 of the Ralston Purina Company Annual Report to
Shareholders 1997, which are incorporated herein by reference, are filed
herewith.
(21) Subsidiaries of the Registrant.
(23) Consent of Independent Accountants.
(27) Financial Data Schedule.
* Denotes a management contract or compensatory plan or arrangement.
2. A Current Report on Form 8-K was filed by the Company on July 21, 1997
to file its press release regarding its third quarter earnings results. A
Current Report on Form 8-K was filed by the Company on July 28, 1997 to
disclose the purchase by underwriters of the Company's 7.0% Exchangeable Notes
Due 2000. A Current Report on Form 8-K was filed by the Company on August 22,
1997 to file its press release announcing that the Company had signed a letter
of intent to sell its Protein Technologies business to E.I. du Pont de Nemours
and Company.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
RALSTON PURINA COMPANY
By: J.P. Mulcahy By: W.P. McGinnis
------------------- ----------------------
J.P. Mulcahy W.P. McGinnis
co-Chief Executive Officer co-Chief Executive Officer
and co-President and co-President
Date: December 16, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on December 16, 1997, by the following persons on
behalf of the registrant in the capacities indicated.
SIGNATURE TITLE
- --------- -----
W. P. McGinnis
- -----------------------------co-Chief Executive Officer and
W.P. McGinnis President
J. P. Mulcahy
- --------------------------- co-Chief Executive Officer and
J.P. Mulcahy President
James R. Elsesser
- ------------------------------- Vice President and Chief
James R. Elsesser Financial Officer
Anita M. Wray
- ------------------------------- Vice President and Controller
Anita M. Wray
William P. Stiritz
- ------------------------------- Chairman of the Board
William P. Stiritz of Directors
David R. Banks
- ------------------------------- Director
David R. Banks
John H. Biggs
- ------------------------------ Director
John H. Biggs
Donald Danforth, Jr.
- ------------------------------ Director
Donald Danforth, Jr.
William H. Danforth
- ------------------------------- Director
William H. Danforth
David C. Farrell
- ------------------------------- Director
David C. Farrell
M. Darrell Ingram
- ------------------------------ Director
M. Darrell Ingram
Richard A. Liddy
- ------------------------------ Director
Richard A. Liddy
John F. McDonnell
- ------------------------------ Director
John F. McDonnell
Katherine D. Ortega
- ------------------------------ Director
Katherine D. Ortega
FINANCIAL STATEMENT AND SCHEDULES
The consolidated financial statements of the Registrant have been incorporated
by reference under Item 8. Financial statements of the Registrant's 50% or
less owned companies have been omitted because, in the aggregate, they are not
significant.
Schedules not included have been omitted because they are not applicable or
the required information is shown in the financial statements or notes
thereto.
AGREEMENT AND PLAN OF MERGER AND EXCHANGE
by and among
E.I. du Pont de Nemours and Company,
Ralston Purina Company,
Protein Technologies International Holdings, Inc.
and
The Other Parties Named Herein
Dated as of December 2, 1997
<PAGE>
v
i
TABLE OF CONTENTS
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 Closing 5
Section 1.2 Domestic Closings 6
Section 1.3 Du Pont Merger Subsidiaries 6
Section 1.4 Du Pont Shares 6
Section 1.6 Foreign Closings 6
Section 1.7 Foreign Protein Subsidiaries 6
Section 1.8 Indebtedness 6
Section 1.9 Initial Completion Date 6
Section 1.10 [Intentionally Omitted.] 6
Section 1.11 Net Debt Amount 6
Section 1.12 Person 7
Section 1.13 PTIBV Exchange 7
Section 1.14 Shares 7
Section 1.15 Subsidiary 7
Section 1.16 Tax Return 7
Section 1.17 Taxes 7
Section 1.18 U.S. Protein Subsidiaries 8
ARTICLE II
THE MERGERS AND FOREIGN EXCHANGES; CLOSINGS
Section 2.1 The Mergers 8
Section 2.2 Conversion of U.S. Protein Shares
in the Mergers 13
Section 2.3 Conversion of Capital Stock of the
Du Pont Merger Subsidiaries in the Merg-ers 14
Section 2.4 Foreign Exchanges; Asset Transfers 14
Section 2.5 Closings 18
Section 2.6 Allocation of Shares 21
ARTICLE III
CERTAIN ADDITIONAL TRANSACTIONS
Section 3.1 Intercompany Accounts 21
Section 3.2 Payment or Defeasance of Indebt-e ness 22
Section 3.3 Transfer of Certain Shares 22
Section 3.4 Certain Asset Transfers 22
Section 3.5 Beneficial Ownership of the Foreign Pro-tein
Subsidiaries following the
Ini-tial Com-pletion Date. 23
Section 3.7 Net Debt Amount 24
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF RALSTON AND STOCK-HOLDER
Section 4.1 Organization 25
Section 4.2 Capitalization; Subsidiaries; Fuji
Joint Venture 26
Section 4.3 Authorization; Binding Effect 28
Section 4.4 Consents and Approvals; No Viola-
tions 29
Section 4.5 SEC Reports and Financial State-
ments 30
Section 4.6 Absence of Certain Changes 31
Section 4.7 No Undisclosed Liabilities 31
Section 4.8 Litigation 32
Section 4.9 Employee Benefit Plans. 32
Section 4.10 No Default; Compliance with Appli-
ca-ble Laws, etc. 36
Section 4.11 Intellectual Prop-erty 38
Section 4.12 [Intentionally Omitted.] 42
Section 4.13 Insurance 42
Section 4.14 Related Party Transac-tions; Inter-
com-pany Matters 43
Section 4.15 Products Liability 44
Section 4.16 Title; Real Properties 45
Section 4.17 Environmental Matters 48
Section 4.18 Indebtedness 50
Section 4.19 Labor and Employment Matters; Col-
lec-tive Bar-gain-ing Agreements 50
Section 4.20 Acquisition for Investment 51
Section 4.21 PTIFS Liquidation 51
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF DU PONT
AND THE DU PONT MERGER SUBSIDIARIES
Section 5.1 Organization 51
Section 5.2 Capitalization 52
Section 5.3 Authorization 52
Section 5.4 Consents and Approvals; No Viola-
tions 53
Section 5.5 SEC Reports and Financial State-
ments 53
Section 5.6 No Prior Activities 54
Section 5.7 Compliance with Securities Laws;
Absence of Changes 54
Section 5.8 Acquisition for Investment 54
ARTICLE VI
COVENANTS
Section 6.1 Interim Operations of the Pro-tein
Subsid-iaries 55
Section 6.2 Access; Confidentiality 58
Section 6.3 Consents and Approvals 59
Section 6.4 No Solicitation 60
Section 6.5 Brokers or Finders 61
Section 6.6 Further Assurances 61
Section 6.7 Publicity 61
Section 6.8 Notification of Certain Matters 61
Section 6.9 Employee Matters 62
Section 6.10 Non-Competition, Etc. 76
Section 6.11 Use of Names and Marks 79
Section 6.12 Related Agreements 80
Section 6.13 Reorganization 81
Section 6.14 Cash and Bank Accounts. 82
Section 6.15 Industrial Revenue Bonds and Other
Real Estate Issues 85
Section 6.16 Interim Operations of Du Pont 86
Section 6.17 Delivery of Surveys and Title Poli-cies 86
Section 6.19 Insurance 87
Section 6.20 Novogen 89
ARTICLE VII
CONDITIONS
Section 7.1 Conditions to Each Party's Obliga tion
to Effect the Mergers 89
Section 7.2 Conditions to Obligation of U.S.
Protein Subsidiaries to Effect the Merg-ers 89
Section 7.3 Conditions to Obligation of the Du Pont
U.S. Merger Subsidiaries to Effect the Mergers 91
Section 7.4 Conditions to Obligation of Stock- holder
to Effect the Foreign Exchanges 93
Section 7.5 Conditions to Obligation of Du Pont to Effect
the Foreign Exchanges 94
ARTICLE VIII
TERMINATION
Section 8.1 Termination 95
Section 8.2 Effect of Termination 96
ARTICLE IX
SURVIVAL AND INDEMNIFICATION
Section 9.1 Survival of Representa-tions, War- ran-ties
and Covenants 96
Section 9.2 Indemnification 97
ARTICLE X
MISCELLANEOUS
Section 10.1 Fees and Expenses 103
Section 10.2 Amendment 103
Section 10.3 Extension; Waiver 103
Section 10.4 Notices 104
Section 10.5 Interpretation 105
Section 10.6 Counterparts 105
Section 10.7 Entire Agreement; No Third Party
Benefi-ciaries 106
Section 10.8 Severability 106
Section 10.9 Governing Law; Forum 106
Section 10.10 Release 107
Section 10.11 Assignment 107
Schedules
- ---------
Schedule 2.2 -- U.S. Protein Subsidiaries Valuations
Schedule 2.4 -- Foreign Protein Subsidiaries Valuations
Exhibits
- --------
Exhibits A-1, A-2, A-3 and A-4 -- Form of Foreign Exchange
Agree-ments
Exhibit B -- Intentionally Omitted
Exhibit C -- Form of Banque Brussels Agreement
Exhibit D -- Form of Bridging Services Agree-ment
Exhibit E -- Form of Registration Rights Agreement
Exhibit F -- Form of Tax Sharing Agreement
Exhibits G-1 and G-2 -- Form of Du Pont Reorga-nization Cer- tif-i-cates
Exhibits H-1 and H-2 -- Form of Ralston Reorganization Cer- tif-i-cates
Exhibit I -- Form of Headquarters Lease
Exhibits J-1 and J-2 -- Form of R&D Lease
Exhibit K -- Form of Intellectual Property Assignment
Exhibit L -- Form of IRB Lease Agreement
Exhibit M -- Form of Commodities Purchasing Agreement
Exhibit N -- Form of Sales Office Employees Agreements
<PAGE>
Defined Term Section No.
- ------------- -----------
ix
vi
Index of Defined Terms
Defined Term Section No.
- ------------- -----------
Acquisition Proposal 6.4
ADM Article IV
Adjustment Amount 6.14(e)
Agreement Preamble
Applicable Discount Rate 6.9(e)(i)(A)
Applicable Du Pont Plan 6.9(b)
Applicable Laws 4.4
Asset Transfers 3.4(a)
Assets 3.4(a)
Authority 6.15(a)
Balance Sheets 4.5(b)
Banque Brussels Agreement 3.2
Basket Amount 9.2(c)
Bonds 6.15(a)
Bridging Services Agreement 6.12
Business Recitals
Canadian Foreign Funded Benefit Plan 6.9(k)
Certificates of Merger 2.1(b)
Closing 1.1
COBRA Coverage 6.9(b)
Code Recitals
Commodities Purchasing Agreement 6.12
Confidentiality Agreement 6.2(a)
Copyrights 4.11(a)
Dairy Food Employees 6.9(a)(i)
Damages 9.2(a)
Defective Products 4.15
DGCL 2.1(a)(i)
Domestic Benefit Plans 4.9(a)(i)
Domestic Closings 1.2
Du Pont Preamble
Du Pont Common Stock Recitals
Du Pont Indemnified Parties 9.2(a)
Du Pont Merger Subsidiaries 1.3
Du Pont Parties Preamble
Du Pont's Pension Plan 6.9(e)(i)
Du Pont's Reimbursement Plan 6.9(d)(iii)
Du Pont Shares 1.4
Effective Time 2.1(b)
Environmental Claim 4.17(a)
Environmental Laws 4.17(a)
ERISA 4.9(a)(i)
ERISA Affiliate 4.9(a)(i)
Excess Cash 6.14(d)
Exchange Act 4.5(a)
Excluded Assets 1.5
Executive Plans 6.9(h)(ii)
Fiber Merger 2.1(a)(i)
Fiber Sales Preamble
Fiber Surviving Corporation 2.1(a)(i)
Final Termination Date 8.1(b)
Financial Statements 4.5(b)
Foreign Benefit Plans 4.9(a)(ii)
Foreign Book Accrual Benefit Plan 6.9(n)
Foreign Book Reserve Benefit Plan 6.9(o)
Foreign Closing Date 2.5(b)(i)
Foreign Closings 1.6
Foreign Employees 6.9(a)(ii)
Foreign Exchange Agreements 2.4(a)(i)
Foreign Exchanges 2.4(a)(i)
Foreign Protein Shares Recitals
Foreign Protein Subsidiaries 1.7
Foreign Transfer Date 6.9(e)(iii)
Fuji Joint Venture 4.1(d)
Fuji Shares 4.1(d)
GAAP 4.5(b)
Governmental Entity 4.4
Headquarters Lease 6.12
HSR Act 4.4
Imperial BTI Preamble
Imperial BTI Merger 2.1(a)(ii)
Imperial BTI Surviving Corporation 2.1(a)(ii)
Income Statements 4.5(b)
Indebtedness 1.8
Indemnified Party 9.2(f)
Indemnifying Party 9.2(f)
Information 6.18(a)
Initial Completion Date 1.9
Initial Transfer Amount 6.9(e)(i)
Intellectual Property 4.11(a)
Intellectual Property Assignment 6.12
IRB Loan Agreements 6.15(a)
IRB Lease Agreements 6.15(a)
IRS 1.17
License Agreements 4.11(a)
Lien 4.2(c)
Material Adverse Effect 4.1(b)
Materials of Environmental Concern 4.17(a)
Market Value 1.10
Mergers 2.1(a)(ix)
Merger Conversion Ratios 2.2(a)
Net Debt Amount 1.11
New Pointer Subsidiaries 3.4(a)
NFI Preamble
NFI Merger 2.1(a)(iii)
NFI Surviving Corporation 2.1(a)(iii)
Off-Site Materials 9.2(h)(A)
Oklahoma Landlord Consents 2.4(e)
Operating Agreement(s) 6.12
Patents 4.11(a)
PBGC 4.9(c)
PBO 6.9(e)(i)
Permits 4.10(b)
Person 1.12
Plant Lease 2.4(e)
Pointer Preamble
Pointer Merger 2.1(a)(iv)
Pointer Surviving Corporation 2.1(a)(iv)
Policies 6.9(h)(vii)
Proceedings 4.8
Products 4.15
Projects 6.15(a)
Protein Competitive Business 6.10(a)
Protein Employees 6.9(a)(iv)
Protein Foreign Funded Benefit Plan 6.9(k)
Protein Subsidiaries Recitals
Protein Subsidiary Contracts 4.4
PTI Preamble
PTI Argentina 3.4(a)
PTI Asia Pacific Preamble
PTI Asia Pacific Merger 2.1(a)(v)
PTI Asia Pacific Surviving Corporation 2.1(a)(v)
PTI Brazil 3.4(a)
PTI Development Preamble
PTI Development Merger 2.1(a)(ix)
PTI Development Surviving Corporation 2.1(a)(ix)
PTI Europe Preamble
PTI Europe Merger 2.1(a)(vi)
PTI Europe Surviving Corporation 2.1(a)(vi)
PTI Germany 1.7
PTI Merger 2.1(a)(viii)
PTI Mexico Recitals
PTI Moscow 1.7
PTI Sales Preamble
PTI Sales Merger 2.1(a)(vii)
PTI Sales Surviving Corporation 2.1(a)(vii)
PTI Shares Recitals
PTI Spain Recitals
PTI Surviving Corporation 2.1(a)(viii)
PTI UK Recitals
PTI Venezuela 1.7
PTIBV 1.7
PTIBV Exchange 1.13
PTIBV Shares Recitals
PTIFS 3.6
PTIFS Liquidation 3.6
PTIM 3.1
PTO 6.9(i)
Qualcepts Letter Article IV
R&D Lease 6.12
Ralston Preamble
Ralston Disclosure Schedule 4.1(d)
Ralston Foreign Funded Benefit Plan 6.9(m)
Ralston Group 6.10(a)
Ralston Indemnified Parties 9.2(b)
Ralston Marks 6.11(a)
Ralston Parties Preamble
Ralston's Pension Plan 6.9(e)(i)
Ralston's Reimbursement Plan 6.9(d)(iii)
Real Properties 4.16(c)
Registration Rights Agreement 6.12
RP Argentina Recitals
RP Brazil Recitals
Sales Office Employees Agreements 6.12
SEC 4.5(a)
Second Payment 6.9(e)(i)
Secretary of State 2.1(b)
Securities Act 4.4
Senior Management Group 10.5
Shares 1.14
Software 4.11(a)
Soil Injection Leases 2.4(e)
Soy Competitive Business 6.10(a)
Stockholder Preamble
Sub No. 1 Preamble
Sub No. 2 Preamble
Sub No. 3 Preamble
Sub No. 4 Preamble
Sub No. 5 Preamble
Sub No. 6 Preamble
Sub No. 7 Preamble
Sub No. 8 Preamble
Sub No. 9 Preamble
Subsidiary 1.15
Surviving Corporations 2.1(a)(ix)
Surviving Corporation Stock 2.3
Survivor Life Insurance Plan 6.9(h)(vii)
Survivor Life Participants 6.9(h)(vii)
Tax Return 1.16
Tax Sharing Agreement 6.12
Taxes 1.17
Technology 4.11(a)
Title IV Plan 4.9(a)(i)
Trademarks 4.11(a)
Transfer Amount 6.9(e)(i)
Transfer Date 6.9(a)(iv)
Transferor Subsidiaries 3.4(a)
Transferred Employees 6.9(a)(i)
Transferred Executive Plans 6.9(h)(ii)
Transferred Foreign Employees 6.9(a)(iii)
Transferred Subsidiaries Recitals
Trustees 6.9(h)(vii)
U.S. Protein Shares Recitals
U.S. Protein Subsidiaries 1.18
Voting Debt 4.2(b)
WARN Act 6.1(n)
wholly owned 1.15
<PAGE>
8
AGREEMENT AND PLAN OF MERGER AND EXCHANGE
-----------------------------------------------
AGREE-MENT AND PLAN OF MERGER AND EXCHANGE, (this "Agree-ment")
----------
dated as of December 2, 1997, by and among
<PAGE>
<PAGE>
(a) Ralston Purina Company, a Missouri corpo-ra-tion ("Ralston"), (b)
-------
Protein Technologies Internation-al Holdings, Inc., a Dela-ware corpo-ra-tion
and wholly owned subsidiary of VCS Holding Company which is a wholly owned
subsidiary of Ralston ("Stock-hold-er"), (c) Fiber Sales & Devel-opment
-------------
Corpo-ra-tion, a Dela-ware corpo-ration and wholly owned subsid-iary of
Stock-holder ("Fiber Sales"), (d) Imperi-al Biotech-nolo-gy, U.S., Inc., a
------------
Dela-ware corpo-ration and wholly owned subsidiary of Stock-holder ("Impe-rial
---------
BTI"), (e) Nutri-tious Foods, Inc., a Dela-ware corpo-ration and wholly
---
owned subsid-iary of Stock-hold-er ("NFI"), (f) Pointer Spe-cialty Chemi-cals,
---
Inc., a Delaware corpo-ration and wholly owned subsid-iary of Stock-holder
("Pointer"), (g) Protein Technolo-gies International Asia Pacific
------
Corpora-tion, a Delaware corpo-ration and wholly owned subsidiary of
------
Stock-holder ("PTI Asia Pacific"), (h) Protein Tech-nologies Inter-national
------ ------------------
Europe, Inc., a Dela-ware corpo-ration and wholly owned sub-sid-iary of
Stock-holder ("PTI Eu-rope"), (i) Protein Technolo-gies Inter-na-tional Sales,
-----------
Inc., a Dela-ware corpo-ration and wholly owned subsidiary of Stock-hold-er
("PTI Sales"), (j) Pro-tein Technologies Internation-al, Inc., a Delaware
----------
corpo-ration and wholly owned subsidiary of Stock-holder ("PTI"), (k) Pro-tein
-- ---
Technologies Interna-tional Develop-ment Corpora-tion, a Dela-ware
corpo-ration and wholly owned subsidiary of Stockholder ("PTI Develop-ment"),
----------------
-- The above entities are hereinafter collec-tively called the
"Ralston Parties" --
AND
(b) E.I. du Pont de Nemours and Company, a Dela-ware corpo-ration ("Du
--
- -Pont"), (m) DuPont PTI 1 Co. ("Sub No. 1"), a Delaware corporation and a
---- ---------
direct wholly owned sub-sid-iary of Du Pont, (n) DuPont PTI 2 Co. ("Sub No.
--- -------
2"), a Delaware corpora-tion and a direct wholly owned sub-sidiary of Du Pont,
-
(o) DuPont PTI 3 Co. ("Sub No. 3"), a Dela-ware corporation and a direct
---------
wholly owned subsidiary of Du Pont, (p) DuPont PTI 4 Co. ("Sub No. 4"), a
---------
Delaware corpo-ration and a direct wholly owned subsidiary of Du Pont, (q)
DuPont PTI 5 Co. ("Sub No. 5"), a Delaware corpora-tion and a direct wholly
---------
owned subsidiary of Du Pont, (r) DuPont PTI 6 Co. ("Sub No. 6"), a Delaware
---------
corporation and a direct wholly owned subsidiary of Du Pont, (s) DuPont PTI 7
Co. ("Sub No. 7"), a Delaware corporation and a direct wholly owned
-----------
sub-sidiary of Du Pont, (t) DuPont PTI 8 Co. ("Sub No. 8"), a Delaware
---- ---------
corporation and a direct wholly owned subsidiary of Du Pont, and (u) DuPont
-
PTI 9 Co. ("Sub No. 9"), a Dela-ware corpora-tion and a direct wholly owned
---------
subsidiary of Du Pont
-- The above entities are hereinafter collec-tively called the
"Du Pont Parties."
WHEREAS, certain Subsidiaries (as defined in Section 1.15
hereof) of Ralston are en-gaged, on a world-wide basis, in the manu-fac-ture,
dis-tri-bution and sale of soy protein, food fiber, pet food coat-ing and
industrial polymer products (the "Busi-ness");
---------
WHEREAS, Stockholder is the record and benefi-cial owner of:
(i) all the issued and outstanding shares of common stock, par value
$0.10 per share, of Fiber Sales;
(ii) all the issued and outstanding shares of common stock, par value
$1.00 per share, of Imperial BTI;
(iii) all the issued and outstanding shares of common stock, par value
$1.00 per share, of NFI;
(iv) all the issued and outstanding shares of common stock, par value
$1.00 per share, of Pointer;
(v) all the issued and outstanding shares of common stock, par value
$1.00 per share, of PTI Asia Pacific);
(vi) all the issued and outstanding shares of common stock, par value
$1.00 per share, of PTI Europe;
(vii) all the issued and outstanding shares of common stock, par value
$1.00 per share, of PTI Sales;
(viii) all the issued and outstanding shares of common stock, par value
$1.00 per share, of PTI;
(ix) all the issued and outstanding shares of common stock, par value
$10.00 per share, of PTI Devel-op-ment;
(x) all the issued and outstanding shares (other than director
qualifying shares) of common stock, par value 100,000DM per share, of Protein
Technol-ogies Inter-national (Deutschland) GmBH, a German corpo-ra-tion;
(xi) all the issued and outstanding shares (other than director
qualifying shares) of common stock, par value $1.00 per share, of Protein
Tech-nologies Inter-na-tional Australia Pty. Limited, an Australian
corpora-tion;
(xii) all the issued and outstanding shares (other than director
qualifying shares) of common stock, par value 10 rubles per share, of Protein
Tech-nol-ogies Inter-na-tional Moscow, a Russian corpo-ration;
(xiii) all the issued and outstanding shares (other than director
qualifying shares) of common stock, par value DLF 100 per share, of Protein
Technol-o-gies Inter-na-tional Overseas B.V. (Nether-lands), a Dutch
corporation (the "PTIBV Shares"); and
-------------
(xiv) 900 of the issued and outstanding shares (other than 100 shares
owned by PTI) of common stock, par value BS 1,000 per share, of Venezuelan
Pro-tein Tech-nol-o-gies Inter-na-tional PTI C.A., a Venezuela corpo-ra-tion
(the shares referenced in clauses (i) through (ix) above are collectively
referred to herein as the "U.S. Protein Shares" and the shares referenced in
-------------------
clauses (x) through (xiv) (including the 100 shares owned by PTI in the case
of clause (xiv)) above are col-lec-tive-ly re-ferred to herein as the
"For-eign Protein Shares").
------------------
WHEREAS, on the Initial Completion Date (as de-fined in Section
1.9 hereof), the closing of the Merg-ers (as de-fined in Sec-tion 2.1(a)(ix)
hereof) and the PTIBV Ex-change (as de-fined in Sec-tion 1.13 hereof) and any
other For-eign Exchang-es (as de-fined in Section 2.4(a)(i) hereof) which can
occur at such time will occur substan-tially simulta-neous-ly and any other
remain-ing Foreign Exchanges will occur as soon as prac-ti-cable there-after
upon the terms and sub-ject to the condi-tions set forth herein;
WHEREAS, it is contemplated that as of the Initial Completion
Date, the Business, in its entirety, will be con-ducted by the U.S. Protein
Subsidiaries (as defined in Section 1.18 hereof) and the Foreign Protein
Subsidiaries (as defined in Section 1.7 hereof) and their directly and
indi-rectly owned Subsidiaries (collectively, the "Protein Subsidiar-ies") and
---------------------
that the Protein Subsid-iaries will own or have the right to use all assets
necessary for the operation of the Business as it is currently conducted,
except that certain operations currently conducted by Ralston Purina
Argenti-na S.A. ("RP Argenti-na") and Ralston Purina Do Bra-sil, Ltda. ("RP
-------------- --
Bra-zil") relating to the Business may be trans-ferred fol-low-ing, rather
-----
than prior to, the Initial Comple-tion Date to Protein Subsid-iaries as set
-
forth herein and that sales operations in the countries of Canada, Japan, the
Philippines, Thailand, Malaysia and Singapore will be con-ducted by
individuals who will technically be employed by Subsidiaries of Ralston other
than the Protein Subsidiar-ies, for a period of time until such individuals
can be trans-ferred to a Subsidiary of Du Pont as set forth herein;
WHEREAS, the parties hereto desire that Stock-hold-er transfer
all of the U.S. Protein Shares and the Foreign Pro-tein Shares to Du Pont in
exchange for the trans-fer by Du Pont to Stock-holder of shares of common
stock, par value $0.30 per share, of Du Pont ("Du Pont Common Stock"), upon
--------------------
the terms and sub-ject to the condi-tions set forth herein, such exchange to
occur by merger in the case of each of the U.S. Protein Sub-sid-iaries and by
exchange of shares other-wise;
WHEREAS, the respective Boards of Directors of each of the Du
Pont Merger Subsidiaries (as defined in Section 1.3 hereof) and each of the
U.S. Protein Subsid-iaries have ap-proved and declared advis-able this
Agree-ment and the merger of each of the Du Pont Merger Subsid-iaries with and
into each of the re-spective U.S. Protein Subsidiar-ies (and have recommended
to their respec-tive stock-holders that they adopt this Agree-ment), upon the
terms and subject to the condi-tions set forth herein, whereby each U.S.
Pro-tein Share will be con-verted into the number of shares of Du Pont Common
Stock deter-mined pursu-ant to Sec-tion 2.2 hereof and each share of stock of
each Du Pont Merger Subsidiary shall be converted into U.S. Protein Shares as
provided for here-in;
WHEREAS, the respective Boards of Directors of Du Pont, Ralston
and Stockholder (i) have each approved this Agreement and the mergers of their
respective Sub-sidiaries and, in their capacity as the sole stockholder of a
U.S. Protein Subsidiary or a Du Pont Merger Subsid-iary, as the case may be,
have adopted this Agreement upon the terms and subject to the condi-tions set
forth herein and (ii) have each approved the exchange of the Foreign Protein
Shares for shares of Du Pont Common Stock as provided for here-in;
WHEREAS, prior to the Initial Completion Date, Ralston shall
cause (i) all of the out-standing shares of capital stock of Protein
Tech-nolo-gies International Iberica S.A., a Spanish corpora-tion ("PTI
---
Spain"), (ii) all of the out-stand-ing shares of capi-tal stock of Pro-tein
Tech-nologies Interna-tional (U.K.) Limit-ed, an Eng-lish corpo-ration ("PTI
---
UK") (which, in turn holds all of the outstand-ing shares of capital stock of
-
Foodmaker Limited, Imperial Biotechnolo-gy Prod-ucts Limited and Pro-tein
Technolo-gies Inter-na-tional Ire-land Limited) and (iii) all of the
out-stand-ing shares of capi-tal stock of Protein Tech-nolo-gies
Interna-tional S.A. de C.V., a Mexican corpora-tion ("PTI Mexi-co" and,
-----------
to-geth-er with PTI Spain and PTI UK, the "Trans-ferred Subsidiaries"), to be
-------------------------
con-trib-uted to Point-er upon the terms and subject to the condi-tions set
forth herein;
WHEREAS, Ralston shall cause two newly formed Sub-sidiaries of
Pointer to acquire the assets primarily asso-ci-at-ed with or used in the
Busi-ness which are current-ly held by RP Argentina and RP Brazil upon the
terms and sub-ject to the condi-tions set forth here-in; and
WHEREAS, for federal income tax purposes, it is intended that
each of the Mergers and each of the Foreign Exchang-es shall constitute a
reorganiza-tion within the meaning of section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), and that with respect to each Merger
----
and each Foreign Exchange this Agree-ment shall con-stitute a "plan of
reorga-niza-tion" for purposes of the Code;
NOW, THEREFORE, in consideration of the forego-ing and the
respective representations, warranties, covenants and agreements set forth
herein, the parties hereto agree as follows:
ARTICLE II
CERTAIN DEFINITIONS
In this Agreement and the Ralston Disclosure Sched-ule (as
defined in Section 4.1(d) hereof), the words and expressions set out in this
Article I shall have the meanings set forth below, unless the context
explicitly requires other-wise:
ARTICLE IISection .1 Closing Closing Closing Closing: A
------- ------- ------- -------
Domestic Closing (as defined in Section 1.2 hereof) or a Foreign Closing (as
de-fined in Section 1.6 hereof).
ARTICLE IISection .2 Domestic Closings Domestic Closings
----------------- -----------------
Domestic Closings Domestic Closings: The closings of the Mergers.
-------------- ------------------
ARTICLE IISection .3 Du Pont Merger Subsidiaries Du Pont Merger
--------------------------- --------------
Subsidiaries Du Pont Merger Subsidiaries Du Pont Merger Subsidiaries:
----------- --------------------------- ---------------------------
Col-lec-tively, Sub No. 1, Sub No. 2, Sub No. 3, Sub No. 4, Sub No. 5,
Sub No. 6, Sub No. 7, Sub No. 8 and Sub No. 9.
ARTICLE IISection .4 Du Pont Shares Du Pont Shares Du Pont
-------------- -------------- -------
Shares Du Pont Shares: The aggregate amount of shares of Du Pont Common
---- --------------
Stock to be issued pursu-ant to the Mergers and the Foreign Exchanges.
ARTICLE IISection .5 Excluded Assets: Those assets owned by a
---------------
Protein Subsidiary, RP Argentina or RP Brazil that are not being directly or
indirectly trans-ferred to Du Pont as part of the Busi-ness, in-cluding the
Belgium Coordi-nation Center and the Dairy Food Systems division including the
plant locat-ed in Hager City, Wisconsin and the assets thereat.
ARTICLE IISection .6 Foreign Closings Foreign Closings
---------------- ----------------
Foreign Closings Foreign Closings: The closings of the exchange, transfer
---------- ----------------
and acquisition of the respec-tive Foreign Protein Shares of each Foreign
Protein Sub-sidiary in exchange for shares of Du Pont Common Stock (as
contemplated by Sec-tion 2.4(a) hereof).
ARTICLE IISection .7 Foreign Protein Subsidiaries Foreign Protein
---------------------------- ---------------
Subsidiaries Foreign Protein Subsidiaries Foreign Protein
------------ ------------------------------ ---------------
Subsidiaries: Col-lec-tively, Protein Technol-ogies International
-------
(Deutsch-land) GmBH ("PTI Germany"), Pro-tein Tech-nologies Inter-na-tional
------ ------------
Aus-tra-lia Pty. Limit-ed, Protein Tech-nol-ogies Inter-na-tional Moscow ("PTI
---
Moscow"), Pro-tein Technolo-gies Inter-na-tional Over-seas B.V.
- ------
(Neth-er-lands) ("PTIBV") and Venezuelan Pro-tein Tech-nol-o-gies
- ------
Inter-na-tional PTI C.A. ("PTI Venezuela").
- ------
ARTICLE IISection .8 Indebtedness Indebtedness Indebtedness
------------ ------------ ------------
Indebtedness: Of any Person (as defined in Section 1.12 hereof) means
------------
(1) in-debt-edness for bor-rowed money of such Person (in-clud-ing any
long-term or short-term por-tions there-of) and (2) any in-debt-ed-ness
se-cured by the assets of, or guaran-teed by, such Person or evi-denced by a
note, bond, letter of cred-it, inden-ture or similar in-stru-ment; provided,
--------
however, that Indebtedness shall not be deemed to include accounts payable or
------
intercom-pany notes.
ARTICLE IISection .9 Initial Completion Date Initial Completion
----------------------- ------------------
Date Initial Completion Date Initial Completion Date: The date of the
--- ----------------------- -----------------------
Domestic Closings.
ARTICLE IISection .10 [Intentionally Omitted.] [Intentionally
Omitted.] [Intentionally Omitted.] [Intentionally Omitted.]
ARTICLE IISection .11 Net Debt Amount Net Debt Amount Net
--------------- --------------- ---
Debt Amount Net Debt Amount: When used with respect to any Protein
--------- ----------------
Subsidiary, as the case may be, the sum of all Indebtedness of such Protein
---
Subsid-iary and all of its Sub-sid-iar-ies, other than Indebtedness referred
to in Section 6.15 of this Agreement.
ARTICLE IISection .12 Person Person Person Person: Any
------ ------ ------ ------
natural per-son, firm, individu-al, corpo-ra-tion, part-ner-ship, joint
ven-ture, busi-ness trust, trust, asso-ciation, compa-ny or any other
busi-ness orga-ni-za-tion or entity, wheth-er incor-po-rat-ed or
unin-corpo-rat-ed.
ARTICLE IISection .13 PTIBV Exchange PTIBV Exchange PTIBV
-------------- -------------- -----
Exchange PTIBV Exchange: The ex-change, trans-fer and acquisition
----- ---------------
contemplated by Section 2.4(a) hereof of Du Pont Common Stock for the PTIBV
----
Shares.
ARTICLE IISection .14 Shares Shares Shares Shares:
------ ------ ------ ------
Collectively, the U.S. Protein Shares and the Foreign Protein Shares.
ARTICLE IISection .15 Subsidiary Subsidiary Subsidiary
---------- ---------- ----------
Subsidiary: With respect to any Person, of which (i) such Person or any other
--------
Subsidiary of such Person is a gener-al part-ner or (ii) at least a
major-ity of the out-standing shares of capital stock or part-nership or other
interests having an inter-est in profits or in assets upon liquida-tion is
di-rectly or indi-rectly owned or con-trolled by such Per-son, by any one or
more of its Subsid-iaries, or by such Person and one or more of its
Subsid-iaries. Refer-ences to a "wholly owned" Subsid-iary of an entity
-------------
include a Subsid-iary all of the common equity of which, other than direc-tor
quali-fying shares, is owned, directly or through wholly owned Sub-sid-iaries,
by such enti-ty.
ARTICLE IISection .16 Tax Return Tax Return Tax Return
---------- ---------- ----------
Tax Return: Any re-port, return, document, declara-tion or other
---------
infor-ma-tion or filing re-quired to be sup-plied to any taxing authority or
--------
juris-dic-tion (foreign or domes-tic) with respect to Taxes, includ-ing,
without limita-tion, informa-tion re-turns, any docu-ments with respect to or
accompany-ing payments of estimated Taxes, or with respect to or accom-panying
requests for the exten-sion of time in which to file any such report,
return, document, declara-tion or other information.
ARTICLE IISection .17 Taxes Taxes Taxes Taxes: Any and
----- ----- ----- -----
all taxes, charg-es, fees, levies or other assess-ments, in-cluding, without
limi-ta-tion, income, gross re-ceipts, excise, real or personal property,
sales, withhold-ing, social securi-ty, occupa-tion, use, service, service use,
license, net worth, payroll, franchise, transfer and record-ing taxes,
fees and charges, imposed by the Internal Revenue Service ("IRS") or any
---
taxing au-thor-i-ty (wheth-er domes-tic or for-eign includ-ing, without
limi-ta-tion, any state, county, local or foreign govern-ment or any
subdi-vision or taxing agency thereof (includ-ing a United States
posses-sion)), whether computed on a sepa-rate, consol-idated, uni-tary,
com-bined or any other basis; and such term shall include any interest whether
paid or received, fines, penal-ties or addi-tional amounts attrib-utable to,
or imposed upon, or with respect to, any such taxes, charges, fees, levies or
other as-sessments.
ARTICLE IISection .18 U.S. Protein Subsidiaries U.S. Protein
------------------------- ------------
Subsidiaries U.S. Protein Subsidiaries U.S. Protein Subsidiaries:
-------- ------------------------- -------------------------
Collec-tive-ly, Fiber Sales, Imperial BTI, NFI, Point-er, PTI Asia Pacific,
PTI Europe, PTI Sales, PTI and PTI Development.
ARTICLE III
THE MERGERS AND FOREIGN EXCHANGES; CLOSINGS
ARTICLE IIISection .1 The Mergers The Mergers The Mergers
----------- ----------- -----------
The Mergers.
------------
(a) (i) Upon the terms and subject to the condi-tions of this
Agreement, at the Ef-fective Time (as de-fined in Section 2.1(b) hereof), Sub
No. 1 shall be merged (the "Fiber Merg-er") with and into Fiber Sales
--------------
whereupon the sepa-rate exis-tence of Sub No. 1 shall cease. After the Fiber
Merg-er, Fiber Sales shall con-tin-ue as the surviv-ing corpora-tion (the
"Fiber Surviv-ing Corpora-tion") and shall con-tinue to be gov-erned by the
----------------------------
law of the State of Dela-ware and shall continue its existence under the name
"Fiber Sales & Develop-ment Corporation" until there-after duly amended or
changed in accor-dance with applica-ble law. The Fiber Merger shall have the
effects speci-fied in the General Cor-pora-tion Law of the State of Delaware
(the "DGCL").
----
(i) Upon the terms and subject to the condi-tions of this Agreement, at
the Effec-tive Time, Sub No. 2 shall be merged (the "Imperial BTI Merg-er")
--------------------
with and into Imperial BTI where-upon the sepa-rate exis-tence of Sub No. 2
shall cease. After the Imperial BTI Merg-er, Imperial BTI shall contin-ue as
the surviving corpo-ra-tion (the "Imperial BTI Surviv-ing Corpora-tion") and
------------------------------------
shall continue to be gov-erned by the law of the State of Dela-ware and shall
con-tinue its existence under the name "Imperi-al Bio-tech-nology, U.S., Inc."
until there-after duly amend-ed or changed in accor-dance with
applica-ble law. The Impe-rial BTI Merger shall have the effects speci-fied
in the DGCL.
(ii) Upon the terms and sub-ject to the condi-tions of this Agreement,
at the Effec-tive Time, Sub No. 3 shall be merged (the "NFI Merger") with and
----------
into NFI whereupon the sepa-rate exis-tence of Sub No. 3 shall cease. After
the NFI Merg-er, NFI shall con-tinue as the sur-viving corpora-tion (the "NFI
---
Sur-viving Corpo-ra-tion") and shall continue to be gov-erned by the law of
- -------------------------
the State of Dela-ware and shall continue its exis-tence under the name
- --
"Nutri-tious Foods, Inc." until there-after duly amended or changed in
- --
accordance with applica-ble law. The NFI Merger shall have the effects
- --
speci-fied in the DGCL.
- --
(iii) Upon the terms and subject to the condi-tions of this Agreement,
at the Effective Time, Sub No. 4 shall be merged (the "Pointer Merg-er") with
---------------
and into Pointer whereupon the sepa-rate exis-tence of Sub No. 4 shall cease.
After the Point-er Merg-er, Pointer shall continue as the surviving
corpo-ra-tion (the "Pointer Surviving Corporation") and shall con-tin-ue to be
-----------------------------
gov-erned by the law of the State of Dela-ware and shall continue its
existence under the name "Point-er Specialty Chemicals, Inc." until
there-after duly amended or changed in accor-dance with applica-ble law. The
Point-er Merger shall have the ef-fects speci-fied in the DGCL.
(iv) Upon the terms and subject to the condi-tions of this Agreement, at
the Effective Time, Sub No. 5 shall be merged (the "PTI Asia Pacific
----------------
Merger") with and into PTI Asia Pacific whereupon the sepa-rate exis-tence of
--
Sub No. 5 shall cease. After the PTI A-sia Pacific Merg-er, PTI Asia Pacific
shall continue as the surviving corpo-ra-tion (the "PTI Asia Pacific Surviving
--------------------------
Corpora-tion") and shall con-tin-ue to be governed by the law of the State of
- ------------
Dela-ware and shall continue its existence under the name "Protein
Technolo-gies Interna-tional Asia Pacific Corpora-tion" until there-after duly
amend-ed or changed in accor-dance with applica-ble law. The PTI A-sia
Pacific Merger shall have the effects speci-fied in the DGCL.
(v) Upon the terms and subject to the condi-tions of this Agreement, at
the Effective Time, Sub No. 6 shall be merged (the "PTI Europe Merger") with
-----------------
and into PTI Europe whereupon the sepa-rate exis-tence of Sub No. 6 shall
cease. After the PTI E-urope Merg-er, PTI Europe shall con-tinue as the
surviving corpo-ra-tion (the "PTI Europe Surviving Corporation") and shall
---------------------------------
con-tin-ue to be governed by the law of the State of Dela-ware and shall
continue its existence under the name "Protein Technolo-gies Inter-national
Europe, Inc." until there-after duly amend-ed or changed in accor-dance with
applica-ble law. The PTI E-urope Merger shall have the effects speci-fied in
the DGCL.
(vi) Upon the terms and subject to the condi-tions of this Agreement, at
the Effective Time, Sub No. 7 shall be merged (the "PTI Sales Merger")
----------------
with and into PTI Sales whereupon the separate exis-tence of Sub No. 7 shall
cease. After the PTI S-ales Merg-er, PTI Sales shall continue as the
sur-viving corpo-ra-tion (the "PTI Sales Surviving Corpo-ration") and shall
--------------------------------
continue to be gov-erned by the law of the State of Dela-ware and shall
continue its existence under the name "Protein Technolo-gies Inter-national
Sales, Inc." until there-after duly amend-ed or changed in accor-dance with
appli-ca-ble law. The PTI S-ales Merger shall have the effects speci-fied in
the DGCL.
(vii) Upon the terms and subject to the condi-tions of this Agreement,
at the Effective Time, Sub No. 8 shall be merged (the "PTI Merger") with and
----------
into PTI whereupon the separate exis-tence of Sub No. 8 shall cease. After
the PTI Merg-er, PTI shall continue as the surviv-ing corpo-ra-tion (the "PTI
---
Surviving Corpo-ra-tion") and shall continue to be gov-erned by the law of the
- -----------------------
State of Dela-ware and shall continue its exis-tence under the name
"Protein Technolo-gies Inter-nation-al, Inc." until there-after duly amend-ed
or changed in accor-dance with applica-ble law. The PTI Merger shall have the
effects speci-fied in the DGCL.
(viii) Upon the terms and subject to the condi-tions of this Agreement,
at the Effective Time, Sub No. 9 shall be merged (the "PTI Develop-ment
----------------
Merg-er" and, to-gether with the Fiber Merger, Imperi-al BTI Merger, NFI
-
Merger, Pointer Merger, PTI Asia Pacific Merger, PTI Europe Merger, PTI Sales
Merger and PTI Merg-er, the "Merg-ers") with and into PTI Devel-op-ment
--------
where-up-on the sepa-rate exis-tence of Sub No. 9 shall cease. After the PTI
D-evel-opment Merg-er, PTI Devel-opment shall contin-ue as the surviving
corpo-ra-tion (the "PTI Development Surviving Corpora-tion" and, together with
--------------------------------------
the Fiber Surviving Corpora-tion, Imperial BTI Surviving Corpo-ration,
NFI Surviving Corpora-tion, Pointer Surviving Corporation, PTI Asia Pacific
Sur-viving Corpo-ration, PTI Europe Surviving Corpora-tion, PTI Sales
Surviving Corpo-ration and PTI Surviving Corpo-ra-tion, the "Surviv-ing
----------
Corpo-rations") and shall con-tin-ue to be gov-erned by the law of the State
-------
of Dela-ware and shall con-tinue its existence under the name "Pro-tein
Technologies International Devel-opment Corpora-tion" until there-after duly
amend-ed or changed in accor-dance with applica-ble law. The PTI D-evelopment
Merger shall have the effects speci-fied in the DGCL.
(b) Concurrently with the Domestic Closings, the parties hereto shall
cause cer-tifi-cates of merger (the "Cer-tif-i-cates of Merg-er") with respect
--------------------------
to each of the Mergers to be exe-cut-ed and filed with the Secretary of
State of the State of Dela-ware (the "Secre-tary of State") as provided in the
-------------------
DGCL. The Mergers shall become effec-tive on the date and time (the
"Effec-tive Time") at which the Cer-tif-icates of Merger are duly filed with
--------
the Secre-tary of State.
(c) (i) Upon the Fiber Merg-er, all the rights, privileg-es,
immunities, powers and franchis-es of Fiber Sales and Sub No. 1 shall vest in
the Fiber Surviv-ing Corporation and all obli-ga-tions, re-stric-tions,
dis-abili-ties, duties, debts and liabili-ties of Fiber Sales and Sub No. 1
shall be the obli-ga-tions, re-stric-tions, dis-abili-ties, duties, debts and
liabilities of the Fiber Sur-viv-ing Corpo-ra-tion.
(i) Upon the Imperial BTI Merger, all the rights, privileg-es,
immunities, powers and franchis-es of Imperial BTI and Sub No. 2 shall vest in
the Imperi-al BTI Surviving Corporation and all obli-gations,
restric-tions, disabilities, duties, debts and liabili-ties of Imperial BTI
and Sub No. 2 shall be the obliga-tions, restric-tions, disabili-ties, duties,
debts and lia-bilities of the Impe-rial BTI Surviving Corporation.
(ii) Upon the NFI Merger, all the rights, privileg-es, immunities,
powers and franchis-es of NFI and Sub No. 3 shall vest in the NFI Sur-viving
Corpora-tion and all obli-gations, restric-tions, disabilities, duties, debts
and liabilities of NFI and Sub No. 3 shall be the obliga-tions, restric-tions,
disabil-ities, duties, debts and lia-bilities of the NFI Surviving
Corporation.
(iii) Upon the Pointer Merger, all the rights, privileg-es, immunities,
powers and franchis-es of Pointer and Sub No. 4 shall vest in the Point-er
Surviving Corpo-ration and all obli-ga-tions, re-stric-tions, disabilities,
duties, debts and lia-bilities of Pointer and Sub No. 4 shall be the
obliga-tions, re-stric-tions, disabil-ities, duties, debts and lia-bilities of
the Pointer Surviv-ing Corporation.
(iv) Upon the PTI Asia Pacific Merger, all the rights, privileg-es,
immunities, powers and fran-chis-es of PTI Asia Pacific and Sub No. 5 shall
vest in the PTI Asia Pacific Surviv-ing Corporation and all obli-gations,
re-stric-tions, dis-abilities, duties, debts and lia-bilities of PTI Asia
Pacific and Sub No. 5 shall be the obliga-tions, restric-tions, disabil-ities,
duties, debts and lia-bilities of the PTI Asia Pacific Sur-viving
Corporation.
(v) Upon the PTI Europe Merger, all the rights, privileg-es, immunities,
powers and franchis-es of PTI Europe and Sub No. 6 shall vest in the PTI
Europe Surviving Corporation and all obli-gations, restric-tions,
disabilities, duties, debts and lia-bili-ties of PTI Europe and Sub No. 6
shall be the obliga-tions, restric-tions, disabil-ities, duties, debts and
lia-bilities of the PTI Europe Surviving Corporation.
(vi) Upon the PTI Sales Merger, all the rights, privileg-es, immunities,
powers and franchis-es of PTI Sales and Sub No. 7 shall vest in the PTI
Sales Surviving Corporation and all obli-gations, restric-tions, disabilities,
duties, debts and lia-bilities of PTI Sales and Sub No. 7 shall be the
obliga-tions, restric-tions, disabil-ities, duties, debts and lia-bili-ties of
the PTI Sales Surviving Corporation.
(vii) Upon the PTI Merger, all the rights, privileg-es, immunities,
powers and franchis-es of PTI and Sub No. 8 shall vest in the PTI Sur-viving
Corpora-tion and all obli-gations, restric-tions, disabilities, duties, debts
and lia-bilities of PTI and Sub No. 8 shall be the obliga-tions,
restric-tions, disabil-ities, duties, debts and lia-bilities of the PTI
Surviving Corporation.
(viii) Upon the PTI Development Merger, all the rights, privileg-es,
immunities, powers and fran-chis-es of PTI Development and Sub No. 9 shall
vest in the PTI Development Surviving Corporation and all obli-gations,
restric-tions, disabilities, duties, debts and lia-bilities of PTI Development
and Sub No. 9 shall be the obliga-tions, restric-tions, disabil-ities,
duties, debts and lia-bilities of the PTI Development Surviv-ing Corporation.
(d) The Cer-tif-icate of Incor-po-ra-tion of each of the U.S. Protein
Subsidiaries in effect imme-di-ate-ly prior to the Effec-tive Time (copies of
which have been delivered by Ralston to Du Pont) shall be the Cer-tif-i-cate
of Incor-pora-tion of each of the respec-tive Surviv-ing Corpo-ra-tions, until
there-after duly amended in accor-dance with applica-ble law.
(e) The By-laws of each of the Du Pont Merger Subsidiaries in effect
imme-di-ately prior to the Effec-tive Time shall be the By-laws of each of the
respective Surviv-ing Corpo-ra-tions, until there-af-ter duly amend-ed in
accor-dance with applica-ble law, the Cer-tif-i-cate of Incor-po-ration of
such Surviv-ing Corpo-ration and the By-laws of such Sur-viv-ing
Corpo-ra-tion.
(f) From and after the Effective Time, the direc-tors of each of the
Du Pont Merger Subsid-iar-ies at the Effec-tive Time shall be the ini-tial
direc-tors of each of the re-spective Surviving Corpora-tions, and the
offi-cers of each of the U.S. Protein Subsidiaries at the Effec-tive Time
shall be the initial offi-cers of each of the respective Sur-viving
Corpora-tions, in each case until their re-spec-tive succes-sors are duly
elected or appoint-ed and quali-fied in accordance with applicable law.
ARTICLE IIISection .2 Conversion of U.S. Protein Shares in the
----------------------------------------
Mergers Conversion of U.S. Protein Shares in the Mergers Conversion of
- ------------------------------------------------ -------------
U.S. Protein Shares in the Mergers Conversion of U.S. Protein Shares
----------------------------------- ---------------------------------
in the Mergers. As of the Effec-tive Time, by virtue of the Mergers and
- ----------------
with-out any action on the part of Stockholder:
- -----
(a) With respect to each U.S. Pro-tein Subsid-iary, each U.S. Protein
Share thereof issued and outstanding immedi-ately prior to the Effective
Time (other than the U.S. Protein Shares to be cancelled in accordance with
Section 2.2(c) hereof) shall be converted into those respective num-bers of
shares of Du Pont Common Stock equal to the respec-tive quo-tients
(collectively, the "Merger Con-ver-sion Ra-tios") of (x) the amount set forth
---------------------------
in Schedule 2.2 hereto oppo-site the name of such U.S. Pro-tein Sub-sid-iary
divid-ed by (y) the number of U.S. Protein Shares of such U.S. Protein
Subsid-iary issued and out-stand-ing imme-di-ately prior to the Effec-tive
Time (other than U.S. Protein Shares to be can-cel-led in accor-dance with
Section 2.2(c) here-of). The number of shares of Du Pont Common Stock issued
pursuant to the fore-go-ing shall be rounded to the nearest whole number.
(b) All U.S. Protein Shares, when so con-vert-ed, shall auto-mat-i-cally
cease to be out-stand-ing and shall be can-cel-led and re-tired and shall
cease to exist, and Stock-holder shall there-after cease to have any rights
with re-spect there-to, except the right to receive certif-i-cates
repre-senting shares of Du Pont Common Stock into which the U.S. Protein
Shares have been converted.
(c) All U.S. Protein Shares owned by such U.S. Protein Subsidiary or
any wholly owned Sub-sid-iary there-of imme-di-ately prior to the Effec-tive
Time shall be can-cel-led and re-tired and no con-sid-er-ation shall be
deliv-ered in exchange therefor.
(d) Subject to rounding errors, the aggregate number of shares of Du
Pont Common Stock to be issued pursu-ant to Sections 2.2(a) and 2.4(a) hereof
shall be equal to Twenty Two Million Five Hundred Thousand (22,500,000).
ARTICLE IIISection .3 Conversion of Capital Stock of the Du Pont
------------------------------------------
Merger Subsidiaries in the Mergers Conversion of Capital Stock of the Du
-------------------------------- -------------------------------------
Pont Merger Subsidiaries in the Mergers Conversion of Capital Stock of the
-------------------------------------- ----------------------------------
Du Pont Merger Subsidiaries in the Mergers Conversion of Capital
----------------------------------------------- ---------------------
Stock of the Du Pont Merger Subsidiaries in the Mergers. As of the Effec-tive
---------------------------------------------------
Time, by virtue of the Mergers and with-out any action on the part of Du Pont,
each share of common stock of each of the Du Pont Merger Subsidiaries issued
and out-stand-ing immedi-ately prior to the Effective Time shall be
con-vert-ed into and become one fully paid and nonas-sess-able share of common
stock of the respective Sur-viving Corpo-ra-tion into which such Du Pont
Merger Subsidiary has been merged ("Sur-viving Corpora-tion Stock") with the
-----------------------------
same rights, powers and privi-leges as the U.S. Protein Shares so con-verted
and shall consti-tute the only out-stand-ing shares of capital stock of each
of the Sur-viving Corpo-ra-tions.
ARTICLE IIISection .4 Foreign Exchanges; Asset Transfers Foreign
---------------------------------- -------
Exchanges; Asset Transfers Foreign Exchanges; Asset Transfers Foreign
- --------------------------- ---------------------------------- -------
Exchanges; Asset Transfers.
- ----------------------------
(a) (i) Upon the terms and subject to the condi-tions of this Agreement,
at the Foreign Closings, Stock-holder shall exchange, trans-fer and deliv-er
to Du Pont, and Du Pont shall acquire from Stock-holder, free and clear of all
liens, claims, op-tions, charges, security interests, encumbranc-es and
re-stric-tions of any kind, all For-eign Protein Shares in separate ex-change
trans-actions (collec-tively, the "Foreign Ex-changes") of the Foreign
-------------------
Pro-tein Shares of each Foreign Protein Subsid-iary for those respective
numbers of shares of Du Pont Common Stock set forth in Schedule 2.4 hereto;
provided that the Foreign Ex-changes relat-ing to PTIBV and PTI Venezuela
------ ----
shall be pursu-ant to the agreements sub-stantial-ly in the form attached
--
hereto as Exhibits A-1 and A-2 and the Asset sales contem-plated by Section
--
3.4 hereof shall be accom-plished pursuant to agreements substantially in the
form at-tached hereto as Exhibits A-3 and A-4 (collectively, the "For-eign
--------
Ex-change Agree-ments"). To the extent that any Foreign Closings do not occur
------------------
on the Ini-tial Comple-tion Date, Du Pont shall place the shares of Du Pont
Common Stock so allocated to any Foreign Pro-tein Subsidiary for which the
Foreign Clos-ing is de-layed in escrow with an inde-pendent third party
reason-ably acceptable to Ralston until such Foreign Closings do occur. Upon
the occur-rence of such Foreign Closings, the respective allocat-ed shares
held in escrow, along with any divi-dends paid with respect there-to following
the Initial Completion Date, shall be deliv-ered to Stockholder. Upon
termina-tion pursuant to Sec-tion 8.1(b) hereof, any shares of Du Pont Common
Stock not previ-ously released from escrow shall be re-delivered to Du Pont
along with any divi-dends paid thereon. Not-withstanding the fore-going, Du
Pont shall have the right to deliver the Du Pont Shares relating to any
Foreign Exchange that does not occur on the Initial Completion Date to Ralston
on the Initial Completion Date and Ralston agrees to transfer such Shares back
to Du Pont together with all dividends or distributions paid thereon in the
event this Agree-ment is terminated with respect thereto without such For-eign
Ex-change having closed.
(i) At each Foreign Closing, Ralston shall cause any director qualifying
shares of the applicable Foreign Protein Subsidiary to be transferred to
such Person as Du Pont designates to Ralston in writing at least two (2) days
prior to the respective Foreign Clos-ing Date (as defined in Section 2.5(b)(i)
hereof).
(b) After the execution and delivery of this Agree-ment, in the event
that either Du Pont or Ralston determines that it is in its best interest to
effect any additional foreign stock exchanges pursuant to separate agreements,
Du Pont and Ralston shall, and shall cause their re-spec-tive applicable
Subsidiaries to, negotiate in good faith such agreements and arrangements,
consistent with the terms hereof, as are necessary to effectuate such
addi-tional foreign stock exchanges and to execute and deliver such mutually
acceptable agreements and arrangements as Du Pont and Ralston shall negotiate.
(c) Du Pont and Ralston shall, and Ralston shall cause its applica-ble
Subsid-iaries to, exe-cute on or prior to each For-eign Clos-ing Date such
addi-tion-al agree-ments and ar-range-ments as may be neces-sary or
appro-pri-ate, (A) to trans-fer the relevant For-eign Protein Shares to Du
Pont, (B) to trans-fer to Du Pont in such jurisdic-tion such local product
regis-tra-tions, franchis-es, li-censes, Intellectual Property (as defined in
Section 4.11(a) hereof) and any other gov-ern-mental autho-ri-za-tions or
other rights owned or held by Ralston, Stock-holder, any other Subsidiary of
Ralston or the For-eign Pro-tein Sub-sid-iaries that are neces-sary to the
conduct of the Busi-ness in such juris-diction, (C) subject to Section
2.5(a)(iv) hereof, to make all such further as-sign-ments and do all such
other acts as are neces-sary or desir-able to carry out the intent of the
parties that the Busi-ness, as a going concern, be fully vested in Du Pont as
of the applica-ble Foreign Clos-ing Date and operated for its benefit and
burden as of 12:01 AM (local time) on December 3, 1997 and (D) to pro-vide
for, and nego-tiate in good faith, such other agree-ments and ar-range-ments
relat-ing to the foregoing as the par-ties deem appro-pri-ate, in-cluding any
such agree-ments or ar-range-ments relat-ing to the treat-ment of em-ploy-ees,
bene-fit plans and Taxes.
(d) If any asset that is exclusively used in the Busi-ness is not owned
by one or more Protein Subsidiaries as of the date of this Agreement, or
leased from a Person or Gov-ern-mental Entity (as defined in Section 4.4
hereof) by one or more Pro-tein Sub-sid-iaries as of the date of this
Agree-ment, includ-ing the furniture and equip-ment set forth in Section
2.4(d)(x) of the Ralston Disclosure Schedule, Ralston shall, as to assets
owned by Ralston or a Subsidiary of Ralston and as to assets located in Pryor,
Oklahoma that are subject to the Plant Lease (as defined in Section
2.4(e) hereof), and as to other as-sets, Ralston shall use its rea-son-able
best ef-forts to, trans-fer, assign and deliv-er such asset (or, in the case
of the Plant Lease, such Lease) to such a U.S. Pro-tein Sub-sid-iary prior to
the Initial Com-pletion Date, unless such asset re-lates exclu-sively to a
Foreign Protein Subsid-iary in which case Ralston shall deliver such asset to
such Foreign Pro-tein Subsidiary prior to the For-eign Closing Date with
respect to such Foreign Protein Subsidiary; pro-vided that the timing of the
--------- ----
trans-fer, as-signment and deliv-ery to a Protein Subsid-iary of the assets
set forth in Section 2.4(d) of the Ralston Dis-closure Sched-ule shall occur
as soon as practica-ble thereaf-ter but in any event not later than January
31, 1998 or, in the case of the import license relating to Argentina, March
31, 1998. With re-spect to any such as-set, to the extent that it is
neces-sary or desir-able to exe-cute deeds, as-sign-ments and other
instru-ments of trans-fer, in-cluding with re-spect to assets owned by a
Sub-sid-iary of Ralston other than a Protein Sub-sid-iary, Ralston shall
deliver such deeds, as-sign-ments and in-stru-ments of trans-fer at the time
such asset is trans-ferred as Du Pont rea-sonably re-quests. If such assets
cannot be transferred, assigned or delivered prior to the Initial Completion
Date or the re-spective Foreign Clos-ing Date, as the case may be, Ralston
shall use its best efforts to give the benefits of ownership of such assets to
the U.S. Protein Subsidiary or Foreign Protein Subsidiary, as the case may be,
until trans-fer, assignment or delivery can be complet-ed. Subject to Section
2.5(a)(iv) hereof, the entire eco-nom-ic bene-fi-cial inter-est in and to, and
the risk of loss with respect to, such assets shall, regard-less of when legal
title there-to shall be transferred to the appropriate U.S. Protein
Subsid-iary or Foreign Pro-tein Subsid-iary, pass to those entities at
Clos-ing. Ralston shall, or shall cause its Subsidiaries to, hold such assets
for the benefit and risk of Du Pont and shall cooperate with it in any lawful
and reasonable ar-rangements designed to provide the benefits of ownership of
the assets to it. In the event that the legal interest in such assets or any
claim, right or benefit arising thereun-der or resulting therefrom, is not
capable of being sold, assigned, trans-ferred or conveyed here-un-der as a
result of the failure to receive any consents or ap-provals required for such
trans-fer, then the legal inter-est in such assets shall not be sold,
assigned, transferred or conveyed unless and until approval, consent or waiver
there-of is obtained. Ralston shall, or shall cause its Subsid-iaries, at its
or their expense, to use reasonable best efforts to cooperate in obtaining
such consents or approvals as may be necessary to complete such transfers and
to obtain satisfac-tion of condi-tions to transfer as soon as practica-ble
after the date of this Agreement. The failure to obtain any such consents or
approvals prior to Closing shall not affect Du Pont's obli-gations to complete
the Mergers and Foreign Ex-changes except as set forth in Arti-cle VI hereof.
Nothing in this Agree-ment shall be construed as an attempt to assign to the
U.S. Protein Subsidiaries or the Foreign Protein Subsid-iaries any legal
interest in such assets which, as a matter of law or by the terms of any
legally binding con-tract, engage-ment or commitment to which the legal owner
is sub-ject, is not assignable without the consent of any other party, unless
such consent shall have been given.
(e) Notwithstanding anything herein to the con-trary, Ralston covenants
and agrees that (i) prior to the Initial Completion Date it shall use its
reasonable best efforts to obtain, and (ii) prior to January 31, 1998 it shall
obtain, the landlord's consent to the subletting of the IRB Lease
Agreements (as defined in Section 6.15 here-of), each dated Novem-ber 1, 1977,
relating to the Projects (as defined in Section 6.15 hereof).
Notwith-standing any-thing to the con-trary here-in, Ralston cove-nants and
agrees that (a) prior to the Ini-tial Comple-tion Date, Ralston shall use its
rea-son-able best efforts to ob-tain, and (b) except in the case of clause
(iii) below, prior to January 31, 1998, it shall obtain the landlord's
con-sent to (i) the as-sign-ment of the Lease Agree-ment dated Novem-ber 1,
1977 relat-ing to the Pryor, Oklahoma manufactur-ing facility and commonly
known as the "Plant Lease"; (ii) the assignment of the leases relat-ing to the
-----------
soil injec-tion operations in Pryor, Oklahoma dated January 27, 1981, as
amended, and May 1, 1983, as amended (collec-tively, the "Soil Injection
--------------
Leas-es"); and (iii) the modifi-cation of the Soil Injection Leases to provide
--
the tenant with options to extend the terms thereof, and the purchase option
outside exercise dates thereunder, for five (5) successive periods of ten (10)
years each at the cur-rently existing rental without altering any other rights
or obliga-tions of the tenant thereunder, such assign-ments to be to the
Protein Subsidiary referenced in the following sen-tence (the con-sents
re-ferred to in claus-es (i), (ii) and (iii) above, collec-tive-ly, the
"Okla-homa Landlord Con-sents"). As soon as practicable and in any event
-------------------------
prior to January 31, 1998, Ralston shall assign the Plant Lease and the Soil
Injec-tion Leases and sublet the IRB Leases to a U.S. Pro-tein Sub-sid-iary in
accor-dance with Section 2.4(d) hereof. Ralston covenants and agrees that
notwith-standing Ralston's or the Oklahoma Ordinance Works Authority's
reten-tion of owner-ship in the por-tion of the Projects ac-quired and/or
con-structed in connec-tion with the Bond issues dated Novem-ber 1, 1977 in
accor-dance with the terms hereof, the por-tions of the Pro-jects acquired
and/or constructed in connec-tion with the Bond issues dated Septem-ber 1,
1996 and March 1, 1990 shall be trans-ferred to a U.S. Protein Subsid-iary in
accordance with Section 2.4(d) hereof. Ralston covenants and agrees that any
and all acts to be performed by Ralston under this Section and Section 6.15(a)
hereof shall be at the sole cost and expense of Ralston, in-clud-ing, but not
limited to, payment of any and all sums re-quired to acquire title to the
Pro-jects including any in-creased or unforeseen costs that result from any
acts or omissions occurring with re-spect to the Projects from and after the
date hereof, and the payment of trans-fer Taxes and other costs and expenses
relating thereto.
(f) Ralston shall, at the Initial Completion Date, assign, transfer and
deliver to Du Pont (or such Protein Subsidiaries as Du Pont shall designate)
the commod-ities purchase agreements listed in Section 2.4(f) of the Ralston
Disclosure Schedule.
Closings Closings Closings
-------- -------- --------
ARTICLE IIISection .5 Closings.
--------
(a) Domestic Closings.
------------------
(i) The Domestic Closings shall, sub-ject to the provi-sions of Arti-cle
VII here-of, take place at 10:00 AM as soon as prac-ti-ca-ble, but in no
event later than the second busi-ness day fol-lowing (A) satis-fac-tion of the
condi-tion set forth in Section 7.1(c) hereof and (B) the satisfaction or
waiver of the condi-tion set forth in Section 7.3(j) hereof, at rooms rented
by Stockholder at the Hotel Du Pont in Wilmington, Dela-ware, unless anoth-er
time, date or place is agreed to in writ-ing by the par-ties hereto.
Notwithstanding anything herein to the contrary, the Domestic Closings shall,
subject to the satisfaction or waiver of the conditions set forth in Section
7.1, 7.2 and 7.3 here-of, take place at 10:00 AM (Eastern Time) on December 3,
1997 or as soon thereafter as practicable.
(ii) At the Domestic Closings and concur-rently with the Effective Time,
(A) Du Pont shall deliver to Stockhold-er, certif-icates repre-sent-ing
shares of Du Pont Common Stock issued pursuant to the Mergers regis-tered in
the name of Stockholder broken down into certif-icates repre-senting such
numbers of shares of Du Pont Common Stock as Stock-hold-er re-quests at least
seven busi-ness days prior to the Initial Completion Date; (B) Stock-hold-er
shall deliv-er to each of the U.S. Protein Subsid-iar-ies, cer-tifi-cates
repre-sent-ing U.S. Protein Shares which shall there-up-on be can-celled and
(C) each of the U.S. Protein Subsidiaries shall deliv-er to Du Pont
cer-tifi-cates, regis-tered in Du Pont's name, repre-senting shares of
Sur-viv-ing Corpo-ra-tion Stock to be issued to Du Pont pursu-ant to Section
2.3 here-of.
(iii) All shares of Du Pont Common Stock issued upon the surren-der for
exchange of the U.S. Pro-tein Shares in accordance with the terms of this
Arti-cle II shall be deemed to have been made in full satis-faction of all
rights per-taining to such U.S. Protein Shares. On and after the Effec-tive
Time there shall be no further registration of transfers on the stock
trans-fer books of any of the U.S. Protein Subsid-iaries of the U.S. Protein
Shares which were out-stand-ing imme-di-ately prior to the Effective Time.
(iv) The Closings shall, upon their oc-cur-rence, be deemed to have
been ef-fec-tive as of 12:01 AM (lo-cal time) on December 3, 1997, ex-cept for
pur-poses of Section 3.1 and Arti-cles VIII and IX here-of.
(b) Foreign Closings.
-----------------
(i) Each Foreign Closing shall, upon the terms and subject to the
conditions set forth in this Agreement and the applicable Foreign Exchange
Agree-ment, if any, take place at such place as shall be mutually agreed to by
the parties hereto and at such time that is the later of (A) the Initial
Completion Date and (B) the second business day following the satisfaction or
waiver of the condi-tions set forth in Sections 7.4 and 7.5 hereof applicable
to such Foreign Exchange or at such other time as the parties hereto may agree
(each such date, a "For-eign Closing Date"). Not-with-stand-ing the terms of
---------------------
this Agree-ment or of any such For-eign Exchange Agree-ment, Du Pont shall be
under no obli-gation to pur-chase any of the For-eign Protein Shares and
Ralston shall be under no obliga-tion to exchange any such Shares prior to the
Initial Comple-tion Date. It is contemplated that the Foreign Closing
relating to the PTIBV Exchange will occur on the Ini-tial Completion Date and
that most of the other Foreign Closings will occur on the first business day
following the Initial Completion Date.
(ii) At each Foreign Closing, Stockholder shall deliver to Du Pont the
fol-low-ing:
(A) A stock certificate or stock cer-tifi-cates
representing the number of those Foreign Pro-tein Shares subject to such
Foreign Closing that are owned by Stockholder as set forth in Section 4.2(a)
of the Ralston Disclosure Schedule, with ap-pro-pri-ate stock powers duly
en-dorsed in blank or accom-pa-nied by other duly exe-cuted in-stru-ments of
transfer.
(B) All other documents required to be delivered by
Stockholder on or prior to such For-eign Closing Date pursuant to this
Agreement or the ap-plicable Foreign Exchange Agreement, if any, or otherwise
required from Stockholder in con-nec-tion herewith and therewith.
(iii) At each Foreign Closing, Stock-holder shall cause the applicable
Foreign Protein Subsidiary to deliver to Du Pont:
(A) The resignations of the members of the board of
directors of such Foreign Pro-tein Sub-sidiary as Du Pont shall request prior
to the applicable Foreign Closing Date.
(B) The stock books, stock ledgers, min-ute books
and corporate seal, if any, of such For-eign Protein Subsidiary; provided that
-------- ----
any of the foregoing items shall be deemed to have been deliv-ered pursuant to
this Section 2.5(b)(iii)(B) if such item has been delivered to or is otherwise
located at such Foreign Protein Subsidiary, or any offices of such Foreign
Protein Subsidiary.
(iv) At each Foreign Closing, Du Pont shall deliver to Stockholder
shares of Du Pont Common Stock as indicated in Schedule 2.4 hereto.
ARTICLE IIISection .6 Allocation of Shares Allocation of Shares
-------------------- --------------------
Allocation of Shares Allocation of Shares. The parties cove-nant and
-------------------- --------------------
agree that the shares of Du Pont Common Stock to be received in the Mergers
and Foreign Exchanges shall be allocated as provided in Schedules 2.2 and 2.4
hereto. The par-ties further covenant and agree that they shall use such
alloca-tion for all finan-cial and Tax report-ing purpos-es.
ARTICLE IV CERTAIN ADDITIONAL TRANSACTIONS CERTAIN ADDITIONAL
TRANSACTIONS CERTAIN ADDITIONAL TRANSACTIONS
CERTAIN ADDITIONAL TRANSACTIONS
ARTICLE IVSection .1 Intercompany Accounts Intercompany Accounts
--------------------- ---------------------
Intercompany Accounts Intercompany Accounts. Prior to the Initial
---------------------- ---------------------
Completion Date, all intercompany re-ceiv-ables of Protein Technologies
International Financial Ser-vic-es N.V. shall be repaid and the proceeds shall
be dis-trib-ut-ed up to Ralston, except for such amounts as may be used to
defease commercial paper obligations or repay Indebtedness or inter-company
accounts payable of Pro-tein Inter-na-tional Manu-fac-turing Bel-gium, N.V.
("PTIM"). As of 11:59 PM on November 30, 1997, all inter-com-pany ac-count
----
bal-ances (in-clud-ing ac-counts pay-able and ac-counts receiv-able) then
out-stand-ing between the Pro-tein Subsid-iary being acquired by Du Pont on
such date (and such Protein Subsidiary's Subsid-iar-ies), on the one hand, and
Ralston, Stock-holder or any of their re-spec-tive Subsid-iar-ies (other than
such Protein Subsid-iary and its Sub-sid-iar-ies), on the other hand, shall be
can-celled with-out pay-ment being made with re-spect there-to; provided that
-------- ----
all intercompany accounts from 11:59 PM on November 30, 1997 until Closing
shall be subject to and arise only pursu-ant to the provisions of Section
6.14(e), and pro-vid-ed, however, that $155 mil-lion of exist-ing
---------- -------
inter-compa-ny debt (constitut-ing all inter-company debt) owed to Ralston and
its Sub-sid-iar-ies (other than Pro-tein Subsid-iar-ies) by PTI and Fiber
Sales will be re-paid, prior to the Ini-tial Comple-tion Date, from the
pro-ceeds of new exter-nal borrowings of the Protein Sub-sid-iaries (the terms
of which shall pro-vide that such borrowings can be repaid in accor-dance with
Sec-tion 4.18 hereof and shall other-wise be rea-son-ably ac-cept-able to Du
Pont). No ad-just-ment shall be made to any number of shares of Du Pont
Common Stock to be deliv-ered pursuant to Section 2.4(a) hereof or any Merger
Con-ver-sion Ratio as a result of any can-cel-la-tion pursuant to this Section
3.1.
ARTICLE IVSection .2 Payment or Defeasance of Indebt-ed-ness
---------------------------------------
Payment or Defeasance of Indebt-ed-ness Payment or Defeasance of
--------------------------------------- -------------------------
Indebt-ed-ness Payment or Defeasance of Indebt-ed-ness. Prior to the
---------- ---------------------------------------
Initial Completion Date, Ralston shall, or shall cause, all out-stand-ing
Indebtedness of all Foreign Protein Subsidiaries (includ-ing the commer-cial
paper obliga-tions of PTIM) to be defeased or re-paid or, in the alterna-tive,
Ralston shall cause PTIM to enter into an agreement with Banque Brussels
Lambert (the "Banque Brussels Agree-ment") sub-stan-tially in the form
----------------------------
attached as Exhibit C hereto and shall cause to be depos-it-ed with Banque
Brussels the amount neces-sary to redeem or defease such debt in full. For
pur-pos-es of this Agree-ment, the calcu-la-tion of the Net Debt Amount shall
not include such Indebt-ed-ness that has been repaid or defeased nor shall the
calcu-la-tion of the Net Debt Amount in-clude or take into account any amounts
depos-it-ed for such defea-sance.
ARTICLE IVSection .3 Transfer of Certain Shares Transfer of
-------------------------- -----------
Certain Shares Transfer of Certain Shares Transfer of Certain Shares.
---------- -------------------------- --------------------------
Prior to the Initial Completion Date, Ralston shall purchase all of the
issued and outstanding capital stock of each of the Trans-ferred Subsidiaries
from the Subsid-iaries of Ralston that are the registered and beneficial
owners of such capi-tal stock and shall cause such capital stock to be
con-trib-ut-ed to Point-er, free and clear of all liens, claims, op-tions,
charg-es, securi-ty interests, encumbranc-es and re-strictions of any kind.
For all pur-poses of this Agreement other than this Article III, the
Trans-ferred Subsidiaries and their respective Subsidiar-ies shall be deemed
to be Subsidiar-ies of U.S. Protein Sub-sidiar-ies as of the date of this
Agreement and there-af-ter.
ARTICLE IVSection .4 Certain Asset Transfers Certain Asset
----------------------- -------------
Transfers Certain Asset Transfers Certain Asset Transfers.
--- ------------------------- -----------------------
(a) Ralston shall form two new Subsidiaries of Pointer (respectively,
"PTI Argentina" and "PTI Brazil" and collec-tively, the "New Pointer
------------- ----------- ------------
Subsidiaries") which shall each ac-quire, as soon as prac-tica-ble follow-ing
----------
execution and deliv-ery of this Agree-ment, the assets primarily asso-ci-ated
with or used in the Busi-ness (the "Assets") that are cur-rent-ly held by each
------
of RP Argentina and RP Bra-zil (col-lec-tive-ly, "Transferor
----------
Subsid-iar-ies") (such acqui-si-tions, col-lec-tive-ly, the "Asset
-- -----
Trans-fers"). If the closing of the Asset Transfers cannot be com-pleted by
the Initial Comple-tion Date, the New Pointer Subsidiaries shall enter into
agreements with RP Argentina and RP Brazil (in the form of Exhib-its A-3 and
A-4 hereto) to ac-quire the Assets as soon as prac-ti-ca-ble there-af-ter, in
accordance with the provisions of Section 3.5 here-of. Prior to the Initial
Completion Date, Ralston shall cause to be contributed to PTI Argentina the
sum of $872,000 and to PTI Brazil, or, in the alterna-tive, to Pointer, the
sum of $2,800,000. If contributed to Pointer, Pointer shall, as soon as
practicable following the Initial Completion Date, contribute such sum to PTI
Brazil. PTI Argentina and PTI Brazil shall thereafter pay such amounts for
the Assets in accordance with the terms of Exhibits A-3 and A-4. To the
extent the amounts so con-trib-uted by Ralston are insufficient to pay for the
Assets in accordance with the terms of Exhibits A-3 and A-4, Ralston shall
pay, or cause to be paid, the amount of such deficien-cies to Pointer. The
Trans-feror Sub-sid-iar-ies shall not be deemed to be Pro-tein Subsid-iar-ies
for pur-poses of this Agreement, except for purposes of Article IV hereof, for
which they shall be deemed to be Protein Subsidiaries. In the event that the
Asset Trans-fers in fact occur, for all pur-poses of this Agree-ment other
than this Article III, the New Pointer Sub-sidiar-ies shall be deemed to be
U.S. Protein Subsid-iaries as of the date of this Agree-ment and there-after.
(b) The closing of each of the Asset Transfers shall take place as soon
as practicable following the satis-faction or waiver of the following
conditions by the party for whose benefit the condition exists; provided that
-------- ----
the New Pointer Subsidiaries may not waive any such condi-tion without the
prior written consent of Du Pont. The obli-gation of the respective
Transferor Subsid-iar-ies and New Pointer Sub-sidiar-ies to effect such Asset
Trans-fers shall be condi-tioned on the re-ceipt of such licenses, permits,
con-sents, ap-prov-als, autho-ri-zations, qualifica-tions and orders of
Govern-mental Entities and other third parties as are necessary in connection
with the Asset Transfers, except where the failure to obtain such li-censes,
permits, con-sents, ap-prov-als, authorizations, quali-fica-tions and orders
would not, individually or in the aggre-gate with all other failures,
reasonably be expected to have a Mate-rial Ad-verse Effect (as defined in
Section 4.1(b) hereof) on the Busi-ness conducted by RP Argentina and RP
Brazil, as the case may be.
ARTICLE IVSection .5 Beneficial Ownership of the Foreign Protein
-------------------------------------------
Subsidiaries following the Initial Com-pletion Date. Beneficial Ownership
------------------------------------------------ --------------------
of the Foreign Protein Subsidiaries following the Initial Com-pletion Date.
- -----------------------------------------------------------------------------
Beneficial Ownership of the Foreign Protein Subsidiaries following the
-------------------------------------------------------------------------
Initial Com-pletion Date. Beneficial Ownership of the Foreign Protein
------------------------ -------------------------------------------
Subsidiaries following the Initial Com-pletion Date.
------------------------------------------------------
(a) Subject to Section 2.5(a)(iv) hereof, at the Ini-tial Com-ple-tion
Date, the entire econom-ic benefi-cial inter-est in and to, and the risk of
loss with re-spect to, the Assets and the Foreign Protein Subsid-iaries shall
(re-gard-less of when legal title there-to is trans-ferred, in the case of the
Assets, to one of the New Pointer Sub-sid-iar-ies or, in the case of a
Foreign Protein Subsid-iary, to Du Pont) pass to PTI Argenti-na, PTI Brazil or
Du Pont, as the case may be; provided that proper recordings shall be made to
-------- ----
evidence such beneficial owner-ship and risk of loss with the appropriate
Governmental Entities, as required by applica-ble law. From and after the
Ini-tial Com-ple-tion Date, Ralston shall cause such Assets and Foreign
Protein Subsid-iaries to be man-aged at Du Pont's direc-tion pursu-ant to an
Operating Agree-ment (as defined in Section 6.12 hereof) until such Assets and
For-eign Pro-tein Sub-sid-iaries are actu-ally legally trans-ferred and
con-veyed or if not so trans-ferred or con-veyed, until the Final Termi-nation
Date (as defined in Section 8.1(b) here-of). Without limit-ing the foregoing,
all reve-nues, earn-ings and cash flows associat-ed with the Assets or of such
Foreign Protein Sub-sidiaries fol-lowing 12:01 AM (local time) on December 3,
1997 shall, subject to Section 2.5(a)(iv) hereof, be for the ac-count of Du
Pont but shall be re-tained by the respec-tive Foreign Protein Subsid-iaries
(or, in the case of Argen-tina and Brazil, by RP Argentina and RP Brazil)
until the re-spec-tive For-eign Closings are con-sum-mat-ed and, in the case
of the Assets until the closing of the Asset Transfers. Fol-lowing the
Ini-tial Com-ple-tion Date, nei-ther Ralston nor any of its Subsid-iaries
shall be re-quired to lend, advance, contrib-ute or use any of its own funds
in connec-tion with the opera-tions of such Foreign Protein Subsidiar-ies.
(b) In the event that any Foreign Exchange-- does not occur on the
Initial Completion Date, Ralston shall use its reasonable best efforts to take
such action as Du Pont shall rea-son-ably re-quest, in order to mini-mize
Du Pont's admin-is-tra-tive burden with re-spect to the Foreign Protein
Sub-sid-iaries relat-ing to such delayed Foreign Exchanges including with
respect to Du Pont's inter-nal finan-cial reporting proce-dures so that Du
Pont may in-clude such For-eign Protein Sub-sidiaries enti-ties in their
financial re-port-ing.
ARTICLE IVSection .6 PTIFS Liquidation. Prior to the Ini-tial
-----------------
Completion Date, Ralston shall, at its sole expense, cause Pro-tein
Tech-nol-o-gies Inter-na-tion-al Finan-cial Servic-es, N.V. Belgium ("PTIFS")
-----
to liqui-date and distrib-ute all of its assets and lia-bili-ties to PTIM (the
"PTIFS Liqui-da-tion").
--------------------
ARTICLE IVSection .7 Net Debt Amount Net Debt Amount Net Debt
--------------- --------------- --------
Amount Net Debt Amount. Except as set forth in Section 3.7 of the
------ ---------------
Ralston Disclosure Schedule, the Net Debt Amount of each Protein Subsidiary
shall be equal to zero on the Initial Completion Date. Ralston shall
indemni-fy Du Pont on a dollar-for-dollar basis to the extent the Net Debt
Amount of any Protein Subsidiary is greater than as set forth pursuant to the
foregoing.
ARTICLE V REPRESENTATIONS AND WARRANTIES OF RALSTON AND STOCK-HOLDER
Ralston and Stockholder, jointly and sever-al-ly, repre-sent
and war-rant to Du Pont and each of the Du Pont Merger Subsidiaries, except
that no representation and warran-ty is made with respect to (a) the assets,
liabilities and operations of Qualcepts Nutrients, Inc. except as set forth in
the letter agreement, dated October 21, 1997, between Du Pont and Ralston (the
"Qualcepts Letter"), (b) the as-sets, lia-bil-i-ties and opera-tions of the
-----------------
industrial polymer busi-ness of Archer Daniels Midland Company ("ADM") that is
- ---
subject to that certain Purchase Agreement, dated September 26, 1997, be-tween
PTI and ADM and (c) the Tech-nol-o-gy li-cense grant-ed by Novogen Limited, as
fol-lows:
ARTICLE VSection .1 Organization Organization Organization
------------ ------------ ------------
Organization.
------------
(a) Each of the U.S. Protein Subsidiaries and the Foreign Protein
Subsidiaries is a corpo-ra-tion duly orga-nized, validly exist-ing and in good
stand-ing under the laws of the jurisdic-tion of its incor-pora-tion or
organi-zation and has all requi-site corporate power and authori-ty and all
necessary govern-men-tal ap-provals to own, lease and oper-ate its proper-ties
and to carry on its business as now being conducted. The U.S. Protein
Sub-sidiaries and the Foreign Protein Subsidiaries are duly quali-fied or
li-censed to do business and, for juris-dic-tions recog-niz-ing such concept,
in good stand-ing, in each juris-dic-tion in which the prop-erty owned, leased
or operated by it or the nature of the busi-ness conducted by it makes such
quali-fication or licens-ing necessary, except where the failure to be so duly
quali-fied or licensed and in good standing would not in the aggregate have a
Material Adverse Effect on the Business, taken as a whole. Stock-holder has
deliv-ered to Du Pont, prior to the execu-tion of this Agree-ment, a com-plete
and cor-rect copy of the cer-tificate of incor-pora-tion and by-laws, each as
amend-ed to date, of each of the U.S. Protein Subsid-iaries and the Foreign
Protein Subsid-iar-ies. Such orga-ni-za-tion-al docu-ments are in full force
and effect and no U.S. Protein Subsidiary or Foreign Protein Subsidiary is in
viola-tion of any provi-sion of such orga-ni-za-tional docu-ments.
(b) As used in this Agree-ment, any refer-ence to any event, change or
effect having a "Mate-rial Adverse Effect" on or with respect to any entity
------------------------
(or group of enti-ties, taken as a whole) or to the "Business," taken as a
whole, means such event, change or effect (i) is mate-ri-ally adverse to the
condi-tion (finan-cial or other-wise), as-sets, busi-ness-es or re-sults of
opera-tions of such entity (or, if used with respect thereto, of such group of
entities, taken as a whole) or of the Busi-ness, taken as a whole, as the
case may be, or (ii) will mate-ri-ally impair the abili-ty of such entity or
group of entities, taken as a whole (or, in the case of the Busi-ness, the
ability of the Protein Subsid-iaries, taken as a whole) to per-form its or
their obli-ga-tions here-un-der or con-sum-mate the transac-tions
contem-plated hereby. "Mate-rial Adverse Effect" when used with refer-ence to
------------------------
the Business, taken as a whole, shall include an event, change or effect which
materially im-pairs the ability of Ralston or Stock-holder to perform their
re-spective obli-gations hereunder or consummate the trans-ac-tions
con-templat-ed hereby.
(c) Each of Ralston and Stockholder is a duly orga-nized, valid-ly
existing corporation and in good stand-ing, under the laws of the jurisdiction
of its incorporation and has all requisite corporate power and authori-ty
and all neces-sary governmental approvals to own, lease and oper-ate its
properties and to carry on its business as now being conducted by it.
(d) Sec-tion 4.1(d) of the disclo-sure sched-ule of Ralston
deliv-ered concur-rently with the execu-tion and deliv-ery by the parties
hereto of this Agreement (the "Ral-st-on Dis-clo-sure Sched-ule") sets forth a
--------------------------------
com-plete list and owner-ship chart of Stockholder and its Subsidiaries
and any other direct or indirect Subsidiaries of Ralston engaged in the
Business in-clud-ing (x) the juris-dic-tion of incor-po-ra-tion or
orga-ni-zation of such Subsid-iary and (y) the percentage of the capi-tal
stock or other owner-ship inter-est of such Sub-sid-iary. Except for (i)
marketable securities having an aggre-gate cost and fair market value on the
date hereof of less than $1 million each, (ii) a 25% interest (the "Fuji
----
Shares") in Fuji-Purina Protein Ltd. (the "Fuji Joint Ven-ture"), and (iii)
- -------------------
3.5% inter-est in Jilin Fuji Pro-tein Compa-ny, Ltd. nei-ther Stock-holder nor
any of the Pro-tein Subsid-iaries owns any equity inter-est in any
corpo-ra-tion or other entity other than its Subsid-iar-ies.
ARTICLE VSection .2 Capitalization; Subsidiaries; Fuji Joint Venture
------------------------------------------------
Capitalization; Subsidiaries; Fuji Joint Venture Capitalization;
---------------------------------------------------- ---------------
Subsidiaries; Fuji Joint Venture Capitalization; Subsidiaries; Fuji Joint
----------------------------- ----------------------------------------
Venture.
- -------
(a) The autho-rized capital stock, and the number of shares that are
issued and outstanding, of each of the Protein Subsidiaries is set forth in
Section 4.2(a) of the Ralston Disclosure Schedule. Shares that are issued and
held in the trea-sury of any of the Pro-tein Subsidiaries are set forth
in Section 4.2(a) of the Ralston Disclosure Sched-ule. All the issued and
out-stand-ing shares of capital stock of each Protein Subsid-iary are duly
autho-rized, validly is-sued, fully paid and nonas-sess-able and were not
issued in violation of statu-to-ry or contrac-tual preemp-tive or similar
rights.
(b) There are no bonds, deben-tures, notes or other In-debt-ed-ness
having general voting rights (or con-vertible into securi-ties having such
rights) ("Voting Debt") of any Protein Subsidiary issued and out-stand-ing.
------------
Except as set forth above, (i) there are no shares of capital stock or other
voting securities of any Protein Subsidiary autho-rized, issued or
out-stand-ing, (ii) there are no exist-ing op-tions, war-rants, calls,
preemp-tive rights, sub-scrip-tions or other rights, agree-ments,
ar-range-ments or com-mitments of any character, relat-ing to the issued or
unissued capital stock of any Pro-tein Subsidiary, obligat-ing any Protein
Sub-sid-iary, Ralston or any Subsidiary of Ralston to issue, trans-fer or sell
or cause to be is-sued, trans-ferred or sold any shares of capital stock
or Voting Debt of, or other equity interest in, any Protein Subsid-iary or
securities convert-ible into or ex-change-able for such shares or equity
inter-ests, or obli-ga-ting any Pro-tein Sub-sidiary to grant, extend or enter
into any such op-tion, warrant, call, subscrip-tion or other right,
agree-ment, ar-rangement or commit-ment and (iii) except as set forth in
Section 4.2(b) of the Ralston Disclosure Schedule, none of the Pro-tein
Sub-sid-iar-ies has agreed to or is obli-gated to pro-vide funds to, or make
any in-vestment (in the form of a loan, capital contri-bu-tion or other-wise)
in, any other Pro-tein Sub-sidiary or any other enti-ty.
(c) Except as set forth in Section 4.2(c) of the Ralston Disclosure
Schedule, all of the out-stand-ing shares of capi-tal stock of each of the
Protein Sub-sidiar-ies (i) except for the out-stand-ing shares of capital
stock of the Trans-ferred Subsid-iar-ies, are, and (ii) as of the Ini-tial
Com-ple-tion Date will be, owned of record and bene-ficial-ly by
Stock-hold-er, directly or indi-rect-ly, and all such Shares have been validly
issued and are fully paid and nonas-sess-able and are owned by either
Stock-hold-er or one of the Protein Subsid-iar-ies free and clear of all Liens
(as defined below), preemptive rights and similar rights and claims of third
parties. As used in this Agree-ment, "Lien" means, with re-spect to any
----
asset, any lia-bility (wheth-er ac-crued, abso-lute, con-tin-gent or
other-wise, includ-ing, without limi-ta-tion, and spe-cial Tax as-sess-ments),
mort-gage, deed to secure debt, lien, pledge, charge, claim, secu-rity
inter-est or encum-brance of any kind in re-spect of such asset. Ralston owns
beneficially and of record, free and clear of all Liens, preemp-tive rights
and simi-lar rights and claims of third par-ties, all of the issued and
out-stand-ing shares of capital stock of Stockholder. At the Closings, except
as noted in Section 4.2(c) of the Ralston Disclosure Schedule, Du Pont will
re-ceive valid title to all of the issued and out-standing shares of capital
stock of each of the Pro-tein Sub-sidiar-ies, free and clear of all Liens,
pre-emp-tive rights and simi-lar rights and claims of third par-ties.
(d) All of the Fuji Shares are owned of record and beneficially, free
and clear of all Liens, preemptive rights and similar rights and claims by
third parties, by Ralston or a wholly owned Sub-sid-iary of Ralston and as of
the Initial Completion Date will be owned of record and beneficially, free and
clear of all Liens, preemptive rights and similar rights and claims of
third parties, by PTI and all such shares have been validly issued and are
fully paid and nonassessable. Neither the execution and delivery and
performance of this Agreement nor any transfers of the Fuji Shares to PTI (to
the extent not currently owned by it) will result in a viola-tion or breach
of, or con-sti-tute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termina-tion, amendment or
can-cella-tion) under, any of the terms, condi-tions or provi-sions of any of
the agreements relating to the Fuji Joint Venture.
(e) There are no voting trusts or other agree-ments or understandings
to which any of the Protein Subsid-iaries is a party with respect to the
voting of the capital stock of any of the Protein Subsidiaries.
(f) None of the Protein Subsidiaries is re-quired to redeem,
repur-chase or other-wise ac-quire shares of capital stock of any Protein
Subsidiary, including as a result of the con-summation of the trans-ac-tions
con-templat-ed by this Agree-ment or by the Foreign Exchange Agreements, if
any.
ARTICLE VSection .3 Authorization; Binding Effect Authorization;
----------------------------- --------------
Binding Effect Authorization; Binding Effect Authorization; Binding
- --------------- ----------------------------- ----------------------
Effect. Each of Ralston, Stockholder and the U.S. Protein Subsid-iaries has
- ------
the requi-site corpo-rate power and au-thor-ity to exe-cute and deliv-er this
Agreement and to perform its re-spective obli-gations hereun-der. The
execu-tion and deliv-ery of this Agree-ment and the perfor-mance of its
respective obliga-tions hereun-der have been duly and valid-ly autho-rized by
the Board of Direc-tors of each of Ralston, Stock-holder and the U.S. Protein
Subsidiaries; the Board of Direc-tors of each U.S Protein Subsidiary has
recommended to Stockholder as the owner of the outstand-ing shares of such
U.S. Protein Subsidiary that it adopt this Agree-ment in accordance with the
DGCL; the Board of Directors of Stockholder has autho-rized it to adopt this
Agreement in its capacity as the sole stockholder of each of the U.S. Protein
Subsidiaries of which it is the sole stock-holder in accordance with the DGCL;
and concur-rently with the execution here-of, Stockhold-er is adopting
this Agreement as the sole stock-holder of such U.S. Protein Subsidiary in
accor-dance with the DGCL. No other pro-ceed-ings on the part of Ralston, any
Subsidiary of Ralston or any Protein Sub-sid-iary are neces-sary to autho-rize
the execu-tion, deliv-ery and per-formance of this Agree-ment. This
Agree-ment has been duly exe-cuted and deliv-ered by Ralston, Stock-holder and
each of the U.S. Protein Subsid-iaries and consti-tutes, assum-ing due and
valid autho-ri-za-tion, execu-tion and delivery of this Agreement by Du Pont
and each of the Du Pont Merger Subsidiaries, a valid and bind-ing obli-ga-tion
of each of Ralston, Stock-hold-er and the U.S. Protein Subsidiaries,
en-force-able against each of them in accor-dance with its terms.
ARTICLE VSection .4 Consents and Approvals; No Viola-tions
--------------------------------------
Consents and Approvals; No Viola-tions Consents and Approvals; No
------------------------------------ --------------------------
Viola-tions Consents and Approvals; No Viola-tions. Except (a) as
----- -----------------------------------------
disclosed in Section 4.4 of the Ralston Disclosure Schedule, (b) for the
-
requisite fil-ings under the DGCL, (c) for the requisite filings and wait-ing
peri-ods under the Hart-Scott-Rodino Anti-trust Im-prove-ments Act of 1976, as
amended (the "HSR Act") and (d) in the case of the Registra-tion Rights
-------
Agree-ment (as defined in Section 6.12 hereof), for the fil-ings, per-mits,
autho-ri-za-tions, con-sents and ap-prov-als as may be required under, and
other appli-cable re-quire-ments of, the Secu-rities Act of 1933 and the rules
and regulations thereunder (the "Secu-ri-ties Act") and state secu-ri-ties or
----------------
blue sky laws, nei-ther the execu-tion and deliv-ery of this Agree-ment nor
the perfor-mance by any of Ralston, Stock-holder or the U.S. Protein
Subsidiaries of their respec-tive obli-ga-tions hereunder nor com-pli-ance by
any of Ralston, Stock-holder or the U.S. Protein Subsidiaries with any of the
provi-sions hereof will (i) con-flict with or result in any breach of any
provi-sion of the corporate documents including the certif-i-cate of
incor-po-ra-tion or the by-laws of Ralston, Stock-hold-er or any of the
Protein Sub-sid-iaries, (ii) re-quire any filing with, or per-mit,
autho-ri-za-tion, con-sent or approv-al of, any government or any agen-cy,
court, tribu-nal, commis-sion, board, bureau, depart-ment, polit-i-cal
subdivi-sion, or other instrumen-tal-ity of any govern-ment (includ-ing any
regulatory or admin-istrative agen-cy), whether federal, state, multinational
(including, but not limited to, the European Community), pro-vincial,
munici-pal or local, domes-tic or for-eign (each, a "Gov-ern-men-tal Enti-ty")
-----------------------
(other than such of the foregoing as are required because of the legal or
regulato-ry status of Du Pont or any Sub-sid-iary thereof or any facts
pertaining to such Per-sons), (iii) result in a viola-tion or breach of, or
con-sti-tute (with or without due notice or lapse of time or both) a default
(or give rise to any right of termina-tion, amend-ment, cancella-tion or
accel-er-ation) under, any of the terms, condi-tions or provi-sions of any
note, bond, mort-gage, inden-ture, lease, license, con-tract, agree-ment,
commit-ment, understanding or other in-strument or obliga-tion to which any
Pro-tein Subsid-iary is a party or by which any of them or any of their
re-spec-tive prop-erties, assets or rights may be bound (col-lec-tively, the
"Protein Subsidiary Con-tracts"), including Li-cense Agree-ments (as defined
-------------------------------
in Section 4.11(a) hereof) or (iv) vio-late any order, writ, in-junc-tion,
judg-ment, de-cree, set-tle-ment, law, ordi-nance, stat-ute, rule,
regu-la-tion or other gov-ern-men-tal approv-al or autho-riza-tion (feder-al,
state, local or foreign) appli-ca-ble to Ralston, Stock-holder or any Protein
Sub-sid-iary or any of their re-spec-tive prop-er-ties, as-sets or rights
(col-lective-ly, "Appli-cable Laws"), ex-clud-ing from the fore-go-ing
-----------------
claus-es (ii), (iii) and, inso-far as laws, stat-utes, rules and regu-la-tions
are con-cerned, (iv) such viola-tions, breach-es or de-faults (other than with
re-spect to License Agree-ments) which would not, indi-vidu-ally or in the
aggre-gate, have a Material Adverse Effect on the Business, taken as a whole.
ARTICLE VSection .5 SEC Reports and Financial State-ments SEC
------------------------------------- ---
Reports and Financial State-ments SEC Reports and Financial State-ments
--------------------------------- -------------------------------------
SEC Reports and Financial State-ments.
-----------------------------------------
(a) As of their re-spec-tive dates or, if amend-ed, as of the date of
the last such amend-ment, none of the forms, reports, schedules, statements
and other documents re-quired to be filed by Ralston since September 30, 1995
under the Securi-ties Exchange Act of 1934, as amend-ed and the rules and
regu-lations thereunder (the "Ex-change Act") or the Secu-ri-ties Act
--------------
(excluding, howev-er, any finan-cial state-ments or schedules includ-ed
there-in) con-tained any untrue state-ment of a material fact relat-ing to the
Business or omit-ted to state a mate-ri-al fact relating to the Business
re-quired to be stated there-in or neces-sary in order to make the state-ments
therein, in light of the circum-stanc-es under which they were made, not
mis-leading. None of the Protein Subsid-iaries is re-quired to file any
forms, re-ports or other docu-ments with the Securities and Exchange
Commission (the "SEC"). None of the Pro-tein Sub-sid-iar-ies has any debt
---
that, immediate-ly after giving effect to the trans-actions contem-plated
hereby, would require it to file any forms, reports or other documents with
the SEC.
(b) Ralston has delivered to Du Pont the unaudit-ed balance sheets
(including the notes thereto) of the Busi-ness as of Sep-tem-ber 30, 1994 to
1996, and as of July 31, 1997 (the "Balance Sheets") and unaudited income
--------------
state-ments (in-cluding the notes there-to) for the Busi-ness for the years
ended Sep-tember 30, 1994 to 1996, and for the ten-month period ended July 31,
1997 (the "In-come State-ments"), copies of which are set forth in
--------------------
Sec-tion 4.5 of the Ralston Dis-clo-sure Sched-ule. The Bal-ance Sheets and
Income State-ments (col-lec-tive-ly, the "Fi-nan-cial State-ments") have been
-----------------------
derived from the books and records of the Business, and except as set forth in
Sec-tion 4.5 of the Ralston Dis-closure Sched-ule, were pre-pared in
accor-dance with gener-ally accept-ed account-ing princi-ples ("GAAP") on a
----
consis-tent basis, and present fully and fairly the financial posi-tion and
re-sults of opera-tions of the Busi-ness at the dates and for the periods
indicat-ed. In addition, Ralston has delivered to Du Pont operating cash flow
schedules relating to the Income State-ments and prepared from the Balance
Sheets and Income State-ments. Such schedules are also set forth in Section
4.5 of the Ralston Disclosure Schedule and include depreciation and capital
expenditure amounts determined in accordance with GAAP.
ARTICLE VSection .6 Absence of Certain Changes Absence of Certain
-------------------------- ------------------
Changes Absence of Certain Changes Absence of Certain Changes.
------- -------------------------- --------------------------
Except as disclosed in Sec-tion 4.6 of the Ralston Disclo-sure Sched-ule,
since July 31, 1997, (i) the Protein Sub-sid-iaries have con-duct-ed their
respec-tive busi-nesses only in the ordi-nary course of business con-sistent
with past prac-tice, (ii) there has not occurred any event having, and there
has not been a, Mate-ri-al Ad-verse Effect with respect to the Busi-ness,
taken as a whole, and there have not oc-curred any events or chang-es
(in-cluding the incurrence of any lia-bili-ties of any nature, whether or not
accrued or con-tin-gent) in or to the Busi-ness which could rea-son-ably be
expected to have, indi-vid-ually or in the aggre-gate, a Mate-ri-al Ad-verse
Effect on the Busi-ness, taken as a whole, and (iii) except as de-scribed in
Section 3.1 or 6.14(c) here-of, none of the Pro-tein Sub-sid-iaries has taken
any of the ac-tions set forth in Sec-tion 6.1 hereof.
ARTICLE VSection .7 No Undisclosed Liabilities No Undisclosed
-------------------------- --------------
Liabilities No Undisclosed Liabilities No Undisclosed Liabilities.
-------- -------------------------- --------------------------
Except as reflected on the Balance Sheet dated as of July 31, 1997 or as
disclosed in Sec-tion 4.7 of the Ralst-on Dis-clo-sure Sched-ule, at July 31,
1997, none of the Protein Subsid-iaries had incurred any lia-bil-i-ties or
obli-ga-tions (whether di-rect, indirect, ac-crued, con-tin-gent or absolute,
and whether due or to become due, nor, to the knowledge of Ralston, have any
facts arisen or oc-curred which could reason-ably form a basis there-for), and
since such date, none of the Protein Sub-sidiar-ies has incurred any such
liabil-ities or obliga-tions, except for such as are in-curred in the ordinary
course of business consis-tent with past practice and which could not
reason-ably be expected to have, individu-ally or in the aggre-gate, a
Material Adverse Effect on the Business, taken as a whole.
ARTICLE VSection .8 Litigation Litigation Litigation
---------- ---------- ----------
Litigation. Section 4.8 of the Ralst-on Dis-closure Schedule sets forth all
------
(i) pending suits, ac-tions and pro-ceed-ings ("Proceedings") and (ii) to the
-----------
knowl-edge of Ralston, all threatened suits, actions, investiga-tions or
reviews against any of the Pro-tein Sub-sid-iar-ies. Except as set forth in
Section 4.8 of the Ralston Dis-clo-sure Sched-ule, there are no pend-ing or,
to the knowl-edge- of Ralston, threat-ened Pro-ceed-ings or pending or
threatened investigations or reviews, against any of the Pro-tein
Sub-sid-iar-ies or any of their re-spec-tive prop-er-ties, assets or rights,
or any of their offi-cers or direc-tors in their capacity as such, or against
Ralston or Stockholder in their capacity as direct or indirect owners of the
capi-tal stock of any of the Pro-tein Subsid-iar-ies, which, indi-vid-u-al-ly
or in the aggre-gate, is rea-son-ably likely to have a Mate-ri-al Ad-verse
Effect on the Business, taken as a whole. Except as dis-closed in Section 4.8
of the Ralst-on Dis-clo-sure Sched-ule, none of the Protein Subsidiaries
is sub-ject to any out-standing order, writ, in-junc-tion, settle-ment or
decree which in any respect re-stricts or limits any activi-ties of any of the
Protein Subsid-iaries or is otherwise mate-rial to any such entity. Ralston
has pro-vided to Du Pont true, com-plete and cor-rect copies of all
com-plaints, mo-tions, re-spons-es and other docu-men-ta-tion and
corre-spon-dence relat-ing to any pending Proceed-ing.
ARTICLE VSection .9 Employee Benefit Plans. Employee Benefit
------------------------ ----------------
Plans.Employee Benefit Plans.Employee Benefit Plans.
------------------- ------------------------
(a) (i) Domestic Benefit Plans. Section 4.9(a)(i) of the Ralston
----------------------
Disclo-sure Sched-ule con-tains a true and complete list of each de-ferred
compensation and each incen-tive com-pensa-tion, stock purchase, stock option
and other equity compensa-tion plan, program, agree-ment or ar-range-ment;
each sever-ance or termination pay, medical, surgical, hospi-tal-iza-tion,
life insurance and other "wel-fare" plan, fund or pro-gram (within the meaning
of section 3(1) of the Em-ployee Retire-ment Income Security Act of 1974,
as amended ("ERISA")); each profit-sharing, stock bonus or other "pen-sion"
-----
plan, fund or program (within the meaning of section 3(2) of ERISA); and each
other employee benefit plan, fund, program, agreement or arrangement, in each
case, that is sponsored, main-tained or contributed to or required to be
contrib-uted to by any U.S. Protein Subsid-iary or by any trade or business,
whether or not incorpo-rated (an "ERISA Affil-iate"), that together with any
----------------
one or more U.S. Protein Subsidiaries would be deemed a "single employer"
within the meaning of sec-tion 4001(b) of ERISA, or to which any U.S. Protein
Subsidiary or an ERISA Affiliate is a party, whether written or oral, for the
benefit of any employee or former employee of any U.S. Protein Subsid-iary
(collec-tively, the "Domestic Benefit Plans"). Each of the Domestic Benefit
----------------------
Plans that is subject to section 302 of Title IV of ERISA or section 412 of
the Code is hereinafter referred to in this Sec-tion 4.9 as a "Title IV Plan".
-------------
Except as disclosed in Section 4.9(a)(i) of the Ralston Disclosure Sched-ule,
none of the U.S. Protein Subsidiaries or any ERISA Affil-iate has any
commitment or formal plan, whether legally bind-ing or not, to create any
addi-tional Domestic Benefit Plan or modify or change any exist-ing Domes-tic
Benefit Plan that would affect any employee or former employee of any U.S.
Protein Subsidiary.
(i) Foreign Benefit Plans. Section 4.9(a)(ii) of the Ralston
---------------------
Dis-clo-sure Schedule con-tains, to the knowl-edge of Ralston, a true and
complete list of each deferred compensa-tion and each incentive
com-pensa-tion, plan, program, agree-ment or arrangement; each severance or
termi-na-tion pay, medical, surgical, hospitaliza-tion, life insur-ance
disabili-ty and accident plan, fund or program; each pension and
profit-sharing plan, fund or program; each employment, termina-tion or
sever-ance agreement; and each other employee benefit plan, fund, program,
agree-ment or arrangement, in each case, that is sponsored, maintained or
contrib-uted to or required to be contrib-uted to by any Foreign Pro-tein
Subsidiary or by any trade or busi-ness, or to which any Foreign Protein
Subsidiary is a party, whether writ-ten or oral, for the benefit of any
employee or former employees of any Foreign Protein subsidiary
(collec-tive-ly, the "Foreign Benefit Plans"). Except as dis-closed in
-----------------------
Section 4.9(a)(ii) of the Ralston Disclosure Schedule, to the knowl-edge of
Ralston, none of the Foreign Pro-tein Subsid-iaries has any commitment or
formal plan, whether legally binding or not, to create any addi-tional
For-eign Benefit Plan or modify or change any exist-ing Foreign Benefit Plan
that would affect any employee or former employee of any Foreign Protein
Subsidiary.
<PAGE>
(b) With respect to each Domestic Benefit Plan, Ralston or a
Subsidiary of Ralston has prior to the Initial Completion Date delivered to Du
Pont true and complete copies of the Domestic Benefit Plan, includ-ing
any amend-ments thereto (or if the Domestic Benefit Plan is not a written
Domestic Benefit Plan, a descrip-tion thereof), any related trust or other
funding vehi-cle, the most recent reports or summaries required under ERISA or
the Code, if any, and the most recent determina-tion letter received from the
IRS with respect to each Domes-tic Benefit Plan in-tended to qualify under
section 401 of the Code. With respect to each Foreign Benefit Plan set forth
in Sec-tion 4.9(a)(ii) of the Ralston Disclosure Schedule, Ralston or a
Sub-sidiary of Ralston, has prior to the applicable Foreign Closing Date
deliv-ered to Du Pont true and complete copies of such For-eign Benefit Plan
and any amendments thereto (or if the For-eign Bene-fit Plan is not a written
Foreign Benefit Plan, a de-scription there-of), any related trust or other
fund-ing vehicle and the most recent reports or summaries required under local
law.
(c) No liability under Title IV or section 302 of ERISA has been
incurred by any U.S. Protein Subsidiary or any ERISA Affiliate that has not
been satisfied in full, and no condition exists that presents a material risk
to any U.S. Protein Subsidiary or any ERISA Affili-ate of incurring any such
liability, other than liability for premiums due the Pension Benefit Guaranty
Corporation ("PBGC") (which premiums have been paid when due). Insofar as the
----
represen-tation made in this Section 4.9(c) applies to sections 4064,
4069 or 4204 of Title IV of ERISA, it is made with respect to any employee
benefit plan, program, agreement or arrange-ment subject to Title IV of ERISA
to which any U.S. Protein Subsidiary or any ERISA Affiliate made, or was
required to make, contribu-tions during the five (5)-year period ending on the
last day of the most recent plan year ended prior to the Initial Completion
Date.
(d) The PBGC has not instituted proceedings to terminate any Title IV
Plan and to the knowledge of Ralston, no condition exists that presents a
material risk that such proceedings will be instituted.
(e) No Title IV Plan is a "multiemployer pension plan," as defined in
section 3(37) of ERISA, nor is any Title IV Plan a plan described in
section 4063(a) of ERISA. None of the U.S. Protein Subsidiaries or any ERISA
Affiliate has made or suffered a "complete with-drawal" or a "partial
withdrawal", as such terms are respectively defined in sections 4203 and 4205
of ERISA (or any liability resulting therefrom has been satisfied in full).
(f) To the knowledge of Ralston, none of the U.S. Protein
Subsidiaries, any Benefit Plan, any trust created thereunder, or any
administrator thereof has engaged in a transaction in connection with which
any U.S. Protein Sub-sidiary, any Domestic Benefit Plan, any such trust, or
administrator thereof, or any party deal-ing with any Domes-tic Benefit Plan
or any such trust could be subject to either a civil penalty assessed pursuant
to section 409 or 502(i) of ERISA or a Tax imposed pursuant to sec-tion
4975 or 4976 of the Code.
(g) Each Domestic Benefit Plan has been oper-ated and administered in
all material respect in accor-dance with its terms and applicable law,
including but not limited to ERISA and the Code. To the knowledge of Ralston,
each Foreign Benefit Plan has been operated and administered in all material
respects in accordance with its terms and applicable local law.
(h) Each Domestic Benefit Plan intended to be "qual-i-fied" within
the meaning of section 401(a) of the Code is so qualified and the trusts
maintained thereunder are exempt from taxation under section 501(a) of the
Code. Each Domestic Benefit Plan intended to satisfy the re-quirements of
section 501(c)(9) of the Code has satis-fied such require-ments.
(i) Except as set forth in Section 4.9(i) of the Ralston Disclosure
Schedule, no Domestic Benefit Plan pro-vides medical, surgical,
hospitalization, death or similar benefits (whether or not insured) for
employees or former employees of any U.S. Protein Subsidiary for periods
extend-ing beyond their retirement or other termi-nation of service, other
than (i) coverage mandated by applicable law, (ii) death benefits under any
"pension plan", or (iii) benefits the full cost of which is borne by the
current or former employee (or his beneficiary).
(j) Except as disclosed in Section 4.9(j) of the Ralston Disclosure
Schedule, the consummation of the trans-actions contemplated by this Agreement
will not (i) entitle any current employee of any Domestic Protein
Subsidiary, and to the knowledge of Ralston, entitle any current or former
employee or officer of any Foreign Protein Subsidiary, to severance pay,
unemployment com-pensation or any other pay-ment, except as expressly provided
in this Agreement, or (ii) accelerate the time of payment or vesting, or
increase the amount of compen-sation due any such current employee of any
Domestic Protein Subsidiary or, to the knowledge of Ralston, any current or
former employee or officer of any Foreign Protein Subsidiary.
(k) Except as disclosed in Section 4.9(k) of the Ralston Disclosure
Schedule, there are no pend-ing, or, to Ralston's knowledge, threatened or
anticipat-ed claims against any Domestic Benefit Plan, or, to the knowledge of
Ralston, pending or threatened against any Foreign Benefit Plan, by any
employee or former employee of any Protein Subsidiary covered under any such
Domestic or Foreign Bene-fit Plan, or otherwise involving any such Domestic or
For-eign Benefit Plan (other than routine claims for benefits).
(l) To the knowledge of Ralston, all Foreign Bene-fit Plans that are
subject to the laws of any juris-dic-tion outside the United States are in
material compli-ance with such applicable laws, including relevant Tax laws,
and the requirements of any trust deed under which they are established. To
the knowledge of Ralston, all re-quired contributions payable to such Foreign
Benefit Plans have been made, and all such Foreign Benefit Plans are in
materi-al compliance with any applicable funding require-ments.
(m)
<PAGE>
<PAGE>
ARTICLE VSection .10 No Default; Compliance with Appli-ca-ble Laws,
----------------------------------------------
etc. No Default; Compliance with Appli-ca-ble Laws, etc. No Default;
--- --------------------------------------------------- -----------
Compliance with Appli-ca-ble Laws, etc. No Default; Compliance with
------------------------------------------ ---------------------------
Appli-ca-ble Laws, etc.
------------------------
(a) Except as disclosed in Sec-tion 4.10(a) of the Ralston Disclosure
Schedule, none of the Protein Subsidiar-ies is in de-fault or viola-tion of
any term, condition or provi-sion of its respective Cer-tificate of
Incorpora-tion or By-laws or any Applica-ble Law, excluding de-faults or
viola-tions of Applicable Laws (other than orders, writs, in-junc-tions,
judg-ments, de-crees and set-tle-ments) which would not, indi-vidu-al-ly or in
the aggre-gate, have a Material Adverse Effect on the Business, taken as
a whole.
(b) Except as dis-closed in Sec-tion 4.10(b) of the Ralston
Disclosure Sched-ule, the Protein Subsidiaries hold, and are in compliance
with the terms of, all per-mits, li-cens-es, vari-anc-es, or-ders, ap-prov-als
and autho-rizations of all Gov-ern-mental Entities required for the
lawful conduct of the Business (the "Permits"), other than those Permits, the
-------
fail-ure to hold or comply with which would not, in the aggregate, have a
Material Adverse Effect on the Business, taken as a whole.
(c) Section 4.10(c) of the Ralston Disclosure Schedule sets forth a
complete and correct list, as of the date of this Agreement, of all of the
fol-low-ing types of Con-tracts:
(i) employment agreements be-tween Ralston, any Subsidiary of Ralston,
or any of the Pro-tein Sub-sid-iaries, on the one hand, and an em-ployee of
any of the Protein Subsidiaries, on the other hand; provided that the
-------- ----
foregoing shall be limited, except with re-spect to employees with the title
of "vice president" and above, to those employ-ment agree-ments that are
either (x) writ-ten or (y) known to Ralston;
(ii) Contracts involving an amount in excess of $100,000 and which
obligate any Pro-tein Sub-sid-iary to fur-nish sup-plies or servic-es to any
Govern-mental Entity;
(iii) Contracts between Ralston, any Subsid-iary of Ralston, or any of
the Protein Subsid-iar-ies, on the one hand, and any direc-tor or offi-cer of
any of the Protein Subsidiaries, on the other hand;
(iv) Contracts between any of the Protein Subsidiaries, on the one hand,
and Ralston, any Subsid-iary of Ralston or any of their respec-tive
affil-i-ates, on the other hand;
(v) Contracts of any of the Protein Subsid-iaries for the future
purchase of, or payment for, supplies, products or services that in-volve an
amount in excess of $100,000 or have a term of six (6) months or more;
(vi) Contracts of any of the Protein Subsid-iaries to sell or supply
prod-ucts or to per-form ser-vices that in-volve an amount in excess of
$100,000 or have a term of six (6) months or more;
(vii) partnership or joint venture agree-ments to which any of the
Protein Subsidiaries is a party;
(viii) Contracts limiting or re-strain-ing any of the Protein
Subsidiaries from engaging or com-pet-ing in any lines or busi-ness with any
Person;
(ix) Contracts other than sales of prod-ucts in the ordinary course of
business pro-viding for rights of indem-ni-fica-tion or excul-pa-tion by any
of the Protein Subsid-iar-ies in favor of any offi-cer, direc-tor, employ-ee
or financial advisor of any of the Protein Subsid-iaries or, to the extent
involving an amount in excess of $100,000 on an annual basis, any other
Per-son;
(x) loan agreements, notes, mortgag-es, inden-tures, security
agreements, letters of credit or other contracts for the borrowing or lending
of money by any of the Protein Subsidiaries; and
(xi) any Contract of any of the Protein Subsidiaries not entered into in
the ordi-nary course of business which require the payment or receipt of
$100,000 or more by or from any of the Protein Sub-sid-iaries, or which is
otherwise material to any of the Protein Subsid-iaries, and which, in any
case, is not other-wise dis-closed pursuant to the forego-ing clauses (i)
through (x).
(d) Each Contract required to be listed in the Ralston Disclosure
Schedule or which is otherwise materi-al to the Business, taken as a whole, is
in full force and ef-fect, has not been modi-fied or amend-ed and
consti-tutes the legal, valid and binding obliga-tion of the Protein
Subsid-iaries, in accor-dance with the terms of such Con-tract. No event or
condi-tion exists which will result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default by any of the
Protein Subsidiaries (or, to the knowledge of Ralston, a default by any other
party there-to) under any Con-tract, except those violations, breaches and
de-faults that would not, individu-ally or in the aggregate, have a Mate-rial
Ad-verse Effect on the Busi-ness, taken as a whole. Ralston, Stock-holder and
the Protein Sub-sidiaries have provid-ed true, com-plete and cor-rect copies
to Du Pont of all Con-tracts.
ARTICLE VSection .11 Intellectual Prop-erty Intellectual
---------------------- ------------
Prop-erty Intellectual Prop-erty Intellectual Prop-erty.
- ----------------------- -----------------------
(a) Except as set forth in Section 4.11(a) of the Ralston Disclosure
Schedule, each Pro-tein Sub-sid-iary owns (and has the valid and
en-force-able right to make, use, and, to the knowledge of Ralston, sell,
offer to sell and import) all Intel-lec-tu-al Prop-er-ty to the extent used in
or neces-sary for the con-duct of its re-spec-tive busi-ness-es, free and
clear of all Liens and, except for the Li-cense Agree-ments set forth in
Sec-tion 4.11(b) of the Ralst-on Dis-clo-sure Sched-ule, free and clear of all
li-cens-es to third par-ties. As used in this Agreement, the term
"In-tel-lectu-al Proper-ty" shall mean: (i) regis-tered and unreg-istered
----------------
trade-marks, ser-vice marks (includ-ing regis-trations, recordings and
applica-tions in the United States Patent and Trademark Office, any state of
the United States or any other Governmen-tal Entity worldwide), slo-gans,
trade names, logos and trade dress (col-lec-tive-ly, to-geth-er with the good
will symbol-ized thereby or associ-ated with each, "Trade-marks"); (ii) all
-----------
national (in-cluding, but not limited to, the United States) and
multina-tional statu-to-ry inven-tion registra-tions, patents, patent
registra-tions and patent appli-ca-tions (includ-ing, but not limited to, all
reis-sues, divi-sions, continua-tions, con-tinua-tions-in-part, exten-sions
and reexami-na-tions, and all rights therein pro-vided by law, multi-na-tional
treaties or con-ven-tions) (col-lec-tive-ly, "Pat-ents"); (iii) all national
--------
and multinational regis-tered and unreg-is-tered copy-rights, in-clud-ing, but
not limited to, copy-rights in software programs and databas-es
(col-lec-tively, "Copy-rights"); (iv) soft-ware programs docu-mentation and
-----------
manu-als used in connection therewith and data-bases (to-geth-er,
"Soft-ware"); (v) rights in names, like-ness-es, images and other attrib-utes
of individu-als; (vi) all (A) inventions, whether patentable or not
pat-ent-able, whether or not reduced to prac-tice, and not yet made the
subject of a pending patent appli-cation or appli-cations, (B) ideas and
concep-tions of poten-tially patentable subject mat-ter, in-clud-ing, without
limita-tion, any patent disclosures, whether or not reduced to prac-tice and
not yet made the sub-ject of a patent applica-tion, (C) trade secrets and
confiden-tial, tech-nical information (includ-ing ideas, formulas,
compo-sitions, inventions and con-cep-tions of inventions wheth-er patent-able
or not patentable and whether or not re-duced to practice), (D) technology
(in-clud-ing, with-out limita-tion, know-how and show-how), manufac-turing and
produc-tion pro-cesses and techniques, service and repair manu-als, research
and development information, draw-ings, specifi-ca-tions, de-signs, plans,
proposals, technical data and copy-rightable works, wheth-er secret or
confidential or not, (E) all rights to obtain and rights to apply for patents,
and to register trade-marks and copyrights and (F) all records (in-clud-ing,
but not limited to, research and testing notebooks) in any acces-sible format
(includ-ing, but not limit-ed to, paper records, photo-graphs, audio and
visual tape record-ings and computer storage media and other information
storage media) pertaining to patentable or potentially patent-able subject
matter (col-lec-tive-ly, "Tech-nolo-gy"); and (vii) agree-ments pursu-ant to
------------
which any Protein Sub-sidiary has ob-tained or grant-ed the right to use any
of the fore-go-ing (col-lec-tively, and together with other agree-ments to
which any Protein Sub-sidiary is a party relat-ing to the devel-op-ment,
acqui-si-tion, use, sale, offer for sale or importation of Intel-lec-tual
Prop-er-ty, "Li-cense Agree-ments").
---------------------
(b) Section 4.11(b) of the Ralston Disclo-sure Sched-ule sets forth, to
the knowledge of Ralston, a true, com-plete and accu-rate list of the
fol-low-ing Intellectual Property items owned by or under obli-gation of
assignment to any Pro-tein Subsid-iary: (i) all regis-tra-tions of and
appli-ca-tions to regis-ter Trade-marks; (ii) all unregis-tered Trade-marks
which are mate-ri-al to the Busi-ness; (iii) all Patents; (iv) all
regis-tra-tions of and appli-ca-tions to regis-ter any Copy-rights; (v) all
Soft-ware; and (vi) all Li-cense Agree-ments, other than off-the-shelf
Software licenses.
(c) Except as set forth in Section 4.11(c) of the Ralston Disclosure
Schedule, one or another Pro-tein Sub-sid-iary is the sole and exclu-sive
owner of the Intel-lec-tu-al Prop-er-ty items set forth in Section 4.11(b) of
the Ralston Dis-clo-sure Sched-ule as speci-fied in such sched-ule and each
owner listed in Section 4.11(b) of the Ralston Disclosure Schedule is listed
in the records of the appropri-ate Govern-mental Entity as the sole owner of
re-cord. Except as set forth in Section 4.11(c) of the Ralston Disclo-sure
Schedule, there is no Lien on the right of Ralston to trans-fer to a Surviving
Corpora-tion any of the Intellectual Prop-er-ty, as con-tem-plated by
this Agree-ment. Ex-cept as other-wise indi-cated in Sec-tion 4.11(b) of the
Ralston Disclo-sure Sched-ule, to the knowledge of Ralston, (i) all issued
patents set forth there-on are valid and en-forceable and (ii) no such
trade-mark regis-tra-tions, trade-mark appli-ca-tions or issued patents set
forth in Sec-tion 4.11(b) of the Ralston Disclo-sure Schedule are sub-ject to
any pend-ing oppo-si-tion, can-cel-la-tion, inter-fer-ence or simi-lar
ad-versarial pro-ceed-ing by or before any Gov-ern-men-tal Enti-ty and no such
proceed-ings are threat-ened.
(d) There are no royalties, honoraria, fees or other payments payable
by any Protein Subsidiary to any Person or Governmental Entity (excluding
prosecution fees and other governmental or attorneys' fees re-quired in the
normal course of obtaining patent, trademark or copy-right rights and
exclud-ing governmental maintenance fees) in con-nec-tion with the owner-ship,
licen-sure, use, sale, offer for sale or importa-tion under any
Intel-lec-tu-al Prop-er-ty, except as set forth in the Li-cens-e Agree-ments
listed in Sec-tion 4.11(b) of the Ralst-on Dis-closure Schedule and pursuant
to off-the-shelf Soft-ware licenses. The Li-cens-e Agree-ments set forth in
Section 4.11(b) of the Ralston Disclosure Sched-ule are valid and bind-ing
obli-ga-tions of the parties thereto, en-force-able in ac-cor-dance with their
terms, and there exists no event or condi-tion which will result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default by any Protein Subsidiary (or, to the knowl-edge of
Ralston, any other party there-to) under any Li-cense Agreement. Except as
set forth in Section 4.11(d) of the Ralston Disclosure Schedule, no consent is
required to be obtained in connection with the right of Ralston to transfer
any License Agreement, if necessary.
(e) Except as disclosed in Section 4.11(e) of the Ralston Disclosure
Schedule, (i) to the knowledge of Ralston, none of the use by any Pro-tein
Sub-sidiary of any Intel-lec-tual Prop-erty, the exer-cise of rights relating
to Pat-ents, Trade-marks and Copy-rights con-tained within the Intel-lectual
Property or the con-duct of the Busi-ness in-fring-es or other-wise vio-lates
any Intel-lec-tu-al Prop-er-ty rights (ei-ther di-rectly or indi-rectly, such
as through con-tribu-tory in-fringe-ment or induce-ment to in-fringe) of any
third party except for such in-fringements and viola-tions which would not in
the aggregate have a Material Adverse Effect on the Business, taken as a
whole, and (ii) no such claims have been asserted or, to the knowledge of
Ralston, threat-ened against any Pro-tein Sub-sid-iary which have not been
re-solved. Except as dis-closed in Sec-tion 4.11(e) of the Ralston
Dis-clo-sure Sched-ule, (i) to the knowledge- of Ralston, no third party is
in-fring-ing or other-wise vio-lat-ing any Intel-lec-tu-al Prop-erty rights of
any Pro-tein Subsidiary and (ii) no such claims are pend-ing or
threat-ened by any Protein Subsid-iary against any third party.
(f) Except as disclosed in Section 4.11(f) of the Ralston Disclosure
Schedule, there are no suits or any other pro-ceed-ings pend-ing or, to the
knowl-edge of Ralston, threat-ened before any Govern-mental Entity to which
any Protein Subsidiary is a party chal-leng-ing (i) any such Person's rights
to own or use any In-tel-lec-tual Prop-er-ty or (ii) the valid-ity or
en-force-abil-i-ty of any such Person's Intel-lec-tu-al Prop-erty. Other than
those listed in Sec-tion 4.11(f) of the Ralst-on Dis-closure Sched-ule,
there are no settle-ment agree-ments, con-sents, judg-ments, or-ders,
forebearances to sue or similar obli-ga-tions which re-strict any rights of
any Protein Subsid-iary to (i) make, use, sell, offer for sale, import or
li-cense under any Intel-lectu-al Prop-er-ty or (ii) conduct its busi-ness in
order to accom-modate a third party's Intel-lectu-al Proper-ty rights.
(g) Each Protein Subsidiary employs rea-son-able mea-sures to protect
the confi-dentiali-ty of its Tech-nolo-gy. Each Protein Subsidiary requires
employees with access to the Technology of such Protein Subsidiary to
exe-cut-e a non-dis-clo-sure agree-ment sub-stan-tially in accor-dance with
the form(s) previous-ly provid-ed by the Protein Subsidiaries to Du Pont.
Except as set forth in Section 4.11(g) of the Ralston Disclo-sure Schedule, to
the knowl-edge- of Ralston, none of the cur-rent or former em-ploy-ees,
offi-cers or direc-tors of any Protein Subsid-iary (i) is suspected to be in
viola-tion of any such agree-ment or (ii) is suspected of having dis-closed
any Tech-nolo-gy to any third party except sub-ject to an appro-priate
confi-den-tiality agree-ment or as required by a Govern-men-tal Enti-ty;
provided that the mere fact that an employee of a Protein Subsidiary becomes
--- ----
an em-ploy-ee of, or a con-sul-tant to, a competitor of the Business shall not
con-sti-tute "knowl-edge" that clause (i) or (ii) has occurred.
(h) Except as set forth in Section 4.11(h) of the Ralston Disclosure
Schedule, there is no Intel-lec-tu-al Prop-er-ty that is sub-ject to an
agree-ment or arrange-ment pursu-ant to which such Intel-lectu-al Prop-erty is
licensed to or used by Ralston or any of its Subsid-iaries (other than
any Pro-tein Subsid-iary).
(i) Except as set forth in Section 4.11(i) of the Ralston Disclosure
Schedule, the con-sum-ma-tion of the trans-ac-tion con-tem-plat-ed by this
Agree-ment will not result in the loss or im-pair-ment of any rights of any
Protein Subsid-iary to own, use or license any Intel-lectu-al Prop-erty.
(j) Except as set forth in Section 4.11(j) of the Ralston Disclosure
Schedule, since June 30, 1997, neither Ralston nor any Pro-tein Sub-sid-iary
has dis-posed of or per-mit-ted to lapse any rights to the use of any
Business-relat-ed Intel-lectu-al Proper-ty, or dis-posed of or dis-closed to
any Person other than repre-sen-ta-tives of Du Pont any Business-related trade
secret, formu-la, pro-cess or know-how not there-tofore a matter of
public knowl-edge other than in the ordi-nary course of busi-ness or pursu-ant
to secrecy agree-ment.
ARTICLE VSection .12 [Intentionally Omitted.] [Intentionally
Omitted.] [Intentionally Omitted.] [Intentionally Omitted.]
ARTICLE VSection .13 Insurance Insurance Insurance
--------- --------- ---------
Insurance. Each Protein Subsid-iary is insured in such amounts as are
---
custom-ary in the busi-nesses in which they are en-gaged by insurers of
-
recog-nized finan-cial re-sponsi-bili-ty and solven-cy, except in areas in
which such Pro-tein Sub-sid-iary is self-insured, against losses and risks.
True, com-plete and cor-rect copies of all poli-cies of insur-ance and
fidel-i-ty or surety bonds insur-ing any Protein Subsid-iary or their
respec-tive busi-ness-es, as-sets, employ-ees, offi-cers or direc-tors in
their capaci-ty as such (to-geth-er with all riders and amend-ments there-to
and if com-pleted, the applications for each of such policies or bonds) will
be provided to Du -Pont as requested. Such poli-cies, as are cur-rent, are in
full force and effect, and such Protein Subsidiary has com-plied in all
materi-al re-spects with the provi-sions of such poli-cies. Except as set
forth in Section 4.13(a) of the Ralston Dis-closure Sched-ule and as set forth
in Section 6.19 hereof, all such poli-cies will, after the Ini-tial
Com-ple-tion Date, cease to cover claims arising out of the opera-tion of the
Busi-ness, other than covered claims in-curred prior to the Ini-tial
Comple-tion Date. Except as set forth in Sec-tion 4.13(b) of the Ralston
Dis-closure Sched-ule, each Protein Subsidiary has complied with all mandatory
recom-men-da-tions for the pre-vention of loss made by all insur-ance
carri-ers. There are no claims by any Protein Subsidiary under any such
policy or in-stru-ment as to which any insur-ance company is deny-ing
liabil-ity or de-fend-ing under a reser-va-tion of rights clause, which, if
not cov-ered, would in the aggregate have a Material Adverse Effect on the
Business, taken as a whole. All neces-sary noti-fi-ca-tions of claims have
been made to insur-ance carriers other than those which will not have a
Materi-al Adverse Effect on the Busi-ness, taken as a whole. No policy
cover-ing Ralston or any of its Subsid-iaries (other than poli-cies limited in
cover-age to the Protein Sub-sid-iaries) requires Du Pont or any of it
Subsid-iar-ies (in-clud-ing the Surviv-ing Corpora-tions) to assume such
policy or pay any premi-ums there-under follow-ing the Domestic Closings or
the Foreign Closings here-under. Sec-tion 4.13(c) of the Ralst-on
Dis-clo-sure Sched-ule de-scribes all workers' compensa-tion self-insur-ance
arrange-ments af-fecting the Pro-tein Sub-sid-iaries and the aggre-gate amount
of all claims made under such ar-range-ments since Octo-ber 1, 1994. No
proceeding is pending or, to the knowledge of Ralston, threatened, to revoke,
cancel or limit such policies and no notice of cancellation of any of such
policies has been received by Stockholder or any Protein Subsidiary.
ARTICLE VSection .14 Related Party Transac-tions; Inter-com-pany
-------------------------------------------
Matters Related Party Transac-tions; Inter-com-pany Matters Related
--- --------------------------------------------------- -------
Party Transac-tions; Inter-com-pany Matters Related Party Transac-tions;
------------------------------------------- ----------------------------
Inter-com-pany Matters.
----------------------
(a) Except as disclosed in Section 4.14 of the Ralston Dis-clo-sure
Schedule, no direc-tor, offi-cer or part-ner of any Pro-tein Subsidiary (i)
has bor-rowed money from or has out-stand-ing any In-debted-ness or other
similar obliga-tions to any Protein Subsidiary, Ralston or any Subsidiary
there-of other than for travel ex-penses in the ordinary course of business
consistent with past practice and other than obli-ga-tions incurred in the
ordinary course of business, in the case of any single individual, in an
amount less than $5,000; (ii) to the knowl-edge of Ralston, owns any direct or
indi-rect inter-est of any kind in, or is a direc-tor, offi-cer,
employ-ee, party, affiliate or associ-ate of, or con-sultant or lender to, or
borrower from, or has the right to partici-pate in the man-age-ment,
opera-tions or profits of, any Person which is (x) a com-pet-i-tor, sup-plier,
cus-tom-er, dis-trib-u-tor, les-sor, tenant, creditor or debtor of any Protein
Sub-sid-iary, (y) engaged in a busi-ness relat-ed to the business of any
Protein Subsidiary or (z) partic-i-pating in any transac-tion to which any
Protein Subsidiary is a party or (iii) is other-wise a party to any binding
agree-ment with any Protein Subsid-iary.
(b) Except as set forth in Section 4.14(b) of the Ralston Disclosure
Schedule or as contemplated in Section 3.1 or 6.14 hereof or otherwise herein,
there are no pay-ments other than in the ordi-nary course of busi-ness
consis-tent with past prac-tice, (in-clud-ing divi-dends, dis-tri-bu-tions,
loans, ser-vice or trade pay-ments, sala-ry, bonuses, payments under any
manage-ment, con-sulting, moni-toring or financial advisory agreements,
advances or other-wise) to be made to or received from any Protein Subsidiary,
on the one hand, and Ralston or Stockhold-er or any of their respective
affiliates, on the other.
ARTICLE VSection .15 Products Liability Products Liability
------------------ ------------------
Products Liability Products Liability. Except as set forth in Section
----------------- ------------------
4.15 of the Ralston Dis-closure Schedule, (a) there is no Proceeding by or
-
before any Governmental Entity, pending or, to the knowledge of Ralston,
-
threatened against or involving any Protein Subsidiary concern-ing any product
-
relat-ing to the busi-ness of any Protein Subsidiary which is alleged to
have been manufactured, shipped, sold, marketed, distrib-uted, processed or
mer-chandised by any Protein Sub-sidiary (collectively, "Products") and
--------
alleged to have a defect or impu-ri-ty of any kind, in manufac-ture,
process-ing, design or other-wise, includ-ing with-out limi-tation any
fail-ure to warn of the defect or impu-rity, nor to the knowledge of Ralston
is there any valid basis for any such Proceeding specifi-cal-ly relating to
the busi-ness of any Pro-tein Subsid-iary that, in the case of a Pro-ceeding
before a Govern-mental Entity, if adversely deter-mined would have a Mate-rial
Ad-verse Effect on the Business, taken as a whole; (b) since Sep-tem-ber 30,
1994, there has not been any prod-uct recall or post-sale warn-ing by any
Pro-tein Subsid-iary con-cerning any product relating to the busi-ness of any
Protein Subsid-iary that was manufac-tured, shipped, sold, mar-keted,
distrib-uted, processed or mer-chan-dised by any Pro-tein Sub-sid-iary; and
(c) none of the Products manu-factured, shipped, sold, marketed, distributed,
processed or merchandised by any Protein Subsidiary at or prior to the Initial
Completion Date are or were Defective Products. As used herein, "De-fec-tive
-----------
Products" shall mean Products which have impurities and Products which satisfy
- --------
any of the following (i), (ii) or (iii): (i) are defec-tive be-cause of a
fail-ure to comply with inter-nal or governmentally required proce-dures and
condi-tions; (ii) cause personal injury, harm to health or death when used in
accordance with dis-closed instructions of any Pro-tein Sub-sidiary as to the
use of such Product; (provided that there shall be excluded from clause (ii)
-------- ----
Products which have such effects because one or more of the ingredients or the
pro-cess used in their manu-fac-ture, wheth-er consid-ered separate-ly or
together, are inher-ently unknow-ingly unsafe and such fact was not known to
Ralston or generally in the indus-try at or prior to the Initial Comple-tion
Date; provid-ed further that (1) a pro-cess shall not be deemed "inherent-ly
--------- ------- ----
unknow-ingly unsafe" (and accordingly not subject to the preceding proviso) if
as of the Initial Completion Date, (A) it was not generally used in the
indus-try, (B) there was a reason-able basis to con-clude that it was unsafe
or (C) if Ralston knew that it was unsafe, and (2) the fact that Prod-ucts or
ingredients which are permitted to be used in cer-tain juris-dictions but not
others does not con-stitute an admission that such Products or ingredients
were known to Ralston to be "inherently un-knowingly unsafe") or (iii) cause
personal injury, harm to health, death or other damage to the extent, but only
to the extent, in the case of this clause (iii), Ralston is enti-tled to
insur-ance cover-age with re-spect thereto, includ-ing by reason of the
indem-nifi-cation provi-sions of this Agree-ment.
ARTICLE VSection .16 Title; Real Properties Title; Real
---------------------- -----------
Properties Title; Real Properties Title; Real Properties.
- ------------------------ -----------------------
(a) Except as set forth in Section 4.16(a) of the Ralston Disclosure
Schedule, the Pro-tein Sub-sid-iar-ies have mar-ket-able fee simple title to,
or a valid lease-hold inter-est enti-tling them to the sole and unen-cumbered
right to posses-sion and use of, all of their re-spec-tive Real Prop-er-ties
(as de-fined in Section 4.16(c) here-of) and mar-ket-able title to all of
their respec-tive non-real property (tangi-ble and intan-gi-ble), free and
clear of all Liens of any kind or char-acter, except: (i) those Liens set
forth in Sec-tion 4.16(a) of the Ralst-on Dis-clo-sure Sched-ule, (ii) Liens
for cur-rent Taxes not yet due and pay-able as set forth in Sec-tion 4.12(a)
of the Ralst-on Disclo-sure Sched-ule; and (iii) Liens (in-clud-ing
mechanics', carriers', workers' and other simi-lar Liens aris-ing or in-curred
in the ordi-nary course of business consistent with past practice) and
imper-fec-tions of title, includ-ing re-stric-tive cove-nants or ease-ments,
which do not, in the aggre-gate, mate-rially detract from the value of, or
interfere with the present use of, the properties sub-ject there-to or
affect-ed there-by, or other-wise materi-ally impair the opera-tions of the
entity which owns or leases such prop-erty.
(b) Except for sales operations in the countries of Canada, Japan, the
Philippines, Thailand, Malaysia and Singa-pore, which are currently conducted
by employees who are technically employed by other Ralston Subsidiaries, the
Pro-tein Sub-sid-iar-ies set forth in Sec-tion 4.1(e) of the Ralston
Dis-clo-sure Schedule are the only Subsid-iaries of Ralston engaged in any
aspect of the Business. The assets (i) that will be owned by the Pro-tein
Subsidiaries at the Domestic Closings and the For-eign Closings, and (ii)
except as set forth in Section 4.16(b) of the Ralston Disclo-sure Sched-ule,
and except for the assets of the Trans-ferred Subsidiaries and the As-sets,
that are owned as of the date of this Agree-ment, con-sti-tute all of the
assets the prima-ry use of which is in the Business as conducted by the
Protein Sub-sidiar-ies, and except as set forth in Section 4.16(b) of the
Ralston Disclo-sure Sched-ule, there are no other assets neces-sary for the
Business to contin-ue to be con-ducted sub-stan-tially iden-tically as
hereto-fore con-duct-ed by any Pro-tein Subsid-iary (other than, as of the
date of this Agree-ment, the Trans-ferred Subsidiar-ies and As-sets).
(c) Section 4.16(c)(i) of the Ralston Disclo-sure Schedule sets
forth a true and com-plete list of all real prop-erty (i) in which any Protein
Subsidiary holds legal or equi-table title or (ii) leased by any Protein
Subsidiary (to-geth-er, the "Real Prop-er-ties"). To the knowledge of
------------------
Ralston, except as set forth in Sec-tion 4.16(c)(ii) of the Ralston
Disclo-sure Sched-ule, none of the Protein Subsidiar-ies has any future right
to acquire or lease, pursuant to any out-standing con-tract, option to
pur-chase or lease, any real proper-ty. Except as set forth on Sec-tion
4.16(c)(iii) of the Ralst-on Disclosure Sched-ule, there are no leas-es,
ground leas-es, li-cens-es or other occupan-cy agree-ments af-fecting any of
the Real Prop-er-ties or to which any Protein Subsidiary is a party or bound
with re-spect to the Real Prop-er-ties (other than such of the foregoing in
respect of any sales office or warehouse as would not in the aggregate have a
Mate-ri-al Ad-verse Effect on the Business, taken as a whole). Except as set
forth in Sec-tion 4.16(c)(iv) of the Ralst-on Disclosure Sched-ule, there are
no leas-es, ground leas-es, li-cens-es or other occu-pan-cy agree-ments to
which Ralston is a party or bound with re-spect to real property that is
neces-sary for the Business to contin-ue to be con-ducted substan-tial-ly
identically as here-to-fore con-ducted. Each such lease re-ferred to in this
subsection (c) is a valid and bind-ing obli-ga-tion of the parties there-to,
en-force-able in ac-cor-dance with its terms, and none of Ralston, any
Subsid-iary of Ralston, or any Protein Subsid-iary has re-ceived or given
notice of a default under any lease to which any Real Prop-erty is sub-ject,
and no event or condi-tion exists which is reasonably likely to result in a
viola-tion or breach of, or con-stitute (with or without due notice or lapse
of time or both) a de-fault by any Protein Subsid-iary (or, to the knowl-edge
of Ralston, any other party there-to) under any such lease, except for such
breaches, violations and de-faults which would not in the aggregate have a
Materi-al Adverse Effect on the Business, taken as a whole. True and
com-plete copies of all such leas-es, in-clud-ing all modi-fi-ca-tions and
amendments there-to, have been previ-ously supplied to Du Pont. There are (i)
to the knowledge of Ralston, no plans by any Gov-ern-men-tal Entity which are
reason-ably likely to result in the impo-sition of any gener-al or special
as-sess-ment relat-ing to any of the Real Proper-ties; (ii) no
non-con-form-ing uses, vari-anc-es, spe-cial excep-tions, condi-tions, permits
or agree-ments per-tain-ing to any of the Real Proper-ties imposed on or
granted by or entered into by any Protein Sub-sidiary, which are en-force-able
by any Govern-men-tal Enti-ty; and (iii) no written notices from any
Gov-ern-men-tal Entity which have been re-ceived by any Protein Sub-sid-iary
alleg-ing a violation of any applica-ble building, land use, zoning, fire,
health or safety laws, codes, ordi-nances or rules, or re-quir-ing or call-ing
atten-tion to the need for any work, re-pair, con-struc-tion, alter-ation or
instal-la-tion on, or in con-nection with, any of the Real Prop-er-ties,
except in the case of clauses (ii) and (iii) hereof for such nonconforming
uses, variances, special exceptions, condi-tions, permits and agreements and
fail-ures to per-form such work, re-pair, con-struc-tion, alter-ation or
instal-la-tion which would not, indi-vidu-ally or in the aggre-gate, result in
a Mate-ri-al Ad-verse Ef-fect on the Busi-ness, taken as a whole. There is no
pending or, to the knowl-edge of Ralston, threat-ened change in the zoning
clas-si-fi-ca-tion of any parcel of the Real Property and no con-dem-na-tion
or emi-nent domain pro-ceed-ing against any Real Prop-erty is pending or, to
the knowledge- of Ralston, threat-ened, except for such of the foregoing as
would not in the aggregate have a Material Ad-verse Effect on the Business,
taken as a whole. Except as set forth in Sec-tion 4.16(c)(ii) of the Ralston
Disclosure Sched-ule all of such Pro-tein Sub-sid-iary prop-er-ties and assets
con-sist-ing of real estate, build-ings, and equip-ment (whether owned or
leased) cur-rently used in the normal opera-tions of the busi-ness of such
Protein Subsid-iary have been main-tained in good oper-at-ing condi-tion by
such Protein Subsid-iary in a manner consis-tent with the normal main-te-nance
proce-dures of such Protein Subsid-iary and of the indus-try and are free from
material de-fects and comply with all appli-ca-ble laws, build-ing, land use,
fire, health and safety codes, ordi-nances and zoning rules and zoning
ordi-nanc-es, except for such failures to be in compli-ance that would not,
individually or in the aggre-gate, have a Material Adverse Effect on the
Busi-ness, taken as a whole. The Pro-tein Sub-sid-iar-ies have rights of
access to public roads adja-cent to the Real Proper-ties. There are no
unre-corded ease-ments relat-ing to the Real Prop-er-ties and no Person or
Governmental Entity is encroach-ing upon any of the Real Proper-ties, except
for such exceptions to the foregoing as would not in the aggre-gate have a
Material Adverse Effect on the Business taken as a whole. Except as set forth
in Section 4.16(c)(v) of the Ralston Disclosure Schedule, (i) to the knowledge
of Ralston, no Person or Gov-ern-men-tal Entity has notified any of the
Pro-tein Subsid-iar-ies of a claim that any activities of the Business are
en-croach-ing upon the prop-er-ties, ease-ments or rights of way of oth-ers,
(ii) no activi-ties of the Protein Subsidiaries are encroach-ing on any Person
or Gov-ernmental Entity, except for such as would not have (and if such
activity ceased there would not be) in the aggregate a Material Adverse Effect
on the Busi-ness, taken as a whole and (iii) there are no third par-ties in
pos-ses-sion having or, to the knowl-edge of Ralston, claim-ing rights to
pos-ses-sion of any of the Real Proper-ties. Ralston has ordered sur-veys and
title poli-cies relat-ing to each of the manufac-turing facili-ties located in
the United States and appropri-ate evidence of ownership of the manufac-turing
facility in Belgium.
ARTICLE VSection .17 Environmental Matters Environmental Matters
--------------------- ---------------------
Environmental Matters Environmental Matters.
---------------------- ----------------------
(a) For purposes of this Agree-ment, "Environ-mental Claim" means any
--------------------
written notice by any Person or Governmen-tal Entity alleg-ing poten-tial
liabil-i-ty (in-clud-ing, with-out limita-tion, poten-tial liability for
inves-tiga-tory costs, clean-up costs, govern-mental response costs, natu-ral
resourc-es damages, proper-ty damages, personal inju-ries, or penal-ties)
arising out of, based on or result-ing from (a) the presence, or release into
the environment, of any Mate-ri-al of Environ-mental Concern (as defined
below) at any loca-tion, wheth-er or not owned by any Protein Subsid-iary or
(b) cir-cum-stances forming the basis of any viola-tion, or alleged violation,
of any Environmental Law (as defined below).
For purposes of this Agreement, "Environmental Laws" means all
------------------
feder-al, state, local and foreign laws and regula-tions relat-ing to
pollu-tion or protection of human safety and health within or without the
workplace or the envi-ron-ment (in-clud-ing, with-out limitation, ambi-ent
air, surface water, ground water, land surface or subsur-face strata),
includ-ing, without limitation, laws and regula-tions relating to emis-sions,
discharges, re-leases or threatened releases of Materi-als of Environmen-tal
Con-cern (as defined below), or other-wise relat-ing to the manufacture,
pro-cess-ing, distribu-tion, use, treat-ment, stor-age, dis-posal, trans-port
or handling of Materi-als of Environ-men-tal Concern.
For purposes of this Agreement, "Materials of Envi-ron-men-tal
-----------------------------
Con-cern" means chemicals, pollutants, contami-nants, wastes, toxic
- --------
sub-stances, petroleum and petroleum prod-ucts.
- --------
(b) Except as set forth in Section 4.17(b)(i) of the Ralston
Dis-closure Sched-ule, each Protein Subsidiary is in com-pli-ance with all
applica-ble Environ-mental Laws except such failures to be in compliance which
would not, indi-vidually or in the aggre-gate, have a Material Adverse
Effect on the Busi-ness, taken as a whole. Except as set forth in Section
4.17(b)(ii) of the Ralst-on Dis-closure Sched-ule, none of Ralston, any of the
Subsidiar-ies of Ralston or the Prote-in Sub-sid-iaries has re-ceived any
written commu-nica-tion, whether from a Govern-mental Entity, citizens' group,
employ-ee or other-wise, that alleges that any Protein Subsid-iary is not in
material com-pli-ance, and, to the knowledge- of Ralston, there are no
cir-cum-stanc-es that may prevent or inter-fere with material compliance in
the future. All per-mits and other govern-mental autho-riza-tions cur-rently
held by any Protein Subsid-iary pursu-ant to the Envi-ron-mental Laws are
iden-ti-fied in Section 4.17(b)(iii) of the Ralst-on Dis-clo-sure Sched-ule.
(c) Except as set forth in Section 4.17(c) of the Ralston Disclo-sure
Schedule, there is no Environmen-tal Claim pending or, to the knowledge of
Ralston, threatened against any Pro-tein Sub-sid-iary or against any Person or
Govern-mental Entity whose liabili-ty for any Envi-ronmen-tal Claim any
Protein Subsidiary has or may have re-tained or as-sumed either
con-trac-tu-al-ly or by operation of law.
(d) Except as set forth in Section 4.17(d) of the Ralston Disclo-sure
Schedule, to the knowledge of Ralston, there are no past or pres-ent ac-tions,
activi-ties, circum-stances, condi-tions, events or inci-dents,
including, without limita-tion, the release, emis-sion, discharge or disposal
of any Material of Envi-ron-mental Con-cern which have occurred within the
last three (3) years, that could form the basis of any Envi-ron-mental Claim
against any Pro-tein Subsid-iary or against any Person or Govern-mental Entity
whose liability for any Envi-ron-men-tal Claim any Protein Subsid-iary has or
may have re-tained or assumed either con-trac-tually or by operation of law
except for such actions, activities, cir-cumstances, events or inci-dents
which would not, individ-ually or in the aggre-gate, have a Material Adverse
Effect on the Business, taken as a whole.
(e) Without in any way limiting the generality of the forego-ing, to
Ralston's knowledge, (i) all on-site loca-tions where any Protein Subsidiary
has within the last three (3) years stored, dis-posed or ar-ranged for the
dis-posal of Mate-ri-als of Envi-ronmen-tal Concern are iden-tified in Section
4.17(e)(i) of the Ralston Disclo-sure Schedule, (ii) all under-ground
stor-age tanks, and the capacity and contents of such tanks, located on
property owned or leased by any Protein Sub-sid-iary are iden-ti-fied in
Section 4.17(e)(ii) of the Ralston Dis-clo-sure Sched-ule, (iii) except as set
forth in Section 4.17(e)(iii) of the Ralston Dis-clo-sure Sched-ule, there is
no asbestos con-tained in or forming part of any building struc-ture or office
space owned or leased by any Protein Subsid-iary, and (iv) except as set forth
in Section 4.17(e)(iv) of the Ralston Disclo-sure Schedule, no polychlorinated
biphenyls (PCB's) are used or stored at any proper-ty owned or leased by any
Protein Subsid-iary.
ARTICLE VSection .18 Indebtedness Indebtedness Indebtedness
------------ ------------ ------------
Indebtedness. Section 4.18(a) of the Ralston Disclosure Schedule sets
------------
forth as of the date of this Agreement and, such section of the Ralston
Disclosure Schedule as updated immediately prior to the Domestic Closings,
sets forth as of the Ini-tial Com-ple-tion Date, the In-debt-ed-ness of Fiber
Sales and PTI. Except as described in Section 3.1 hereof or as set forth in
Section 4.18(a) of the Ralston Disclosure Schedule, no other Pro-tein
Sub-sid-iary has any out-stand-ing In-debt-ed-ness. Except as set forth in
Sec-tion 4.18(b) of the Ralston Disclo-sure Sched-ule or as de-scribed in
Section 3.1 hereof, since July 31, 1997, none of the Prote-in Sub-sid-iaries
has in-curred any In-debt-ed-ness, issued any debt secu-ri-ties, expand-ed any
exist-ing credit facili-ties or, except for amounts in the aggregate not
exceeding $200,000, as-sumed, guar-an-teed or en-dorsed the obli-ga-tions of
any other Person. Except as set forth in Sec-tion 4.18(c) of the Ralston
Dis-closure Sched-ule, all In-debted-ness of any Protein Subsid-iary can be
repaid at any time without prepay-ment penal-ty, premium or ex-pense other
than normal breakage costs relat-ing to LIBOR, CD or Euro-dollar loans.
Schedule 4.18(d) of the Ralston Disclo-sure Schedule sets forth all of the
capitalized leases of the Protein Sub-sid-iaries.
ARTICLE VSection .19 Labor and Employment Matters; Col-lec-tive
------------------------------------------
Bar-gain-ing Agreements Labor and Employment Matters; Col-lec-tive
------------------- --------------------------------------------
Bar-gain-ing Agreements Labor and Employment Matters; Col-lec-tive
------------------- --------------------------------------------
Bar-gain-ing Agreements Labor and Employment Matters; Col-lec-tive
------------------- --------------------------------------------
Bar-gain-ing Agreements. Except as set forth in Section 4.19(a) of the
-------------------
Ralston Disclosure Schedule, none of the Prote-in Subsidiaries is a party to,
-
or bound by, any collec-tive bar-gaining agree-ment, contract or other
agree-ment or under-standing with a labor union or labor organi-zation or
other repre-sentative of employees. Except as set forth in Sec-tion 4.19(b)
of the Ralst-on Dis-closure Schedule, there is no unfair labor practice charge
and no charge, claim or complaint or other pro-ceed-ing pend-ing which
Ralston or any Protein Subsid-iary has been served with or otherwise has
knowledge of or, to the knowl-edge of Ralston, threat-ened against any Protein
Subsid-iary before the Nation-al Labor Rela-tions Board, the U.S. Equal
Employment Opportu-nity Commis-sion, the U.S. Department of Labor or any other
state or federal Gov-ern-mental Enti-ty re-sponsible for investigating and/or
adjudicat-ing employment discrim-ination or wage and hour claims. There is no
labor strike, slow-down or stop-page pend-ing or, to the knowledge of Ralston,
threat-ened against or affecting any Protein Subsid-iary, nor has there been
any such activity within the past three years. Except as set forth in Section
4.19(c) of the Ralston Disclosure Sched-ule, there are cur-rent-ly no on-going
col-lec-tive bar-gain-ing nego-tia-tions relat-ing to the em-ployees of any
Protein Subsid-iary.
ARTICLE VSection .20 Acquisition for Investment Acquisition for
-------------------------- ---------------
Investment Acquisition for Investment Acquisition for Investment.
--------- -------------------------- --------------------------
Each of Ralston and Stockholder acknowledge that the Du Pont Shares have not
--
been registered under the Secu-rities Act, or under any state securities laws.
Stock-holder is acquir-ing the Du Pont Shares solely for its own ac-count
and not with a view to any distribution or other disposi-tion of such Du Pont
Shares or any part thereof, or inter-est therein, except in accordance with
the Securi-ties Act. Each of Ralston and Stockholder is an "accred-ited
inves-tor" (as defined in Rule 501 of Regulation D under the Securities Act).
ARTICLE VSection .21 PTIFS Liquidation PTIFS Liquidation
----------------- -----------------
PTIFS Liquidation PTIFS Liquidation. Ralston has, or has caused to be,
-------------- -----------------
taken the actions set forth in Section 4.21 of the Ralston Disclosure
Schedule.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF DU PONT
AND THE DU PONT MERGER SUBSIDIARIES
Du Pont and the Du Pont Merger Subsidiaries, jointly and
severally, repre-sent and war-rant to Stock-holder and Ralston as follows:
ARTICLE VISection .10 Organization Organization Organization
------------ ------------ ------------
Organization. Each of Du Pont and the Du Pont Merger Subsidiaries is a
------------
corpo-ra-tion duly orga-nized, validly existing and in good standing under the
laws of the State of Delaware and has all requi-site corporate or other power
and au-thority and all necessary governmen-tal approvals to own, lease and
oper-ate its properties and to carry on its business in all material respects
as now being conducted.
ARTICLE VISection .11 Capitalization Capitalization
-------------- --------------
Capitalization Capitalization. The autho-rized capital stock of Du Pont
----- --------------
consists of (i) 1,800,000,000 shares of Du Pont Common Stock, par value $0.30
per share, of which, as of June 30, 1997, 1,155,282,028 shares of Du Pont
Common Stock were issued and out-stand-ing (in-clud-ing shares held by the Du
Pont Flexitrust) and no shares of Du Pont Common Stock were issued and held in
the trea-sury of Du Pont; and (ii) 23,000,000 Du Pont Pre-ferred Shares,
of which as of June 30, 1997, 1,672,594 shares of the $4.50 series were issued
and out-stand-ing and 700,000 shares of the $3.50 series were issued and
outstanding. All the issued and out-stand-ing shares of Du Pont's capi-tal
stock are, and all Du Pont Shares to be issued pursu-ant to this Agree-ment
will be, when issued in accor-dance with the terms hereof, duly autho-rized,
valid-ly is-sued, fully paid and nonas-sessable and not issued in violation of
statu-tory or contrac-tual preemp-tive or similar rights.
ARTICLE VISection .12 Authorization Authorization
------------- -------------
Authorization Authorization. Each of Du Pont and the Du Pont Merger
-- -------------
Subsidiaries has the requisite corpo-rate power and authority to exe-cute and
deliv-er this Agreement to per-form its respective obligations hereun-der.
The execu-tion and deliv-ery of this Agree-ment and the perfor-mance of its
respective obliga-tions hereun-der have been duly and valid-ly autho-rized by
the Board of Direc-tors of each of Du Pont and the Du Pont Merger
Subsidiaries; each of the Boards of Direc-tors of the Du Pont Merger
Subsidiaries has recom-mended to Du Pont that it adopt this Agreement in
accor-dance with the DGCL; and concur-rently with the execution here-of, Du
Pont is adopt-ing this Agreement as the sole stock-holder of each of the Du
Pont Merger Subsidiaries in accor-dance with the DGCL. No other pro-ceed-ings
on the part of either Du Pont or the Du Pont Merger Subsidiaries are
neces-sary to autho-rize the execu-tion, deliv-ery and per-formance of this
Agree-ment and the con-summa-tion of the trans-ac-tions con-tem-plated hereby.
This Agree-ment has been duly exe-cuted and deliv-ered by Du Pont and the Du
Pont Merger Subsidiaries, as the case may be, and consti-tutes, assum-ing due
and valid authori-za-tion, execu-tion and delivery of this Agreement by
Ralston, Stockhold-er and the Protein Subsidiaries, a valid and bind-ing
obli-ga-tion of each of Du Pont and the Du Pont Merger Subsidiaries
en-force-able against such Persons in accor-dance with its terms.
ARTICLE VISection .13 Consents and Approvals; No Viola-tions
--------------------------------------
Consents and Approvals; No Viola-tions Consents and Approvals; No
-------------------------------------- --------------------------
Viola-tions Consents and Approvals; No Viola-tions. Except (a) as
------- -----------------------------------------
disclosed in Section 5.4 of the dis-clo-sure schedule of Du Pont delivered
---
concurrently -with the execution and delivery by Du Pont and the Du Pont
Merger Subsidiaries of this Agree-ment, (b) for the requisite fil-ings under
the DGCL, (c) for the requisite filings and wait-ing periods under the HSR Act
and (d) in the case of the Regis-tra-tion Rights Agree-ment, for the
fil-ings, per-mits, autho-ri-za-tions, con-sents and ap-prov-als as may be
required under, and other appli-cable re-quire-ments of, the Securities Act
and state secu-ri-ties or blue sky laws, nei-ther the execu-tion and deliv-ery
nor the per-for-mance by either Du Pont or the Du Pont Merger Subsid-iaries of
their respective obliga-tions hereun-der nor com-pli-ance by Du Pont or the Du
Pont Merger Subsidiaries with any of the provi-sions hereof will (i) con-flict
with or result in any breach of any provi-sion of the certifi-cate of
incorpora-tion or by-laws of either Du Pont or the Du Pont Merger
Subsidiaries, (ii) re-quire any filing with, or per-mit, authori-za-tion,
con-sent or approv-al of, any Gov-ern-mental Enti-ty (other than such of the
foregoing as are required because of the legal or regulato-ry status of
Ralston or any Subsidiary thereof, including any Protein Subsidiary, or any
facts pertaining to such Per-sons), (iii) result in a viola-tion or breach of,
or con-sti-tute (with or without due notice or lapse of time or both) a
de-fault (or give rise to any right of termi-na-tion, can-cella-tion or
accel-era-tion) under, any of the terms, conditions or provi-sions of any
note, bond, mort-gage, inden-ture, lease, li-cense, con-tract, agree-ment,
com-mit-ment, understanding or other in-strument or obliga-tion to which Du
Pont or any of its Subsid-iaries is a party or by which any of them or any of
their re-spective prop-er-ties, assets or rights may be bound or (iv) vio-late
any order, writ, injunc-tion, judg-ment, de-cree, settle-ment, law,
ordi-nance, stat-ute, rule, regu-la-tion or other gov-ern-men-tal approval or
autho-riza-tion (feder-al, state, local or foreign) appli-ca-ble to Du -Pont,
any of its Sub-sid-iar-ies or any of their re-spec-tive prop-er-ties, assets
or rights, ex-cluding from the fore-go-ing claus-es (ii), (iii) and, insofar
as laws, statutes, rules and regula-tions are concerned, (iv) such
viola-tions, breach-es or de-faults which would not, indi-vidually or in the
aggre-gate, have a Material Adverse Effect on Du Pont and its Subsid-iaries
taken as a whole.
ARTICLE VISection .14 SEC Reports and Financial State-ments SEC
------------------------------------- ---
Reports and Financial State-ments SEC Reports and Financial State-ments
----------------------------------- -------------------------------------
SEC Reports and Financial State-ments. As of their re-spec-tive dates
----------------------------------------
or, if amend-ed, as of the date of the last such amend-ment, none of the
forms, re-ports, sched-ules, state-ments and other documents required to be
filed by Du Pont since December 31, 1995 under the Ex-change Act (ex-cluding,
however, any finan-cial state-ments or sched-ules in-clud-ed therein) did not
contain any untrue state-ment of a material fact or omit to state a material
fact required to be stated therein or neces-sary in order to make the
state-ments therein, in light of the circum-stanc-es under which they were
made, not mis-leading. The finan-cial state-ments of Du Pont in-clud-ed in
the Du Pont SEC Docu-ments have been pre-pared from, and are in accor-dance
with, the books and records of Du Pont and its Subsid-iaries, comply in all
mate-rial re-spects with appli-ca-ble ac-count-ing require-ments and with the
published rules and regula-tions of the SEC with respect thereto, have been
prepared in accor-dance with GAAP ap-plied on a consistent basis during the
peri-ods involved (except as may be indicat-ed in the notes there-to) and
fairly pres-ent the con-sol-i-dat-ed finan-cial posi-tion, re-sults of
opera-tions, cash flows and changes in finan-cial position of Du Pont and its
Sub-sid-iaries as of the re-spec-tive dates and for the respec-tive peri-ods
set forth therein.
ARTICLE VISection .15 No Prior Activities No Prior Activities
------------------- -------------------
No Prior Activities No Prior Activities. None of the Du Pont Merger
-------------------- -------------------
Subsidiaries has incurred any liabili-ties or obligations or engaged in any
transactions, except those incurred in connection with its organization or
with the negotiation and consum-mation of this Agree-ment and the
trans-actions contem-plated hereby.
ARTICLE VISection .16 Compliance with Securities Laws; Absence of
-------------------------------------------
Changes Compliance with Securities Laws; Absence of Changes Compliance
---- --------------------------------------------------- ----------
with Securities Laws; Absence of Changes Compliance with Securities
------------------------------------------ --------------------------
Laws; Absence of Changes. Since Decem-ber 31, 1996, Du Pont has filed, and
--------------------------
until the Initial Comple-tion Date will continue to file, all materi-al
-
reports required by the Exchange Act to be filed by it and such re-ports
-
com-plied in all material respects with the appli-cable disclosure
-
re-quirements of the securities laws. Since December 31, 1996, to Du Pont's
-
knowledge, there have not occurred any events or changes (including the
occur-rence of any liabilities of any nature) whether or not ac-crued or
contingent, which could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Du Pont and its Subsidiaries, taken as
a whole.
ARTICLE VISection .17 Acquisition for Investment Acquisition for
-------------------------- ---------------
Investment Acquisition for Investment Acquisition for Investment.
- ---------- -------------------------- --------------------------
Each of Du Pont and the Du Pont Merger Subsidiaries acknowledge that the
- ---
Shares have not been registered under the Securi-ties Act, or under any state
- ---
securities laws. Du Pont is acquiring the Shares solely for its own account
and not with a view to any distribution or other disposition of such Shares or
any part thereof, or inter-est therein, except in accordance with the
Securities Act.
ARTICLE VII COVENANTS COVENANTS COVENANTS
COVENANTS
ARTICLE VIISection .10 Interim Operations of the Pro-tein
----------------------------------
Subsidiaries Interim Operations of the Pro-tein Subsidiaries Interim
- ----------------------------------------------- -------
Operations of the Pro-tein Subsidiaries Interim Operations of the Pro-tein
-------------------------------------- ----------------------------------
Subsidiaries. Each of Ralston, Stockhold-er and the U.S. Protein
------------
Subsidiaries cove-nant and agree that, except (i) as ex-press-ly contemplated
--
by this Agree-ment or as described in Sections 3.1 through 3.6 or 6.14 of this
Agreement, (ii) as set forth in Sec-tion 6.1 of the Ralst-on Dis-clo-sure
Sched-ule or (iii) as con-sented to by Du -Pont in writ-ing, after the date
here-of, and until the acquisi-tion of all of the Protein Sub-sidiaries or any
termina-tion of this Agree-ment pursuant to Section 8.1 hereof; provid-ed that
--------- ----
the follow-ing restric-tions shall cease to apply with respect to any
particu-lar Protein Subsidiary after its acqui-sition by Du Pont:
(a) the business of the Protein Subsidiaries shall be conducted only
in the ordinary and usual course of business and, to the extent
consistent there-with, each Protein Subsid-iary shall use its reasonable best
efforts to preserve its business orga-ni-zation intact and maintain its
existing rela-tions with custom-ers, suppliers, employ-ees, creditors and
business part-ners;
(b) none of the Protein Subsidiaries shall amend their respective
certificates of incorporation or by-laws;
(c) none of the Protein Subsidiaries shall: (i) de-clare, set aside
or pay any divi-dend or other distribu-tion pay-able in stock or property
(other than in cash) with re-spect to its capital stock or (ii) re-deem,
pur-chase or other-wise ac-quire di-rectly or indi-rectly any of its shares of
capital stock;
(d) none of the Protein Subsidiaries shall: (i) issue, sell,
pledge, dispose of or encumber any addition-al shares of, or securities
convert-ible into or exchange-able for, or options, war-rants, calls,
commit-ments or rights of any kind to ac-quire any shares of, capital stock of
any class or any other secu-rities (in-cluding Voting Debt) of any
Prote-in Sub-sidiary; (ii) amend the terms of any such secu-rities or
agree-ments outstanding on the date hereof; or (iii) split, combine or
reclassify any of its shares of capital stock;
(e) none of the Protein Subsidiaries shall trans-fer, lease,
li-cense, sell, mort-gage, pledge, dispose of, or encumber any material assets
or fail to maintain such assets in such operating condi-tion as they were
at the date hereof, ordinary wear and tear excepted;
(f) none of the Protein Subsidiaries or Ralston shall: (i) grant
any increase in the com-pen-sation payable or to become payable by any Protein
Sub-sidiary to any of its executive officers or vice presidents except in
accordance with existing written policies; (ii) (A) adopt any new, (B) amend
or other-wise in-crease, or (C) accel-erate the pay-ment or vest-ing of the
amounts pay-able or to become payable under, any exist-ing, bonus, incen-tive
com-pensa-tion, de-ferred compen-sa-tion, sever-ance, profit shar-ing, stock
op-tion, stock pur-chase, insurance, pen-sion, retire-ment or other employ-ee
bene-fit plan agree-ment or ar-range-ment; or (iii) enter into any
em-ploy-ment or sever-ance agreement with or, except in accor-dance with the
existing written policies of any Protein Sub-sidiary or applicable law, grant
any sever-ance or termi-na-tion pay to any offi-cer, direc-tor or employee of
any Protein Subsid-iary;
(g) none of the Protein Subsidiaries shall modi-fy, amend or
terminate any of its mate-rial Company Contracts or waive, release or assign
any mate-rial rights or claims;
(h) none of the Protein Subsidiaries shall permit any material
insurance policy naming it as a beneficiary or a loss payable payee to be
cancel-led or terminated without notice to Du Pont;
(i) none of the Protein Subsidiaries shall: (i) incur or assume any
long-term Indebted-ness (other than for amounts owed to any other Protein
Subsid-iary), or incur or assume any short-term In-debted-ness in amounts not
in the ordi-nary course of business consis-tent with past prac-tice (other
than for amounts owed to any other Protein Subsid-iary) the proceeds of which
will be used to repay exist-ing inter-company Indebtedness of the Busi-ness;
(ii) as-sume, guar-an-tee, en-dorse or other-wise become liable or
respon-sible (wheth-er di-rectly, contin-gently or otherwise) for the
obli-ga-tions of any other Person other than any wholly owned Protein
Subsid-iary; (iii) enter into any capitalized leases; or (iv) make any loans,
ad-vanc-es or capi-tal con-tribu-tions to, or invest-ments in, any other
Person (other than to any other Protein Subsidiary) except for travel and
expense ad-vances to employees in the ordinary course of busi-ness consis-tent
with past prac-tice; provided that PTI and Fiber Sales may incur third party
-------- ----
In-debt-edness in an amount equal to their respective existing Indebt-edness
owed to Stock-holder the proceeds of which are used to repay such
inter-com-pa-ny In-debt-edness, so long as any such third party In-debted-ness
so in-curred (A) shall not breach the repre-senta-tion and war-ran-ty set
forth in Sec-tion 4.18 hereof and (B) shall be on terms, and all
docu-menta-tion relat-ing thereto shall be, rea-son-ably acceptable to Du
Pont;
(j) none of the Protein Subsidiaries shall ac-quire or agree to
acquire by merg-ing or consoli-dating with, or by purchasing any material
portion of the stock or assets of, or by any other man-ner, any busi-ness or
any corpo-ra-tion, partner-ship, asso-ciation or other busi-ness orga-nization
or division there-of;
(k) none of the Protein Subsidiaries shall change any of the
accounting methods used by it, unless required by GAAP;
(l) none of the Protein Subsidiaries shall adopt a plan of complete
or partial liquida-tion, dissolu-tion, merger, consolidation, restruc-turing,
recapitaliza-tion or other reor-ganization of any Protein Subsidiary (other
than the Merg-ers, the Foreign Exchanges and the PTIFS Liqui-d-ati-on-);
(m) none of the Protein Subsidiaries shall take, omit to take, agree
to take, or agree not to take, any action that would: (i) make any
repre-sen-ta-tion or warran-ty of Ralston, Stockholder or the Protein
Subsid-iaries con-tained herein inac-cu-rate in any respect at, or as of any
time prior to, the Effective Time or (ii) cause or be rea-son-ably likely to
result in any of the condi-tions set forth in Article VII hereof not being
satisfied or materi-ally impair the ability of Ralston, Stockholder, the
Protein Subsidiaries, Du Pont or the Du Pont Merger Subsidiaries to
con-sum-mate the trans-ac-tions contemplat-ed by this Agree-ment or by the
Foreign Exchange Agreements;
(n) none of the Protein Subsidiaries shall effec-tu-ate (i) a "plant
closing" as defined in the Worker Adjust-ment and Retraining Notification Act
(the "WARN Act") af-fecting any site of employment or one or more facilities
---------
or operating units within any site of employ-ment or facility of any Protein
Subsidiary or ii) a "mass layoff" as defined in the WARN Act affecting any
site of employment or one or more facilities of any Protein Subsidiary, except
in either case, after complying fully with the notice and other
requirements of the WARN Act;
(o) none of the Protein Subsidiaries shall set-tle, compromise or waive
any claim for Taxes or make any material Tax election which could
adversely affect the liability for Taxes of any Protein Subsidiary follow-ing
the applicable Domestic Closing or Foreign Closing, as the case may be;
(p) other than for transfers of cash, cash equiv-a-lents and inventory
in the ordinary course consis-tent with past practice, no assets shall be
transferred by any U.S. Protein Subsidiary to any Foreign Protein Subsid-iary
or by any Foreign Protein Subsidiary to any other For-eign Protein Sub-sidiary
and no liabilities of any Foreign Protein Subsid-iary shall be assumed by
any U.S. Protein Subsid-iary or any other Foreign Protein Subsidiary except by
opera-tion of law in the ordinary course; and
(q) none of the Protein Subsidiaries shall enter into an agreement,
contract, commitment or arrange-ment to do any of the foregoing, or to
autho-rize, recom-mend, propose or announce an inten-tion to do any of the
foregoing;
provided, however, that the foregoing shall not prohibit the transfer by
-------- -------
any Protein Subsidiary to Ralston or any of its Subsidiaries (other than any
Prote-in Subsid-iary) of the Ex-cluded Assets in a manner reasonably
acceptable to Du Pont after at least five (5) business days' notice prior
thereto.
ARTICLE VIISection .11 Access; Confidentiality Access;
----------------------- -------
Confidentiality Access; Confidentiality Access; Confidentiality.
----- ------------------------ -----------------------
(a) Upon reasonable notice, Ralston shall, and shall cause each Protein
Subsidiary to, afford to the offi-cers, em-ploy-ees, accountants,
counsel, financing sources and other repre-sentatives of Du Pont, reasonable
access, during normal business hours, to all of the properties, books,
con-tracts, com-mit-ments and records of such Protein Subsidiary and, during
such peri-od, Ralston shall, and shall cause each Protein Sub-sidiary to,
fur-nish prompt-ly to Du Pont all infor-ma-tion con-cern-ing the busi-ness,
prop-er-ties and person-nel of such Protein Sub-sidiary as Du Pont may
reasonably re-quest (includ-ing, without limitation, any information relat-ing
to Taxes and Tax Returns of such Protein Subsidiary). Unless other-wise
re-quired by law and until the Effec-tive Time, Du Pont will hold any such
informa-tion which is nonpublic in confi-dence in accor-dance with the
provi-sions of a letter agreement dated July 18, 1997 (the
"Con-fiden-ti-al-ity Agree-ment") between Ralston and Du Pont.
-------------
(b) Following the Effec-tive Time, Ralston and Stockholder shall, and
shall cause their respective Sub-sid-iar-ies to, hold in confi-dence all
infor-mation relating to the Protein Subsidiar-ies, other than information
relating to the Excluded Assets, to the same extent as cur-rently is
appli-ca-ble to Du Pont pursu-ant to the Confi-den-ti-al-i-ty Agree-ment;
provid-ed that the foregoing obligations of Ralston and Stockholder shall
----- ----
terminate (except with respect to techni-cal information and/or results
obtained, directly or indi-rectly, pursuant to the Confidentiality and
Evalu-a-tion Agreement, dated August 9, 1994, between PTI and Du Pont, and any
Intellectual Property relating thereto, including that Intellectual
Property relat-ing to new soy bean variet-ies developed by Du Pont for use in
iso-lated soy protein and fiber products, with re-spect to which they shall
continue indefi-nite-ly without limi-tation) two years following Effec-tive
Time.
ARTICLE VIISection .12 Consents and Approvals Consents and
---------------------- ------------
Approvals Consents and Approvals Consents and Approvals.
--- ------------------------ ------------------------
(a) Upon the terms and subject to the condi-tions of this Agree-ment,
each of Ralston, Ralston's Subsidiaries, the Pro-tein Subsidiaries, Du Pont
and the Du Pont Merger Subsid-iaries shall use its reasonable best ef-forts to
take, or cause to be taken, all ac-tions, and to do, or cause to be done,
all things neces-sary, proper or advis-able under appli-ca-ble laws and
regulations to con-summate and make effective the transac-tions contem-plated
by this Agree-ment, includ-ing with respect to the Asset Transfers, as
promptly as practi-cable including, but not limited to, (i) the prepa-ration
and filing of all appli-cable forms under the HSR Act, re-quired in
connec-tion with the per-formance of this Agree-ment and the transac-tions
contem-plated hereby, (ii) the prepa-ra-tion and filing of all other forms,
registra-tions and notices re-quired to be filed to consum-mate the
trans-ac-tions contem-plated hereby and the taking of such ac-tions as are
neces-sary to obtain any requisite approv-als, consents, orders, exemp-tions
or waivers by any third party or Governmental Entity and (iii) causing the
satis-fac-tion of all condi-tions set forth in Article VII here-of; provided,
--------
howev-er, that the forego-ing will not re-quire (x) Du Pont or the Du Pont
- --------
Merger Subsidiaries or any other Sub-sidiary of Du Pont to accept or offer to
- ---
accept an order pro-vid-ing for the dives-titure by Du Pont, the Du Pont
Merger Subsid-iar-ies, any other Subsidiary of Du Pont or any Protein
Sub-sid-iary of any por-tion of the busi-ness-es, as-sets, opera-tions or
prop-er-ties of Du Pont, any Subsidiary of Du Pont or any Protein Subsid-iary
other than an immaterial portion of the Business owned by the Protein
Subsidiaries, or (y) Du Pont or the Du Pont Merger Subsid-iaries to be willing
to accept any other condi-tions, re-stric-tions, limita-tions or agree-ments
materi-ally affecting Du Pont's or any Du Pont Merger Subsidiary's full rights
of owner-ship of the Business and of the Protein Subsidiaries (except as
permitted by clause (x) above), and none of the Protein Subsid-iaries shall
accept any such order, condi-tion, restriction, limita-tion or agree-ment
without Du Pont's prior written approval. Ralston and Du Pont shall prompt-ly
con-sult with the other with re-spect to, provide any neces-sary informa-tion
with re-spect to and pro-vide the other (or its coun-sel) copies of, all
fil-ings made by such party with any Gov-ernmental Entity in con-nection with
this Agree-ment, the Foreign Exchange Agree-ments and the trans-ac-tions
contem-plated hereby and there-by.
(b) Each of the parties hereto fur-ther agree, with respect to a
threat-ened or pending pre-limi-nary or perma-nent injunction or other order,
decree or ruling or statute, rule, regu-lation or execu-tive order that would
adversely affect the ability of the parties hereto to per-form their
respective obliga-tions hereunder and con-sum-mate the trans-ac-tions
con-tem-plat-ed here-by, to use their re-spec-tive rea-son-able best ef-forts
to pre-vent the entry, enactment or promul-ga-tion thereof, as the case may
be.
(c) Each of the parties hereto shall prompt-ly inform the other
parties hereto of any material communi-cation from any Govern-mental Entity
regarding any of the trans-actions con-tem-plat-ed here-by. If any of the
parties hereto re-ceives a re-quest for addi-tional infor-ma-tion or
documen-ta-ry materi-al from any Governmental Entity with respect to the
trans-ac-tions contemplated hereby, then such party will endeav-or in good
faith to make, or cause to be made, as soon as reasonably practi-cable and
after consulta-tion with Du Pont (in the case of Ralston, Stock-holder or the
Protein Subsidiaries) or Ralston (in the case of Du Pont or the Du Pont Merger
Subsid-iaries), an appro-pri-ate re-sponse in com-pli-ance with such
request.
ARTICLE VIISection .13 No Solicitation No Solicitation No
--------------- --------------- --
Solicitation No Solicitation. None of Ralston, Stock-holder, the Protein
--------- ---------------
Subsidiaries or any of their re-spec-tive affil-i-ates, or any of their
respec-tive offi-cers, direc-tors, employ-ees, repre-senta-tives and agents,
includ-ing, but not limited to, finan-cial advi-sors, attor-neys and
ac-coun-tants, shall, di-rect-ly or indirect-ly, encour-age, solic-it,
partici-pate in or initi-ate dis-cus-sions or nego-tiations with, or provide
any information to, any Person (other than Du Pont, any of its affiliates or
representa-tives) con-cern-ing any Acqui-sition Proposal (as defined below).
For pur-poses of this Agree-ment, "Acquisi-tion Proposal" means any offer or
---------------------
proposal for a merger, con-sol-i-da-tion, recap-i-tal-iza-tion, liqui-da-tion,
tender offer, ex-change offer, sale of as-sets outside the ordinary
course of business, sale of shares of capi-tal stock or debt secu-ri-ties or
similar transac-tions involv-ing any Protein Subsid-iary, division or
operat-ing or principal busi-ness unit of the Business, other than the
transactions contem-plated by this Agree-ment. Stock-holder will
imme-di-ately cease any exist-ing activ-ities, dis-cus-sions or negotia-tions
with any Person conducted hereto-fore with respect to any Acquisi-tion
Propos-al.
ARTICLE VIISection .14 Brokers or Finders Brokers or Finders
------------------ ------------------
Brokers or Finders Brokers or Finders.
- -------------------- --------------------
(a) Each of Du Pont and Ralston represents, as to itself, its
Sub-sid-iaries and its affiliates, that no agent, broker, invest-ment banker,
financial advisor or other firm or Person is or will be entitled to any
brokers' or finder's fee or any other commis-sion or similar fee in connection
with any of the transac-tions contemplated by this Agree-ment except for
financial advisory fees payable to J.P. Morgan & Co. by Ralston and to BT
Wolfensohn by Du Pont; and
(b) Each of Du Pont and Ralston agrees to indem-nify and hold the other
harm-less from and against any and all claims, liabilities or
obliga-tions with respect to any other fees, commis-sions or expenses
as-serted by any Person on the basis of any act or state-ment alleged to have
been made by such party or its affili-ates.
ARTICLE VIISection .15 Further Assurances Further Assurances
------------------ ------------------
Further Assurances Further Assurances. If at any time after the
- ------------------- -------------------
Effec-tive Time any further action is necessary or desir-able to carry out the
- ---------
purpos-es of this Agreement, the proper officers and directors of the
parties hereto shall use all rea-son-able ef-forts to take, or cause to be
taken, all such necessary ac-tions.
ARTICLE VIISection .16 Publicity Publicity Publicity
--------- --------- ---------
Publicity. The initial press release with respect to the execution of this
-----
Agreement shall be a joint press release accept-able to Du Pont and Ralston.
There-after, so long as this Agreement is in ef-fect, neither Ralston, Du Pont
nor any of their re-spec-tive affil-iates shall issue or cause the
publica-tion of any press release or other announcement with respect to this
Agree-ment and the trans-actions con-tem-plated hereby with-out the prior
consulta-tion of the other party, except as may be required by law or by any
list-ing agree-ment with a na-tional secu-ri-ties exchange or trading market;
provid-ed, however, that nothing con-tained in the forego-ing shall limit the
- --------- -------
contents of any meet-ings or dis-cus-sions with ana-lysts, industry
partici-pants, members of the press or interview-ers.
ARTICLE VIISection .17 Notification of Certain Matters
----------------------------------
Notification of Certain Matters Notification of Certain Matters
------------------------ ----------------------------------
Notification of Certain Matters. Ralston shall give prompt notice to Du Pont
--------------------------
and Du Pont shall give prompt notice to Ralston, of (i) the occur-rence or
non-occurrence of any event of which such notifying party has knowledge the
occur-rence or non-occur-rence of which would cause any repre-senta-tion or
warranty contained in this Agreement to be untrue or inaccu-rate in any
material respect at or prior to the Effec-tive Time and (ii) any mate-rial
failure of Ralston, Stockhold-er or the Protein Subsidiar-ies (on the one
hand) or Du Pont or the Du Pont Merger Subsid-iaries (on the other hand), as
the case may be, to comply with or satis-fy any cove-nant, condition or
agree-ment to be com-plied with or satisfied by it hereun-der; provided,
--------
howev-er, that the delivery of any notice pursu-ant to this Section 6.8 shall
---
not limit or other-wise affect the reme-dies avail-able hereunder to the party
receiving such notice.
ARTICLE VIISection .18 Employee Matters Employee Matters
---------------- ----------------
Employee Matters Employee Matters.
------------- -----------------
(a) Continuation of Employ-ment.
-----------------------------
(i) Effec-tive as of the Initial Comple-tion Date, Du Pont will
contin-ue the em-ploy-ment with any U.S. Pro-tein Sub-sid-iary of all
employees of such U.S. Pro-tein Sub-sid-iary (A) who are en-gaged in the
operation of the Busi-ness and who are active-ly at work as of the Initial
Comple-tion Date, or (B) who are on an approved leave of absence from ac-tive
em-ployment, in-cluding, but not limit-ed to, leave due to a short-term
dis-ability or sick-ness, leave under the Family and Medi-cal Leave Act (FMLA)
or a leave or layoff with re-call rights under a collec-tive bar-gain-ing
agreement but (C) excluding those em-ployees who, as of the Initial Completion
Date, are receiving long-term disabil-ity bene-fits pursu-ant to any em-ployee
pension or wel-fare benefit plan and program of Ralston or any of its
Subsid-iar-ies which provides disabili-ty bene-fits and further (D)
ex-clud-ing those em-ployees listed in Section 6.9(a) of the Ralston
Dis-closure Schedule (the "Dairy Food Em-ploy-ees"). All em-ploy-ees of a
-----------------------
U.S. Pro-tein Sub-sid-iary whose employ-ment is con-tin-ued immedi-ately
follow-ing the Ini-tial Comple-tion Date are here-inaf-ter re-ferred to as
"Trans-ferred Employ-ees". Du Pont and the U.S. Pro-tein Subsid-iaries shall
----------------------
retain and be solely re-sponsi-ble for any rein-statement or reem-ploy-ment
claims made by any Trans-ferred Employee pursu-ant to any collec-tive
bar-gain-ing agree-ment, or employment agree-ment or applicable law.
Notwithstanding the forego-ing, except as may be re-quired by applica-ble law,
employment agreement or collective bar-gaining agree-ment, Du Pont may cause a
U.S. Protein Subsid-iary to terminate the employ-ment of any Trans-ferred
Employee at any time on or after the Initial Comple-tion Date.
(ii) Effective as of the Foreign Closing Date appli-cable with respect
to each Foreign Protein Subsid-iary, Du Pont will continue the employment with
each such For-eign Protein Subsidiary of all employees of such For-eign
Protein Subsid-iary and will cause the Foreign Protein Subsidiary to con-tinue
to satisfy any obliga-tions of such Foreign Protein Subsidiary to its former
employ-ees. Such current and former employees shall be defined as "Foreign
-------
Employees". Notwith-stand-ing the foregoing, except as may be required by
-------
appli-cable law, employment agreement or collective bargain-ing agree-ment, Du
-
Pont may cause a Foreign Protein Subsidiary to terminate the employment of any
Foreign Employee at any time on or after the applica-ble Foreign Closing Date.
(iii) Ralston and Du Pont shall cooperate in trans-fer-ring, as soon as
practicable following the appli-cable Foreign Closing Date, the employment of
each em-ployee of a Ralston Subsid-iary who is engaged in con-duct-ing the
Business to a Foreign Protein Subsidiary ("Trans-ferred Foreign Employees").
------------------------------
The effective date of transfer of such employees shall be de-fined, with
respect to each such employee, as the "Foreign Transfer Date".
-----------------------
(iv) The Transferred Employees, Foreign Em-ploy-ees and Trans-ferred
Foreign Employees shall be collec-tively herein-after referred to as "Protein
-------
Em-ployees". The Initial Completion Date with respect to Transferred
- ----------
Employees, the applicable Foreign Closing Date with respect to each Foreign
- --------
Employee and the applicable Transfer Date with respect to each Trans-ferred
- --
Foreign Employee shall be hereinafter referred to as the "Trans-fer Date".
- -- --------------
(v) Prior to the Initial Completion Date, Ralston shall cause Ralston or
a Ralston Subsidiary which is not a Protein Subsidiary to hire each Dairy
Food Em-ployee and to offer com-pen-sa-tion (includ-ing base salary or wage
rate, vari-able com-pen-sation and long-term compen-sa-tion) and bene-fits to
the Dairy Food Em-ployees sub-stan-tially similar, in the aggre-gate, to those
provided to such Dairy Food Em-ploy-ees immedi-ately prior to the Ini-tial
Completion Date.
(b) Com-pensation and Benefits. As of the appli-cable Trans-fer Date,
--------------------------
Du Pont shall or shall cause, as appli-ca-ble, the Protein Subsid-iaries or a
Subsidiary of Du Pont to offer com-pen-sa-tion (includ-ing base salary or wage
rate, vari-able com-pen-sation and long-term compen-sa-tion) and
bene-fits to the Protein Em-ployees sub-stan-tially similar, in the
aggre-gate, to those provid-ed to such Protein Em-ploy-ees immedi-ately prior
to the appli-ca-ble Transfer Date; pro-vided that any employee or retir-ee
--------- ----
bene-fits provid-ed to Protein Em-ploy-ees may be pro-vided under exist-ing or
newly estab-lished employee bene-fit plans which may, in ei-ther case, be
em-ploy-ee benefit plans of Du Pont, a Subsidiary of Du Pont or a Protein
Subsidiary (any such em-ployee benefit plan in which Protein Employ-ees
partici-pate, the "Appli-ca-ble Du Pont Plan") and which may be modi-fied at
-------------------------
any time. Du Pont shall indemnify and hold harmless Ralston and its
Subsid-iaries, their direc-tors, officers, employees and agents, and all
fiduciaries of employee benefit plans of such entities, for any claims
relating to or arising out of changes or modifi-ca-tions, on or after the
applicable Closing or effective Foreign Trans-fer Dates, to compensa-tion or
benefits avail-able (pursuant to the Benefit Plans or de-scriptions thereof
which have been delivered to Du Pont pursuant to Section 4.9(a) hereof) to the
Protein Employees prior to the appli-cable Closing or effective Foreign
Trans-fer Dates. Such claims shall in-clude, but are not limited to, the cost
of paying claims by Trans-ferred Employees for post-retirement welfare
benefits and for group health plan continua-tion cover-age pursu-ant to Code
sec-tion 4980B and ERISA sec-tions 601 through 609 ("CO-BRA Coverage") under
---------------
Ralston's Com-pre-hen-sive Health Plan or Executive Medical Plan; provid-ed,
---------
however, that Du Pont shall not have any liability pursuant to this subsection
------
(b) with respect to the Management Conti-nuity Agreements between Ralston and
those employees of the Protein Subsidiaries named therein and any claims
thereun-der, except that if Du Pont, a Subsid-iary of Du Pont or a Protein
Subsidiary fails to maintain, for such employees subject to the Management
Continuity Agreements, compensa-tion and benefits that are substantially
similar in the aggregate to those in effect prior to the Initial Comple-tion
Date as required hereunder, Du Pont shall have liability pursuant to the
foregoing indemnification with respect to the Management Continuity
Agreements. Changes announced or planned by Ralston to any employee benefit
or to any Bene-fit Plan which are not in effect on the Initial Completion
Date, including changes to the Ralston Pen-sion Plan in the future, shall not
be deemed to be part of any employ-ee benefit or any Benefit Plan and shall
not be taken into account for purposes of determining Du Pont's obligations
under this subsection (b), nor shall this ESOP feature of the Ralston Savings
Plan be deemed to be a part of the Ralston Savings Plan for purposes of
determining Du Pont's obligation under this subsection (b) after it ceases to
be a feature of the Ralston Savings Plan. Du Pont's indemnifi-cation
obli-gations pursuant to this Section 6.9(b) shall be subject to the
provisions of Section 9.2(g) hereof, for which purpose Ralston shall be deemed
to be the Indemnified Party and Du Pont shall be deemed to be the Indemnifying
Party.
(c) Certain Liabilities.
--------------------
(i) On and after the applicable Trans-fer Date, Du Pont and the Pro-tein
Subsidiar-ies shall retain and be solely re-spon-sible for all em-ployee
lia-bilities or obli-ga-tions not otherwise pro-vided for in this Agree-ment,
in-clud-ing, without limi-ta-tion, wag-es, ac-crued holi-day, vaca-tion and
sick day bene-fits, whether aris-ing prior to or after the applicable Transfer
Date, which re-late to any Pro-tein Employee.
(ii) Du Pont and the Protein Subsidiaries shall retain or assume
responsibility for all bonus plans and liabilities associated therewith with
re-spect to all Protein Employees.
(iii) Ralston shall be re-spon-sible for all liabili-ties in con-nection
with claims incurred by any Trans-ferred Em-ploy-ee or Transferred
Foreign Employee prior to the appli-ca-ble Trans-fer Date under any em-ploy-ee
bene-fit plans of Ralston or its Subsid-iaries that provide health, life or
acci-dent bene-fits. Du Pont and the Protein Subsid-iaries shall be
re-spon-sible for all lia-bili-ties in con-nection with claims for health,
life, accident or long-term disability benefits by any Trans-ferred Em-ploy-ee
or any Transferred Foreign Employee under any Appli-cable Du Pont Plan which
are in-curred on or after the applicable Trans-fer Date. For pur-poses of
this Section 6.9, a claim for health benefits shall be consid-ered in-curred
on the date treat-ment is ren-dered or a ser-vice per-formed and a claim for
life or accident benefits shall be consid-ered in-curred on the date the
inci-dent occurred which gave rise to the claim. A claim for long-term
disability bene-fits shall be con-sid-ered incurred at the time the claim for
long-term disability benefits is approved. Ralston and its Subsid-iaries
shall retain liability for retiree medical cover-age and the group health plan
con-tinua-tion cover-age pursuant to Code sec-tion 4980B and ERISA sec-tions
601 through 609 for all former employ-ees and their depen-dents. Du Pont and
the U.S. Protein Subsidiaries shall be responsi-ble for main-taining the group
health plan coverage for Trans-ferred Employees and their depen-dents with
respect to active employee medical cover-age, includ-ing but not limited to
health reim-burse-ment account benefits pursuant to Code section 125.
(iv) The Transferred Employees who partic-ipated in Ralston's
Partnership Life Plan and Volun-tary Enriched Life Plan may, subject to the
terms and condi-tions of such plans, continue to partici-pate in such plans
after the appli-cable Transfer Date. Du Pont shall have no rights or
obligations with respect to such plans.
(v) Ralston shall be responsible for all liabili-ty in connec-tion with
any workers' compensa-tion claims for which a claim was filed prior to the
appli-ca-ble Trans-fer Date. Du Pont and the U.S. Protein Subsid-iaries shall
be responsible for all liabilities in con-nection with any workers'
compen-sation claims for which a claim was filed on or after the applica-ble
Transfer Date.
(vi) Notwithstanding anything herein to the con-trary, Ralston shall be
responsible for all lia-bili-ties with respect to employee benefit plans of
Ralston or any Ralston Subsidiary regarding employees who are not Protein
Em-ploy-ees, regard-less of when such claims are incurred.
(d) Participation and Service Credit.
-----------------------------------
(i) On and after the applicable Transfer Date, Du Pont and Protein
Subsidiaries shall give Protein Em-ploy-ees service credit for pur-pos-es of
eligi-bili-ty, vest-ing, deter-mi-na-tion of the level of benefits and benefit
accru-al under any Appli-ca-ble Du Pont Plan, for service with any
Protein Sub-sidiary prior to the appli-ca-ble Transfer Date, to the extent
such ser-vice was recog-nized under the corre-spond-ing employee benefit plans
of Ralston, any Ralston Subsidiary or Protein Subsidiary.
(ii) Du Pont shall cause any pre-existing condi-tion restric-tions or
wait-ing periods under Appli-ca-ble Du Pont Plans to be waived to the extent
neces-sary to pro-vide immedi-ate cover-age to each Protein Employ-ee as of
the appli-ca-ble Transfer Date. Du Pont's medi-cal plan will apply any
amounts paid under Ralston's medical plan by a Protein Em-ployee or
deduct-ibles and copayments during the year in which such Transfer Date falls
toward deduct-ible, out-of-pocket limits and the orthodontia bene-fits of Du
Pont's medi-cal plan for the plan year in which the Initial Comple-tion Date
occurs, unless the cover-age option selected by the Protein Em-ployee does not
have deductibles or out-of-pocket or similar lim-its.
(iii) An Applicable Du Pont Plan which pro-vides health and depen-dent
care reimbursement accounts estab-lished under Code section 125 ("Du Pont's
---------
Reim-bursement Plan") will credit the account of each Trans-ferred Em-ployee
------------------
cur-rently participating in Ralston's comparable reim-burse-ment plan
("Ralston's Reimbursement Plan") with an amount equal to the aggregate pre-tax
----------------------
contribu-tions made to such Trans-ferred Employee's account in Ralston's
Reimbursement Plan during the 1997 calendar year through the applicable
Transfer Date, reduced by any reimbursements during such period to the
Trans-ferred Employee by Ralston's Reim-bursement Plan. Such resulting
account shall be applied to any health bene-fit and dependent care claims
incurred by the Trans-ferred Employee, or his or her covered depen-dents,
through December 31, 1997 in accor-dance with the terms of the Du Pont
Reimbursement Plan.
(e) United States Defined Benefit Pen-sion Plan.
------------------------------------------------
(i) Effective as of the Initial Comple-tion Date, Ralston shall cause
the Transferred Employees to cease pension benefit accruals under the Ralston
Purina Retire-ment Plan ("Ralston's Pension Plan") and Du Pont shall establish
----------------------
or desig-nate a de-fined benefit pension plan and trust in-tended to
quali-fy under section 401(a) and sec-tion 501(a) of the Code, respectively
(the "Du Pont's Pen-sion Plan"). No later than the date speci-fied below,
--------------------------
Ralston shall cause the trustee of Ralston's Pension Plan to transfer to the
trustee of Du Pont's Pension Plan an amount in cash equal to the Project-ed
Benefit Obli-gation ("PBO"), as defined in Finan-cial Accounting Standards 87,
---
attrib-utable to pen-sion bene-fits accrued as of the Ini-tial Completion Date
by the Trans-ferred Employees (in-cluding those with less than one year of
service as of the Ini-tial Completion Date) under Ralston's Pension Plan,
excluding, however, those who have retired under Ralston's Pension Plan as of
the Initial Completion Date (the "Transfer Amount"). For purposes of this
---------------
Agree-ment, the PBO for the Trans-ferred Employees shall be deter-mined in
accordance with Ralston's Pension Plan documents and established
admin-is-tra-tive procedures for Ralston's Pension Plan as of the Initial
Completion Date. The follow-ing assumptions shall apply for purposes of
deter-mining the PBO:
(A) the rate used to discount plan liabili-ties shall be
equal to the greater of 7.25% per annum or the discount rate used by Du Pont
as of December 31, 1997 with respect to Du Pont's Pen-sion Plan pursuant to
Statement No. 87 of the Financial Accounting Standards Board (such great-er
rate, the "Appli-ca-ble Dis-count Rate");
------------------------------
(B) the mortality table used shall be the 1983 Group
annuity Mortality Table for Males, with no setback for males and a six-year
setback for fe-males;
(C) the rates of retirement shall be the rates for normal
and early retirements as-sumed for pur-poses of the Schedule B to the 1995
Form 5500 for Ralston's Pension Plan;
(D) the rates of turnover for Transferred Em-ploy-ees
shall be the rates of turnover assumed or employees of the U.S. Protein
Subsidiaries for purposes of the Sched-ule B to the 1995 Form 5500 for
Ralston's Pension Plan;
(E) the rates of disability for Transferred Em-ploy-ees
shall be the disability rates assumed for pur-poses of the Schedule B to the
1995 Form 5500 for Ralston's Pension Plan;
(F) all Transferred Employees shall be pre-sumed to elect
a single life annuity at retirement with a guar-antee of sixty (60) monthly
payments;
(G) for purposes of determining the portion of the PBO
attributable to pre-retirement death bene-fits, ninety (90) per-cent of
Transferred Em-ployees shall be presumed to be married and males shall be
pre-sumed to be three years older than females;
(H) employee contributions without interest shall be
assumed to be refunded to Transferred Employees on the earlier of their death
or retire-ment;
(I) salary increases shall be presumed to be 5.5% per
annum;
(J) maximum Social Security Wage base shall be assumed to
increase 5.5% per annum, and limita-tions under Code sections 415 and
401(a)(17) shall be assumed to in-crease 5.0% per annum; and
(K) all other assumptions shall be those set forth in
Schedule B to the 1995 Form 5500 for Ralston's Pension Plan.
No changes in the status of any Transferred Employee between the
Initial Completion Date and the date funds are actually transferred pursuant
to this paragraph shall affect the Transfer Amount to be calculated
hereun-der. The Initial Trans-fer Amount (as defined below) and the remainder
of the Transfer Amount (the "Second Pay-ment") shall each be in-creased with
---------------
interest at an effec-tive annual rate equal to the Applicable Discount Rate
from the Initial Completion Date, to the actual date of each such transfer.
The trans-fer of the Transfer Amount shall be condi-tioned upon comple-tion of
the fol-lowing items: (1) the exchange of an opinion of each party's legal
counsel stating that such party's respec-tive pen-sion plan is qualified under
sec-tion 401(a) of the Code and the trust established under such pension plan
is exempt from taxa-tion under section 501(a) of the Code; (2) the ex-change
of a certification from the plan admin-istrator of each party's respective
pen-sion plan that such plan has, in all material re-spects, been
admin-is-tered and operated in a manner to preserve the plan's qualified
status under the Code and the trust's exempt status under the Code; and (3)
each party's filing, with the IRS, of the notice required by sec-tion 6058(b)
of the Code. The parties agree that such notices required by section 6058(b)
of the Code will be filed within three (3) days of the Initial Comple-tion
Date and the opinions and certifications in (1) and (2) above will be
exchanged within thirty (30) days after the Initial Completion Date. An
ini-tial por-tion of the Trans-fer Amount (the "Initial Transfer Amount")
-----------------------
shall be trans-ferred to the trustee of Du Pont's Pen-sion Plan by no later
than three (3) busi-ness days after the expira-tion of the thirty (30) day
wait-ing period re-quired by section 6058(b) of the Code. Unless other-wise
agreed to by the parties, the Second Payment shall be trans-ferred no later
than ninety (90) days after the last to occur of items (1) or (2) above.
(ii) In no event will the Transfer Amount be less than the amount of the
present value of ac-crued bene-fits of the Transferred Employees who did
not retire under Ralston's Pension Plan, as deter-mined based on the
actu-arial assump-tions of Ralston's Pension Plan which amount satisfies
sec-tion 414(l) of the Code.
(iii) The Transfer Amount will be deter-mined by agree-ment of Ralston
and Du Pont. The Initial Transfer Amount shall be Twenty Five Million Dollars
($25,000,000). Ralston's actu-ary shall then calcu-late and shall
pro-vide to Du Pont's actuary, at least thirty (30) days prior to the proposed
transfer of the Second Pay-ment, a schedule of the Trans-fer Amount and
suffi-cient detail regarding such calcula-tions to allow Du Pont to make an
appropriate re-view. Upon transfer of the Second Pay-ment, Ralston and
Ralston's Pension Plan shall cease to have any liability or obligation
whatso-ever with re-spect to those assets and liabili-ties for accrued
benefits of Transferred Employees transferred to Du Pont's Pension Plan or any
obliga-tion for bene-fits which may be accrued after the Initial Completion
Date by the Transferred Employ-ees, and Du Pont and the U.S. Protein
Subsidiaries and Du Pont's Pension Plan shall assume and be responsible for
all assets and liabili-ties for accrued benefits which were so trans-ferred.
Ralston, the U.S. Protein Subsidiaries and Du Pont shall pro-vide each other
with such re-cords and infor-ma-tion as may be neces-sary or appropri-ate to
carry out their obli-ga-tions under this Section 6.9(e) or for the purpos-es
of admin-istra-tion of Du Pont's Pension Plan, and they shall coop-er-ate in
the filing of docu-ments required by the transfer of assets and liabil-ities
de-scribed herein.
(iv) Notwithstanding anything herein to the con-trary, with respect to
any Trans-ferred Em-ploy-ee who has re-tired under Ralston's Pen-sion Plan
prior to or coin-ci-dent with the Initial Completion Date, the ser-vice of
such Trans-ferred Employ-ee shall not be credit-ed for benefit accrual
pur-poses under Du Pont's Pension Plan but shall be cred-ited for pur-pos-es
of vest-ing and eligibility for early re-tire-ment, or dis-abil-ity
retire-ment benefits, if any, under Du Pont's Pension Plan.
<PAGE>
(f) U.S. Savings Plan. After the Initial Com-ple-tion Date, to the
-----------------
extent elected by a Transferred Employ-ee, Du Pont's Savings Plan shall accept
a direct rollover from Ralston's Savings Plan of an amount equal to each
Trans-ferred Employee's account balance, as directed by the Trans-ferred
Em-ploy-ee, in cash and/or notes associated with the outstand-ing balance of
any loans to Transferred Employ-ees made pursuant to ERISA section 408(b)(1)
and Code sec-tion 4975(d)(1), in accor-dance with appli-ca-ble law.
(g) Post-Retirement Welfare Bene-fits. Du Pont and the U.S. Protein
---------------------------------
Subsidiaries will be respon-si-ble for pro-viding post-retirement welfare
bene-fits to Transferred Employees who were eligible for such benefits under
the Ralston health plans at the Initial Completion Date and who retire from
any U.S. Protein Subsid-iary fol-low-ing the Ini-tial Completion Date with the
requi-site years of age and ser-vice. With re-spect to each Trans-ferred
Em-ploy-ee who has not re-tired under Ralston's Pension Plan based on the
terms and conditions of Ralston's Pension Plan as of the Initial Completion
Date, the service of such Trans-ferred Employee with any U.S. Protein
Subsidiary shall be recog-nized for the pur-pose of deter-mining eligi-bility
and level of benefits so provid-ed; pro-vided, howev-er, that such ser-vice
--------- --------
will not be so recog-nized unless Ralston, within ninety (90) days fol-lowing
such Initial Completion Date, pays to the U.S. Pro-tein Subsidiaries in full
an amount equal to sixty-two per-cent (62%) of the Accu-mu-lat-ed
Post-retirement Bene-fit Obli-ga-tion as de-fined in Finan-cial Accounting
Stan-dards 106 with re-spect to the Trans-ferred Employees as of the Initial
Comple-tion Date under the Ralston post-re-tire-ment wel-fare benefit plans
based on assump-tions used in Ralston's calcu-lations of liabili-ties under
Finan-cial Ac-counting Stan-dards 106 as of September 30, 1997. The
post-retire-ment welfare bene-fits for Trans-ferred Employ-ees who retire
under Ralston's Pension Plan on or prior to such Initial Comple-tion Date
shall be the sole re-spon-sibil-ity of Ralston. The parties to this Agreement
hereby ac-knowledge and agree that the amounts paid by Ralston to Du Pont
pursu-ant to this Section 6.9(g) shall be treated for all Tax purposes as if
such amounts were con-tributed by Stock-holder to the U.S. Protein Subsid-iary
immediate-ly prior to the relevant Initial Completion Date and, according-ly,
acknowl-edge and agree that such payment will not result in a cur-rent Tax
deduc-tion to Ralston or any Subsidiary of Ralston and will not result in the
current recognition of income by Du Pont or any Sub-sid-iary of Du Pont. The
par-ties to this Agreement fur-ther agree to take no posi-tion on any Tax
Re-turn, or in any audit or judi-cial or admin-is-trative proceed-ing or
other-wise that is incon-sis-tent with the imme-diately preceding sentence.
(h) Executive Benefit Plans.
-------------------------
(i) Ralston and its Sub-sidiar-ies shall retain all lia-bility for
benefits accrued or award-ed or claims in-curred as of the Initial Comple-tion
Date under the Incentive Stock Plan, the Executive Long Term Disabili-ty
Plan, the Execu-tive Health Plan, the Execu-tive Life Plan, the Manage-ment
Continuity Agree-ments with certain executives of the Protein Subsid-iaries
(except as otherwise agreed in Section 6.9(b) hereof) and the 1991 Split
Dollar Second to Die Plan with re-spect to those Trans-ferred Employees who
partici-pated in such programs immediately prior to the Initial Comple-tion
Date.
(ii) Effective as of the Initial Completion Date, Ralston shall cause
the Ralston Purina Company Deferred Compen-sa-tion Plan for Key Employees, the
Ralston Purina Supple-mental Retire-ment Plan and the Ralston Purina
Executive Savings Invest-ment Plan (the "Executive Plans") to be amended to
---------------
transfer to the applicable Protein Sub-sidiary a portion of each such plan
related to the lia-bilities for certain benefits accrued by the Protein
Employees as of the Initial Completion Date (the "Trans-ferred Execu-tive
-----------------------
Plans"); and to provide that on and after the Ini-tial Completion Date, the
-
applicable Protein Subsidiary shall be the plan spon-sor and plan
admin-is-trator of such plans. The lia-bili-ties to be trans-ferred pursuant
to this Section 6.9(h)(ii) shall be the ac-count balanc-es of Protein
Employees in the Equity and Variable Interest Options of the Ralston Purina
De-ferred Compen-sation Plan for Key Employees, the account balances of
Protein Em-ploy-ees in the Ralston Purina Company Execu-tive Savings
Invest-ment Plan and the accrued benefits under the Sup-ple-mental Execu-tive
Re-tire-ment Plan valued as of the Initial Comple-tion Date. Accrued benefits
under the Ralston Purina Sup-plemen-tal Retirement Plan shall be equal to the
pres-ent value of the pro-jected benefit obligation (deter-mined in the same
manner as with respect to the Ralston Purina Re-tire-ment Plan as set forth in
Section 6.9(e)(i) hereof) accrued by the Protein Employees as of the Ini-tial
Com-pletion Date. Ralston shall assign to the appli-cable Protein Subsid-iary
the portion of any contracts between Ralston and the Protein Employees
pursuant to which compensa-tion of such employees was deferred under the
Equity Option and Variable Interest Option of the De-ferred Com-pen-sation
Plan for Key Em-ploy-ees and any predecessor plans.
(iii) After the Initial Completion Date, Ralston and its Sub-sidiaries
shall have no further au-thority or liabil-ity with respect to the Transferred
Executive Plans and Du Pont and its Subsidiaries shall assume all
authority for such Plans and shall be solely responsi-ble for all lia-bilities
and obligations whatso-ev-er relating to benefits and claims for benefits
thereun-der, whether such claim arose before or after the Ini-tial Completion
Date. Du Pont and its Subsid-iaries shall indemnify and hold harm-less
Ralston and its Subsidiaries, and their officers, directors, em-ployees,
agents and fiduciaries, against any and all claims arising out of any Protein
Subsidiary's or Du Pont's spon-sor-ship of the such Plans, includ-ing but not
limit-ed to claims arising out of the adminis-tration or amendment of such
Plans or any registra-tion statement filed in connec-tion with any such Plan,
includ-ing but not limit-ed to claims by employees or any govern-mental
agencies.
(iv) On or promptly following the Initial Com-ple-tion Date, Ralston
shall pay to the U.S. Protein Sub-sidiar-ies an amount in cash equal to
sixty-two per-cent (62%) of the aggregate lia-bil-i-ties of the Trans-ferred
Execu-tive Plans to be trans-ferred as of that date.
(v) Ralston shall retain all liability for all unpaid bene-fits,
obligations and liabilities with respect to account balances of Protein
Employees in the Fixed Bene-fit Option of the Ralston Purina Compa-ny Deferred
Compen-sation Plan for Key Employees.
(vi) The par-ties to this Agree-ment hereby ac-knowl-edge and agree that
the amounts paid by Ralston to U.S. Pro-tein Subsid-iaries pursu-ant to
this Section 6.9(h) shall be treated for all Tax purposes as if such amounts
were contributed by Stock-holder to the relevant U.S. Protein Subsidiary
immediate-ly prior to the Ini-tial Completion Date and, according-ly,
acknowl-edge and agree that such payment will not result in a current Tax
deduc-tion to Ralston or any Subsidiary of Ralston and will not result in the
current recognition of income by Du Pont or any Sub-sid-iary of Du Pont. The
par-ties to this Agreement fur-ther agree to take no posi-tion on any Tax
Re-turn, or in any audit or judi-cial or admin-is-trative proceeding or
other-wise that is incon-sis-tent with the imme-diately preceding sentence.
(vii) Effective as of the Initial Com-pletion Date, all of Ralston's
obligations under the 1996 Split Dollar Second-To-Die Plan (the "Survivor Life
-------------
Insurance Plan") including, but not limited to, the obligation to pay any
- ---------------
premiums on life insurance policies subject to such Plan (the "Poli-cies"),
- ---- ---------
shall cease with respect to the Transferred Employees who participated in the
- --
Plan immediately prior to the Initial Completion Date ("Sur-vi-vor Life
---------------
Participants"). Promptly following the Initial Completion Date, Ralston shall
------
be reim-bursed for all premi-ums paid with respect to such Policies in
accor-dance with the terms of the 1996 Split Dollar Agree-ments and
Collater-al Assignments between Ralston and the Survi-vor Life Participants,
or the trustee of a trust created by the Survivor Life Partic-ipants for the
purpose of holding such Policies (the "Trustees"). Upon reim-burse-ment of
--------
such premiums, Ralston shall release all of its rights under such Collateral
Assign-ments in accordance with their terms, vesting full ownership rights in
the Policies to the Survivor Life Partici-pants or the Trust-ees, as
appro-priate. Du Pont shall cause the appropriate U.S. Protein Subsidiary to
adopt a substan-tially identi-cal Survivor Life Insurance Plan with respect to
all Survi-vor Life Participants, and shall enter into substan-tially identical
Split Dollar Agree-ments and Collateral Assignments with the Survivor Life
Participants, or the Trustees, in accor-dance with such Plan effective
immedi-ately after the Initial Completion Date.
(i) Paid Time Off. As of the Ini-tial Com-pletion Date, Du Pont shall
-------------
cause the U.S. Pro-tein Subsid-iaries to contin-ue to provide paid time off
("PTO") entitlements to the Trans-ferred Employ-ees that are sub-stan-tially
---
equiva-lent to the PTO entitlements of the Trans-ferred Employees under the
PTO policy of the U.S. Protein Subsid-iaries immediately prior to the Ini-tial
Completion Date. Du Pont and the U.S. Subsidiaries shall be responsible
for all PTO benefit obli-gations with respect to the Trans-ferred Em-ploy-ees
that are accrued but unpaid as of the Initial Com-pletion Date, in-cluding but
not limited to PTO days that were "banked" for use during a future sabbatical
leave.
As of the applicable Transfer Date, Du Pont shall cause the
Foreign Protein Subsidiaries to continue to pro-vide vacation entitlements to
the Transferred Foreign Em-ployees that are substantially equivalent to the
vacation entitlement of the Transferred Foreign Employees under the vacation
plans, policies and practic-es applicable to such employees immediately prior
to the applicable Transfer Date. Du Pont and the Foreign Pro-tein
Subsidiaries shall be re-sponsible for all vacation benefit entitlements with
re-spect to the Transferred Foreign Employees that are accrued but unpaid as
of the applicable Transfer Date including, but not limited to vacation days
that were "banked" for future use.
(j) Actions by Du Pont. Any action required to be taken under this
------------------
Section 6.9 by Du Pont, may be taken by a Subsidiary of Du Pont or a Pro-tein
Subsidiary.
(k) Canadian Foreign Funded Employee Benefit Plans. With respect to
----------------------------------------------
any Ralston or Ralston Subsidiary funded Canadian pension plan in which
Foreign Employees or Trans-ferred Foreign Employees participate (the
"Cana-di-an Foreign Funded Benefit Plan"), the Foreign Protein Sub-sid-iaries
-------------------------------
shall make available to the Foreign Employ-ees or Transferred Foreign
Employees who are participants in such Canadian Foreign Funded Benefit Plan a
comparable plan upon the transfer from the Canadian Foreign Funded Bene-fit
Plan to such comparable plan of the Foreign Protein Subsidiary of an amount of
assets sufficient to cover the greater of the ongoing lia-bility or
solvency in respect of all Protein Employees who participate in such Funded
Canadian Foreign Benefit Plan; provided that the trans-fer does not violate
-------- ----
applicable laws, contracts or the terms of the Canadian Foreign Funded
Bene-fit Plan.
(l) Protein Foreign Funded Benefit Plans. With re-spect to any Ralston,
------------------------------------
Ralston Subsidiary or Pro-tein Sub-sidiary funded pension plan in which
only Foreign Employ-ees or Transferred Foreign Employees participate (each, a
"Pro-tein Foreign Funded Benefit Plan"), Du Pont and the Protein Subsidiaries
-------------------------------------
shall assume or retain sole responsi-bility for each such Protein Foreign
Funded Bene-fit Plan. No addition-al assets shall be transferred by Ralston
or any Ralston Subsidiary to Du Pont or the Pro-tein Subsidiaries, or to any
Protein Foreign Funded Benefit Plan, with respect to each such Protein Foreign
Funded Benefit Plan.
(m) Other Ralston Foreign Funded Employee Benefit Plans. Except as
---------------------------------------------------
provided in Section 6.9(l) hereof, with respect to any Ralston or Ralston
Sub-sid-iary funded pension plan in which Foreign Employees or Trans-ferred
Foreign Employees and other Ralston em-ployees participate (each, a "Ralston
-------
Foreign Funded Benefit Plan"), the Foreign Protein Subsidiaries shall make
-----------------------------
available to the Foreign Employees of Transferred Foreign Employees who are
--
participants in such Ralston Foreign Funded Benefit Plan a comparable plan
-
upon the transfer from the Ralston Foreign Funded Benefit Plan to such
-
comparable plan of the Foreign Protein Subsid-iary of an amount of assets
-
sufficient to cover the foreign equiva-lent of the pro-jected benefit
-
obligations in re-spect of all Foreign Employees or Transferred Foreign
-
Employees who partici-pate in such Ralston Foreign Funded Benefit Plan as
-
determined by the mutual agreement of Du Pont's and Ralston's actu-ar-ies or
-
such lesser amount as necessary to prevent the Ralston Foreign Funded Bene-fit
Plan from being funded on less than such projected bene-fit obli-gation
basis with respect to the remaining Plan partici-pants; pro-vided that the
--------- ----
trans-fer of assets does not violate appli-ca-ble laws, con-tracts or the
terms of such Plan.
(n) Foreign Governmental or Quasi-Governmental Employ-ee Benefit Plans.
------------------------------------------------------------------
With respect to Ralston or any Ralston Subsidiary, or any Protein
Subsidiary governmen-tal, quasi-governmental or insured plan employee benefit
plan in which Foreign Employees or Transferred Foreign Employees partici-pate
(each, a "Foreign Book Accrual Benefit Plan"), the Foreign Protein
-------------------------------------
Subsidiaries shall make available to the Foreign Employees or Transferred
-
Foreign Employees a compa-rable plan, or continue to sponsor such Foreign Book
Accrual Benefit Plan on behalf of such employees as applicable, and shall be
responsible for payment of the respective contribu-tions and premiums for each
such Foreign Book Accrual Bene-fit Plan effective as of the Foreign Completion
Date appli-cable with respect to each Foreign Protein Subsidiary, in
accordance with applicable law and any governing documents.
(o) Foreign Book Reserve Benefit Plans. With respect to any Ralston or
----------------------------------
Ralston Subsidiary employee bene-fit plan for which Ralston or any Ralston
Subsidiary, or any Protein Subsidiary, maintains a book reserve and in which
Foreign Employees or Transferred Foreign Employ-ees partici-pate (each, a
"Foreign Book Reserve Benefit Plan"), the Foreign Protein Subsidiaries shall
--------------------------------
make available to the Foreign Employees or Transferred Foreign Employees, a
compa-rable plan, or continue to sponsor such Foreign Book Reserve Benefit
Plan, on behalf of such em-ploy-ees as appropriate, in accordance with
applicable law.
(p) Severance. As of the applicable Transfer Date, Du Pont and the
---------
Protein Subsid-iaries shall retain and be re-sponsible for any and all
severance costs, whether arising before or after the applicable Transfer Date,
under the severance plans, programs and practices of the Protein
Subsidiaries with respect to the Protein Employees except that Ralston shall
be solely responsible for (a) severance costs incurred upon the termination of
employees of Protein Technologies International Financial Services, N.V. as
set forth in Section 6.9(p) of the Ralston Disclosure Schedule and (b)
severance costs in-curred upon the transfer of the Trans-ferred Foreign
Employees from a Ralston Subsid-iary to a Protein Subsidiary.
ARTICLE VIISection .19 Non-Competition, Etc. Non-Competition,
--------------------- ----------------
Etc. Non-Competition, Etc. Non-Competition, Etc.
- ---------------------- ----------------------
(a) Subject to the provisions of this Section 6.10, Ralston agrees that
for a period of ten (10) years from the Initial Completion Date, Ralston and
its successors (which shall include the pet food division and the animal feed
division of Ralston and any Person that (i) Ralston merges into, (ii) Ralston
trans-fers all or any part of its pet food divi-sion or its animal feed
division to (other than any such Person who acquires all or any part of such
divi-sion, unless the voting and equity ownership interest in such Person is
in the aggregate owned directly or indi-rectly fifty percent (50%) or more by
Persons who are in any of the fol-lowing categories: (x) merchant banks,
leveraged buyout organizations, investment banks or other similar buyers who
are commonly known as "finan-cial buy-ers"; (y) em-ploy-ees of the divi-sion
or por-tion there-of being trans-ferred or the trans-feror or (z) Persons who
directly or indirectly owned an equity or voting inter-est in such
trans-ferred division or portion thereof immedi-ately prior to such trans-fer;
pro-vided that the exclu-sion in this paren-theti-cal of certain
--------- ----
transferees of such divi-sion shall not apply to Persons acquiring all or any
---
part of either such divi-sion as part of a spin off, split up or similar
transac-tion), (iii) ac-quires Ralston if, after giving effect to such
acquisi-tion, the share-holders of Ralston immedi-ately prior thereto own at
least fifty per-cent (50%) of the voting or common stock of such ongoing
Person or (iv) is a succes-sive successor (de-fined similarly to the
forego-ing) to a Person de-scribed in clauses (i)-(iii) above) and their
re-spec-tive affil-i-ates (collec-tively, the "Ralston Group") shall not (A)
-------------
manufac-ture or market, directly or indirectly, any-where in the world,
isolated soy protein, soy milk, soy fiber, soy con-centrate or any product
fifty percent (50%) or more of which (on a dry matter basis) is com-prised of
soy protein (collec-tively, "Soy Competitive Prod-ucts"), except that Ralston
-------------------------
may manu-facture or cause to be manufactured any of the Soy Com-peti-tive
Products for use as an ingredient in a different prod-uct manufactured by or
for Ralston for sale to third par-ties, which different product is either (1)
a pet or animal feed or (2) a product less than fifty percent (50%) of which
(on a dry matter basis) is comprised of soy pro-tein; (B) manu-facture in
Europe for sale to others, directly or indi-rect-ly, baby pig, dairy calf or
veal calf soy protein feed ingre-dients, it being understood that the
alter-ation or modifica-tion of such ingredients, or the procurement of
toll-milled or custom-milled products, for use as an ingre-dient in such
feeds, shall not constitute the direct or indirect manufac-ture thereof; or
(C) manufac-ture for sale to others, any-where in the world, any powdered soy
protein product or extract there-of for human consump-tion (each of clauses
(A), (B) and (C) shall consti-tute a "Pro-tein Com-peti-tive Busi-ness") or
--------------------------------
(D) di-rectly or indi-rect-ly own a voting or equity inter-est of ten percent
or more in, man-age, oper-ate, join or con-trol in any manner a Protein
Competitive Busi-ness; pro-vid-ed that it shall not be deemed to be a
---------- ----
viola-tion of clause (D) above for Ralston or any of its Subsid-iaries to own
a voting or equity inter-est of less than fifty percent (50%) in any Person
whose gross reve-nues de-rived from Protein Compet-i-tive Business-es are both
less than $50 mil-lion and less than twenty-five percent (25%) of such
Person's total gross reve-nues. Each in-vest-ment made by Ralston,
Stock-holder or any of their re-spective Sub-sid-iaries which is sub-ject to
the provi-sions of this Section 6.10 must be permis-sible hereun-der at the
time of such invest-ment and, except in the case of Novogen Limit-ed,
there-after; provided further that each member of the Ralston Group shall have
-------- -------
twenty-four (24) months to divest itself of any in-vest-ment that com-plied
with this section when made but which at any time there-after failed to so
com-ply, such twenty-four (24) months to be mea-sured from the date of such
non-compli-ance.
(b) For a period of three years (except with re-spect to non-exempt
persons for whom it shall be one year) after the Ini-tial Com-ple-tion Date,
Ralston and the other members of the Ralston Group shall not, di-rect-ly or
indi-rect-ly, (i) in-duce, en-cour-age or attempt to induce any offi-cer,
em-ploy-ee, repre-sen-ta-tive or agent of Du Pont or any of its affil-iates,
in-cluding any Protein Sub-sid-iary, engaged pri-marily in the Busi-ness to
leave the employ of Du Pont or any such affili-ate, or vio-late the terms of
any such Person's con-tracts, or any em-ploy-ment ar-range-ments, with Du Pont
or any such affil-i-ate or (ii) hire any such officer, em-ployee,
repre-senta-tive or agent of Du Pont or any of its affiliates except with the
prior approval of Du Pont (which will not be unreasonably withheld);
pro-vid-ed that the fore-go-ing re-stric-tion con-tained in clause (ii) above
- ----
shall not apply with respect to any Person from and after such time as such
Person's employ-ment with Du Pont and all of its affili-ates shall have been
termi-nated by Du Pont and its affil-iates.
(c) Notwithstanding anything to the contrary con-tained in subsection
(a) of this Section 6.10, neither Ralston nor any member of the Ralston Group
shall be deemed to have violat-ed the restric-tions con-tained in this Section
6.10 in the event that Ralston or any member of the Ralston Group should
as part of an acqui-si-tion, by joint ven-ture, merger, asset pur-chase, stock
purchase or other busi-ness combi-na-tion acquire a voting or equity interest
greater than that permitted by subsec-tion (a) of this Sec-tion 6.10 in any
Person engaged in a Protein Competi-tive Business if (i) the revenue derived
from such Pro-tein Com-petitive Busi-ness is less than 50% of the gross
reve-nues of the Per-son, and (ii) Ralston or such member of the Ralston Group
divests such por-tion of the Pro-tein Com-peti-tive Busi-ness to comply with
the restric-tions con-tained in subsection (a) of this Section 6.10 within
twenty-four (24) months from the date of such acqui-si-tion.
(d) The parties covenant and agree that no por-tion of the shares of Du
Pont Common Stock to be received in the Mergers and Foreign Exchanges is
attributable to the provi-sions of this Section 6.10. The parties further
cove-nant and agree to take all financial and Tax report-ing positions
con-sistent with such allocation.
(e) Ralston and Du Pont acknowledge that this Sec-tion 6.10 constitutes
an independent covenant and shall not be affected by performance or
nonperformance of any other provi-sion of this Agreement. Each of Ralston and
Du Pont repre-sents that it believes that the cove-nants set forth in
this Sec-tion 6.10 are reason-able and proper. It is the desire and intent of
the parties that the provi-sions of this Section 6.10 shall be en-forced to
the full-est extent permis-sible under applica-ble law. If all or part of
this Section 6.10 is held inval-id, illegal or incapable of being enforced by
any law or public policy, all other terms and provisions of this Agree-ment
shall nevertheless remain in full force and effect. If any part of this
Section 6.10 is held to be excessively broad as to dura-tion, scope, activity
or sub-ject, such part will be construed by limiting and reducing it so as to
be en-forceable to the maximum extent compatible with appli-cable law.
ARTICLE VIISection .20 Use of Names and Marks Use of Names and
---------------------- ----------------
Marks Use of Names and Marks Use of Names and Marks.
--- -------------------------- --------------------------
(a) Anything in this Agreement to the contrary notwithstanding, Du Pont
agrees that, except with respect to the Fuji Joint Venture, it shall, and
shall cause its Sub-sid-iar-ies to, as soon as practi-ca-ble after the
Ini-tial Comple-tion Date and in any event within six months thereaf-ter,
cease to (i) make any use of the names "Ralston," "Purina," "Ralston Purina,"
"Checkerboard Square," the Checkerboard logo and any ser-vice marks,
trade-marks, trade names, iden-tifying sym-bols, logos, emblems, signs or
insig-nia owned by or li-censed to Ralston or its Subsidiaries relat-ed
there-to or con-tain-ing or com-pris-ing the fore-go-ing, includ-ing any name
or mark con-fus-ingly similar thereto (the "Ralston Marks"), and (ii) hold
-------------
itself out as having any affili-ation with Ralston or any of its
Subsid-iar-ies other than as suc-cessor to the Busi-ness. In fur-ther-ance
there-of, as prompt-ly as prac-ti-ca-ble but in no event later than six months
fol-lowing the Effec-tive Time, Du Pont shall, and shall cause its
Subsid-iar-ies to, re-move, strike over or other-wise oblit-erate or replace
all Ralston Marks from all mate-rials owned by any Protein Sub-sid-iary,
in-clud-ing, with-out limi-ta-tion, any vehi-cles, busi-ness cards,
sched-ules, statio-nery, containers, packag-ing materi-als, dis-plays, signs,
previ-ously prepared advertising and promo-tion-al mate-ri-als, manu-als,
forms, com-put-er soft-ware and other mate-ri-als. Anything in this
Agree-ment to the contrary notwith-standing, Du Pont acknowledges that the
rights in and/or related to the Fuji Joint Venture assigned to Du Pont or to
one or more of its Subsidiaries, do not include rights in the "Purina"
trademark or trade name except to the extent necessary to require Fuji Oil
Company, the Fuji Joint Ven-ture or other Person in which Fuji Oil Company has
an inter-est, permanently to discontinue the use and registration of any
trademark or trade name consisting of or containing the word "Purina." Du
Pont agrees to exert its reasonable best efforts to obtain such discontinuance
within twenty-four (24) months following the Initial Completion Date. Ralston
agrees to refrain from exer-cis-ing such right for a period of twenty-four
(24) months following the Ini-tial Completion Date in the interest of
facilitating the said joint venture's successful transi-tion from use of the
name "Purina" so long as the Fuji Purina joint venture continues as now
structured.
(b) Anything in this Agreement to the contrary notwithstanding, Ralston
agrees that it shall, and shall cause its Subsid-iaries to, as soon as
practica-ble after the Ini-tial Completion Date and in any event within six
months fol-low-ing the last Foreign Closing Date, cease to (i) make any use of
the Trade-marks included within the Intel-lec-tu-al Prop-er-ty to be owned by
Du Pont or any Protein Subsidiary pursu-ant to this Agreement or any names or
marks con-fus-ing-ly simi-lar there-to, and (ii) hold itself out as having any
affil-i-ation with Du Pont or any Surviving Corpo-ration. In fur-ther-ance
there-of, as prompt-ly as prac-ti-ca-ble, but in no event later than six
months fol-lowing the Initial Comple-tion Date, Ralston shall, and shall cause
its Sub-sidiar-ies to, re-move, strike over or other-wise oblit-erate or
replace all Trade-marks included in such Intel-lec-tual Prop-er-ty from all
mate-ri-als not owned by any Protein Subsid-iary, in-clud-ing, with-out
limi-ta-tion, any vehi-cles, busi-ness cards, sched-ules, statio-nery,
containers, packag-ing materi-als, dis-plays, signs, previously prepared
advertising and promo-tion-al mate-ri-als, manu-als, forms, com-puter
soft-ware and other mate-ri-als.
ARTICLE VIISection .21 Related Agreements Related Agreements
------------------ ------------------
Related Agreements Related Agreements. At the Domes-tic Clos-ings,
- ------------------- -------------------
Ralston and Du Pont shall enter into, execute and deliver (a) a transi-tion-al
- ------
services agreement sub-stan-tially in the form attached hereto as Exhibit
D (the "Bridg-ing Services Agree-ment"), (b) a registra-tion rights agree-ment
-----------------------------
substan-tially in the form at-tached hereto as Exhibit E (the "Reg-istration
-------------
Rights Agree-ment"), (c) a tax sharing and indemnification agree-ment
-----------------
substantially in the form attached hereto as Exhibit F (the "Tax Sharing
------- -----------
Agreement"), (d) agree-ments providing for the operations after the Initial
--------
Comple-tion Date of the For-eign PTI Sub-sidiar-ies which are not being
-
transferred on the Initial Completion Date, in-clud-ing to the extent
-
appli-cable the operations to be ac-quired by the New Point-er Sub-sid-iar-ies
-
after the Ini-tial Com-ple-tion Date, on terms con-sis-tent with this
Agree-ment or as the par-ties hereto other-wise agree (the "Operat-ing
----------
Agree-ment(s)"), and agreements dealing with employees conducting sales
------
operations in Canada, Japan, the Philip-pines, Thai-land, Malaysia and
Singapore substantially in the form attached hereto as Exhibit N (the "Sales
-----
Office Employees Agree-ments"), (f) a lease agree-ment relat-ing to the
-----------------------------
head-quar-ters of the Busi-ness in St. Louis, Mis-souri substan-tially in the
-----
form at-tached hereto as Exhib-it I (the "Head-quar-ters Lease"), (g) lease
--------------------
agree-ments related to the space current-ly used by the Busi-ness in the
research facili-ty in St. Louis, Missouri sub-stan-tially in the form attached
hereto as Exhibits J-1 and J-2 (the "R&D Lease") and (h) a com-mod-i-ties
---------
purchasing agreement substantially in the form at-tached hereto as Exhibit M
(the "Commodities Purchas-ing Agree-ment"). At or prior to the Domes-tic
------------------------------------
Closings, Ralston and the Pro-tein Subsidiar-ies shall enter into, execute and
deliver a li-cense-back of cer-tain Intel-lec-tu-al Prop-er-ty sub-stan-tially
in the form at-tached hereto as Exhib-it K (the "Intel-lectual Proper-ty
-----------------------
Assignment").
-----
ARTICLE VIISection .22 Reorganization Reorganization
-------------- --------------
Reorganization Reorganization. The parties hereto intend each of the
------ --------------
Mergers and each of the Foreign Exchanges to qualify as a reorganiza-tion
under section 368(a) of the Code. Each party and its affili-ates shall use
all reason-able efforts to cause the Merg-ers and the Foreign Exchanges to so
qualify. The parties hereto and their respective Subsidiaries and other
affiliates shall not (a) take any ac-tion, including any trans-fer or other
dispo-si-tion of assets or any inter-est in the Protein Subsidiaries before or
after the Domestic Clos-ings and the Foreign Closings, that would cause
any Merger or any Foreign Exchange not to qualify as a reor-gani-zation within
the mean-ing of section 368(a) of the Code and any comparable state or local
tax stat-ute or (b) enter into any contract, agree-ment, com-mitment or
arrange-ment to take any such action; provided that the parties hereto
-------- ----
expressly agree that Du Pont shall be permitted to transfer the stock of any
or all of the Protein Subsidiaries to a controlled (within the meaning of
Section 368(c) of the Code) Subsid-iary of Du Pont at any time following the
rele-vant Domestic Closing or Foreign Closing, as the case may be.
ARTICLE VIISection .23 Cash and Bank Accounts. Cash and Bank
---------------------- -------------
Accounts. Cash and Bank Accounts. Cash and Bank Accounts.
---- ------------------------- ----------------------
(a) With respect to U.S. Protein Subsidiaries, until the Initial
Com-pletion Date, Ralston shall continue to employ cash management practices
consistent with those em-ployed immediately prior to the date of this
Agreement, in-cluding (i) continuing to col-lect funds generated from the
Business from bank accounts of Ralston and the U.S. Protein Subsidiaries and
through Ralston's standard cash management transfer system; and (ii)
continuing to fund the bank ac-counts of Ralston and the U.S. Protein
Subsidiaries in connection with cash dis-bursements related to the Business.
(b) The following provisions of this subsection (b) are subject to
Section 6.14(e) hereof. All col-lec-tion and dis-burse-ment bank ac-counts of
the U.S. Pro-tein Subsid-iaries existing as of the Initial Comple-tion
Date, including the balances therein, shall be retained at Closing by such
U.S. Protein Subsidiar-ies, which shall retain lia-bility with respect to all
checks or other drafts or with-drawals written on all such accounts prior to
the Closing. Notwithstanding the foregoing, it is the inten-tion of the
parties that the book cash balance of the U.S. Pro-tein Subsid-iaries, in the
aggre-gate, as of 11:59 PM on November 30, 1997 shall be zero, and to the
extent that the actual bal-ance, determined in the ordi-nary course
con-sis-tent with past practices, is negative, Ralston shall pay to Du Pont an
amount equal to such short-fall. To the extent that the actual book cash
balance is positive, Du Pont shall remit to Ralston the amount of such excess
over zero. Prior to any such payment, Ralston shall have the opportunity to
review the books and records of the U.S. Pro-tein Subsidiar-ies and to confirm
transactions with banks utilized by them in order to verify amounts to be
paid. All disbursement bank ac-counts of Ralston which are utilized by the
Business prior to the Ini-tial Completion Date shall be retained at Closing by
Ralston, which shall retain liability with re-spect to all checks or other
drafts or withdrawals written on all such accounts prior to 11:59 PM on
November 30, 1997. At Clos-ing, no other checks or other drafts or
with-drawals of the Busi-ness shall be made against such ac-counts, except as
may be pro-vided in the Bridging Services Agree-ment. All bona fide checks
and other instru-ments depos-ited in Ralston accounts or accounts of the U.S.
Protein Subsid-iaries prior to the Initial Com-pletion Date and related to the
operations of the Business which are returned to such accounts thereaf-ter
shall be assigned to and shall become the responsibility of Du Pont, and Du
Pont shall reimburse Ralston as soon as practicable for all such items
re-turned to Ralston accounts upon the transfer to Du Pont of all rights
relating to such checks or instruments and the re-ceipt by Du Pont or a
Pro-tein Subsid-iary of pay-ment in cash in respect of such re-turned items;
pro-vid-ed that such reim-burse-ment shall be limit-ed to the amount actually
--------- ----
re-ceived by Du Pont or a Protein Subsid-iary and Du Pont shall use reasonable
best efforts to collect such checks in full.
(c) The following provisions of this subsection (c) are subject to
Section 6.14(e) hereof. With respect to Foreign Protein Subsidiaries, until
11:59 PM on November 30, 1997, Ralston shall employ cash manage-ment
practices, through capital contribu-tions, divi-dends or other distribu-tions,
or other-wise as appropri-ate, in a manner designed to provide that as of
such time the aggregate book cash balance of the Foreign Protein Subsid-iaries
(other than amounts placed in escrow accounts in defeasance of outstand-ing
Indebtedness of any of the Foreign Protein Subsidiaries) will be One Million
Eight Hundred Thousand Dollars ($1,800,000), and that such aggre-gate amount
will be allo-cated among the various Foreign Protein Subsidiaries as necessary
to provide for their respec-tive ordinary cash requirements. To the extent
that the actual aggregate book cash balance is less than One Million Eight
Hundred Thousand Dollars ($1,800,000), Ralston shall pay to Du Pont an amount
equal to such shortfall. To the extent that the actual aggregate book cash
balance is in excess of Two Million Dollars ($2,000,000), Du Pont shall issue
shares of Du Pont Common Stock to Ralston which are equal in value, based on
the closing sale price of Du Pont Common Stock at the time of issuance, to the
amount of the excess over One Mil-lion Eight Hun-dred Thousand Dol-lars
($1,800,000). Prior to any such payment or issu-ance, Ralston shall have the
oppor-tunity to review the books and records of the Foreign Pro-tein
Subsid-iaries and to confirm transactions with banks utilized by them in order
to verify amounts to be paid or issued. On and following the Initial
Completion Date, even if the Closings with respect to any Foreign Protein
Subsid-iaries have not occurred, Ralston shall no longer authorize divi-dends
or other distri-butions to be made by, or capital contributions to be made to,
any Foreign Protein Subsidiar-ies, and any funding of cash needs of such
Subsidiaries for which Closings have not occurred shall be made by Du Pont
pursuant to the terms of the re-spective Operating Agree-ments. In addition
to the foregoing, PTI Argentina shall have an aggregate book cash balance of
Eight Hun-dred Sev-enty Two Hundred Thousand Dol-lars ($872,000) and Pointer
shall have an aggregate book cash balance of Two Mil-lion Eight Hun-dred
Thousand Dol-lars ($2,800,000), which amounts shall be excluded from the
calculation of the $1,800,000 and the $2,000,000 amounts set forth above.
(d) Separate from and without otherwise limiting or affecting the
provisions of Section 6.14(b) hereof, (i) Fiber Sales shall have at the
Effective Time an addition-al amount of Nine Million Dollars ($9,000,000) in
cash (the "Excess Cash") and (ii) Ralston shall pay an additional $1,850,080
-----------
to PTI on or promptly following the Initial Com-ple-tion Date.
(e) The parties have determined, in accor-dance with and subject to
Section 2.5(a)(iv) hereof, that the eco-nom-ics of the Closings shall be such
as to transfer economic owner-ship of cash flows of the Busi-ness to Du Pont
as of 11:59 PM (local time) on November 30, 1997 rather than the Initial
Completion Date. According-ly, the calculations set forth above in
subsections (b) and (c) of this Section 6.14 shall be subject to further
adjust-ment, as set forth below. Ralston shall keep track of (x) all cash
receipts of the Protein Subsidiaries, minus (y) the sum of all cash
dis-bursements of, and cash con-tributions by Ralston or a Sub-sidiary thereof
(other than a Protein Sub-sidiary) to, the Protein Subsidiaries during
the period from 11:59 PM on November 30, 1997 to 12:01 AM on December 3, 1997
(such amount, the "Ad-just-ment Amount") and shall inform Du Pont promptly
--------------------
upon calcu-lating the Adjust-ment Amount. Cash receipts shall include checks
received. Du Pont shall have the right to review Ralston's calcu-la-tion of
the Ad-justment Amount and the back-up there-for. In the event of any
dis-pute between the par-ties, they shall use their best efforts to resolve
it. In the event the parties agree, or it is otherwise conclu-sively
deter-mined, that (i) the Ad-justment Amount is nega-tive, Du Pont shall
deliver addition-al shares of Du Pont Common Stock, or (ii) the Adjustment
Amount is positive, Ralston shall deliver shares of Du Pont Common Stock back
to Du Pont, in each case with an aggregate value (based on the market price of
Du Pont Common Stock at the time of delivery or redelivery) equal to such
Adjustment Amount. Such shares of Du Pont Common Stock shall be deliv-ered
for the benefit of, or redelivered on behalf of, the appropriate Protein
Subsidiar-ies, based on what the calcula-tion of such Adjust-ment Amount would
be for such Protein Subsidiary separately.
ARTICLE VIISection .24 Industrial Revenue Bonds and Other Real Estate
----------------------------------------------
Issues Industrial Revenue Bonds and Other Real Estate Issues
------ ---------------------------------------------------------
Industrial Revenue Bonds and Other Real Estate Issues Industrial Revenue
--------------------------------------------------- ------------------
Bonds and Other Real Estate Issues.
--------------------------------------
(a) Certain facilities, equipment and other pro-jects located at Pryor,
Oklahoma (the "Projects") are the subject of various loan agreements (the "IRB
-------- ---
Loan Agree-ments") or lease agree-ments (the "IRB Lease Agreements")
----------------- --------------------
entered into in con-nection with the issuance by the Oklahoma Ordinance Works
Authority (the "Authority") of various tax exempt bond issues (the "Bonds").
--------- -----
The IRB Loan Agreements, the IRB Lease Agree-ments and the Bonds are listed in
Section 6.15 of the Ralston Dis-closure Schedule. Ralston shall remain liable
for all debts, liabili-ties, payments and obli-ga-tions (including financial
re-porting obliga-tions) with respect to the IRB Loan Agreements, the IRB
Lease Agreements and the Bonds, except as otherwise herein agreed, and shall
hold and save Du Pont, and PTI (or any other Protein Subsid-iary operating the
Projects) harmless from the foregoing includ-ing any costs of admin-is-tration
reasonably incurred and any losses sus-tained as a result of Ralston's failure
to per-form, comply with or pay such debts, liabilities, pay-ments and
obliga-tions, includ-ing without limitation any and all lia-bility to
bond-holders or any other person in the event any such bonds cease to be
deemed tax-exempt. Except as set forth below, Ralston shall sublease the
Projects which are the subject of the IRB Lease Agree-ments to PTI, which
sub-lease shall be substantially in the form attached hereto as Exhib-it L.
Ralston cove-nants and agrees that upon the defea-sance or maturity by reason
of accelera-tion, re-demption or other-wise of the bond indebted-ness relating
to the Pro-jects which are the subject of the IRB Lease Agree-ments, or upon
the reason-able request of Du Pont or PTI, Ralston will timely and promptly
acquire fee title there-to and transfer such fee title to PTI or another
desig-nated Protein Subsid-iary. Ralston also cove-nants and agrees that it
will, on the Initial Completion Date, send appropri-ate notice to the
Authority and to each trustee under the inden-tures pursuant to which the
Bonds were issued of the assign-ments, subleases and conveyances pursuant to
the provi-sions hereof, all as may be required by the terms of such Bonds or
inden-tures.
(b) Du Pont agrees to cause PTI, or any other Sub-sidiary operating the
Projects, to permit the respec-tive issuers or trustees with respect to the
Bonds, or their duly authorized agents, to enter its facilities for the
pur-pose of examination and inspection of said Projects, at all reasonable
times during normal business hours, subject to any other rights which Ralston
may have under the indentures or other agree-ments related to the Bonds.
ARTICLE VIISection .25 Interim Operations of Du Pont Interim
----------------------------- -------
Operations of Du Pont Interim Operations of Du Pont Interim Operations
----------------- ----------------------------- ------------------
of Du Pont. Du Pont covenants and agrees that, except as set forth in
------------
Section 6.16 of the Du Pont Disclosure Schedule or as con-sented to by Ralston
in writing, after the date here-of, and prior to the Effective Time:
(a) the business of Du Pont and its Sub-sidiar-ies shall be conducted in
all material respects only in the ordi-nary and usual course of business;
(b) it shall not declare, set aside or pay any dividend or other
distribution payable in stock or property (other than in cash) with respect to
its capital stock if such action has a materi-al adverse impact on Du
Pont's stock price;
(c) it shall not split, combine or re-classify any of its shares of
capital stock unless appro-priate adjustment is made to the Merger Conversion
Ratios and the number of Du Pont Shares to be issued pursuant to the Foreign
Exchanges;
(d) it shall not adopt, as to itself, a plan of com-plete or par-tial
liquidation, dissolution, merg-er, con-soli-dation, re-struc-tur-ing,
recapitalization or other reorga-niza-tion; and
(e) it shall not take, omit to take, agree to take, or agree not to
take, any action that would: (i) make any representation or warranty of Du
Pont or its Subsidiar-ies contained herein inaccurate in any respect at, or as
of any time prior to, the Effective Time or (ii) cause or be reason-ably
likely to result in any of the condi-tions to the transac-tions contemplated
by this Agreement not being satis-fied or materially impair the ability of Du
Pont or its Subsidiaries to consummate such transactions.
ARTICLE VIISection .26 Delivery of Surveys and Title Poli-cies
---------------------------------------
Delivery of Surveys and Title Poli-cies Delivery of Surveys and Title
------------------------------------------ -----------------------------
Poli-cies Delivery of Surveys and Title Poli-cies. Ralston agrees that it
------- ---------------------------------------
shall, and shall cause its Subsidiaries to, deliver to Du Pont copies of
all sur-veys and title policies relating to each of the manufactur-ing
facil-i-ties of the Business located in the United States and the appropriate
evidence of ownership of the manu-fac-tur-ing facility in Belgium prompt-ly
upon the re-ceipt of such sur-veys, title poli-cies and evidence of ownership.
ARTICLE VIISection .27 Access to Information.
-----------------------
(a) From and after the Initial Completion Date, Du Pont shall cause the
Protein Subsidiaries to afford Ralston, and Ralston shall afford to Du Pont,
and their respective agents, employees, accountants, counsel and other
designated representatives, reasonable access and duplicat-ing rights during
normal business hours to all records, books, con-tracts, instru-ments,
computer data and other data and infor-mation (collec-tively, "Information")
-----------
within such Person's possession relating to the Protein Subsidiaries'
busi-ness-es, assets or lia-bil-ities, inso-far as such access is reason-ably
requested by such other party. Without limiting the forego-ing, such
Information may be requested under this Section 6.18 for audit, accounting,
claims, litigation and Tax purposes, as well as for purposes of fulfilling
disclo-sure and reporting obligations.
(b) In connection with any liabilities assumed or retained by either
Ralston, on the one hand, or Du Pont or any of the Protein Subsidiaries, on
the other hand, each of the parties hereto shall, and shall cause their
respective agents and employees to, aid, cooperate with and assist the other
party or parties in their defense of such assumed or retained litigation or
liabilities, by, among other things, providing such other party or parties
with full access to pertinent records at such times as such other party or
parties may rea-son-ably re-quest, and making avail-able for depo-si-tions,
testimo-ny or other consul-tation, such officers, employees or agents as such
party or parties may reasonably request without cost to such party or parties
except for reimburse-ment by it or them of reasonable out-of-pocket
expenditures incurred in connec-tion with such cooper-ation and assistance.
ARTICLE VIISection .28 Insurance Insurance Insurance
--------- --------- ---------
Insurance. Ralston agrees to take on a timely basis the following actions
-----
with respect to the insur-ance poli-cies referred to below (the actions
specified in subsections (a) (the second sentence thereof) and (b) shall be
taken prior to the Ini-tial Com-ple-tion Date):
(a) Ralston's current and prior liability insur-ance policies that
provide coverage in respect of the opera-tions or activities of the Business
on an occurrence basis shall be maintained by Ralston for all occurrences
which take place prior to the Initial Completion Date. In addi-tion, Ralston
shall ob-tain, for a period of six years, Cover-age B Dis-covery Cover-age for
occur-rences prior to the Ini-tial Comple-tion Date under poli-cies
issued by XL (Pol-icy XLUMB-00373, $75MM Limit) and ACE (Policy RAL-5059/5,
$150MM Limit) which are part of the cur-rent Ralston program. When Du Pont
becomes aware of a possible claim, Du Pont shall notify Ralston in a timely
manner and Ralston will re-ceive full coop-er-a-tion from Du Pont in pursuing
such claim under the insur-ance cover-age.
(b) The current Ralston Purina Property and Busi-ness Inter-ruption
coverage provided by Ameri-can Guaran-tee and Liability Insurance Co. (Binder
No. PPR6884311-03) shall be extended to include all of the Business sites that
are cur-rently covered in the global program until August 31, 1999. This
extension will not include coverage for flood or earthquake. Du Pont, an
affil-i-ate of Du Pont or a Pro-tein Sub-sid-iary will be a named in-sured and
sole loss payee for any Busi-ness-relat-ed loss.
(c) Any open claims filed with insurers on behalf of a Protein
Subsidiary, not settled prior to the Initial Completion Date, shall con-tin-ue
to be settled by Ralston and any pro-ceeds shall be payable to a Protein
Subsidiary or Du Pont.
(d) Ralston shall bear the full cost of insur-ance coverages as required
above, as well as any costs asso-ciated with the pursuit of claims
payment from the insurance carri-ers.
(e) Failure of Ralston to complete any of the above requirements shall
not absolve it of the responsibili-ty of indemnifying Du Pont and the Protein
Subsidiaries to the extent provided herein (including pursuant to Section
9.2(a)(vi) hereof). Without limiting the foregoing, Ralston agrees to take
all action necessary to keep the insur-ance coverages described above in full
force and effect and to timely pursue all rights and remedies thereunder.
(f) Ralston hereby assigns to Du Pont any amounts payable to Ralston or
a Subsidiary of Ralston under any insurance policy referred to in this Section
6.19 to the extent that such amounts would constitute Damages (as
de-fined in Section 9.2(a) hereof) in respect of which a Du Pont Indemnified
Party (as defined in Section 9.2(a) hereof) would be entitled to be
indemnified under Section 9.2(a) hereof with-out regard to the limi-ta-tions
set forth in Sec-tion 9.2(c) here-of. To the extent any further
docu-menta-tion or instru-ments are reason-ably request-ed by Du Pont or are
necessary to cause such as-sign-ment to be effec-tive, Ralston agrees to
promptly execute the same.
ARTICLE VIISection .29 Novogen Novogen Novogen Novogen.
------- ------- ------- -------
Ralston shall timely make all payments required to be paid by it, and perform
all other obligations to be performed by it, under the equity pur-chase
agree-ment con-tem-plat-ed by the Purchase Agreement, dated November 14, 1997,
between Ralston and Novogen Limit-ed.
ARTICLE VIII CONDITIONS CONDITIONS CONDITIONS CONDITIONS
ARTICLE VIIISection .10 Conditions to Each Party's Obliga-tion to
-----------------------------------------
Effect the Mergers Conditions to Each Party's Obliga-tion to Effect the
----------------- ----------------------------------------------------
Mergers Conditions to Each Party's Obliga-tion to Effect the Mergers
----- -------------------------------------------------------------
Conditions to Each Party's Obliga-tion to Effect the Mergers. The respective
------------------------------------------------------------
obliga-tion of each party to effect the Mergers shall be subject to the
satis-faction or waiver on or prior to the Initial Completion Date of each of
the fol-lowing conditions:
(a) No statute, rule, order, decree or regu-la-tion shall have been
enact-ed or pro-mul-gat-ed by any for-eign or domes-tic Gov-ern-mental Entity
(and be in effect) which pro-hib-its the con-sum-mation of any of the Mergers
or the PTIBV Exchange.
(b) There shall be no order or in-junc-tion of a foreign or United
States feder-al or state court or other Governmental Entity of competent
juris-diction in effect pre-cluding, restrain-ing, enjoining or prohibit-ing
consum-ma-tion of the Mergers.
(c) The expiration or early termi-na-tion of all applicable waiting
periods under the HSR Act shall have oc-curred and all governmental
authorizations or approvals re-quired in connection with the transactions
contemplated by this Agreement shall have been obtained or given, other than
those authorizations and approvals, the fail-ure of which to have been
obtained, would not, in the aggregate, have a Mate-rial Adverse Effect on the
Busi-ness, taken as a whole.
(d) Between the date of this Agreement and the Effec-tive Time, there
shall not have occurred, and then be in effect, any delisting on The New York
Stock Ex-change of the Du Pont Shares.
ARTICLE VIIISection .11 Conditions to Obligation of U.S. Protein
----------------------------------------
Subsidiaries to Effect the Mergers Conditions to Obligation of U.S.
---------------------------------- --------------------------------
Protein Subsidiaries to Effect the Mergers Conditions to Obligation of
------------------------------------------ ---------------------------
U.S. Protein Subsidiaries to Effect the Mergers Conditions to Obligation
---------------------------------------------- ------------------------
of U.S. Protein Subsidiaries to Effect the Mergers. The obli-ga-tions of each
-------------------------------------------------
U.S. Protein Subsidiary to effect the Merg-ers shall be sub-ject to the
satis-fac-tion or waiver on or prior to the Initial Comple-tion Date of the
fol-low-ing addi-tional condi-tions:
(a) Du Pont and the Du Pont Merger Subsidiar-ies shall have each
per-formed or complied in all material re-spects with all obli-ga-tions and
agree-ments required to be performed or com-plied with by it under this
Agreement at or prior to the Effec-tive Time.
(b) The representations and warranties of Du Pont and the Du Pont
Merger Subsidiaries contained in this Agree-ment shall be true and correct in
all material respects at and as of the Effective Time as if made at and as of
such date, and the aggregate effect of all inaccura-cies in the
repre-sen-ta-tions and war-ran-ties of Du Pont and the Du Pont Merger
Subsidiaries con-tained in this Agree-ment (without taking into account any
qualifi-ca-tions, exceptions or limi-tations as to materiality or Material
Adverse Effect con-tained in such repre-sen-ta-tions and war-ran-ties) as if
made at and as of the Effec-tive Time, did not and would not have a Mate-rial
Ad-verse Effect on Du Pont and its Subsid-iaries, taken as a whole.
(c) From the date of this Agreement through the Effective Time, there
shall not have been any event, fact, condition, change or effect that is,
or is reason-ably likely to be, materially adverse to the condi-tion
(fi-nan-cial or other-wise), as-sets, busi-ness-es or re-sults of opera-tions
of Du Pont and its Subsid-iaries, taken as a whole.
(d) Such licenses, permits, con-sents, approv-als, authoriza-tions,
qualifications and orders of Govern-mental Entities and other third par-ties
as are neces-sary in connec-tion with the Mergers shall have been ob-tained,
except where the failure to obtain such licens-es, per-mits, consents,
ap-provals, authoriza-tions, quali-fica-tions and orders would not,
individu-ally or in the aggre-gate with all other fail-ures, reasonably be
expected to have a Material Adverse Effect on Ralston and its Subsid-iaries
(other than the Protein Subsid-iaries, taken as a whole) or Du Pont and its
Subsidiaries, taken as a whole.
(e) Stockholder shall have received a cer-tifi-cate from the Vice
President and General Manager of Du Pont's Agri-cul-tur-al Prod-ucts
Divi-sion, dated the Clos-ing Date, to the effect that the condi-tions set
forth in paragraphs (a), (b), (c) and (d) above have been satis-fied.
(f) Du Pont shall have executed and delivered to Ralston the
Registration Rights Agreement, the Bridging Ser-vices Agreement, the Tax
Sharing Agree-ment, the Head-quar-ters Lease and the R&D Lease.
(g) Ralston shall have received the opinion of tax counsel to Ralston
to the effect that (i) the Mergers and the Foreign Ex-changes will each
consti-tute a reorga-niza-tion for United States feder-al income tax purposes
within the meaning of section 368(a) of the Code and (ii) Du Pont, each of the
Du Pont Merger Sub-sid-iaries, each of the U.S. Pro-tein Subsid-iaries and
each of the Foreign Protein Subsid-iaries -will be a party to their
respec-tive reor-gani-za-tions within the mean-ing of sec-tion 368(b) of the
Code. Ralston and Du Pont shall each deliver to Ralston's tax counsel
representation letters relat-ing to each of the Merg-ers and each of the
For-eign Ex-chang-es quali-fying as a reor-gani-zation for United States
feder-al income tax pur-poses within the meaning of section 368(a) of the
Code, substan-tially in the form at-tached hereto as Exhibits G-1 and G-2 (in
the case of Du Pont) and Exhibits H-1 and H-2 (in the case of Ralston). Such
representation letters of Ralston and such representa-tion letters of Du Pont
shall con-stitute repre-senta-tions and war-ran-ties of Ralston and Du Pont,
re-spec-tive-ly.
ARTICLE VIIISection .12 Conditions to Obligation of the Du Pont U.S.
--------------------------------------------
Merger Subsidiaries to Effect the Mergers Conditions to Obligation of the
- ------------------------------------------ -------------------------------
Du Pont U.S. Merger Subsidiaries to Effect the Mergers Conditions to
- ------------------------------------------------------------ -------------
Obligation of the Du Pont U.S. Merger Subsidiaries to Effect the Mergers
- ------------------------------------------------------------------------------
Conditions to Obligation of the Du Pont U.S. Merger Subsidiaries to Effect the
- ------------------------------------------------------------------------------
Mergers. The obligations of the Du Pont Merger Subsidiaries to effect
-------
the Mergers shall be subject to the satis-fac-tion or waiver on or prior to
the Closing Date of the follow-ing addi-tion-al condi-tions:
(a) Ralston, Stockholder and the Protein Subsid-iar-ies shall each
have per-formed or com-plied in all mate-ri-al respects with all obligations
and agree-ments re-quired to be per-formed or complied with by it under this
Agreement at or prior to the Effective Time.
(b) The representations and warranties of Ralston and Stockholder
con-tained in this Agree-ment shall be true and cor-rect in all material
respects at and as of the Effec-tive Time as if made at and as of such date,
and the aggre-gate effect of all inaccura-cies in the repre-sen-ta-tions and
war-ran-ties of Ralston, Stockholder and the Protein Subsid-iaries con-tained
in this Agree-ment (with-out taking into account any quali-fica-tions,
exceptions or limita-tions as to materi-ality or Material Adverse Effect
con-tained in such repre-senta-tions and war-ran-ties) as if made at and as of
the Effec-tive Time, did not and would not, have a Mate-rial Ad-verse
Effect on the Busi-ness, taken as a whole.
(c) From the date of this Agreement through the Effective Time, there
shall not have been any event, fact, condition, change or effect that is, or
is reason-ably likely to be, materially adverse to the condi-tion (fi-nan-cial
or other-wise), as-sets, busi-ness-es or re-sults of opera-tions of the
Protein Subsidiaries, taken as a whole.
(d) Such licenses, permits, con-sents, approv-als, authoriza-tions,
qualifications and orders of Govern-mental Entities and other third par-ties
as are neces-sary in connec-tion with the Mergers or the transfer of any
assets to be transferred hereunder shall have been ob-tained, except where the
fail-ure to obtain such licens-es, per-mits, con-sents, ap-prov-als,
authori-zations, quali-fica-tions and orders would not, indi-vidu-ally or in
the aggre-gate with all other fail-ures, rea-sonably be expected to have a
Materi-al Adverse Effect on (i) Du Pont and its Sub-sid-iar-ies, taken as
whole or (ii) the U.S. Pro-tein Subsid-iaries, taken as a whole.
(e) Du Pont shall have received a certifi-cate from the Chief Execu-tive
Offi-cer of PTI and the Chief Finan-cial Officer of Ralston, dated the
Clos-ing Date, to the effect that the condi-tions set forth in paragraphs (a),
(b), (c) and (d) above have been satis-fied.
(f) At the Effective Time, there shall not be any out-stand-ing
op-tions, war-rants, calls, pre-emp-tive rights, sub-scrip-tions or other
rights, agree-ments, ar-rangements or com-mitments of any character of Ralston
or any of its Sub-sidiar-ies obligat-ing Ralston or any of its
Subsidiaries to issue, trans-fer or sell or cause to be issued, trans-ferred
or sold any shares of capital stock of, or other equity interest in, the U.S.
Protein Subsid-iar-ies or any Foreign Protein Subsid-iary being acquired
concur-rently with such Closing or any of their respective Subsidiaries or
securi-ties con-vert-ible into or ex-change-able for such shares or equity
interests, or obli-gating Ralston or any of its Sub-sidiaries to grant, extend
or enter into any such option, warrant, call, subscrip-tion or other right,
agreement, arrangement or commit-ment.
(g) Ralston shall have executed and delivered to Du Pont the
Registration Rights Agreement, the Bridg-ing Services Agree-ment, the Tax
Shar-ing Agree-ment, the Headquar-ters Lease, the R&D Lease, the Intel-lectual
Property Assign-ment and the Commodities Purchasing Agree-ment.
(h) Du Pont shall have received the opinion of tax counsel to Du Pont
to the effect that (i) the Mergers and the Foreign Ex-changes will each
consti-tute a reorga-niza-tion for United States feder-al income tax purposes
within the meaning of section 368(a) of the Code and (ii) Du Pont, each of the
Du Pont Merger Sub-sid-iaries, each of the U.S. Pro-tein Sub-sid-iaries and
each of the Foreign Protein Subsid-iaries -will be a party to their
respec-tive reor-gani-za-tions within the mean-ing of sec-tion 368(b) of the
Code. Ralston and Du Pont shall each deliver to Du Pont's tax counsel
representation letters relating to each of the Mergers and each of the
For-eign Ex-chang-es qualifying as a reorga-ni-zation for United States
feder-al income tax pur-poses within the meaning of section 368(a) of the
Code, sub-stan-tially in the form at-tached hereto as Exhibits G-1 and G-2 (in
the case of Du Pont) and Exhib-its H-1 and H-2 (in the case of Ralston). Such
representation letters of Ralston and such representa-tion letters of Du Pont
shall con-stitute representa-tions and war-ran-ties of Ralston and Du Pont,
respectively.
(i) Substantially concurrently with the Merger Closings, the PTIFS
Liquidation and the PTIBV Exchange shall have occurred or be occurring.
ARTICLE VIIISection .13 Conditions to Obligation of Stock-holder to
-------------------------------------------
Effect the Foreign Exchanges Conditions to Obligation of Stock-holder to
----------------------------- -------------------------------------------
Effect the Foreign Exchanges Conditions to Obligation of Stock-holder to
----------------------------- -------------------------------------------
Effect the Foreign Exchanges Conditions to Obligation of Stock-holder to
----------------------------- -------------------------------------------
Effect the Foreign Exchanges. The obliga-tions of Stockholder to effect each
----------------------------
Foreign Exchange shall be subject to the satisfaction or waiver on or prior to
the Foreign Closing Date related thereto of the following additional
conditions insofar as they relate to the Foreign Exchange of applicable
For-eign Protein Shares:
(a) The Domestic Closing shall have oc-curred prior to or simultaneous
with such Foreign Closing.
(b) Such licenses, permits, con-sents, approv-als, authoriza-tions,
qualifications and orders of foreign Govern-mental Entities and other third
par-ties as are neces-sary in connec-tion with such Foreign Closing shall have
been ob-tained, except where the failure to obtain such licens-es,
permits, consents, approvals, authoriza-tions, quali-fications and orders
would not, individu-ally or in the aggregate with all other failures,
reasonably be expected to have a Materi-al Adverse Effect on Ralston and its
Subsidiaries (other than the Protein Subsidiar-ies), taken as a whole, or Du
Pont and its Subsidiar-ies, taken as a whole.
(c) To the extent the following is applicable, if at all, each of the
further conditions set forth in the Sec-tion of the applicable Foreign
Exchange Agreement, if any, entitled "Conditions to Stockholder's
Obli-ga-tions" (all of which may be waived in whole or in part by Stockholder,
which is transferring the shares of stock of such foreign entity) shall
have been satisfied or waived prior to or simultaneous with such Foreign
Closing.
(d) In the case of the PTIBV Exchange, the PTIFS Liqui-d-ati-on--- shall
have occurred no later than immediately prior to such Foreign Clos-ing.
ARTICLE VIIISection .14 Conditions to Obligation of Du Pont to Effect
---------------------------------------------
the Foreign Exchanges Conditions to Obligation of Du Pont to Effect
----------------------- ---------------------------------------------
the Foreign Exchanges Conditions to Obligation of Du Pont to Effect the
---------------------- -------------------------------------------------
Foreign Exchanges Conditions to Obligation of Du Pont to Effect the
----------------- --------------------------------------------------
Foreign Exchanges. The obliga-tion of Du Pont to effect each Foreign Exchange
----------------
shall be sub-ject to the satisfac-tion or waiver on or prior to the Foreign
Closing Date related thereto of the following additional condi-tions insofar
as they relate to the Foreign Exchange of applicable Foreign Protein Shares:
(a) The Domestic Closing shall have oc-curred prior to or simultaneous
with such Foreign Closing.
(b) Such licenses, permits, con-sents, approv-als, authoriza-tions,
qualifications and orders of foreign Govern-mental Entities and other third
par-ties as are neces-sary in connec-tion with such Foreign Closing shall have
been ob-tained, except where the failure to obtain such licens-es,
permits, consents, approvals, authoriza-tions, quali-fications and orders
would not, individu-ally or in the aggregate with all other failures,
reasonably be expected to have a Materi-al Adverse Effect on such Foreign
Protein Subsidiary and its Subsidiar-ies, taken as a whole, or Du Pont and its
Subsid-iaries, taken as a whole.
(c) To the extent the following is applicable, if at all, each of the
further conditions set forth in the Sec-tion of the applicable Foreign
Exchange Agreement, if any, entitled "Conditions to Du Pont's Obli-gations"
(all of which may be waived in whole or in part by Du Pont) shall have been
satisfied or waived prior to or simultaneous with such For-eign Closing.
(d) At such Foreign Closing Date, there shall not be any out-stand-ing
op-tions, war-rants, calls, pre-emp-tive rights, sub-scrip-tions or other
rights, agree-ments, ar-range-ments or com-mitments of any character of such
Foreign Pro-tein Subsidiary being acquired or any of its Subsidiaries
obligat-ing such Foreign Protein Subsidiary or any of its Subsidiaries to
issue, trans-fer or sell or cause to be issued, trans-ferred or sold any
shares of capital stock of, or other equity inter-est in, such Foreign Protein
Subsidiary being acquired concur-rently with such Foreign Closing or any
of its or securi-ties con-vert-ible into or ex-change-able for such shares or
equity interests, or obli-gating such Foreign Protein Subsidiary or any of its
Subsidiaries to grant, extend or enter into any such option, warrant, call,
sub-scrip-tion or other right, agreement, arrangement or commit-ment.
(e) On such Foreign Closing Date, the repre-senta-tion and warranty of
Ralston and Stockholder insofar as it relates to the applicable Foreign
Protein Subsidiary and its Subsidiaries set forth in Sec-tion 4.18 hereof
shall be true and cor-rect as of such Closing Date as though such
repre-senta-tion and warran-ty had been made on and as of such date.
(f) In the case of the PTIBV Exchange, the PTIFS Liqui-d-ati-on--- shall
have occurred prior to or simul-ta-neous with such Foreign Closing. In
the case of the Closings of the Foreign Exchanges relating to PTI Germany and
PTI Mos-cow, the PTIBV Ex-change shall have occurred prior or simul-taneous
therewith.
ARTICLE IX
TERMINATION
ARTICLE IXSection .10 Termination Termination Termination
----------- ----------- -----------
Termination.
-----------
(a) This Agreement may be terminated and the Merg-ers and Foreign
Exchanges contemplated herein may be aban-doned at any time prior to the
Initial Comple-tion Date:
(i) by the mutual consent of the Board of Directors of Du Pont and
the Board of Direc-tors of Ralston; or
(ii) by either Du Pont or Ralston:
(A) if the Mergers shall not have oc-curred by the
close of business on December 8, 1997, or such other date, if any, as Du Pont
and Ralston shall agree upon; pro-vid-ed that the right to ter-mi-nate this
---------- ----
Agree-ment under this Section 8.1(b)(i) shall not be avail-able to any party
whose failure to ful-fill any obli-gation under this Agree-ment has been the
cause of or re-sult-ed in the fail-ure of the Merg-ers to occur on or be-fore
such date; or
(B) if any Governmental Entity shall have issued an
order, decree or rul-ing or taken any other action, in each case per-ma-nently
re-strain-ing, en-joining or other-wise pro-hib-iting any of the Mergers or
the PTIBV Exchange contem-plated by this Agree-ment and such order, de-cree,
ruling or other action shall have become final and nonap-pealable.
(b) This Agreement may be terminated with respect to Foreign Exchanges
not yet consummated and the For-eign Ex-chang-es con-tem-plat-ed herein that
have not yet been consum-mated may be aban-doned at any time after the
Ini-tial Comple-tion Date by either Du Pont or Ralston with respect to any
particular Foreign Ex-change if such For-eign Exchange has not occurred by
December 31, 1999, which date may be extend-ed by the mutual agreement of the
parties hereto (the "Final Termi-nation Date").
-------------------------
ARTICLE IXSection .11 Effect of Termination Effect of Termination
--------------------- ---------------------
Effect of Termination Effect of Termination. In the event of the
----------------------- ---------------------
termination of this Agreement as provided in Section 8.1(a) hereof, written
notice thereof shall forth-with be given to the other party or parties
specify-ing the provi-sion hereof pursu-ant to which such termina-tion is
made, and in the case of any termination pursuant to Section 8.1(a) hereof,
this Agree-ment shall forthwith become null and void, and there shall be no
liability on the part of any party hereto to any other party hereto; provided,
--------
however, that no termination pursuant to Sec-tion 8.1(a) or (b) hereof shall
- -------
relieve any party hereto for liability for any breach of the provisions hereof
prior to the time of such termina-tion.
ARTICLE X SURVIVAL AND INDEMNIFICATION SURVIVAL AND
INDEMNIFICATION SURVIVAL AND INDEMNIFICATION
SURVIVAL AND INDEMNIFICATION
ARTICLE XSection .10 Survival of Representa-tions, War-ran-ties and
----------------------------------------------
Covenants Survival of Representa-tions, War-ran-ties and Covenants
-------- -----------------------------------------------------------
Survival of Representa-tions, War-ran-ties and Covenants Survival of
------------------------------------------------------------ -----------
Representa-tions, War-ran-ties and Covenants.
----------------------------------------------
(a) The repre-sen-tations and warran-ties con-tained in Section 4.9
hereof shall survive all Clos-ings here-under, as well as the termination of
this Agreement pursu-ant to Section 8.1(b) hereof, and remain in full force
and effect until sixty days following the date on which the appli-ca-ble
stat-ute of limi-ta-tions ex-pires. The represen-tations and warranties
con-tained in Section 4.15(c) hereof shall sur-vive all Closings hereunder, as
well as the termi-nation of this Agree-ment pursu-ant to Section 8.1(b)
hereof, and remain in full force and effect until the sixth anniver-sary of
the Initial Compl-etion Date. The repre-sen-ta-tions and war-ran-ties
con-tained in Sec-tions 4.2, 4.3, 5.2 and 5.3 hereof shall sur-vive all
Clos-ings hereunder, as well as the termination of this Agree-ment pursuant to
Sec-tion 8.1(b) hereof, and remain in full force and effect with-out
limita-tion. All other repre-sen-ta-tions and war-ran-ties con-tained in this
Agree-ment shall sur-vive all Clos-ings hereun-der, as well as the termination
of this Agreement pursuant to Section 8.1(b) hereof, and remain in full force
and effect until December 31, 1999, at which time they shall termi-nate.
(b) All cove-nants and agreements con-tained here-in shall survive all
Clos-ings hereunder, as well as the termi-na-tion of this Agreement pursu-ant
to Section 8.1(b) hereof, and remain in full force and effect without
limita-tion.
(c) Except with respect to covenants and agree-ments to be subsequently
performed, the sole remedy follow-ing any Closing for any breach of any
represen-ta-tion, war-ran-ty, cove-nant or agreement shall be pursuant to
Sections 9.2 and 9.3 hereof, except in the case of fraud.
ARTICLE XSection .11 Indemnification Indemnification
--------------- ---------------
Indemnification Indemnification.
------- ---------------
(a) From and after the Initial Completion Date, Ralston shall indem-nify
and hold harm-less Du Pont, the Surviv-ing Corpo-rations, the Foreign
Protein Subsid-iaries and their respective Subsid-iar-ies and all offi-cers
and direc-tors of the foregoing (col-lec-tive-ly, the "Du -Pont Indem-ni-fied
----------------------
Par-ties") from and against all lia-bili-ties or expenses (including
- --------
attorneys' fees), judgments, fines, losses, claims, damag-es and amounts paid
- --------
in set-tlement, including conse-quen-tial, incidental and punitive damages
("Damag-es") to the extent they are the result of, arise in connection with,
-------
or relate to (i) any inac-cu-racy in or breach of any repre-sen-ta-tion or
warranty con-tained in Article IV of this Agree-ment or in the representation
letters of Ralston refer-enced in Sec-tions 7.2(g) and 7.3(h) hereof, (ii) the
fail-ure of Ralston, Stock-holder or any Pro-tein Subsid-iary to duly per-form
or ob-serve any term, provi-sion, cove-nant or agree-ment re-quired to be
per-formed or ob-served by Ralston, Stock-holder or such Pro-tein Subsidiary
pursu-ant to this Agree-ment, (iii) any claims by any third party that
Ralston, any of its Subsid-iar-ies or any Protein Subsid-iary or any Person on
their behalf entered into any agreement or agree-ment-in-princi-ple or made
any binding representation or prom-ise to such third party with re-spect to
the sale of any Protein Subsidiary or any inter-est there-in, (iv) the
Ex-cluded Assets or any opera-tions or busi-ness conducted with or at such
assets or any liabili-ties related thereto includ-ing any liabilities aris-ing
out of the distri-bution or trans-fer of such assets by any Protein
Subsid-iary to Stock-holder or any of its Sub-sid-iar-ies, (v) [clause
intentionally omitted] or (vi) any occur-rence, event or loss with re-spect to
which (but only to the extent to which) Ralston or a Subsid-iary thereof is
enti-tled to recov-ery under the insur-ance coverage which Ralston has or has
agreed to main-tain or continue pursuant to Section 6.19 hereof (it being
acknowl-edged that this clause (vi) should be indepen-dent of, and shall not
limit any rights under, any of the preceding clauses (i)-(v)). For pur-poses
of clause (i) above, the repre-sen-ta-tions and war-ran-ties con-tained in
Article IV hereof shall be deemed to have been made as of the time of the
execu-tion and deliv-ery of this Agree-ment and again as of the Clos-ings
occur-ring on the Ini-tial Comple-tion Date and in the case of Section 4.18
here-of, again as of each subsequent Foreign Closing Date. The
con-sum-ma-tion by the Du Pont Indem-ni-fied Par-ties of the Initial
Comple-tion Date with knowledge of a breach of war-ran-ty or cove-nant or
misrep-resen-tation by any party hereto shall not con-sti-tute a waiver of any
claim for the Du Pont's Indem-nified Parties' Damages with respect to such
breach or misrepre-senta-tion. For pur-pos-es of deter-min-ing wheth-er any
Du Pont Indem-ni-fied Party is entitled to indemni-fi-ca-tion under this
Section 9.2(a), the parties shall ignore (i) any require-ment in any
representation or warranty (other than Section 4.6(ii) here-of) con-tained
herein that an event or fact be mate-rial, have a Mate-rial Ad-verse Effect on
the Busi-ness, taken as a whole, any Protein Sub-sid-iary or the Protein
Sub-sid-iar-ies, taken as a whole, and (ii) any other refer-ence to
materiality con-tained in any such repre-senta-tion or warran-ty (other than
Section 4.10(c)(xi) here-of); provid-ed that (other than a
--------- ----
mis-rep-re-sen-ta-tion or breach of the repre-senta-tion and war-ran-ty
con-tained in Section 4.5 or 4.6(ii) here-of) no indem-ni-fi-ca-tion shall be
re-quired in respect of any repre-sen-ta-tion quali-fied or limited by a
reference to Material Adverse Effect (or in respect of any breach there-of)
unless the aggre-gate amount of Damag-es result-ing from, arising out of, or
relating to such rep-resen-ta-tion or breach exceeds $100,000, in which event
the Du Pont Indem-nified Par-ties shall be entitled to be indemni-fied for the
full amount of such Damages without regard to the $100,000 thresh-old,
sub-ject, howev-er, to the provi-sions of Sec-tion 9.2(c) here-of.
(b) From and after the Initial Completion Date, Du Pont shall indemnify
and hold harmless Ralston, Stock-holder and each of their respective offi-cers
and directors (col-lec-tive-ly, the "Ralston Indem-ni-fied Par-ties")
------------------------------
from and against any Damag-es to the extent they are the result of, arise in
connection with, or relate to (i) any inac-cu-ra-cy in or breach of any
repre-sen-ta-tion or warranty con-tained in Arti-cle V of this Agree-ment or
in the representation letters of Du Pont refer-enced in Sections 7.2(g) and
7.3(h) hereof, (ii) the fail-ure of Du Pont or any Du Pont Merger Sub-sid-iary
to duly per-form or ob-serve any term, provi-sion, cove-nant or agree-ment
re-quired to be per-formed or ob-served by Du Pont or such Du Pont Merger
Subsid-iary pursu-ant to this Agreement, (iii) any acts, omis-sions, events,
occur-rences, circumstanc-es or trans-actions of what-soever type or nature
associated with, arising out of or relating to the owner-ship, use or
posses-sion of the assets of the Business, other than the Excluded Assets, or
its con-duct or operation, whether occur-ring prior to or after the Initial
Completion Date, other than those acts, omis-sions, events, occur-rences,
circum-stances or transac-tions for which Ralston is or would be obligated to
indem-nify Du Pont or any other Du Pont Indemni-fied Party pursu-ant to this
Arti-cle IX or (iv) [clause intentionally omitted]. For pur-poses of clause
(i) above, the repre-senta-tions and war-ran-ties con-tained in Article V
hereof shall be deemed to have been made as of the time of the execu-tion and
deliv-ery of this Agree-ment and again as of the Clos-ings occur-ring on the
Ini-tial Completion Date. The con-sum-ma-tion by the Ralston Indem-ni-fied
Par-ties of the Initial Completion Date with knowl-edge of a breach of
war-ranty or covenant or mis-rep-resen-tation by any party hereto shall not
con-sti-tute a waiver of any claim for the Ralston's Indemni-fied Parties'
Damages with respect to such breach or misrep-re-sentation.
(c) Notwithstanding anything herein to the con-trary, no indemnification
shall be available under Section 9.2(a)(i) or 9.2(b)(i) hereof unless and
until the aggre-gate amount of Damages that would other-wise be subject to
such indemnifi-cation ex-ceeds Fif-teen Million Dollars ($15,000,000) (the
"Bas-ket Amount"); pro-vid-ed that in the event such Damages exceed the Basket
------------ ---------- ----
Amount, the indem-nify-ing party shall indemnify the Du Pont Indem-nified
Par-ties in the case of Section 9.2(a)(i) hereof or the Ralston Indem-ni-fied
Par-ties in the case of Section 9.2(b)(i) hereof for all such Damages in
excess of the Basket Amount up to an aggre-gate amount of such excess Damages
of Fif-teen Mil-lion Dol-lars ($15,000,000) and there-af-ter for fifty (50)
percent of all such Damag-es (that is, all such Damages exceeding Thirty
Mil-lion Dol-lars ($30,000,000)); pro-vid-ed further that the fore-going
---------- ------- ----
proviso shall not apply to Damag-es that are the result of, arise in
connection with, or relate to any inac-curacy in or breach of any
representa-tion or warran-ty con-tained in Sec-tion 4.1, 4.2, 4.3, 5.1, 5.2
and 5.3.
(d) [Intentionally Omitted.]
(e) Any calculation of Damages for pur-poses of this Section 9.2 shall
be (i) net of (A) any Tax benefit to the indemnified party (as determined in
accordance with the meth-odology and procedures described in Section 6(d) of
the Tax Sharing Agreement) and (B) any insur-ance recov-ery made by the
indem-ni-fied party (whether paid directly to such indem-ni-fied party or
assigned by the indemnifying party to such indemni-fied party) and (ii)
grossed up for the actual in-crease in income, franchise or other similar
Taxes paid by the indemni-fied party as a result of receiving or accruing such
indemnity payments for Tax purposes. The limitations on Damages set
forth in subsection (c) of this Section 9.2 shall only apply to Damages with
respect to which the party entitled to indemnification (including by reason of
Section 9.2(a)(vi) hereof) but without giving effect to the limi-ta-tions
contained in Section 9.2(c) hereof is not enti-tled to recov-ery there-for
from any third-party insur-er.
(f) No action, claim or set-off for Damag-es subject to
indemnification under Sec-tion 9.2(a)(i) or 9.2(b)(i) hereof shall be brought
or made with re-spect to claims for Damag-es re-sult-ing from a breach of any
repre-sen-ta-tion or warranty con-tained in this Agree-ment after the date, if
any, on which such repre-senta-tion or war-ranty shall termi-nate
pur-su-ant to Sec-tion 9.1 here-of; provided, however, that any claim made
-------- -------
with rea-sonable speci-ficity by the party seeking indemni-fica-tion (the
"Indem-nified Party") to the party from which indem-nifica-tion is sought (the
---------------
"Indemni-fying Party") within the time periods set forth in Section 9.1 hereof
-------------------
shall survive (and be subject to indem-ni-fi-ca-tion) until it is finally and
fully re-solved.
(g) Upon receipt by the Indemnified Party of notice of any action,
suit, proceeding, claim, demand or as-sess-ment against such Indemnified Party
which might give rise to a claim for Damages, the Indemnified Party shall
give prompt written notice thereof to the Indemni-fy-ing Party indicat-ing the
nature of such claim and the basis there-for, provided that the failure to
-------- ----
give such prompt notice shall not relieve the Indemnifying Party of its
obligations here-under except to the extent the Indem-nifying Party or the
defense of any such claim is preju-diced thereby. A claim to indem-ni-ty
here-un-der may, at the option of the Indemni-fied Party, be asserted as soon
as Damages have been threat-ened by a third party orally or in writ-ing,
regard-less of whether actual harm has been suffered or out-of-pocket expenses
incurred, provided the Indemni-fied Party shall reasonably determine that it
may be liable or otherwise incur such Damages. However, pay-ments for Damages
by the Indemnifying Party in respect of third party claims against the
Indemni-fied Party shall not be re-quired except to the extent that the
Indemnified Party has expended out-of-pocket sums. The Indemnifying Party
shall have the right, at its option, to assume the de-fense of, at its own
expense and by its own counsel, any such matter involving the assert-ed
liability of the Indemnified Party so long as the Indemnify-ing Party has
ac-knowledged and agreed in writing that if the same is adversely deter-mined,
the Indemnify-ing Party will have an obligation to provide indemnifica-tion to
the Indemni-fied Party in respect thereof. If any Indem-ni-fy-ing Party shall
under-take to com-pro-mise or defend any such assert-ed liabili-ty, it shall
promptly notify the Indemni-fied Party of its inten-tion to do so, and the
Indemnified Party agrees to coop-erate fully with the Indemnifying Party and
its counsel in the compromise of, or defense against, any such as-serted
liability; provid-ed, however, that the Indemnify-ing Party shall not settle
--------- -------
any such asserted liability without the written consent of the Indemnified
Party (which consent will not be unreasonably withheld). No Indemnified Party
shall have any right to settle or compromise any asserted liabili-ty in
respect of any claim or proceeding of which the Indem-nify-ing Party has
as-sumed the defense as set forth above. Not-with-stand-ing an elec-tion by
the Indemnifying Party to assume the de-fense of such action or pro-ceed-ing
as set forth above, such Indem-ni-fied Party shall have the right to employ
separate coun-sel and to partici-pate in the defense of such action or
proceed-ing, and the Indem-nify-ing Party shall bear the reason-able fees,
costs and expenses of such separate counsel (and shall pay such fees, costs
and expenses at least quarter-ly), if (A) the use of counsel chosen by the
Indemnifying Party to repre-sent such Indem-nified Party would present such
counsel with a conflict of interest; (B) the defen-dants in, or targets of,
any such action or proceeding include both an Indemnified Party and the
Indemnifying Party, and such Indemnified Party shall have reasonably concluded
that there may be legal de-fenses available to it or to other Indemnified
Parties which are different from or addition-al to those available to the
Indemnifying Party (in which case the Indemnifying Party shall not have the
right to direct the defense of such action or proceeding on behalf of the
Indemnified Party); (C) the Indem-nifying Party shall not have employed
coun-sel rea-sonably satisfactory to such Indemnified Party to repre-sent such
Indemnified Party within a reasonable time after notice of the insti-tution of
such action or pro-ceeding; or (D) the Indemni-fying Party shall authorize
such Indemnified Party to employ separate counsel at the Indemnifying Party's
expense. In any event, the Indemni-fied Party and its counsel shall cooperate
with the Indemnifying Party and its counsel and shall not assert any position
in any proceeding materially inconsis-tent with that asserted by the
Indem-nifying Party. Notwithstanding any-thing to the contrary contained in
this subsection (g), in those circumstances where Ralston's liability pursuant
to subsection (c) above is 50% or less of the Damages, then (i) any Du Pont
Indemnified Party shall have the right to assume the defense of any action,
suit, proceeding, claim, demand or as-sess-ment and expenses incurred in
connection therewith shall be deemed to be Damages and (ii) such Du Pont
Indem-ni-fied Party may settle any asserted liability without the written
consent of any Ralston Indemnified Party.
(h) Environmental Indemnification. Notwithstand-ing anything herein to
-----------------------------
the contrary, Ralston agrees to indem-ni-fy and hold harmless each Du Pont
Indem-nified Party from and against all Damag-es (including consultants' fees,
dis-burse-ments and expens-es) asserted against, re-sulting to, imposed
on, or incurred by such Du Pont Indemnified Party, di-rect-ly or indi-rect-ly,
in con-nec-tion with any of the fol-lowing:
(A) all lia-bil-i-ties, costs and ex-pens-es which
re-late to Materi-als of Environ-mental Concern which were trans-ported
off-site on or prior to the Initial Comple-tion Date, when-ev-er the claim for
indem-nifica-tion is made by a Du Pont Indem-ni-fied Party ("Off-Site
--------
Mate-ri-als"). Off-Site Mate-rials shall not in-clude Materi-als of
---
Envi-ron-mental Con-cern which mi-grated from the Real Proper-ties to an
-
adja-cent site; and
(B) any Environmental Claim against any Person or
Governmental Entity whose liabil-ity for such Envi-ronmen-tal Claim Ralston,
Stockholder or any Protein Subsid-iary has or may have as-sumed or re-tained
either con-tractu-al-ly or by oper-ation of law, except for Envi-ronmental
Claims disclosed in Sec-tion 9.2(h) of the Ralst-on Disclo-sure Sched-ule.
(i) All indemnification payments made pursu-ant to this Section 9.2
shall be made in the form of cash; provid-ed, however, in the case of
--------- -------
indemnifica-tion payments to be made to Ralston, Ralston may elect to receive
such payment in addi-tional shares of Du Pont Common Stock if Ralston
reason-ably believes that the receipt of such payment in Du Pont Common Stock
is necessary to preserve the status of the Mergers and Foreign Exchanges, as
the case may be, as a reorganiza-tion within the meaning of Section 368 of the
Code. For purpos-es of this Section 9.2(i), the shares of Du Pont Common
Stock shall be valued at the time of making such indemnifi-cation payments at
the then current market price of Du Pont Common Stock.
(j) Except with respect to any breach of the covenants set forth in
Section 6.13 hereof, or with respect to the representation letters required by
Sections 7.2(g) and 7.3(h) hereof, all indem-ni-fi-ca-tion obligations
and proce-dures relating to Taxes shall be as set forth in the Tax Shar-ing
Agree-ment.
ARTICLE XI MISCELLANEOUS MISCELLANEOUS MISCELLANEOUS
MISCELLANEOUS
ARTICLE XISection .10 Fees and Expenses Fees and Expenses
----------------- -----------------
Fees and Expenses Fees and Expenses. Except as contem-plated by this
---------------- -----------------
Agreement, all costs and expenses incurred in con-nec-tion with this Agreement
-
and the con-summa-tion of the transactions contemplated hereby shall be
paid by the party incurring such expens-es.
ARTICLE XISection .11 Amendment Amendment Amendment
--------- --------- ---------
Amendment. Any provision of this Agreement may be amended if, and only if,
----
such amendment is in writing and signed by the parties hereto; provided that
-------- ----
the consent of no Ralston Party not affect-ed by an amendment shall be
required to effect such amendment so long as Ralston shall have consented
there-to.
ARTICLE XISection .12 Extension; Waiver Extension; Waiver
----------------- -----------------
Extension; Waiver Extension; Waiver.
--------------- ------------------
(a) At any time prior to the Effective Time, Du Pont on behalf of itself
or any Du Pont Party may (i) extend the time for the perfor-mance of any
of the obliga-tions or other acts of any Ralston Party or any Protein
Subsidiary, (ii) waive any inaccuracies in the repre-senta-tions and
warran-ties of any Ralston Party or any Pro-tein Subsidiary con-tained herein
or in any docu-ment, certifi-cate or writing deliv-ered by any Ralston Party
or any Protein Subsidiary pursu-ant hereto or (iii) waive com-pli-ance with
any of the agree-ments of any Ralston Party or any Protein Subsidiary or
condi-tions to any Du Pont Merger Subsidiary's obligations con-tained here-in.
(b) At any time prior to the Effective Time, Ralston on behalf of itself
or any Ralston Party, may (i) extend the time for the per-for-mance of
any of the obliga-tions or other acts of any Du Pont Party, (ii) waive any
inac-cura-cies in the repre-senta-tions and warran-ties of any Du Pont Party
con-tained herein or in any docu-ment, cer-tifi-cate or writing deliv-ered by
any Du Pont party pursu-ant hereto or (iii) waive com-pli-ance with any of the
agree-ments of any Du Pont Party or condi-tions to any Protein Subsidiary's
obliga-tions con-tained here-in.
(c) Any agree-ment on the part of any party to any such exten-sion or
waiver shall be valid only if set forth in an instru-ment in writing signed on
behalf of such party. Nei-ther the fail-ure or the delay on the part of
any party to exercise any right, remedy, power or privi-lege under this
Agree-ment shall operate as a waiver thereof.
(d)
<PAGE>
XI.13 Notices Notices Notices Notices. All notices and
------- ------- ------- -------
other commu-nications hereunder shall be in writing and shall be deemed given
if delivered personally, telecopied (which is con-firmed) or sent by an
overnight courier service, to the parties at the follow-ing ad-dress-es (or at
such other address for a party as shall be specified by like no-tice):
(a) if to Du Pont or any Du Pont Merger Sub-sid-iary, to:
E.I. du Pont de Nemours and Company
1007 Market Street
Wilmington, Delaware 19898
Atten-tion: Jane Brooks
Telephone No.: (302) 992-6173
Telecopy No.: (302) 992-6184
with a copy to:
E.I. du Pont de Nemours and Company
1007 Market Street
Wilmington, Delaware 19898
Atten-tion: Roger W. Arrington, Esq.
Telephone No.: (302) 992-6624
Telecopy No.: (302) 892-7343
and with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Lou R. Kling, Esq.
Telephone No.: (212) 735-2770
Telecopy No.: (212) 735-2001
and
(b) if to Ralston, Stockholder or, prior to the Initial Closing Date, any
Pro-tein Sub-sid-iary, to:
Ralston Purina Company
Checkerboard Square
St. Louis, Missouri 63164
Attention: James M. Neville, General Counsel Telephone
No.: (314) 982-1266
Telecopy No.: (314) 982-1288
with a copy to:
Protein Technologies International, Inc.
Checkerboard Square
St. Louis, Missouri 63164
Attention: General Counsel
Telephone No.: (314) 982-2307
Telecopy No.: (314) 982-2424
XI.14 Interpretation Interpretation Interpretation
-------------- -------------- --------------
Interpretation. When a refer-ence is made in this Agreement to Sections, such
--------
refer-ence shall be to a Section of this Agreement unless otherwise
indi-cated. Whenever the words "include", "includes" or "including" are used
in this Agreement they shall be deemed to be followed by the words "with-out
limitation". As used in this Agree-ment, the term "af-fil-i-ate(s)" and
"associates" shall have the meaning set forth in Rule l2b-2 of the Exchange
Act. As used in this Agreement, the term "to the knowledge of Ralston" or "to
Ralston's knowledge" with respect to a fact or other matter shall mean that
any indi-vid-u-al serv-ing as a direc-to-r, offi-cer or attorney of Ralston or
any indi-vid-ual who is a member of the Senior Manage-ment Group (as defined
be-low) (i) is aware of such fact or other matter or (ii) should have known of
such fact or other matter in the course of con-ducting a rea-sonably
compre-hensive investi-gation concern-ing the truth or existence of such fact
or other mat-ter. For purposes of this definition, a "rea-sonably
comprehen-sive investi-ga-tion" shall mean an inqui-ry di-rected to execu-tive
offi-cers, division vice presi-dents, country managing direc-tors, plant
managers and attorneys of the Business, as well as any other employee of the
Business headquar-tered in St. Louis, Missouri who has primary responsibil-ity
for the substan-tive area in ques-tion. No refer-ence in this Agreement
(other than in Section 6.1(a) hereof) to "rea-son-able best ef-forts" shall
re-quire a Person obli-gated to use its reasonable best efforts to incur
out-of-pocket expenses or Indebt-edness. As used herein, "Senior Man-agement
------------------
Group" means Jay W. Brown, Charles E. Coco, James Fales, Katherine L. Harris
- -----
and Terry Hatfield.
XI.15 Counterparts Counterparts Counterparts
------------ ------------ ------------
Counterparts. This Agreement may be executed in two or more counterparts, all
of which shall be considered one and the same agreement.
XI.16 Entire Agreement; No Third Party Beneficiaries Entire
---------------------------------------------- ------
Agreement; No Third Party Beneficiaries Entire Agreement; No Third Party
------------------------------------ --------------------------------
Beneficiaries Entire Agreement; No Third Party Beneficiaries. This
------------ ------------------------------------------------
Agreement, the Confiden-tiali-ty Agreement, the Registration Rights Agreement,
-----
the Bridg-ing Services Agreement, the Tax Shar-ing Agree-ment, the
Operating Agreement(s), the For-eign Ex-change Agree-ments, the Qualcepts
Letter, the Headquarters Lease, the R&D Lease, the Intel-lectual Prop-erty
Assignment, the Com-modi-ties Pur-chasing Agree-ment and the Sales Office
Em-ployees Agree-ments (in-clud-ing the docu-ments and the in-stru-ments
re-ferred to herein and there-in) con-sti-tute the entire agree-ment among the
par-ties hereto with re-spect to the subject matter hereof and super-sede all
prior and con-tem-po-ra-ne-ous agree-ments and under-stand-ings, both written
and oral, among the parties with respect to the subject matter hereof.
XI.17 Severability Severability Severability
------------ ------------ ------------
Severability. This Agreement shall be deemed severable; if any term,
provi-sion, cove-nant or re-stric-tion of this Agree-ment is held by a court
of compe-tent juris-dic-tion or other au-thority to be inval-id, void,
unen-forceable or against its regula-tory policy, the remainder of the terms,
provi-sions, cove-nants and re-stric-tions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or
invalidated.
XI.18 Governing Law; Forum Governing Law; Forum Governing
-------------------- -------------------- ---------
Law; Forum Governing Law; Forum.
-------- ----------------------
(a) This Agree-ment shall be governed by and con-strued in accor-dance
with the laws of the State of Delaware, without giving effect to the
prin-ci-ples of conflicts of law thereof.
(b) By execution and delivery of this Agree-ment, the parties hereto
submit to the personal juris-diction of any state or federal court in the
State of Delaware in any suit or proceeding arising out of or relating to this
Agreement.
(c) To the extent that any of the parties hereto has or hereafter may
acquire any immunity from jurisdiction of any Delaware court or from any legal
process (whether through service or notice, attachment prior to judgment,
attachment in aid of execution, execu-tion or otherwise) with respect to
itself or its proper-ty, such Person hereby irrevocably waives such immunity
in respect of its obligations with respect to this Agree-ment.
(d) The parties hereto agree that the appro-priate and exclusive forum
for any disputes between any of the parties hereto arising out of this
Agreement or the transactions contemplated hereby shall be in any state or
federal court in the State of Delaware. The par-ties hereto further agree
that the parties will not bring suit with respect to any disputes arising out
of this Agreement or the transactions contemplated hereby in any court or
jurisdiction other than the above speci-fied courts; provided, however, that
-------- -------
the foregoing shall not limit the rights of the parties to obtain execution of
judgment in any other jurisdiction. Notwithstanding the foregoing, the
parties hereto agree that if a third party brings a claim against a party
hereto and, in connection therewith, such party or one of its affili-ates
wishes to make a claim for indemnification against another party here-to, such
latter party shall not object to the juris-dic-tion or forum of such
proceed-ing without the prior consent of the party seeking to make such claim
for indemnification. The par-ties hereto fur-ther agree, to the extent
per-mit-ted by law, that final and unappeal-able judgment against a party in
any action or proceed-ing contemplated above shall be conclu-sive and may be
en-forced in any jurisdic-tion within or outside the United States by suit on
the judgment, a certified or exempli-fied copy of which shall be conclu-sive
evi-dence of the fact and amount of such judgment.
XI.19 Release Release Release Release. Ralston
------- ------- ------- -------
uncondi-tion-ally releases, on behalf of itself and its Subsid-iaries, the
Protein Subsidiaries and their respective offi-cers and directors from any
claims of whatever kind or na-ture, wheth-er contin-gent or absolute, that
Ralston may have against such Persons aris-ing out of, or relat-ing to,
ac-tions taken or events occur-ring prior to the Effective Time, including,
with-out limitation, all claims with respect to any prod-ucts sold or
manufactured by any Protein Subsid-iary prior to the Initial Comple-tion Date;
provided, however, that the foregoing shall not apply to the release of
-------- -------
any claims against any officer or director relat-ing to (i) the willful
misconduct of any such Person if such claim is asserted after such Person is
no longer employed by Du Pont or a Subsidiary thereof including any Protein
Subsidiary or (ii) regardless of when such claim is asserted, the crimi-nal or
illegal con-duct of such offi-cer or direc-tor.
XI.20 Assignment Assignment Assignment Assignment.
---------- ---------- ---------- ----------
Neither this Agree-ment nor any of the rights, interests or obliga-tions
hereunder shall be assigned by any of the parties hereto (whether by operation
of law or otherwise) with-out the prior written consent of the other
parties, except that any Du Pont Merger Subsidiary may as-sign, in its sole
discre-tion, any or all of its rights, interests and obligations hereun-der to
Du Pont or to any direct or indirect wholly owned Subsid-iary of Du Pont.
Sub-ject to the preceding sen-tence, this Agree-ment will be bind-ing upon,
inure to the benefit of and be enforce-able by the parties and their
respective succes-sors and assigns.
<PAGE>
IN WITNESS WHEREOF, Du Pont, the Du Pont Merger Subsidiaries,
Ralston, Stockholder and the U.S. Protein Subsidiaries have caused this
Agree-ment to be signed by their respec-tive officers thereunto duly
authorized as of the date first written above.
E.I. DU PONT DE NEMOURS AND COMPANY
By:/s/ William F. Kirk
----------------------
Name: William F. Kirk
Title: Senior Vice Pre-sident
AG Enterprise
DUPONT PTI 1 CO.
By:/s/ Donald P. McAviney
-------------------------
Name: Donald P. McAviney
Title: President
DUPONT PTI 2 CO.
By:/s/ Donald P. McAviney
-------------------------
Name: Donald P. McAviney
Title: President
DUPONT PTI 3 CO.
By:/s/ Donald P. McAviney
-------------------------
Name: Donald P. McAviney
Title: President
DUPONT PTI 4 CO.
By:/s/ Donald P. McAviney
-------------------------
Name: Donald P. McAviney
Title: President
DUPONT PTI 5 CO.
By:/s/ Donald P. McAviney
-------------------------
Name: Donald P. McAviney
Title: President
DUPONT PTI 6 CO.
By:/s/ Donald P. McAviney
-------------------------
Name: Donald P. McAviney
Title: President
DUPONT PTI 7 CO.
By:/s/ Donald P. McAviney
-------------------------
Name: Donald P. McAviney
Title: President
DUPONT PTI 8 CO.
By:/s/ Donald P. McAviney
-------------------------
Name: Donald P. McAviney
Title: President
DUPONT PTI 9 CO.
By:/s/ Donald P. McAviney
-------------------------
Name: Donald P. McAviney
Title: President
RALSTON PURINA COMPANY
By:/s/ James M. Neville
-----------------------
Name: James M. Neville
Title: Vice President and General Counselor
PROTEIN TECHNOLOGIES INTER-NA-TIONAL HOLD-INGS, INC.
By:/s/ Nancy E. Hamilton
------------------------
Name: Nancy E. Hamilton
Title: Assistant Secretary
FIBER SALES & DEVELOPMENT CORPO-RATION
By:/s/ Nancy E. Hamilton
------------------------
Name: Nancy E. Hamilton
Title: Assistant Secretary
IMPERIAL BIOTECHNOLOGY, U.S., INC.
By:/s/ Nancy E. Hamilton
------------------------
Name: Nancy E. Hamilton
Title: Assistant Secretary
NUTRITIOUS FOODS, INC.
By:/s/ Nancy E. Hamilton
------------------------
Name: Nancy E. Hamilton
Title: Assistant Secretary
POINTER SPECIALTY CHEMI-CALS, INC.
By:/s/ Nancy E. Hamilton
------------------------
Name: Nancy E. Hamilton
Title: Assistant Secretary
PROTEIN TECHNOLOGIES INTER-NA-TIONAL ASIA PACIFIC COR-PORATION
By:/s/ Nancy E. Hamilton
------------------------
Name: Nancy E. Hamilton
Title: Assistant Secretary
PROTEIN TECHNOLOGIES INTER-NA-TIONAL EUROPE, INC.
By:/s/ Nancy E. Hamilton
------------------------
Name: Nancy E. Hamilton
Title: Assistant Secretary
PROTEIN TECHNOLOGY INTERNA-TIONAL SALES, INC.
By:/s/ Nancy E. Hamilton
------------------------
Name: Nancy E. Hamilton
Title: Assistant Secretary
PROTEIN TECHNOLOGIES INTER-NA-TIONAL, INC.
By:/s/ Nancy E. Hamilton
------------------------
Name: Nancy E. Hamilton
Title: Assistant Secretary
PROTEIN TECHNOLOGIES INTER-NA-TION-AL DE-VEL-OP-MENT CORPO-RA-TION
By:/s/ Nancy E. Hamilton
------------------------
Name: Nancy E. Hamilton
Title: Assistant Secretary
ex10xiii.doc
NON-QUALIFIED STOCK OPTION
--------------------------
RALSTON PURINA COMPANY (the "Company"), effective November 20, 1997,
grants this Non-Qualified Stock Option to Name ("Optionee") to purchase a
total of Shares shares of Common Stock of the Company ("Common Stock") at a
price of $92.25 per share pursuant to its 1996 Incentive Stock Plan (the
"Plan"). Subject to the provisions of the Plan and the following terms,
Optionee may exercise this Option from time to time by tendering to the
Company written notice of exercise together with the purchase price in cash,
or in shares of Common Stock at their Fair Market Value as determined by the
Human Resources Committee, or both.
1. Normal Exercise. This Option becomes exercisable at the rate of 25% of
---------------
the total shares on November 20 in each of the years 1999, 2000, 2001 and
2002. This Option remains exercisable through November 19, 2007 unless
Optionee is no longer employed by the Company, in which case the Option is
exercisable only in accordance with the provisions of paragraph 3 below.
2. Acceleration. Notwithstanding the above, any shares not previously
------------
forfeited under this Option will become fully exercisable before the normal
exercise dates set forth in paragraph 1 hereof upon the occurrence of any of
the following events while Optionee is employed by the Company:
a. death of Optionee;
b. declaration, by the Committee, of Optionee's total and permanent
disability;
c. the voluntary termination of employment of Optionee (i) at or
after age 55 with 15 years of service with the Company or its Affiliates; or
(ii) at or after age 62;
d. a Change of Control; or
e. the involuntary termination of employment of Optionee, other than
a termination for any of the following reasons: Termination for Cause,
Optionee's engaging in competition with the Company or an Affiliate, or
Optionee's engaging in any activity or conduct contrary to the best interests
of the Company or any Affiliate. For purposes of this Option, involuntary
termination shall include (i) Optionee's involuntary termination of employment
with the Company or an Affiliate which employs Optionee; or (ii) the sale or
other disposition of a majority of the stock or assets of an Affiliate which
employs Optionee. In no event shall transfers of employment between the
Company and any of its Affiliates, or the creation of a class of stock of the
Company which tracks the performance of an Affiliate, be deemed to constitute
an involuntary termination of employment.
3. Exercise After Certain Events. Upon the occurrence of any of the
------------------------------
events described below, any shares that are exercisable upon such occurrence
shall remain exercisable during the period stated below, but, in any event,
not later than November 19, 2007:
a. If Optionee's employment is terminated due to death, declaration
of total and permanent disability, voluntary termination at or after the time
set forth in paragraph 2(c)(i) or (ii), or involuntary termination of
employment (other than for events described in Sections IV.A.1, 3 or 4 of the
Plan), such shares that are exercisable shall remain exercisable for five
years thereafter;
b. If Optionee's employment is terminated voluntarily prior to the
time set forth in paragraph 2.c(i) or (ii), such shares that are exercisable
shall remain exercisable for six months after such voluntary termination;
c. When, prior to a Change of Control, there has been a declaration
of forfeiture pursuant to Section IV of the Plan because Optionee's employment
is Terminated for Cause, Optionee engages in competition with the Company or
an Affiliate, or Optionee engages in any activity or conduct contrary to the
best interests of the Company or any Affiliate, such shares that are then
exercisable shall remain exercisable for seven days after such declaration; or
d. After a Change of Control, if Optionee's employment is Terminated
for Cause, Optionee engages in competition with the Company or an Affiliate,
or Optionee engages in any activity or conduct contrary to the best interests
of the Company or any Affiliate, such shares that are then exercisable shall
remain exercisable for seven days after a declaration that any of such events
has occurred.
4. Forfeiture. Prior to a Change of Control, this Option is subject to
----------
forfeiture for the reasons set forth in Section IV.A.1, 3 or 4 of the Plan.
If there is a declaration of forfeiture, those shares that are exercisable at
the time of the declaration may be exercised as set forth in paragraph 3
hereof; all other shares are forfeited.
5. Definitions. Unless otherwise defined in this Non-Qualified Stock
-----------
Option, defined terms used herein shall have the same meaning as set forth in
the Plan.
"Change of Control" shall occur when (i) a person, as defined under
securities laws of the United States, acquires beneficial ownership of more
than 50% of the outstanding voting securities of the Company; or (ii) the
directors of the Company immediately before a business combination between the
Company and another entity, or a proxy contest for the election of directors,
shall, as a result thereof, cease to constitute a majority of the Board of
Directors of the Company of any successor to the Company.
6. Severability. The invalidity or unenforceability of any provision
-------------
hereof in any jurisdiction shall not affect the validity or enforceability of
the remainder hereof in that jurisdiction, or the validity or enforceability
of this Non-Qualified Stock Option, including that provision, in any other
jurisdiction. To the extent permitted by applicable law, the Company and
Optionee each waive any provision of law that renders any provision hereof
invalid, prohibited or unenforceable in any respect. If any provision of this
Option is held to be unenforceable for any reason, it shall be adjusted rather
than voided, if possible, in order to achieve the intent of the parties to the
extent possible.
ACKNOWLEDGED AND ACCEPTED: RALSTON PURINA COMPANY
____________________________
Optionee
By:_________________________
____________________________ Co-Chief Executive Officer
Date
ex10xiv.doc
AMENDED NOVEMBER 13, 1997
RALSTON PURINA COMPANY
DEFERRED COMPENSATION PLAN FOR KEY EMPLOYEES
--------------------------------------------
1. GENERAL PROVISIONS
1.1 PURPOSE OF PLAN
The purpose of the Plan is to enhance the profitability and value of the
Company for the benefit of its shareholders by providing a supplemental
retirement program to attract, retain and motivate a select group of key
employees who make important contributions to the success of the Company.
1.2 DEFINITIONS
(a) "ACQUIRING PERSON" means any person or group of Affiliates or
Associates who is or becomes the beneficial owner, directly or indirectly, of
shares representing 20% or more of the total votes of the outstanding stock
entitled to vote at a meeting of shareholders.
(b) "ACCELERATION OF PAYMENT" means the expiration of the period
during which Ralston Purina Company has the right to cure, but fails to cure,
a default in its obligation to fund a grantor trust established pursuant to a
Trust Agreement dated as of September 15, 1994, between Ralston Purina Company
and Wachovia Bank of North Carolina, N.A. Upon the occurrence of an
Acceleration of Payment, the time of payment of all remaining benefits to
Participants and Beneficiaries under the Plan shall be accelerated and benefit
shall be paid in lump sum form, in cash or stock as applicable, as soon as
practicable after the effective date of the Acceleration of Payment. Such
Acceleration of Payment shall occur under the Plan irrespective of any action,
or intent to take action, by Ralston Purina Company.
(c) "ADMINISTRATOR" means Wachovia Bank of North Carolina, N.A. or
its successor.
(d) "AFFILIATE" OR "ASSOCIATE" shall have the meanings set forth in
Rule 12b-2 of the General Rules and Regulations under the Securities Exchange
Act of 1934, as amended.
(e) "BENEFICIAL OWNER" shall mean a person who shall be deemed to
have acquired "beneficial ownership" of, or to "beneficially own", any
securities:
(i.) which such person or any of such person's Affiliates or Associates
beneficially owns, directly or indirectly;
(ii.) which such person or any of such person's Affiliates or Associates
has (A) the right to acquire (whether such right is exercisable immediately or
only after the passage of time) pursuant to any agreement, arrangement or
understanding (other than customary agreements with and between underwriters
and selling group members with respect to a bona fide public offering of
securities), or upon the exercise of currently exercisable conversion or
exchange rights, warrants or options, or otherwise; provided, however, that a
person shall not be deemed the Beneficial Owner of, or to beneficially own,
securities tendered pursuant to a tender or exchange offer made by or on
behalf of such person or any of such person's Affiliates or Associates until
such tendered securities are accepted for purchase or exchange; or (B) the
right to vote pursuant to any agreement, arrangement or understanding;
provided, however, that a person shall not be deemed the Beneficial Owner of,
or to beneficially own, any security if the agreement, arrangement or
understanding to vote such security (1) arises solely from a revocable proxy
or consent given to such person in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable rules
and regulations promulgated under the Exchange Act and (2) is not also then
reportable on Schedule 13D under the Exchange Act (or any comparable or
successor report); or
(iii.) which are beneficially owned, directly or indirectly, by any other
person with which such person or any of such person's Affiliates or Associates
has any agreement, arrangement or understanding (other than customary
agreements with and between underwriters and selling group members with
respect to a bona fide public offering of securities) for the purpose of
acquiring, holding, voting or disposing of any securities of Company.
Notwithstanding anything in this definition of "Beneficial Owner" to the
contrary, the phrase "then outstanding", when used with reference to a
person's beneficial ownership of securities of Company, shall mean the number
of such securities then issued and outstanding together with the number of
such securities not then actually issued and outstanding which such person
would be deemed to own beneficially hereunder.
(f) "BENEFICIARY" means the person or persons (including legal
entities) who have been designated in accordance with Section 3.2 hereof to
receive benefits under this Plan following a Participant's death.
(g) "CHANGE OF CONTROL" shall mean the time when (A) any Acquiring
person, either individually or together with such person's Affiliates or
Associates, shall have become the Beneficial Owner, directly or indirectly, of
more than 20% of the total votes of the outstanding stock of Ralston Purina
Company; (B) individuals who shall qualify as Continuing Directors shall have
ceased for any reason to constitute at least a majority of the Board of
Directors of Ralston Purina Company; or (C) a majority of the individuals who
shall qualify as Continuing Directors shall approve a declaration that a
Change of Control has occurred.
(h) "COMMITTEE" means the Human Resources Committee of the Board of
Directors of Ralston Purina Company or any successor to such Committee.
(i) "COMPANY" means Ralston Purina Company and its subsidiaries and
affiliates.
(j) "COMPENSATION" means all or any part of any cash or other
consideration to be paid to an Employee for services rendered or to be
rendered to the Company.
(k) "CONTINUING DIRECTOR" means any member of the Board of Directors
of Ralston Purina Company, while such person is a member of such Board, who is
not an Affiliate or Associate of an Acquiring Person or of any such Acquiring
Person's Affiliate or Associate and was a member of such Board prior to the
time when such Acquiring Person became an Acquiring Person, and any successor
of a Continuing Director, while such successor is a member of such Board, who
is not an Acquiring Person or an Affiliate or Associate of an Acquiring Person
or a representative or nominee of an Acquiring Person or of any Affiliate or
Associate of such Acquiring Person and is recommended or elected to succeed
the Continuing Director by a majority of the Continuing Directors.
(l) "CORPORATE COMPENSATION DEPARTMENT" means the Corporate
Compensation Department of Ralston Purina Company or any successor department
or individual performing the same functions.
(m) "DATE OF CREDITING" means, with respect to any Compensation
deferred pursuant to the Plan, the first day of November of the year during
which such Compensation would otherwise be paid to a Participant, provided,
however, with respect to the deferral of special, not annual, bonuses which
are not paid at the same time as annual bonuses and which are deferred
pursuant to the Plan, Date of Crediting shall mean the date on which such
Compensation would otherwise be paid to a Participant.
(n) "EMPLOYEE" means any regular employee of the Company.
(o) "MARKET VALUE" means, in the case of any class or series of
Stock, the average of the closing prices of such class or series as reported
by the New York Stock Exchange - Composite Transactions during the ten (10)
trading days immediately preceding the date in question, or, if the class or
series of Stock is not quoted on such composite tape or if such class or
series is not listed on such exchange, on the principal United States
securities exchange registered under the Securities Exchange Act of 1934, as
amended, on which the class or series of Stock is listed, or if the class or
series is not listed on any such exchange, the average of the closing bid
quotations with respect to a share of the class or series of Stock during the
ten (10) days immediately preceding the date in question on the NASDAQ Stock
Market National Market System or any system then in use, or if no such
quotations are available, the fair market value on the date in question of a
share of the class or series of Stock as determined by a majority of the
Continuing Directors in good faith.
(p) "PARTICIPANT" means any Employee who participates in the Plan.
(q) "PLAN" means the Deferred Compensation Plan for Key Employees, as
amended.
(r) "PLAN ADMINISTRATOR" means Wachovia Bank of North Carolina, N. A.
or its successor.
(s) "RETIREMENT" means an Employee's voluntary or involuntary
termination of employment with the Company following attainment of age 55.
(t) "STOCK" means shares of the Company's common stock, par value
$.10 per share, which consists of shares of a class of common stock designated
as Ralston Common Stock ("RAL Stock") or any such other security outstanding
upon the reclassification or redesignation of the Company's RAL Stock or any
other outstanding class or series of common stock, including, without
limitation, any stock split-up, stock dividend, creation of tracking stock, or
other distributions of stock in respect of stock, or any reverse stock
split-up, or recapitalization of the Company or any merger or consolidation of
the Company with any Affiliate, or any other transaction, whether or not with
or into or otherwise involving an Acquiring Person.
(u) "TERMINATION FOR CAUSE" means a Participant's termination of
employment with the Company because the Participant willfully engaged in gross
misconduct; provided, however, that a "Termination for Cause" shall not
include a termination attributable to:
(i.) poor work performance, bad judgment or negligence on the part of the
Participant; or
(ii.) an act or omission reasonably believed by the Participant in good
faith to have been in or not opposed to the best interests of his employer and
reasonably believed by the Participant to be lawful.
(v) "YEAR" means calendar year unless otherwise specified.
1.3 ELIGIBILITY AND PARTICIPATION
Any Employee who is entitled to Compensation, and who is permitted to
request the deferral of such Compensation by the Committee, is eligible to
participate in the Plan. An eligible Employee becomes a Participant in this
Plan upon the effective date of an agreement executed by the parties pursuant
to Section 2.1(c).
1.4 APPROVAL OF DEFERRALS AND ADMINISTRATION OF THE PLAN
The Committee shall have full power and sole discretion to designate or
approve Employees eligible to participate in the Plan; to designate types of
Compensation which may be deferred; to approve or disapprove eligible
Employees' requests for deferral into or under any option; to mandate deferred
Leveraged Incentive Plan (LIP) payments if necessary to assure the tax
deductability of the payments; to allow for in-service distribution of
mandated deferred LIP when the payment would be deductible by the Company; and
to impose on any deferral any terms and conditions in addition to those set
forth in the Plan.
The Plan Administrator shall administer the Plan and, in connection
therewith, shall have full power and sole discretion to construe and interpret
the Plan; to establish rules and regulations; to delegate responsibilities to
others to assist it in administering the Plan or performing any
responsibilities hereunder; and to perform all other acts it believes
reasonable and proper in connection with the administration of the Plan.
1.5 POWER TO AMEND
The power to amend, modify or terminate this Plan at any time is reserved
to the Committee except that the Chief Executive Officer of the Company may
make amendments to resolve ambiguities, supply omissions and cure defects, and
may make any amendments deemed necessary or desirable to comply with federal
tax law or regulations to avoid loss of qualification or adverse tax
consequences, and any other amendments deemed necessary or desirable, which
shall be reported to the Committee. Notwithstanding the foregoing, no
amendment, modification or termination which would reasonably be considered to
be adverse to a Participant or Beneficiary may apply to or affect the terms of
any deferral of Compensation that was approved prior to the effective date of
such amendment, modification or termination, without the consent of the
Participant or Beneficiary affected thereby.
2. DEFERRAL OPTIONS
2.1 TERMS AND CONDITIONS
(a) Deferral options available- The options for deferral of
----------------------------
Compensation offered under this Plan shall consist of the Equity Option, the
Variable Interest Option and such other options as the Committee may from time
to time determine. Prior to commencement of employment, or with respect to
existing Employees, on or before December 31 of the Year prior to the Year in
which any such Compensation will be earned, an eligible Employee may request
in writing that the Committee approve a deferral either into or under any
single deferral option provided under this Plan, or any combination thereof.
The Committee, in its sole discretion, may permit amounts deferred by an
eligible Employee pursuant to any other deferred compensation program of the
Company to be converted into any deferral option provided under this Plan.
Participants in this Plan shall be permitted twice each calendar year, in such
manner and at such time as may be determined by the Plan Administrator, to
transfer any amounts which have been deferred for at least one year (other
than Company Matching Deferrals, as hereinafter defined) in an account
credited with Stock equivalents (a "Stock Equivalent Account") or a Deferred
Cash Account established pursuant to the Variable Interest Option, as the case
may be, to any other account established pursuant to the Equity Option or the
Variable Interest Option. Company Matching Deferrals may not be transferred
from the Stock Equivalent Account to which they are originally credited.
(b) Mandated deferral of Leveraged Incentive Plan (LIP) Payments - The
------------------------------------------------------------
Committee or its delegee may mandate that Named Executive Officers (N.E.O.s)
specifically named shall defer a portion of those amounts of their 1994 LIP
award into the Plan until time of payout as provided in Sections 2.2(g) and
2.3(d) accordingly. Participants for whom the Committee or its delegee
mandates deferrals may select the options for deferral provided under Section
2.1(a).
(c) Source of terms and conditions- Any deferral under the Plan shall
------------------------------
be subject to the provisions of the Plan, any other conditions imposed by law,
and the terms of any award of Compensation. Approval of a deferral of
Compensation shall in no event constitute a waiver by the Company of any
conditions to the receipt of such Compensation.
(d) Written agreement- Every deferral that is approved by the
------------------
Committee shall be made pursuant to a written agreement signed by the
Participant and the Company. Any modifications or amendments to such
agreement shall also be in writing, signed by the parties. In the event of
any conflict or inconsistency between the terms of such written agreement and
the terms of the Plan, such written agreement shall control.
2.2 EQUITY OPTION
(a) Stock equivalents - Upon approval of a request for a deferral in
-----------------
the Equity Option or a mandated deferral as provided in Section 2.1(b), a
"Stock Equivalent Account" shall be established in the Participant's name.
Stock equivalents and fractions thereof shall be credited to such Stock
Equivalent Account in an amount determined by dividing the amount of
Compensation to be deferred in each such account by the Market Value of the
relevant Stock on the Date of Crediting. Upon the occurrence of any stock
split-up, stock dividend, issuance of any tracking stock, combination or
reclassification with respect to any outstanding series or class of Stock, or
consolidation, merger or sale of all or substantially all of the assets of the
Company, the number of Stock equivalents in each Stock Equivalent Account
shall, to the extent appropriate, be adjusted accordingly.
(b) Company Matching Deferral - The Chief Executive Officer may, in
-------------------------
his or her sole discretion, determine that the additional matching deferral
described in this Section 2.2 (b) shall be made with respect to Participant
requested deferrals in any specific fiscal year of the Company. Absent such
determination with respect to any such fiscal year deferrals, no Participant
shall be entitled to the additional matching deferrals described herein. Upon
such determination by the Chief Executive Officer and upon a deferral into the
Equity Option and the associated crediting of Stock equivalents, to a
Participant's appropriate Stock Equivalent Account, the Company shall credit
each such Stock Equivalent Account, on the same Date of Crediting, with
additional Stock equivalents, equal to a percentage (as determined by the
Chief Executive Officer) of the Compensation being deferred at that time into
each such Stock Equivalent Account divided by the Market Value of the relevant
Stock on the Date of Crediting. Such additionally credited Stock equivalents,
and all dividend equivalents associated therewith, are hereinafter referred to
as "Company Matching Deferrals". A Participant's entitlement to Company
Matching Deferrals credited to the Participant's account shall be subject to
the forfeiture provisions set below. No Company Matching Deferral is
available for Participants with mandated deferrals who select the Equity
Option.
A Participant shall become fully vested in his or her Company Matching
Deferrals upon termination if:
(i.) the Participant has attained 50 years of age; or
(ii.) the Participant is involuntarily terminated at any age;
provided, that all Company Matching Deferrals may be forfeitable
upon the occurrence of any of the events set forth below.
A Company Matching Deferral is forfeited in its entirety in the event
that:
(i.) the Participant voluntarily terminates employment with the Company
prior to age 50, unless such termination was approved by the Chief Executive
Officer of the Company and such termination occurs five or more years after
the Date of Crediting of such Company Matching Deferral;
(ii.) the Participant is Terminated for Cause at any age.
(iii.) In addition, a Company Matching Deferral shall also be forfeited in
its entirety if at any time within two years after a distribution of a Company
Matching Deferral to a Participant (other than to Participants who have
attained age 55 at or prior to termination of employment), the Committee
determines that the Participant has engaged in competition with the Company.
The Participant, upon written demand by the Company, shall promptly, remit to
the Company all Company Matching Deferrals paid to him or her upon
termination. The determination that a Participant is engaging in competition
with the Company shall be made by the Committee in its sole and absolute
discretion. In exercising its discretion, the Committee shall consider, among
other factors, the nature of the competitive activity, the potential harm to
the Company which may result from the competitive activity, the Participant's
ability to find non-competitive employment and the Participant's financial
need. Upon request, the Committee shall advise a Participant whether it deems
an activity in which the Participant proposes to engage to be a competitive
activity.
Notwithstanding the provisions of this Section 2.2 (b), upon a Change of
Control or the effective date of Acceleration of Payment, all Company Matching
Deferrals shall be fully vested and nonforfeitable.
(c) Time of crediting - Deferrals in Stock equivalents shall be
------------------
credited to a Participant's Stock Equivalent Account or Accounts on the Date
of Crediting.
(d) Dividend Equivalents - To the extent dividends on any class or
--------------------
series of outstanding Stock are paid, dividend equivalents and fractions
thereof shall be calculated with respect to balances of such Stock equivalents
in any Stock Equivalent Account, converted to additional equivalents of such
Stock and credited to the appropriate Stock Equivalent Account as of the
dividend payment dates. The number of Stock equivalents to be credited as of
each such date shall be determined by dividing the amount of the dividend
equivalent by the Market Value of the relevant Stock on the dividend payment
date. The Participant's Stock Equivalent Account or Accounts shall continue
to earn such dividend equivalents until fully distributed if distributed in
Stock, otherwise such dividend equivalents shall be earned only until the
earliest to occur of:
(i.) a Participant's Retirement or other termination;
(ii.) the date of the Administrator's determination of total and permanent
disability; or
(iii.) the effective date of Acceleration of Payment. At the discretion
of the Committee, dividend equivalents may be credited in cash to a Deferred
Cash Account established or existing for the Participant under the "Variable
Interest Option", described in Section 2.3 hereof, instead of converting them
to additional Stock equivalents.
(e) Other conditions of award- Deferrals in the Equity Option are
-------------------------
"Other Stock Awards" under the Ralston Purina Company Incentive Stock Plan and
are subject to the provisions of that Plan in addition to the terms of this
Plan.
(f) Form of distribution- Distributions under this option, including
--------------------
distributions of Company Matching Deferrals, shall be in the form of cash,
unless the Participant elects to receive Stock with cash for any fractional
shares; provided, however, that any distribution by a trust established
pursuant to Section 3.1 hereof shall be in the form of cash. The amount of
cash to be distributed shall be the number of whole Stock equivalents in each
Stock Equivalent Account multiplied by the Market Value of the relevant class
or series of Stock on the earliest to occur of:
(i.) the Participant's Retirement or other termination;
(ii.) the date of the Administrator's determination of total and permanent
disability;
(iii.) the in-service date when the Committee or its delegee first
determines that mandated deferred LIP payments would be deductible by the
Company; or
(iv.) the effective date of Acceleration of Payment with interest
accruing, at the rate described in Section 2.3(a) hereof, from such date until
the time of distribution.
(g) Time of distribution to Participant- All amounts due to the
------------------------------------
Participant under the Equity Option shall be payable on the earlier to occur
of:
(i.) the 60th day following the Participant's Retirement or other
termination; or
(ii.) the 60th day following the date of the Administrator's determination
of the Participant's total and permanent disability. No amounts shall be
payable to a Participant prior to such times except as permitted under the
hardship withdrawal provisions of Section 3.3. Notwithstanding the foregoing,
in the event Ralston Purina Company is in default of its funding obligations
under the Trust Agreement dated as of September 15, 1994, between Ralston
Purina Company and Wachovia Bank of North Carolina, N.A., as amended, and it
fails to cure such default in a timely manner as provided under such Trust
Agreement, the Plan Administrator shall, as soon as practicable, pay to each
Participant or Beneficiary all amounts credited to the Stock Equivalent
Account of each Plan Participant or Beneficiary, except to the extent such
individual elects, before the date such payments are made, to continue to
defer receipt of such payment; or
(iii.) the 60th day following the Committee or its delegee's determination
that the respective mandated deferred LIP payment is deductible by the Company
and therefore available for in-service distribution.
(h) Distribution upon death - In the event of the Participant's
------------------------
death, all amounts due under this Option shall be paid to the Beneficiary; but
if none is designated then benefits shall be paid to Participant's estate or
as provided by law. Distribution in full shall be made on the 60th day
following the Participant's death.
(i) Change of Control- Upon a Change of Control, deferrals into the
-----------------
Equity Option will no longer be permitted and each Stock Equivalent Account
shall be immediately converted into a Deferred Cash Account established
pursuant to Section 2.3(a) hereof. The amount of cash to be credited to each
such Deferred Cash Account shall be equal to the number of whole and/or
fractional Stock equivalents in each Stock Equivalent Account multiplied by
the Market Value of the relevant class or series of Stock as of the Change in
Control. Each Participant whose Stock Equivalent Account is hereby converted
to a Deferred Cash Account shall have the right, at his or her sole
discretion, to convert such Deferred Cash Account into any other deferral
option which may thereafter be established pursuant to the Plan or any other
deferred compensation plan established by the Company or any successor.
2.3 VARIABLE INTEREST OPTION
(a) Interest equivalents- Upon approval of a deferral in the Variable
--------------------
Interest Option, a "Deferred Cash Account" shall be established in the
Participant's name. The amount of Compensation being deferred under this
option will be credited to this account on or before the Date of Crediting.
Interest equivalents on amounts deferred under this option shall be calculated
annually as of October 31 of each year for the period from the Date of
Crediting until October 31, or, if such period is greater than one year, for
the one-year period commencing with the previous November 1. Such equivalents
shall be based on the average of the daily close of business prime rates for
the 365 days of such year, with respect to amounts credited prior to such
year, or, with respect to amounts credited during such year, for the number of
days from the Date of Crediting. The daily close of business rates shall be
as established by Morgan Guaranty Trust Company of New York or such other bank
as may be designated by the Committee. At distribution, interest equivalents
shall similarly be calculated on amounts in the Deferred Cash Account based on
average daily prime rates from the preceding November 1, or, if later, the
Date of Crediting, through the date of distribution, and added to the total to
be distributed. The crediting of interest equivalents to the Participant's
Deferred Cash Account shall continue until the balance in such account is
fully distributed.
(b) Time of crediting- The interest equivalent calculated each
-------------------
October 31 shall be credited to a Participant's Deferred Cash Account on
November 1 of that Year. Prior to distribution to a Participant pursuant to
Section 2.3(d) hereof, interest equivalents calculated as described above
shall be credited to such Participant's Deferred Cash Account.
(c) Form of distribution- Distribution under this option shall be in
--------------------
cash; provided, however, that prior to a Change in Control, the Committee in
its discretion may change the form to any class or series of Stock or a
combination of cash and any class or series of Stock.
(d) Time of distribution to Participant- All amounts due to the
------------------------------------
Participant under the Variable Interest Option shall be payable on the earlier
to occur of:
(i.) the 60th day following the Participant's Retirement or other
termination; or
(ii.) the 60th day following the date of the Administrator's determination
of the Participant's total and permanent disability. No amounts shall be
payable to a Participant prior to such times except as permitted under the
hardship withdrawal provisions of Section 3.3. Notwithstanding the foregoing,
in the event Ralston Purina Company is in default of its funding obligations
under the Trust Agreement dated as of September 15, 1994, between Ralston
Purina Company and Wachovia Bank of North Carolina, N.A., as amended, and it
fails to cure such default in a timely manner as provided under such Trust
Agreement, the Plan Administrator shall, as soon as practicable, pay to each
Participant or Beneficiary all amounts credited to the Stock Equivalent
Account of each Plan Participant or Beneficiary, except to the extent such
individual elects, before the date such payments are made, to continue to
defer receipt of such payment; or
(iii.) the 60th day following the Committee or its delegee's determination
that the respective mandated deferred LIP payment is deductible by the Company
and therefore available for in-service distribution.
(e) Distribution upon death- In the event of the Participant's death,
-----------------------
all amounts due under this Option shall be paid to the Beneficiary; but if
none is designated, then benefits shall be paid to Participant's estate or as
provided by law. Distribution in full shall be made on the 60th day following
the Participant's death or, if death occurs after Acceleration of Payment,
distribution shall be made as soon as practicable following such event.
3. OTHER GOVERNING PROVISIONS
3.1 COMPANY'S OBLIGATIONS UNFUNDED
All benefits due a Participant or a Beneficiary under this Plan are
unfunded and unsecured and are payable out of the general funds of the
Company. If a "grantor trust" is established for the payment of benefits and
obligations hereunder, the assets of such trust shall be at all times subject
to the claims of creditors of the Company as provided for in such trust. The
establishment of such trust shall not alter the characterization of the Plan
as an "unfunded plan" for purposes of the Employee Retirement Income Security
Act, as amended. Such trust shall make distributions in accordance with the
terms of the Plan.
3.2 BENEFICIARY DESIGNATION
A Participant may file with the Corporate Compensation Department a
written designation of a Beneficiary or beneficiaries (subject to such
limitations as to the classes and number of beneficiaries and contingent
beneficiaries as the Plan Administrator may from time to time prescribe) to
receive, following the death of the Participant, benefits payable under any
option of the Plan. The Plan Administrator reserves the right to review and
approve Beneficiary designations. A Participant may from time to time revoke
or change any such designation of Beneficiary and any designation of
Beneficiary under the Plan shall be controlling over any other disposition,
testamentary or otherwise; provided, however, that if the Plan Administrator
shall be in doubt as to the right of any such Beneficiary to receive any
benefits under the Plan, the Plan Administrator may determine to recognize
only the rights of the legal representative of the Participant, in which case
the Company, the Plan Administrator and the members thereof, shall not be
under any further liability to anyone.
3.3 HARDSHIP WITHDRAWALS
The Plan Administrator in its sole and absolute discretion may permit
withdrawal by a Participant of any amount from his accounts if the Plan
Administrator determines, in its discretion, that such funds are needed due to
serious and immediate financial hardship from an unforeseeable emergency.
Serious and immediate financial hardship to the Participant must result from a
sudden and unexpected illness or accident of the Participant or a dependent,
loss of property due to casualty, or other similar extraordinary and
unforeseeable circumstances arising from events beyond the control of the
Participant. A distribution based upon such financial hardship cannot exceed
the amount necessary to meet such immediate financial need. In addition, the
Plan Administrator may impose suspensions of future deferrals or other
penalties as a condition to such withdrawals.
3.4 CLAIM PROCEDURE
Each Participant or Beneficiary who believes his claim for benefits has
been wholly or partially denied shall have the right to request the Plan
Administrator or its delegee to review such denial. A request for review
shall be filed by the Participant or Beneficiary or duly authorized
representative on or before the sixtieth (60th) day following the Participant
or Beneficiary's receipt of notice of denial of his claim. The Participant or
Beneficiary shall have the right to review pertinent documents and submit
issues and comments in writing in connection with the request for review. The
Plan Administrator or its delegee's shall issue a written statement on or
before the sixtieth (60th) day following its receipt of such request stating
the Plan Administrator or its delegee's decision on review and the reasons
therefor, including specific references to pertinent Plan provisions on which
the decision is based, and any other information required by applicable law.
If special circumstances require additional time for processing such review,
the Plan Administrator or its delegee may extend the period for an additional
sixty (60) days provided that the Participant or Beneficiary is notified of
such circumstances. If the decision is not issued within the prescribed
period, the appeal shall be deemed denied. No Participant or Beneficiary
shall have recourse to courts of law until the administrative review process
set forth herein has been completed.
3.5 RESUMPTION OF BENEFITS AFTER INTERRUPTION OF PAYMENTS
In the event payment of benefits under the Plan, including benefits that
are accelerated due to the Company's default in funding the Company's grantor
trust, are not made in a timely manner for any reason where the Company is at
fault or unable to pay, the first payment after such interruption shall
include all payments due during such period of interruption, plus interest
accrued on such amounts calculated in the same manner as interest equivalents
under the Variable Interest Option.
3.6 TRANSFERABILITY OF BENEFITS
The right to receive payment of benefits under this Plan shall not be
transferred, assigned or pledged except by Beneficiary designation, will or
pursuant to the laws of descent and distribution.
3.7 ADDRESS OF PARTICIPANT OR BENEFICIARY
A Participant shall keep the Company apprised of his current address and
that of any Beneficiary at all times during participation in the Plan. At the
death of a Participant, a Beneficiary who is entitled to receive payment of
benefits under the Plan shall keep the Company apprised of his current address
until the entire amount to be distributed has been paid.
3.8 TAXES
Any taxes required to be withheld under applicable federal, state or
local tax laws or regulations may be withheld from any payment due hereunder.
3.9 GENDER
The use of masculine pronouns herein shall be deemed to include both
males and females.
ex10xv.doc
AGREEMENT FOR DEFERRAL OF 1997 ANNUAL CASH BONUS
Ralston Purina Company ("Company") and NAME agree that, effective
------
November 1, 1997, $ DEFERRAL awarded to Participant under the 1997 Annual Cash
----------
Bonus Award Program shall be deferred, as requested by Participant, into the
option or options available under the Deferred Compensation Plan for Key
Employees ("Plan"), which is attached hereto as Exhibit A and incorporated by
reference herein.
Pursuant to Participant's request, the following amounts have been
deferred for Participant in the manner set forth below:
(1) EQUITY OPTION -
-----------------
(a) $ EQUITY in a Deferred Stock Equivalent Account in
---------
Participant's name under the Equity Option as set forth in Section 2.2 of the
Plan.
(b) $ MATCH in a Deferred Stock Equivalent Account in
--------
Participant's name representing Company Matching Deferral (25% of amount
listed in 1(a) above) as set forth in Section 2.2(b) of the Plan.
(2) SHORT-TERM VARIABLE INTEREST OPTION - $ SHORT in a Deferred Cash
----------------------------------- -------
Account in Participant's name under the Variable Interest Option as set forth
in Section 2.3 of the Plan; provided, however, that, notwithstanding any
provision to the contrary contained in the Plan, amounts attributable to
deferrals into the Short-Term Variable Interest Option shall be paid to
Participant in January 1998.
(3) LONG-TERM VARIABLE INTEREST OPTION - $ LONG in a Deferred Cash
---------------------------------- ------
Account in Participant's name under the Variable Interest Option as set forth
in Section 2.3 of the Plan.
Participant's deferral hereunder is pursuant to the Plan and is subject
in all respects to the terms and conditions of this Agreement and of the Plan.
No other communications or representations, written or oral, made prior or
subsequent to this Agreement shall be deemed to amend or modify the terms of
this deferral except by an agreement in writing executed by the parties
subsequent to the date of this Agreement, expressly consenting to such
amendment or modification. Participant hereby waives any rights, and releases
Company from any claim, based on any such prior communications or
representations, if any.
ACCEPTED: RALSTON PURINA COMPANY
_____________________________ By:__________________________
Participant C. S. Sommer
Vice President and
Director, Administration
_____________________________
Date
i:sec\10k-97\ex10xvii.doc
1996 LEVERAGED INCENTIVE PLAN
-----------------------------
I. RECOMMENDATION
--------------
Management recommends implementation of a second flight of the Leveraged
Incentive Plan approved in 1994 to provide a 3-year duration cash incentive
award for a select group of key executives whose actions can positively impact
shareholder value. This second plan would be known as the 1996 Leveraged
Incentive Plan (the "Plan").
II. BACKGROUND
----------
Our pay objective continues to position base pay below the median for
comparable executive positions at comparator companies while providing the
opportunity to achieve total compensation at the 75th percentile or above for
exceptional performance.
Hewitt has evaluated the Company's total pay in 1995, which was an
outstanding year for Company performance. Even in F'1995, our long-term
incentive and net total compensation were significantly below the 75th
percentile and only marginally above the 50th percentile among 28 peer
competitors.
F'95 Competitive Posture
--------------------------
50th Percentile 75th Percentile
---------------- ----------------
Total Cash +5% -12%
Long Term Incentive +5% -16%
NET TOTAL COMPENSATION +5% -14%
Implementing a continuation of this award with an overlapping flight will
provide the long-term incentive pay continuity originally anticipated and
should further assuage the deficiency (even in years of outstanding
performance) referenced above.
III. ELIGIBILITY
-----------
Eligibility for this plan would be limited to certain key executives
nominated by the Chief Executive Officer and approved by the Human Resources
Committee of the Board of Directors.
Participants must remain employed by the Company throughout the 3-year
performance period to be eligible to receive payment under the Plan.
Exceptions would comprise cases of retirement and eligibility for commencement
of retirement benefits under one of the Company's qualified retirement plans,
long-term disability, death, sale of business or business unit or discharge
related to sale of unit, or other involuntary termination. In these
situations pro rata payments would be made based on performance of the Company
and peer group to the termination date.
<PAGE>
- 2 -
1996 LEVERAGED INCENTIVE PLAN (CONT.)
IV. PLAN DESCRIPTION
-----------------
A. PERFORMANCE MEASURES
---------------------
Average compound growth in Total Shareholder Return (stock price
appreciation plus dividends) and compound "controllable earnings" would be
measured over a three-year period beginning October 1, 1996 and ending
September 30, 1999. Appropriate adjustments would be made in the event of
divestiture, acquisition, recapitalization, or other financial restructuring.
Corporate participants would be measured on Total Shareholder Return ("TSR")
only; however, unit participants would be measured half according to TSR and
half according to controllable earnings growth within their unit as determined
by the Corporate Controller's Office.
The TSR measurement would be made in both absolute terms and in relation
to a group of peer companies (see next page). In calculating the beginning
and ending stock price under the Plan, the average of the closing price for
the previous ten trading days including the first and last days of the Plan
term, would be used.
B. AWARD OPPORTUNITY - BASE AWARD
----------------------------------
A base cash award would be made at the end of the three-year period based
on the following schedule:
Performance Factors For: Performance Factors For: This Plan would pay
Corporate Operating Units accourding to
Compound Growth Weighted: designated participa-
Total Shareholder 50% tion levels this %
Return (TSR) 50% Controllable of salary**
Compound Growth TSR + Earnings* /2=Sample
of Unit Outcome Full Half Quarter
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
18% or Higher 18% + 16% \ 2 = 17%> 100% 50.0% 25%
17% 17% + 15% \ 2 = 16% 90% 45.0% 22.5%
16% 16% + 14% \ 2 = 15% 80% 40.0% 20%
15% 15% + 13% \ 2 = 14% 70% 35.0% 17.5%
14% 14% + 12% \ 2 = 13% 60% 30.0% 15%
13% 13% + 11% \ 2 = 12% 50% 25.0% 12.5%
12% 12% + 10% \ 2 = 11% 45% 22.5% 11.25%
11% 11% + 9% \ 2 = 10% 40% 20.0% 10%
10% 10% + 8% \ 2 = 9% 35% 17.5% 8.75%
9% 9% + 7% \ 2 = 8% 30% 15.0% 7.5%
8% 8% + 6% \ 2 = 7% 25% 12.5% 6.25%
Less than 8% Less than 7% 0% 0% 0%
- -------------- ------------------------- ----- ----- -----
</TABLE>
* Controllable earnings before special items such as acquisitions or
divestitures
** Defined as aggregate salary over the 3-year period. Amounts in between
those shown above will be calculated using straight-line interpolation
<PAGE>
- 3 -
1996 LEVERAGED INCENTIVE PLAN (CONT.)
For a given payment level, the operating units' controllable earnings growth
standard, recognizing the absence of dividends, is 2% less than the TSR
demanded.
C. AWARD OPPORTUNITY - PEER GROUP AWARD
-------------------------------------------
If Ralston Purina Company's 3-Year TSR meets or exceeds the 75th
percentile of its peer Competitor Group, an additional 50%, 25%, or 12 1/2%,
--------------------------------
of aggregate salary, depending on one's participation level, would be deferred
for all Plan participants until retirement, termination, death, or long-term
disability, in Ralston Purina stock equivalents in an account established in
the participants' names in the Equity Option of the Deferred Compensation Plan
for Key Employees. This peer-group payout would be made irrespective of the
absolute level of TSR. Attachment #1 provides a sample calculation for both a
Corporate and a business unit participant.
D. PERFORMANCE PEER GROUP
------------------------
- S&P's Foods and Household Products Indices plus Duracell and
Gillette -
Archer Daniels Midland H. J. Heinz
Campbell Soup Company Hershey Foods Corp.
The Clorox Company Kellogg Company
Colgate-Palmolive Company Kimberly Clark
ConAgra, Inc. The Proctor & Gamble Company
CPC International Inc The Quaker Oats Company
Duracell Ralston Purina Company
General Mills Sara Lee Company
Gillette Wm. Wrigley Jr. Company
Companies must be in the sample for the entire 3 years to be
counted
Dividend reinvestment, calculated using S&P methodology
Final calculations related to the Peer Group's performance will be
overseen by Hewitt
Associates or another independent consulting firm.
E. FORM AND TIMING OF PAYMENT
------------------------------
The base award would be made after the close of the three-year
performance period in cash or might be deferred into either of the options
available in the Deferred Compensation Plan for Key Employees, if so elected
by Plan participants at least one year prior to the date the amount of award
would be determinable, or deferral may be mandated by the Human Resources
Committee to assure compliance with the deductibility provisions of Section
162(m) of the Internal Revenue Code of 1986, as amended. If the Equity Option
is elected for deferral, there would be no match. The peer group payout would
be deferred in the Equity Option with no transfer permitted to another fund
until a participant's retirement (including "early" retirement), termination,
death or long-term disability. Appropriate
- 4 -
1996 LEVERAGED INCENTIVE PLAN (CONT.)
amendments would be made, subject to final approval by C. S. Sommer,
to the Deferred Compensation Plan. Pro rata payments as described under III
would include a peer group computation at the time of an individual's
departure.
If Ralston Purina Company should cease to be a publicly-traded
company, or in those situations described as exceptions under Eligibility
-----------
relating to employment tenure throughout the 3-year Plan duration, participant
awards earned to that date would be paid as soon as practicable thereafter on
a pro-rata basis.
If, in the year of payment, a participant's compensation exceeds the
Company's $1 million limit on deductible compensation, the Human Resources
Committee may, at its sole discretion and without the consent of participants,
defer payment or a portion thereof until the year in which compensation would
be deductible. The Committee retains the discretion to effect deferrals in
other circumstances as it deems appropriate.
The value of awards, to the extent permitted by applicable benefit
plans, would be included in annual benefit earnings.
V. VALUE/COST SUMMARY
-------------------
Assuming a constant dividend payout at 2%, constant RAL stock price
multiple, and participant salary growth at 5% per year, the following table
indicates program costs in relation to value returned to the shareholder. The
illustrated favorable leverage for shareholders is significant at all levels
of performance.
LEVERAGED INCENTIVE PLAN SUMMARY
-----------------------------------
% Average Annual Total Annualized Projected
---------------------------
Shareholder Op. Unit 3 Year Value Cost of Award RAL
Share
Return Weighted Return Returned If Earned Price
------ --------------- -------- --------- -----
8 7 $1.6 bil. $1,239,900 $78
13 12 $2.8 bil. $2,479,700 $89
18 17 $4.1 bil. $4,959,400 $102
If RAL's performance is in the top quartile of common stocks of peer
companies previously referenced, an additional payout of $7.2 million would
occur -- irrespective of the level of total business unit growth and return to
shareholders. It is expected RAL's relative stock price would reflect this
superior performance.
VI. OTHER
-----
Attachment #2 lists the participants in the Plan and their recommended
level of participation.
- 5 -
1996 LEVERAGED INCENTIVE PLAN (CONT.)
Appropriate adjustments in computing TSR would be made in the event of
any divestiture, acquisition, recapitalization, or other financial
restructuring of the Company. Were the Plan to be terminated prior to
September 30, 1999, appropriate pro rata payments would be made or deferred as
in the manner previously described in III. and IV.E.
Management requests, in circumstances which warrant, that authority be
delegated to the Chief Executive Officer to add additional executive
participants to this 3-year Plan on a pro rata basis up to, but not to exceed,
cumulative aggregate participants' salary additions of $1 million.
ex10xx.doc
The following resolution was adopted by the Human Resources Commitee of the
Company's Board of Directors on September 26, 1996 with respect to certain
Options held by officers of the Company:
RESOLVED, that, effective September 26, 1996, all Non-Qualified Performance
Stock Options granted September 28, 1995, be amended to provide that the
exercise period for optionees who terminate on or after September 26, 1996,
shall be the shorter of five years or the balance of the original ten-year
term of the option remaining, provided that an optionee meets the following
conditions on the date of termination: (i) optionee is (a) age 55 or older
with at least 15 years of service, or (b) at least age 62, or (c)
involuntarily terminated other than for Cause; (ii) optionee has not (a)
engaged in any activity or conduct contrary to the best interests of the
Company or any Affiliate, or (b) engaged in competition with the Company or
any Affiliate; and (iii) in any fiscal year prior to termination in which
optionee is among the five highest paid executive officers of the Company,
optionee has refrained from exercising such options if a portion of his or her
compensation exceeded, or would exceed if the options were exercised, the
deductibility limits of Section 162(m) of the Internal Revenue Code of 1986,
as amended; and
FURTHER RESOLVED, that, subject to the foregoing terms of the amendment, all
other terms of the option award remain unchanged; and
FURTHER RESOLVED, that W. P. Stiritz, and C. S. Sommer be, and each of them
are hereby authorized, to take any and all action and execute any and all
documents they deem necessary or desirable to effectuate the foregoing
resolution.
i:ex10xxi.doc
SPLIT DOLLAR AGREEMENT
THIS AGREEMENT made and entered into this ____________ day of
____________, 19_____, by and among Ralston Purina Company, a Missouri
corporation, with its principal offices and place of business in the State of
Missouri (the "Corporation"), [________________________ (the "Employee"), and
_____________________________________________, Trustee of the _____________
Irrevocable Insurance Trust U/I/T dated ____________], 19_____ (the "Owner")],
or [__________________ (the "Employee" and "Owner")].
WITNESSETH THAT:
WHEREAS, the Employee is employed by the Corporation;
WHEREAS, the Employee wishes to provide life insurance protection for his
family in the event of his death and the death of his spouse or other named
insured designated by the Employee (the "Second Insured") under a policy of
life insurance insuring his life and the life of the Second Insured (the
"Policy"), which is described in Exhibit A attached hereto and by this
reference made a part hereof, and which is being issued by Security Equity
Life Insurance Company (the "Insurer");
WHEREAS, the Corporation is willing to pay a portion of the premiums due
on the Policy as an additional employment benefit for the Employee on the
terms and conditions hereinafter set forth; and
WHEREAS, the Insurer has determined that the Employee and the Second
Insured satisfy its insurability criteria; and
WHEREAS, the Owner is the owner of the Policy and, as such, possesses all
incidents of ownership in and to the Policy; and
WHEREAS, the Corporation wishes to have certain rights in and to the
Policy collaterally assigned to it by the Owner, in order to secure the
repayment of the amounts which it will advance toward the premiums on the
Policy;
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the parties hereto agree as follows:
1. Purchase Of Policy. The Owner has purchased or will
--------------------
contemporaneously purchase the Policy from the Insurer in the total face
-
amount of One Million Dollars ($1,000,000). The parties hereto agree that the
Policy shall be subject to the terms and conditions of this Agreement and of
the collateral assignment (the "Assignment"), as described in paragraph 5
hereof, filed with the Insurer relating to the Policy.
2. Ownership Of Policy. The Owner shall be the sole and absolute
-------------------
owner of the Policy and may exercise all ownership rights granted to the owner
thereof by the terms of the Policy, except as otherwise provided herein or in
the Assignment.
3. Policy Dividends. Any dividend declared on the Policy shall be
----------------
applied to increase the cash value of the Policy. The parties hereto agree
that the dividend election provisions of the Policy shall conform to the
provisions hereof.
4. Payment Of Premiums.
---------------------
a. Thirty (30) days prior to the due date of each Policy
premium, the Insurer shall notify the Owner of the exact amount of its
required payment of such Policy Premium, as determined in accordance with the
premium schedule provided by the Insurer set forth on Exhibit B, Survivor Life
Insurance Plan Projection, attached hereto and by reference made a part hereof
(the "Premium Schedule"). In no event shall the amount due from the Owner
result in the violation of the rules set forth in Section 7702 of the Internal
Revenue Code of 1986, as amended (the "Code"). The Owner shall pay such
required contribution to the Insurer on or before the premium due date, or
within the grace period provided therein. If the Owner fails to make such
timely payment, the Corporation, in its sole discretion, may elect to make the
Owner's portion of the premium payment which payment shall be recovered by the
Corporation as provided herein.
b. On or before the due date of each Policy premium, or within
the grace period provided therein, the Corporation shall pay to the Insurer
that portion of the premium due in accordance with the Premium Schedule.
5. Collateral Assignment Of Policy. To secure the repayment to the
-------------------------------
Corporation of the total amount of the premiums on the Policy paid by it
hereunder, the Owner shall execute and deliver to the Insurer the Assignment
pursuant to which the Owner shall grant to the Corporation the limited rights
in and to the Policy specified therein. The Assignment shall not be
terminated, altered, or amended by the Owner without the written consent of
the Corporation, which consent shall not be unreasonably withheld. The
parties hereto agree to take all action necessary to cause the Assignment to
conform to the provisions of this Agreement. All rights in and to the Policy
not granted to the Corporation by the Assignment or this Agreement, including
but not limited to the right to designate and change the beneficiary of that
portion of the Policy proceeds to which the Owner is entitled hereunder, shall
be retained by the Owner subject to the provisions hereof, including,
specifically, the provisions of the last sentence of Paragraph 6 below. The
Assignment is intended only to grant to the Corporation a security interest in
the Policy and this security interest shall not be interpreted in any way to
include any incidents of ownership, except as provided in this Agreement or
the Assignment.
6. Collection Of Death Benefits. In the event of the death of the
----------------------------
survivor of the Employee and the Second Insured prior to the termination of
this Agreement in accordance with paragraph 7 hereof, the Corporation shall
have the unqualified right to receive a portion of the death benefits provided
under the Policy equal to the total amount of premiums paid by it hereunder
(the "Corporation's Premium Payment"). The balance of the death benefits
provided under the Policy, if any, shall be paid directly to the
beneficiary(ies) designated by the Owner, in the manner and in the amount
provided in the beneficiary designation provision of the Policy. In no event
shall the amount payable to the Corporation hereunder exceed the Policy
proceeds payable at the death of the survivor of the Employee and his Second
Insured. No amount shall be paid from such death benefits to the
beneficiary(ies) designated by the Owner until the full amount due the
Corporation hereunder has been paid. The parties hereto agree that the
beneficiary designation provision of the Policy shall conform to the
provisions hereof, and the Owner shall perform each and every act necessary to
establish the Corporation as a beneficiary of the Policy to the extent of the
Corporation's Premium Payment.
7. Termination Of Agreement.
--------------------------
a. Events Of Termination. This Agreement shall terminate
-----------------------
[except for the provisions of subparagraphs 8(a) and 8(b) hereof] without
notice upon the first to occur of any of the following events: (1) the
bankruptcy, receivership, or dissolution of the Corporation; (2) the
termination of the Employee's employment with the Corporation or one of its
wholly-owned subsidiaries or affiliates, for whatever reason, including,
without limitation, the sale or other divestiture of any subsidiary of the
Corporation, or the assets of any business unit, by which the Employee is
employed; (3) the retirement of the Employee on or after the attainment of age
55; (4) the death of the Employee; (5) the failure of the Owner to timely pay
to the Insurer the Employee's portion of the premium, if any, due hereunder,
unless the Corporation elects to make such payment on behalf of the Employee;
(6) the date on which the cash value of the Policy equals or exceeds the sum
of (i) the Corporation's Premium Payment, and (ii) the amount needed to fund
the cost of insurance as determined by the Insurer to maintain the Policy in
force during the lives of the Employee and Second Insured (the "Policy
Rollout"); (7) the expiration of fifteen (15) Policy years from the effective
date of the Policy, or a greater number of Policy years as the parties hereto
may mutually agree; or (8) the modification of the tax laws, or in the IRS
interpretation of such laws, which adversely impact the tax effectiveness of
the Agreement for the Corporation, the Owner, or the Employee.
b. Exception To Termination; Cessation Of Corporation's
--------------------------------------------------------
Premiums. Notwithstanding the foregoing, the Corporation in its sole
discretion may elect not to terminate the Agreement upon the termination of
the Employee's employment, for whatever reason, or retirement of the Employee,
in accordance with subparagraphs 7(a)(2) or (3), and, in such event, the
repayment of the Corporation's Premium Payment in accordance with paragraph 8
shall not occur until the occurrence of any other event listed in subparagraph
7(a); however, the Corporation's obligations set forth in paragraph 4 hereof,
including the obligation to pay any premiums with respect to the Policy as set
forth in the Premium Schedule, shall cease upon the termination of the
Employee's employment, for whatever reason, or retirement of the Employee.
c. Termination By Owner Or Employee. Either the Owner or the
--------------------------------
Employee may terminate this Agreement, while no premium under the Policy is
overdue, by written notice to the other parties hereto. Such termination
shall be effective as of the date of mailing of the notice in accordance with
the provisions of paragraph 15 hereof.
8. Repayment Of The Corporation Upon Termination Of The Agreement.
--------------------------------------------------------------
a. Release Of Assignment. Within thirty (30) days after the
---------------------
date of the termination of this Agreement in accordance with paragraph 7
hereof, the Owner shall obtain the release of the Assignment of the Policy to
the Corporation. The Owner may exercise all ownership rights granted to the
Owner thereof by the terms of the Policy. Such release shall be given upon
the Corporation's receipt of the Corporation's Premium Payment by (i) a
withdrawal of the cash value of the Policy equal to the Corporation's Premium
Payment; provided, however, if the cash value of the Policy is less than the
Corporation's Premium Payment, the provisions of subparagraphs 8(b) or 8(c)
hereof shall apply; or (ii) a payment by the Owner or the Employee, in
immediately available U.S. funds, to the Corporation in the amount of the
Corporation's Premium Payment. Upon release of the Assignment of the Policy,
neither the Corporation nor its respective successors or assigns shall have
any further interest or rights in and to the Policy, either under the terms
thereof or under this Agreement.
b. Reimbursement/Forfeiture. If the Agreement terminates for
------------------------
any reason other than the involuntary termination of the Employee's employment
or Policy Rollout, in accordance with subparagraph 7a, hereof, and the cash
value of the Policy is less than the amount of the Corporation's Premium
Payment due the Corporation in accordance with subparagraph 8a hereof, the
Owner or the Employee shall pay to the Corporation, within 30 days thereafter,
in immediately available U.S. funds, such difference in amount, and the
Corporation shall release the Assignment of the Policy as set forth in
subparagraph 8a hereof. If the Owner or the Employee fail to timely pay the
Corporation such amount, the Owner promptly shall execute any and all
instruments required to vest ownership of the Policy in the Corporation.
Neither the Owner nor any Policy beneficiary designated by the Owner prior to
the termination of the Agreement shall thereafter have any further interest in
the Policy, and the Owner and the Corporation will be deemed to have satisfied
all of their respective obligations hereunder.
c. Involuntary Termination. In the event the Agreement
------------------------
terminates as a result of the involuntary termination of the Employee's
employment, and the cash value of the Policy is less than the amount of the
Corporation's Premium Payment due the Corporation in accordance with paragraph
8(a) hereof, the Corporation shall be entitled to an amount equal to the
product resulting when the cash value of the Policy is multiplied by a
fraction, the numerator of which is the Corporation's Premium Payment, and the
denominator of which is the aggregate amount of premiums paid by the
Corporation and by the Owner.
d. Death Of Employee. In the event the Agreement terminates
-----------------
upon the death of the Employee prior to the Second Insured, the Corporation
may in its sole discretion, pay to the Second Insured, or to the Owner of the
Policy, an amount needed to fund the cost of insurance as determined by the
Insurer until Policy Rollout.
9. Change Of Control
-------------------
a. Assignment To Trustee. In the event of a "Change of
-----------------------
Control", as defined in subparagraph c herein, prior to the termination of
this Agreement in accordance with paragraph 8 hereof, the Trust Agreement,
dated as of September 15, 1994 between the Corporation and Wachovia Bank of
North Carolina, N.A., shall become the assignee of the Assignment, and the
terms of the Assignment shall so conform to this provision.
b. Sale Of Business. Notwithstanding the provisions of
------------------
Paragraph 7 hereof, in the event the Employee ceases to be employed by the
Corporation or one of its subsidiaries or affiliates due to a sale or other
disposition of a subsidiary or other business unit of the Corporation by which
the Employee is employed, the Corporation may elect not to terminate this
Agreement, but may assign this Agreement, in its sole discretion, to the
acquiror of the subsidiary or other business unit, and the Employee hereby
consents to such assignment. In such event, the Corporation shall be relieved
of all of its obligations hereunder.
c. Definitions. For purposes of this Agreement, a "Change of
-----------
Control" shall be deemed to occur upon the acquisition by any person, entity,
or group, within the meaning of Sections 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934 (the "Exchange Act"), of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of fifty
percent (50%) or more of the then outstanding shares of common stock of the
Corporation, other than acquisitions by the Corporation or any of its
Affiliates or any employee benefit plan of the Corporation or any of its
Affiliates; or any entity holding common stock of the Corporation for or
pursuant to the terms of any such plan; or the cessation of the Continuing
Directors to constitute, for any reasons, at least a majority of the Board of
Directors of the Corporation.
As used herein, "Affiliate" shall mean, with respect to a
specified person, group, or entity, a person that directly or indirectly,
through one or more intermediaries, controls, or is controlled by, or is under
common control with, the person specified. "Continuing Directors" shall mean
any member of the Board of Directors of the Corporation, as of September 26,
1996, while such person is a member of the Board of Directors, and any
successor of a Continuing Director, while such successor is a member of the
Board of Directors, who is recommended or elected to succeed the Continuing
Director by at least two-thirds (2/3) of the Continuing Directors then in
office.
10. Discharge Of Insurer. The Insurer shall be fully discharged from
--------------------
its obligations under the Policy by payment of the Policy death benefit to the
beneficiary(ies) named in the Policy, subject to the terms and conditions of
the Policy. In no event shall the Insurer be considered a party to this
Agreement, or any modification or amendment hereof. No provision of this
Agreement, nor of any modification or amendment hereof, shall in any way be
construed as enlarging, changing, varying, or in any way affecting the
obligations of the Insurer as expressly provided in the Policy, except insofar
as the provisions hereof are made a part of the Policy by the Assignment.
11. Named Fiduciary And Claims Procedure
----------------------------------------
a. Prior to a Change of Control, the Corporation is hereby
designated as the named fiduciary under this Agreement; after a Change of
Control, the trustee of the Trust Agreement described in subparagraph 9(a) is
designated as such named fiduciary. The named fiduciary shall have authority
to control and manage the operation and administration of this Agreement, and
it shall be responsible for establishing and carrying out a funding policy and
method consistent with the objectives of this Agreement.
b. The named fiduciary shall make all determinations concerning
rights to benefits under this Agreement. Any decision by the named fiduciary
denying a claim by the Owner or a beneficiary shall be stated in writing and
delivered or mailed to the Owner or such beneficiary. Such decision shall set
forth the specific reasons for the denial, written to the best of the named
fiduciary's ability in a manner calculated to be understood by the Owner or
beneficiary. In addition, the named fiduciary shall afford a reasonable
opportunity to the Owner or such beneficiary for a full and fair review of the
decision denying such claim.
12. Limitations On Corporation's And Owner's Rights In Policy.
-----------------------------------------------------------
a. Except as otherwise provided herein, the Owner shall not
sell, assign, transfer, borrow against, surrender, or cancel the Policy,
change the beneficiary designation provision thereof with respect to the
proceeds due the Corporation as provided hereunder, nor terminate any dividend
election or death benefit option thereof without, in any such case, the
express written consent of the Corporation. The Owner and the Employee may
not transfer or assign any of their respective rights or obligations under
this Agreement, except by express written consent of the Corporation.
b. The Corporation may not transfer or assign any of its
interest in the Policy or its rights or obligations under this Agreement to
any person or entity other than the Owner or the Insurer except by express
written consent of the Owner, or as provided under this Agreement; provided,
however, the Corporation may so transfer or assign such interest, rights, or
obligations to any successor by reason of merger, consolidation, or other
corporate reorganization provided that such successor in interest agrees in
writing to be bound by the terms and provisions of this Agreement.
c. In no event shall the Corporation, the Owner, or the Employee
undertake any action with respect to the Policy which would result in the
Policy becoming a Modified Endowment Contract, as defined in Code Section
7702A.
13. Amendment. This Agreement may not be amended, altered, or
---------
modified, except by a written instrument signed by the parties hereto, or
their respective successors or assigns, and may not be otherwise terminated
except as provided herein.
14. Binding Agreement. This Agreement shall be binding upon and
-----------------
inure to the benefit of the Corporation and its successors and assigns and the
Employee, the Owner, and their respective successors, assigns, heirs, personal
representatives, administrators, and beneficiaries.
15. Notice. Any notice, consent, or demand required or permitted to
------
be given under the provisions of this Agreement shall be in writing, and shall
be signed by the party giving or making the same. If such notice, consent, or
demand is mailed to a party hereto, it shall be sent by United States
certified mail, postage prepaid, addressed to such party's last known address
as shown on the records of the Corporation. The date of such mailing shall be
deemed the date of notice, consent, or demand.
16. Gender/Number. Any reference to masculine or singular, herein,
-------------
shall imply the feminine or plural, as appropriate.
17. Governing Law. This Agreement, and the rights of the parties
-------------
hereunder, shall be governed by and construed in accordance with the laws of
the State of Missouri.
IN WITNESS WHEREOF, the parties hereto have executed this agreement as of
the date and year first above written.
RALSTON PURINA COMPANY
By: ____________________________
C. S. Sommer
Vice President, Administration
"Corporation"
ATTEST:
________________________
Secretary
____________________________
"Employee"
____________________________
"Owner"
H:\RCW\WINWORD\PRCW101B.DOC
<PAGE>
EXHIBIT A
---------
The following life insurance policy is subject to the attached Split
Dollar Agreement:
Insurer _____SECURITY EQUITY_________________
First Insured _______________________________________
Second Insured _______________________________________
Policy Number _______________________________________
Face Amount _____$1,000,000_________________________
Date of Issue _______________________________________
<PAGE>
Page 2
WHEREAS, the Owner is the owner of the Policy and, as such, possesses all
incidents of ownership in and to the Policy; and
WHEREAS, the Corporation wishes to have certain rights in and to the
Policy collaterally assigned to it by the Owner, in order to secure the
repayment of the amounts which it will advance toward the premiums on the
Policy;
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the parties hereto agree as follows:
1. Purchase Of Policy. The Owner has purchased or will
--------------------
contemporaneously purchase the Policy from the Insurer in the total face
-
amount of Ten Million Dollars ($10,000,000). The parties hereto agree that
the Policy shall be subject to the terms and conditions of this Agreement and
of the collateral assignment (the "Assignment"), as described in paragraph 5
hereof, filed with the Insurer relating to the Policy.
2. Ownership Of Policy. The Owner shall be the sole and absolute
-------------------
owner of the Policy and may exercise all ownership rights granted to the owner
thereof by the terms of the Policy, except as otherwise provided herein or in
the Assignment.
3. Policy Dividends. Any dividend declared on the Policy shall be
----------------
applied to increase the cash value of the Policy. The parties hereto agree
that the dividend election provisions of the Policy shall conform to the
provisions hereof.
<PAGE>
EXHIBIT A
---------
The following life insurance policy is subject to the attached Split
Dollar Agreement:
Insurer _____SECURITY EQUITY_________________
First Insured _______________________________________
Second Insured _______________________________________
Policy Number _______________________________________
Face Amount _____$10,000,000________________________
Date of Issue _______________________________________
ex10xvix.doc
RESPONSE DUE DECEMBER 31, 1997
===================================
November 26, 1997
PERSONAL AND HIGHLY CONFIDENTIAL
- -----------------------------------
Potential Fiscal 1998 Bonus Plan Participants
DEFERRAL OF POTENTIAL FISCAL 1998 BONUS AWARD
---------------------------------------------------
The Deferred Compensation Plan for Key Employees gives you the opportunity to
defer all or a portion of your annual cash bonus, subject to the approval of
the Human Resources Committee of the Board of Directors. In general,
deferring compensation has the advantage of postponing payment of tax and of
allowing any earnings on the deferred amount to accumulate free of tax until
distributed. To protect the tax status of the 1998 bonus deferral program,
you must:
- - Decide now whether to defer all or part of any 1998 annual cash bonus
you might receive, and
- - Promptly return the enclosed election form. IF YOUR ELECTION FORM IS
NOT RECEIVED BY DECEMBER 31, 1997, YOU WILL NOT BE ABLE TO DEFER ANY 1998
ANNUAL BONUS AWARD.
Deferral Options for 1998:
- -----------------------------
You may choose from three deferral accounts:
- - Equity Option, which features a 25% COMPANY MATCH
(note: match may not be offered every year);
- - Short-Term Variable Interest Option (payable in January, 1999);
- - Variable Interest Option.
Special Reminders:
- -------------------
In making your election, please refer to the enclosed Deferred Compensation
Plan for Key Employees Prospectus, dated November 26, 1997. Also refer to
Attachment 1, Factors to Consider. You should keep in mind that YOUR ELECTION
-------------
TO DEFER MAY NOT BE CHANGED.
- ---------------------------------
You are given the opportunity to transfer your deferrals (other than the
match) between the Equity and Variable Interest accounts. Transfers are
offered twice a year (June and December).
PLEASE RETURN ONE COPY OF THE 1998 BONUS DEFERRAL ELECTION FORM, ATTACHMENT 2,
BY DECEMBER 31, 1997 WHETHER OR NOT YOU REQUEST A DEFERRAL. A duplicate form
--------------------------------------
is enclosed for your records. If you request a deferral, it will be
considered for 1998 annual bonus awards only. AS WITH ALL CORRESPONDENCE
INVOLVING EXECUTIVE COMPENSATION, PLEASE TREAT THIS MATERIAL WITH THE UTMOST
CONFIDENTIALITY.
If you have any questions, please feel free to call the Corporate Compensation
Department at extension 1918 or 5888.
Corporate Compensation Department - 1A
<PAGE>
November 26, 1997 Attachment 1
FACTORS TO CONSIDER
===================
Equity Match:
- -------------
- - Deferrals to the Equity Option will be credited with a 25% COMPANY MATCH
FOR 1998
- - The company match may not be offered every year
- - The 5-year deferral requirement of Company-Matching deferrals has been
--- ----
eliminated
---------
- - Participant will become fully vested in the Company Matching
Deferrals upon termination if:
-----------------
- participant has attained age 50; or
- participant is involuntarily terminated at any age.
- - Company Matching Deferrals are forfeited in the event:
- participant is terminated for cause at any age; or
- participant voluntarily terminates prior to age 50; or
- participant engages in competition with the company within 2 years
after termination prior to age 55.
Transfers:
- ---------
- - Available on amounts deferred for at least one year.
- - Limited to transfers between Equity and (Long-Term) Variable Interest
Accounts.
- - Does not apply to the Fixed Benefit Option or Company Matching Deferral
Accounts.
- - Can be made twice a year (June and December).
Under present Federal and state income tax laws, you will not be taxed on any
deferral amounts until you actually receive payments of cash or delivery of
stock at which time amounts received would be taxed as ordinary income in the
year received. If you are subject to the income tax laws of a foreign
country, you should consult your personal tax advisor regarding the proper tax
treatment.
Since deferred compensation is subject to the Medicare Hospital Insurance (HI)
Tax (1.45%), as well as Social Security Tax if the earnings limit has not been
met (6.2%), THE TAX(ES) ATTRIBUTABLE TO YOUR ANNUAL BONUS DEFERRAL WILL BE
WITHHELD FROM YOUR NOVEMBER 1998 PAYCHECK, along with the applicable tax(es)
attributable to your nondeferred compensation received in November. Bonus
-----------
deferrals are counted as taxable earnings only for Social Security and/or
----
Medicare HI Tax in the year in which the bonuses are deferred. In addition,
IRS rules require that HI Tax be withheld on Company Matching deferrals no
longer subject to a substantial risk of forfeiture, which under the amended
Plan terms would occur on or after a participant's attainment of age 50. The
tax will be withheld from such participant's December paycheck. More
information will be sent to applicable participants.
The Administrative Retirement plan definition of "final average earnings"
includes deferred compensation. Therefore, under the terms of that plan, your
pension will be calculated to include deferred bonuses.
If you are a participant in the Savings Investment Plan ("SIP"), any bonus
deferred into the Equity or Variable Interest Options will not be included in
---
your compensation for purposes of computing your SIP contribution or the
Company matching SIP contribution. PLEASE NOTE, HOWEVER, that your SIP
contributions ARE DEDUCTED from the Short-Term Variable Interest CASH PAYMENT
MADE IN JANUARY to employed participants.
The value of the Company's Stock can fluctuate widely as a result of market
activity, and over certain periods, the value may decline. The Company does
not guarantee the performance or the value of the Common Stock or Stock
equivalents or the payment of dividends. In evaluating the Equity Option,
consider the Company Match and the length of time your investment in Stock
equivalents subjects your deferral to market risks.
The Variable Interest Option will credit interest equivalents on your deferred
amounts annually based on the average of the daily close of business prime
rates. These equivalents may vary substantially from year to year depending
on changes in interest rates. The average prime rates established by Morgan
Guaranty Trust Company of New York during recent calendar years are listed
below. Historical rates may or may not be indicative of future rates.
1994 = 7.041% 1996 = 8.271%
1995 = 8.827% 1997 = 8.435%
BENEFITS UNDER THE DEFERRED COMPENSATION PLAN FOR KEY EMPLOYEES ARE UNFUNDED.
IN CONSIDERING THE OPTIONS, YOU SHOULD NOTE THAT YOUR RIGHT TO RECEIVE
DISTRIBUTIONS FROM THE PLAN IS THAT OF AN UNSECURED GENERAL CREDITOR OF
RALSTON PURINA COMPANY. The Company has set aside funds in a grantor trust to
help it meet its benefit obligations under this Plan and certain other plans.
This trust is also subject to the claims of creditors. If the Company fails
to meet its funding commitments to the trust, an event not presently
anticipated to occur, employees will, unless they elect otherwise, be entitled
to be paid by the Company the present value of all amounts deferred under the
Plan at that time. This provision in no way is intended to alter the status
of this Plan as an unfunded plan of deferred compensation.
Consider your deferral participation carefully and consult your personal
advisor if you have any questions. Please refer to the enclosed Deferred
Compensation Plan for Key Employees Prospectus, dated November 26, 1997 for
more details. YOUR ELECTION TO DEFER MAY NOT BE CHANGED FOR ANY REASON.
<PAGE>
<PAGE>
Enclosures
<PAGE>
November 26, 1997 1998 BONUS DEFERRAL ELECTION Attachment 2
Please submit my request as follows with respect to any 1998 annual cash bonus
which may be awarded to me by Ralston Purina Company or its affiliates:
CHECK ONE BOX BELOW:
NO DEFERRAL (Check here if you do not wish to defer any portion of
any 1998 annual bonus. Ignore items 1) and 2) and proceed to bottom section.)
DEFERRAL (Check here if you wish to defer any portion of any
1998 annual bonus. Complete items 1) and 2) and the bottom section.)
1) FILL IN ONE BLANK ONLY:
Defer % OR
Defer all up to $ OR
Defer all in excess of $
2) PLEASE ALLOCATE THE AMOUNT INDICATED IN ITEM 1) ABOVE TO THE
FOLLOWING ACCOUNTS:
[100% may go to any account or may be divided among them.]
% To the EQUITY ACCOUNT25% Company Matched
% To the SHORT-TERM VARIABLE INTEREST ACCOUNT (Payable
in January 1999)
% To the (LONG-TERM) VARIABLE INTEREST ACCOUNT
100% TOTAL
===
I UNDERSTAND THAT ANY DECISION REGARDING ANY 1998 ANNUAL BONUS THAT MAY BE
- ------------------------------------------------------------------------------
PAID TO ME OR DEFERRED FOR FUTURE PAYMENT IS AT THE DISCRETION OF MANAGEMENT
- ------------------------------------------------------------------------------
AND THE HUMAN RESOURCES COMMITTEE. I FURTHER UNDERSTAND THAT AN ELECTION TO
- ------------------------------------------------------------------------------
DEFER, ONCE MADE, IS IRREVOCABLE.
- -------------------------------------
1
Social Security Number
Signature
Today's Date
Name (Type or Print)
Division
Department Location
Home Street Address
City State Zip
RETURN TO CORPORATE COMPENSATION - 1A, ST. LOUIS, MO
OR RETURN BY FAX TO #314-982-2490
NO LATER THAN DECEMBER 31, 1997
i:\sec\10k-97\exh10xvi.doc
AGREEMENT FOR DEFERRAL OF 1997 ANNUAL AND SPECIAL CASH BONUS
Ralston Purina Company ("Company") and NAME agree that, of the $ ANNUAL
----- --------
Annual Bonus and $ SPECIAL Special Bonus awarded to Participant under the 1997
---------
Annual and Special Cash Bonus Award Program, $ DEFERRED shall be deferred,
----------
effective November 1, 1997, as requested by Participant, into the option or
options available under the Deferred Compensation Plan for Key Employees
("Plan"), which is attached hereto as Exhibit A and incorporated by reference
herein.
Pursuant to Participant's request, the following amounts have been
deferred for Participant in the manner set forth below:
(1) EQUITY OPTION -
-----------------
(a) $ Equity in a Deferred Stock Equivalent Account in Participant's name
--------
under the Equity Option as set forth in Section 2.2 of the Plan.
(b) $ Match in a Deferred Stock Equivalent Account in Participant's name
-------
representing Company Matching Deferral (25% of amount listed in 1(a) above) as
set forth in Section 2.2(b) of the Plan.
(2) SHORT-TERM VARIABLE INTEREST OPTION - $ Short in a Deferred
----------------------------------- -------
Cash Account in Participant's name under the Variable Interest Option as set
forth in Section 2.3 of the Plan; provided, however, that, notwithstanding any
provision to the contrary contained in the Plan, amounts attributable to
deferrals into the Short-Term Variable Interest Option shall be paid to
Participant in January 1998.
(3) LONG-TERM VARIABLE INTEREST OPTION - $ Long in a Deferred
---------------------------------- ------
Cash Account in Participant's name under the Variable Interest Option as set
forth in Section 2.3 of the Plan.
Participant's deferral hereunder is pursuant to the Plan and is subject
in all respects to the terms and conditions of this Agreement and of the Plan.
No other communications or representations, written or oral, made prior or
subsequent to this Agreement shall be deemed to amend or modify the terms of
this deferral except by an agreement in writing executed by the parties
subsequent to the date of this Agreement, expressly consenting to such
amendment or modification. Participant hereby waives any rights, and releases
Company from any claim, based on any such prior communications or
representations, if any.
ACCEPTED: RALSTON PURINA COMPANY
______________________________ By:______________________________
Participant C. S. Sommer
Vice President and
Director, Administration
______________________________
Date
i:sec\10k-97\x10xviii.doc
Exhibit (3ii)
BYLAWS
------
OF
RALSTON PURINA COMPANY
----------------------
(AS AMENDED JULY 17, 1997)
***
ARTICLE I - SHAREHOLDERS
------------------------
SECTION 1. ANNUAL MEETING: The annual meeting of shareholders shall be
-----------------------------
held at the principal office of the Company, or at such other place either
within or without the State of Missouri as the Directors may from time to time
determine, at 2:00 P.M. on the third Thursday in January in each year, or such
other time as may be determined by the Chairman of the Board, or if said day
be a legal holiday then on the next succeeding business day, to elect
Directors and transact such other business as may properly come before the
meeting.
SECTION 2. SPECIAL MEETINGS: Special meetings of shareholders may be
-------------------------------
called by the Chairman of the Board, any President or the Secretary, or in
any other manner
permitted by law; and each such meeting shall be held at such time, and at
such place either within or without the State of Missouri, as may be specified
in the notice thereof.
SECTION 3. NOTICE: Notice of each annual or special meeting of
--------------------
shareholders, stating the time
-----
and place thereof, shall be served upon or mailed to each shareholder of
record entitled to vote at such meeting at least ten days but not more
than seventy days prior to the meeting.
Such other or additional
notice shall be given as may be required by law.
SECTION 4. QUORUM: At any meeting of shareholders, the holders of a
--------------------
majority of the
outstanding shares entitled to vote thereat and the holders of a majority of
the votes of the outstanding
shares entitled to vote thereat, and present in person or represented by
proxy, shall constitute a quorum
for all purposes. The holders of a majority of the outstanding shares present
and entitled to vote at any
meeting and a majority of the votes of such shares may adjourn the same from
time to time to a specified
date not more than ninety days after such adjournment, without notice other
than announcement at the
meeting, and any business may be transacted at such adjourned meeting as
originally notified.
At any meeting of shareholders, only such business shall be conducted as
shall have been
properly brought before the meeting. In addition to any other requirements
imposed by or pursuant to
law, the Articles or these Bylaws, each item of business to be properly
brought before a meeting must (i) be specified in the notice of meeting (or
any supplement thereto) given by or at the direction of the Board or the
persons calling the meeting pursuant to these Bylaws; (ii) be otherwise
properly brought before the meeting by or at the direction of the Board; or
(iii) be otherwise properly brought before the meeting by a shareholder. For
business to be properly brought before a meeting by a shareholder, the
shareholder must have given timely notice thereof in writing to the Secretary
of the Company. To be timely, a shareholder's notice must be delivered to or
mailed and received at the principal executive offices of the Company not less
than twenty-five days prior to the meeting; provided, however, that in the
event that less than, twenty-five days' notice or prior public disclosure of
the date of the meeting is given or made to shareholders, notice by the
shareholder to be timely must be so received not later than the seventh day
following the day on which such notice of the date of the meeting was mailed
or such public disclosure was made. A shareholder's notice to the Secretary
shall set forth as to each matter he or she proposes to bring before the
meeting (i) a brief description of the business desired to be brought before
the meeting and the reasons for conducting such business at the meeting; (ii)
the name and address, as they appear in the Company's shareholder records, of
the shareholder(s) proposing such business; (iii) the class and number of
shares of the Company's capital stock which are beneficially owned by the
proposing shareholder(s), and (iv) any material interest of the proposing
shareholder(s) in such business. Notwithstanding anything in these Bylaws to
the contrary, no business shall be conducted at a meeting except in accordance
with the procedures set forth in this Section. Any Chairman or Co-Chairman of
the meeting shall, if the facts warrant, determine and declare to the meeting
that business was not properly brought before the meeting in accordance with
the provisions of this Section, and if he or she should so determine, shall so
declare to the meeting and any such business not properly brought before the
meeting shall not be transacted. Any Chairman or Co-Chairman of the meeting
shall have absolute authority to decide questions of compliance with the
foregoing procedures, and his or her ruling thereon shall be final and
conclusive.
SECTION 5. ORGANIZATION: Each meeting of shareholders shall be convened
--------------------------
by a President, Secretary or other officer or person calling the meeting by
notice given in accordance with these Bylaws. The Chief Executive Officers, or
any person appointed by a Chief Executive Officer prior to any meeting of
shareholders, shall act as Chairman of each meeting of shareholders. In the
absence of all Chief Executive Officers, or a person appointed by a Chief
Executive Officer to act as Chairman of the meeting, the shareholders present
at the meeting shall designate a shareholder present to act as Chairman of the
meeting. The Secretary of the Company, or a person designated by the Chairman,
shall act as Secretary of each meeting of shareholders. Whenever the Secretary
shall act as Chairman of the meeting, or shall be absent, the Chairman of the
meeting shall appoint a shareholder present to act as Secretary of the
meeting.
ARTICLE II - BOARD OF DIRECTORS
-------------------------------
SECTION 1. ELECTION; TENURE; QUALLFLCATLONS: The Board of Directors shall
--------------------------------------------
consist of not less than nine nor more than eighteen members, such Directors
to be classified in respect of the time for which they shall severally hold
office by dividing them into three classes of approximately equal size, each
class to be elected for a term of three years; and the number of Directors
shall be fixed by a resolution of the Board of Directors adopted from time to
time.
Directors shall be elected at each annual meeting of shareholders, to
hold office until the expiration of the term of their respective class, or
until their respective successors shall be elected and shall qualify.
Nominations of persons for election to the Board of Directors of the
Company may be made at a meeting of shareholders by or at the direction of the
Board or any committee thereof designated by the Board, or by any shareholder
of the Company entitled to vote for the election of Directors at the meeting
who complies with the procedures set forth herein. In order for persons
nominated to the Board, other than those persons nominated by or at the
direction of the Board, to be qualified to serve on the Board, such
nominations shall be made pursuant to timely notice in writing to the
Secretary of the Company. To be timely, a shareholder's notice shall be
delivered to or mailed and received by the Secretary of the Company not less
than twenty-five days prior to the meeting; provided, however, that in the
event that less than twenty-five days' notice or prior public disclosure of
the date of the meeting is given or made to shareholders by the Company,
notice by the shareholder to be timely must be so received not later than the
close of business on the seventh day following the day on which such notice of
the date of the meeting was mailed or such public disclosure was made. Such
shareholder's notice shall set forth (i) as to each person whom the
shareholder proposes to nominate for election or re-election as a Director,
(A) the name, age, business address and residence address of such person, (B)
the principal occupation or employment of such person for the previous five
years, (C) the class and number of shares of the Company's capital stock which
are beneficially owned by such person, (D) such person's written consent to
being named as a nominee and to serving as a Director if elected, and (E) any
other information relating to such person that is required to be disclosed in
solicitations of proxies for election of Directors, or is otherwise required,
in each case pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended, and (ii) as to the shareholder(s) making the nomination (A)
the name and address, as they appear in the Company's shareholder records, of
such shareholder(s) and (B) the class and number of shares of the Company's
capital stock which are beneficially owned by such shareholder(s). No person
shall be qualified for election as a Director of the Company unless nominated
in accordance with the procedures set forth in this Section 1. The Chairman of
a meeting shall, if the facts warrant, determine and declare to the meeting
that a nomination was not made in accordance with the procedures prescribed by
the Bylaws, and if he or she should so determine, shall so declare to the
meeting, and the defective nomination shall be disregarded. The Chairman of a
meeting shall have absolute authority to decide questions of compliance with
the foregoing procedures, and his or her ruling thereon shall be final and
conclusive.
SECTION 2. POWERS: The Board of Directors shall have power to manage and
-------------------
control the
property and affairs of the Company, and to do all such lawful acts and things
which, in their absolute
judgment and discretion, they may deem necessary and appropriate for the
expedient conduct and furtherance of the Company's business.
SECTION 3. CHAIRMAN: The Directors shall elect one of their number to be
---------------------
Chairman of the
Board. The Chairman shall preside at all meetings of the Board, unless absent
from such meeting, in which case, if there is a quorum, the Directors present
may elect another Director to preside at such meeting.
SECTION 4. MEETINGS: Regular meetings of the Board may be held without
----------------------
notice at such time
and place either within or without the State of Missouri as shall from time to
time be determined by the
Chairman of the Board. Special meetings of the Board may be held at any time
and place upon the call of the Chairman of the Board, a President, or
Secretary of the Company.
SECTION 5. QUORUM: A majority of the full Board of Directors shall
--------------------
constitute a quorum at all
meetings of the Board, and the act of the majority of the Directors present at
any meeting at which a
quorum is present shall be the act of the Board of Directors unless a greater
number of Directors is
required by the Articles of Incorporation, the Bylaws or by law. At any
meeting of Directors, whether or not a quorum is present, the Directors
present thereat may adjourn the same from time to time without notice other
than announcement at the meeting.
SECTION 6. VACANCIES: Vacancies on the Board and newly created
-----------------------
directorships resulting from any increase in the number of Directors to
constitute the Board of Directors may be filled by a majority of the Directors
then in office, although less than a quorum, or by a sole remaining Director,
until the next election of Directors by the shareholders of the corporation.
SECTION 7. COMPENSATION OF DIRECTORS: The Board of Directors may, by
-----------------------------------------
resolution
passed by a majority of the whole Board, fix the terms and amount of
compensation payable to any person for his services as Director, if he is not
otherwise compensated for services rendered as an officer or employee of the
Company; provided, however, that any Director may be reimbursed for reasonable
and necessary expenses of attending meetings of the Board, or otherwise
incurred for any Company purpose; and provided, further, that members of
special or standing committees may also be allowed compensation and expenses
similarly incurred.
SECTION 8. COMMITTEES OF THE BOARD OF DIRECTORS: The Board of Directors
--------------------------------------------------
may, by resolution passed by a majority of the whole Board, designate two or
more Directors to constitute an
Executive Committee of the Board which shall have and exercise all of the
authority of the Board of
Directors in the management of the Company, in the intervals between meetings
of the Board of Directors. In addition, the Board may appoint any other
committee or committees, with such members, functions, and powers as the Board
may designate. The Board shall have the power at any time to fill vacancies
in, to change the size or membership of, or to dissolve, any one or more of
such committees. Each such committee shall have such name as may be determined
by the Board, and shall keep regular minutes of its proceedings and report the
same to the Board of Directors for approval as required.
ARTICLE III - OFFICERS
-----------------------
SECTION 1. OFFICERS; ELECTION: The officers of the Company shall be a
----------------------------------
Chairman of the
Board, one or more Chief Executive Officers, one or more Presidents, and a
Secretary, and may be, as the Board may from time to time designate, one or
more Vice Chairmen of the Board, one or more Executive Vice Presidents, one or
more Senior Vice Presidents, one or more Group Vice Presidents, one or more
Vice Presidents, a General Counsel, a Treasurer, a Controller, and one or more
Assistant Secretaries, Assistant Treasurers, and Assistant Controllers. All
officers of the Company shall be elected by the Board of Directors, except
that Assistant Secretaries, Assistant Treasurers and Assistant Controllers may
be appointed by the Chairman of the Board or any Chief Executive Officer. Any
two or more offices may be held by the same person except the offices of
Chairman of the Board and Secretary.
SECTION 2. TERMS: COMPENSATION: All officers of the Company shall hold
---------------------------------
office at the
pleasure of the Board of Directors. The compensation each officer is to
receive from the Company shall be determined in such manner as the Board of
Directors shall from time to time prescribe.
SECTION 3. POWERS: DUTIES: Each officer of the Company shall have such
-----------------------------
powers and duties as may be prescribed by resolution of the Board of Directors
or as may be assigned by the Board of Directors or any Chief Executive
Officer.
SECTION 4. REMOVAL: Any officer elected by the Board of Directors may be
--------------------
removed by the
Board of Directors whenever in its judgment the best interest of the Company
will be served thereby, but
such removal shall be without prejudice to the contract rights, if any, of the
officer so removed. The
Chairman of the Board may suspend any officer until the Board of Directors
shall next convene.
ARTICLE IV - CAPITAL STOCK
--------------------------
SECTION 1. STOCK CERTIFICATES: All certificates of stock of the Company
--------------------------------
shall be signed by
the Chairman of the Board or any President or a Vice President and the
Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer
of the Company, and shall bear the corporate seal of the Company. To the
extent permitted by law, the signatures of such officers, and the corporate
seal,
appearing on certificates of stock, may be facsimile, engraved or printed. In
case any such officer who
signed or whose facsimile signature appears on any such certificate shall have
ceased to be such officer before the certificate is issued, such certificate
may nevertheless be issued by the Company with the same effect as if such
officer had not ceased to be such officer at the date of its issue.
The Company shall not issue a certificate for a fractional share;
however, the Board of Directors
may issue, in lieu of any fractional share, scrip or other evidence of
ownership upon such terms and
conditions as it may deem advisable.
All certificates of stock of each class and series shall be numbered
appropriately.
SECTION 2. RECORD OWNERSHIP: The corporation shall maintain a record of
------------------------------
the name and
address of the holder of each certificate, the number of shares represented
thereby, and the date of issue and the number thereof. The Company shall be
entitled to treat the holder of record of any share of stock as the holder in
fact thereof, and accordingly it will not be bound to recognize any equitable
or other claim of interest in such share on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of Missouri.
SECTION 3. TRANSFERS: Transfers of stock shall be made on the books of
-----------------------
the Company only by direction of the person named in the certificate, or by an
attorney lawfully constituted in writing, and upon the surrender of the
certificate therefor.
SECTION 4. TRANSFER AGENTS; REGISTRARS: The Board of Directors shall, by
---------------------------------------
resolution,
from time to time appoint one or more Transfer Agents, that may be officers or
employees of the Company, to make transfers of shares of stock of the Company,
and one or more Registrars to register shares of stock issued by or on behalf
of the Company. The Board of Directors may adopt such rules as it may deem
expedient concerning the issue, transfer and registration of stock
certificates of the Company.
SECTION 5. LOST CERTIFICATES: Each person whose certificate of stock has
------------------------------
been lost, stolen
or destroyed shall be entitled to have a replacement certificate issued in the
same name and for the same number of shares as the original certificate,
provided that such person has first filed with such officers of the Company,
Transfer Agents and Registrars, as the Board of Directors may designate, an
affidavit stating that such certificate was lost, stolen or destroyed and a
bond of indemnity, each in the form and with such provisions as such officers,
Transfer Agents and Registrars may reasonably deem satisfactory.
SECTION 6. TRANSFER BOOKS; RECORD DATES: The Board of Directors shall
--------------------------------------------
have power to close the stock transfer books of the Company as permitted by
law; provided, however, that in lieu of
closing the said books, the Board of Directors may fix in advance a date, not
exceeding seventy days
preceding the date of any meeting of shareholders, or the date for the payment
of any dividend, or the date for the allotment of rights, or the date when any
change or conversion or exchange of shares shall go into effect, as a record
date for the determination of the shareholders entitled to notice of, and to
vote at, any such meeting, and any adjournment thereof, or entitled to receive
payment of any such dividend, or to any such allotment of rights or to
exercise the rights in respect of any such change, conversion or exchange of
shares, and in such case such shareholders and only such shareholders as shall
be shareholders of record on the date of closing the transfer books or on the
record date so fixed shall be entitled to notice of, and to vote at, such
meeting, and any adjournment thereof, or to receive payment of such dividend,
or to receive such allotment of rights, or to exercise such rights, as the
case may be, notwithstanding any transfer of any shares on the books of the
Company after such date of closing of the transfer books or such record date
fixed as aforesaid.
ARTICLE V - OFFICES, SEAL, BOOKS, FISCAL YEAR
----------------------------------------------
SECTION 1. OFFICES: The principal office of the Company shall be located
--------------------
at Checkerboard
Square, St. Louis, Missouri 63164.
SECTION 2. SEAL: The corporate seal of the Company shall be a circular
------------------
seal; the words
"RALSTON PURINA COMPANY, ST. LOUIS, MO." shall be embossed in the outer
margin; a nine-square
bordered design, and the symbol "SEAL 1894" shall be embossed in the central
circular field; an impression of the same is set forth hereon.
SECTION 3. PLACE FOR KEEPING BOOKS AND SEAL: The books of the Company,
-----------------------------------------------
and its
corporate minutes and corporate seal, shall be kept in the custody of the
Secretary at the principal office of the Company, or at such other place or
places and in the custody of such other person or persons as the Board of
Directors may from time to time determine.
SECTION 4. FISCAL YEAR: The fiscal year of the Company shall commence
--------------------------
with the first day of
October in each year.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
RESTATED FINANCIAL DATA SCHEDULE FOR 1997
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE RESTATED RALSTON PURINA COMPANY BALANCE SHEETS AND STATEMENTS OF
EARNINGS FOR THE PERIODS ENDED 6/30/97, 3/31/97 AND 12/31/96.
INFORMATION EXTRACTED FROM THESE BALANCE SHEETS AND STATEMENTS OF
EARNINGS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 9-MOS 6-MOS 3-MOS
<FISCAL-YEAR-END> SEP-30-1997 SEP-30-1997 SEP-30-1997
<PERIOD-END> JUN-30-1997 MAR-31-1997 DEC-31-1996
<CASH> 91,400 86,600 106,000
<SECURITIES> 0 0 0
<RECEIVABLES> 652,600 640,000 822,900
<ALLOWANCES> 27,200 27,200 27,000
<INVENTORY> 646,100 622,700 582,700
<CURRENT-ASSETS> 1,503,100 1,453,800 1,605,300
<PP&E> 2,138,900 2,124,200 2,102,000
<DEPRECIATION> 1,053,500 1,046,400 1,032,700
<TOTAL-ASSETS> 4,655,600 4,528,700 4,671,600
<CURRENT-LIABILITIES> 1,703,500 1,532,400 1,716,200
<BONDS> 1,412,500 1,448,700 1,411,800
307,800 314,300 317,700
0 0 0
<COMMON> 11,500 11,500 11,500
<OTHER-SE> 849,900 789,900 817,000
<TOTAL-LIABILITY-AND-EQUITY> 4,655,600 4,528,700 4,671,600
<SALES> 3,350,700 2,308,900 1,260,500
<TOTAL-REVENUES> 3,350,700 2,308,900 1,260,500
<CGS> 1,699,500 1,175,800 645,400
<TOTAL-COSTS> 1,699,500 1,175,800 645,400
<OTHER-EXPENSES> 1,271,700 792,700 401,200
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 129,000 87,000 44,200
<INCOME-PRETAX> 250,500 253,400 169,700
<INCOME-TAX> 20,400 94,700 63,200
<INCOME-CONTINUING> 253,500 173,300 114,300
<DISCONTINUED> 61,300 40,800 23,100
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 314,800 214,100 137,400
<EPS-PRIMARY> 2.99 2.04 1.32
<EPS-DILUTED> 2.83 1.92 1.23
<FN>
F1 LOSS-PROVISION INCLUDED IN OTHER-EXPENSES ABOVE FOR
9 MOS., 6 MOS. AND 3 MOS. PERIODS
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
RESTATED FINANCIAL DATA SCHEDULE FOR 1996
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE RESTATED RALSTON PURINA COMPANY BALANCE SHEETS AND STATEMENTS
OF EARNINGS FOR THE PERIODS ENDED 9/30/96, 6/30/96, 3/31/96 AND
12/31/95. INFORMATION EXTRACTED FROM THESE BALANCE SHEETS AND
STATEMENTS OF EARNINGS IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<RESTATED>
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 9-MOS 6-MOS 3-MOS
<FISCAL-YEAR-END> SEP-30-1996 SEP-30-1996 SEP-30-1996 SEP-30-1996
<PERIOD-END> SEP-30-1996 JUN-30-1996 MAR-31-1996 DEC-31-1995
<CASH> 62,300 62,300 61,600 71,800
<SECURITIES> 0 0 0 0
<RECEIVABLES> 688,900 639,200 634,200 832,100
<ALLOWANCES> 26,700 26,600 26,500 27,100
<INVENTORY> 628,200 653,100 648,000 590,800
<CURRENT-ASSETS> 1,472,700 1,440,600 1,448,600 1,596,400
<PP&E> 2,057,600 2,026,200 1,996,100 1,965,200
<DEPRECIATION> 1,006,700 1,000,500 988,300 970,200
<TOTAL-ASSETS> 4,523,000 4,429,900 4,393,500 4,501,900
<CURRENT-LIABILITIES> 1,703,000 1,658,700 1,557,200 1,641,800
<BONDS> 1,437,000 1,446,000 1,547,200 1,586,800
323,500 327,000 336,900 336,900
0 0 0 0
<COMMON> 11,500 11,500 11,500 11,500
<OTHER-SE> 677,500 622,800 590,900 602,800
<TOTAL-LIABILITY-AND-EQUITY> 4,523,000 4,429,900 4,393,500 4,501,900
<SALES> 4,301,900 3,213,200 2,211,500 1,217,600
<TOTAL-REVENUES> 4,301,900 3,213,200 2,211,500 1,217,600
<CGS> 2,206,000 1,640,800 1,122,800 609,300
<TOTAL-COSTS> 2,206,000 1,640,800 1,122,800 609,300
<OTHER-EXPENSES> 1,451,700 1,090,400 750,200 384,900
<LOSS-PROVISION> 6,200 0 0 0
<INTEREST-EXPENSE> 190,300 145,400 99,200 49,700
<INCOME-PRETAX> 447,700 336,600 239,300 173,700
<INCOME-TAX> 162,900 121,500 88,600 65,200
<INCOME-CONTINUING> 296,400 221,100 154,100 110,400
<DISCONTINUED> 65,300 50,800 33,600 18,100
<EXTRAORDINARY> 2,100 2,100 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 359,600 269,800 187,600 128,500
<EPS-PRIMARY> 3.39 2.55 1.77 1.23
<EPS-DILUTED> 3.21 2.41 1.67 1.15
<FN>
<F1>LOSS-PROVISION INCLUDED IN OTHER-EXPENSES ABOVE FOR 9 MOS.,
6 MOS. AND 3 MOS. PERIODS
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
RESTATED FINANCIAL DATA SCHEDULE FOR 1995
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 9/30/95
RESTATED RALSTON PURINA COMPANY BALANCE SHEET AND STATEMENT OF EARNINGS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 44,300
<SECURITIES> 0
<RECEIVABLES> 665,500
<ALLOWANCES> 25,500
<INVENTORY> 621,000
<CURRENT-ASSETS> 1,424,000
<PP&E> 1,930,800
<DEPRECIATION> 941,100
<TOTAL-ASSETS> 4,310,800
<CURRENT-LIABILITIES> 1,565,500
<BONDS> 1,602,100
348,700
0
<COMMON> 11,500
<OTHER-SE> 482,700
<TOTAL-LIABILITY-AND-EQUITY> 4,310,800
<SALES> 5,645,400
<TOTAL-REVENUES> 5,645,400
<CGS> 2,880,600
<TOTAL-COSTS> 2,880,600
<OTHER-EXPENSES> 2,158,300
<LOSS-PROVISION> 7,100
<INTEREST-EXPENSE> 199,800
<INCOME-PRETAX> 399,600
<INCOME-TAX> 167,800
<INCOME-CONTINUING> 232,700
<DISCONTINUED> 67,400
<EXTRAORDINARY> 3,700
<CHANGES> 0
<NET-INCOME> 296,400
<EPS-PRIMARY> 2.72
<EPS-DILUTED> 2.63
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
FINANCIAL DATA SCHEDULE FOR 1997
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 9/30/97
RALSTON PURINA COMPANY BALANCE SHEET AND STATEMENT OF EARNINGS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<CASH> 109,100
<SECURITIES> 0
<RECEIVABLES> 700,000
<ALLOWANCES> 24,800
<INVENTORY> 604,800
<CURRENT-ASSETS> 1,505,500
<PP&E> 2,160,600
<DEPRECIATION> 1,046,900
<TOTAL-ASSETS> 4,741,800
<CURRENT-LIABILITIES> 1,215,800
<BONDS> 1,860,400
304,900
0
<COMMON> 11,500
<OTHER-SE> 905,600
<TOTAL-LIABILITY-AND-EQUITY> 4,741,800
<SALES> 4,486,800
<TOTAL-REVENUES> 4,486,800
<CGS> 2,281,900
<TOTAL-COSTS> 2,281,900
<OTHER-EXPENSES> 1,642,600
<LOSS-PROVISION> 3,100
<INTEREST-EXPENSE> 174,300
<INCOME-PRETAX> 384,900
<INCOME-TAX> 70,000
<INCOME-CONTINUING> 348,900
<DISCONTINUED> 74,800
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 423,700
<EPS-PRIMARY> 4.02
<EPS-DILUTED> 3.80
</TABLE>
EXHIBIT 11
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
RALSTON PURINA COMPANY
COMPUTATION OF EARNINGS PER SHARE
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
YEAR ENDED
SEPTEMBER 30,
---------------
1997 1996
--------------- -------
EARNINGS PER COMMON SHARE OUTSTANDING
Earnings from continuing operations before extraordinary item $ 348.9 $296.4
Net earnings from discontinued operations 74.8 65.3
--------------- -------
Earnings before extraordinary item 423.7 361.7
Dividend on Series A ESOP convertible
preferred stock, net of taxes (13.1) (14.1)
--------------- -------
410.6 347.6
Extraordinary item - (2.1)
Earnings available to common shareholders $ 410.6 $345.5
=============== =======
Weighted average shares - primary
earnings per share calculation 102.1* 101.8 *
=============== =====
Earnings per common share outstanding
Earnings from continuing operations $ 3.29 $ 2.77
Earnings from discontinued operations 0.73 0.64
Extraordinary item - (0.02)
Net earnings $ 4.02 $ 3.39
=============== =======
EARNINGS PER SHARE ASSUMING FULL DILUTION
Earnings from continuing operations before extraordinary item $ 348.9 $296.4
Net earnings from discontinued operations 74.8 65.3
--------------- -------
Earnings before extraordinary item 423.7 361.7
Adjustments to net earnings to reflect assumed
ESOP preferred stock conversion (3.1) (4.4)
--------------- -------
420.6 357.3
Extraordinary item - (2.1)
--------------- -------
Net earnings for fully diluted earnings per share calculation $ 420.6 $355.2
=============== =======
Weighted average number of common shares outstanding 102.1* 101.8 *
Convertible preferred stock 6.5 6.7
Dilutive effect of stock options 1.8 1.8
Dilutive effect of deferred compensation awards 0.2 0.3
--------------- -------
Weighted average shares - fully diluted earnings
per share calculation 110.6 110.6
=============== =======
Earnings per share assuming full dilution
Earnings from continuing operations $ 3.13 $ 2.64
Earnings from discontinued operations 0.67 0.59
Extraordinary item - (0.02)
Net earnings $ 3.80 $ 3.21
=============== =======
</TABLE>
* Excludes 4,307,000 and 4,228,000 shares held in Grantor Trust at September
30, 1997 and 1996,
respectively.
<PAGE> 1
R A L S T O N P U R I N A C O M P A N Y
Five Year Financial Summary
...............................................................................
(In millions except per share and percentage data)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------
STATEMENT OF EARNINGS DATA 1997 1996 1995<Fd> 1994<Fg> 1993
---- ---- -------- -------- ----
<S> <C> <C> <C> <C> <C>
Net Sales............................... $4,486.8 $4,301.9 $5,645.4 $6,319.8 $6,542.0
Depreciation and Amortization........... 189.0 193.8 249.4 268.3 272.1
Earnings from Continuing Operations
before Interest Expense, Income Taxes,
Equity Earnings, Extraordinary Item
and Cumulative Effect of Accounting
Changes............................... 559.2 638.0 599.4 546.5 726.9
As a Percent of Sales............... 12.5% 14.8% 10.6% 8.6% 11.1%
Earnings from Continuing Operations
before Income Taxes, Equity Earnings,
Extraordinary Item and Cumulative
Effect of Accounting Changes.......... $ 384.9 $ 447.7 $ 399.6 $ 326.1 $ 488.8
Income Taxes............................ 70.0 162.9 167.8 162.6 194.4
Earnings from Continuing Operations
before Extraordinary Item and
Cumulative Effect of Accounting
Changes<Fa>........................... 348.9 296.4 232.7 163.5 294.4
As a Percent of Sales............... 7.8% 6.9% 4.1% 2.6% 4.5%
Net Earnings<Fb>........................ $423.7<Fh> $ 359.6 $296.4<Fe> $ 208.9 $ 122.6
Earnings Available to Common
Shareholders.......................... 410.6 345.5 277.6 188.7 101.6
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------
BALANCE SHEET DATA 1997 1996 1995<Fd> 1994<Fg> 1993
---- ---- -------- -------- ----
<S> <C> <C> <C> <C> <C>
Working Capital......................... $ 289.7 $ (230.3) $(141.4) $ (60.1) $ 74.1
Property at Cost, Net................... 1,113.7 1,050.9 989.7 1,536.5 1,967.1
Additions (during the year)......... 282.9 228.8 235.2 281.8 271.8
Depreciation (during the year)...... 142.5 139.5 198.5 222.8 226.5
Total Assets............................ 4,741.8 4,523.0 4,310.8 4,423.9 4,912.8
Long-Term Debt.......................... 1,860.4 1,437.0 1,602.1 1,594.6 2,054.5
Redeemable Preferred Stock.............. 304.9 323.5 348.7<Ff> 469.7 509.8
Shareholders Equity..................... 917.1 689.0 494.2 355.6 469.8
Common Shares Outstanding:
RAL Stock<Fc>....................... 102.3 101.7 101.7 100.0 101.8
CBG Stock........................... 20.6 20.7
<FN>
- ---------
<Fa> Before extraordinary charges for early retirement of debt of $2.1 for 1996, $3.7 for 1995, $9.5 for 1994 and $11.8 for
1993. Also, before charges for the cumulative effect of accounting changes of $206.9 in 1993.
<Fb> After-tax restructuring provisions reduced earnings by $36.3 in 1997, $11.0 in 1996, $70.0 in 1995 and $82.4 in 1994.
<Fc> Does not include 4.3, 4.2, 4.1 and 4.0 shares of RAL Stock held by the Company's Grantor Trust in 1997, 1996, 1995 and
1994, respectively.
<Fd> Effective July 22, 1995, the Company sold its Continental Baking Company (CBC) subsidiary. The Company's earnings and
cash flows reflect the operations of CBC through July 22, 1995.
<Fe> Includes an after-tax gain on the sale of CBC of $42.0.
<Ff> Reflects conversion of 1.0 shares of Redeemable Preferred Stock in connection with the sale of CBC.
<Fg> On March 31, 1994, the Company effected a spin-off of Ralcorp Holdings, Inc., (Ralcorp), its private label and branded
cereal, baby food, crackers and cookies, ski resort and coupon redemption businesses. The Company's earnings and cash
flows reflect the operations of those businesses through March 31, 1994.
<Fh> Includes a tax benefit of $34.7 related to tax refund claims for 1993 through 1996 as a result of a change in the
Company's method of computing foreign tax credits and an after-tax gain of $15.1 on the sale of 1.0 shares of
Interstate Bakeries Corporation stock.
</TABLE>
14 ............................................................................
<PAGE> 2
R A L S T O N P U R I N A C O M P A N Y
...............................................................................
(In millions except per share data)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
------------------------------------------------------
PER SHARE DATA 1997 1996 1995 1994 1993<Fa>
---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
RAL Stock (pro forma in 1995 and 1994
assuming one class of common stock):
Earnings from Continuing Operations
before Extraordinary Item
Primary......................... $ 3.29 $ 2.77 $ 2.10 $ 1.40
Fully Diluted................... 3.13 2.64 2.05 1.39
Net Earnings
Primary......................... 4.02 3.39 2.72 1.84
Fully Diluted................... 3.80 3.21 2.63 1.80
Average Shares Outstanding.......... 102.1 101.8 101.9 102.4
RAL Stock (based on RPG Group earnings
through May 15, 1995 and consolidated
Ralston earnings thereafter):
Earnings from Continuing Operations
before Extraordinary Item and
Cumulative Effect of Accounting
Changes
Primary......................... $ 2.22 $ 1.57 $ .30
Fully Diluted................... 2.16 1.55 .30
Net Earnings
Primary......................... 2.85 2.04 .36
Fully Diluted................... 2.74 1.98 .35
CBG Stock (through May 15, 1995):
Earnings (Loss) before Extraordinary
Item and Cumulative Effect of
Accounting Changes
Primary......................... $ (.45) $ (.74) $ .21
Fully Diluted................... (.45) (.74) .19
Net Earnings (Loss)
Primary......................... (.45) (.78) .19
Fully Diluted................... (.45) (.78) .17
Ralston Purina Company Common Stock
(through July 30, 1993):
Earnings from Continuing Operations
before Extraordinary Item and
Cumulative Effect of Accounting
Changes
Primary......................... $ 2.30
Fully Diluted................... 2.20
Net Earnings
Primary......................... .59
Fully Diluted................... .63
Average Shares Outstanding:
RAL Stock........................... 100.7 100.5 102.2
CBG Stock (through May 15, 1995).... 20.6 20.5 20.7
Ralston Purina Company Common
Stock............................. 103.6
Dividends Declared:
RAL Stock........................... $ 1.20 $ 1.20 $ 1.20 $ 1.20 $ .60<Fb>
CBG Stock........................... .16<Fb>
Ralston Purina Company Common
Stock............................. .632<Fb>
<FN>
- ---------
<Fa> Actual earnings per share for 1993 are segregated due to the redesignation of Ralston Purina Company Common Stock and
the issuance of CBG Stock, both occurring on July 30, 1993. RAL Stock and CBG Stock earnings are for the period after
July 30 through September 30, 1993.
<Fb> Represents dividends declared on redesignated RAL Stock and newly issued CBG Stock from July 30, 1993 through September
30, 1993 and dividends declared on Ralston Purina Company Common Stock from October 1, 1992 through July 30, 1993.
</TABLE>
............................................................................ 15
<PAGE> 3
R A L S T O N P U R I N A C O M P A N Y
Financial Review
...............................................................................
The following discussion is a summary of the key factors management
considers necessary in reviewing the Company's results of operations, liquidity,
capital resources, and operating segment results. This discussion should be read
in conjunction with the Business Segment Information and the Consolidated
Financial Statements and related notes.
Highlights
..........
Net earnings were $423.7 million for the year ended September 30, 1997
compared to $359.6 million in 1996. Earnings per share were $4.02 and $3.80 on
a primary and fully diluted basis, respectively, compared to earnings per
primary and fully diluted share of $3.39 and $3.21 in the prior year. Included
in net earnings in 1997 are net earnings from discontinued operations of $74.8
million and several unusual items which increased net earnings by $13.5
million. Discontinued operations consist of Soy Protein Products, which is
being sold to E.I. Du Pont de Nemours and Company (DuPont), and Agricultural
Products, which will be spun-off to shareholders in early 1998. The first
unusual item in 1997 was an after-tax restructuring charge of $36.3 million,
net of income tax benefits of $75.1 million, primarily related to continued
rationalization of Battery Products' worldwide battery production capacity and
business structure. The income tax benefits of $75.1 million associated with
current and past restructuring actions included current tax benefits of $13.4
million and the recognition of capital loss benefits of $61.7 million. The
second unusual item is a tax benefit of $34.7 million related to tax refund
claims for 1993 through 1996 as a result of a change in the Company's method of
computing foreign tax credits. The third unusual item is a $15.1 million
after-tax gain on the sale of 1.0 million shares of Interstate Bakeries
Corporation (IBC) stock.
Net earnings in 1996 included net earnings from discontinued operations of
$65.3 million, after-tax restructuring charges in the Pet Products and Battery
Products segments of $11.0 million and an extraordinary loss on early debt
retirement of $2.1 million, after taxes.
In 1997, earnings from continuing operations before the unusual items
described above increased $28.0 million to $335.4 million, compared to $307.4
million in 1996. The 1997 earnings increase resulted from higher IBC equity
earnings, lower interest expense, lower translation and exchange losses and
higher returns on other investments. Operating profit was flat in 1997.
Earnings per share on this basis were $3.16 and $3.01 per primary and fully
diluted share, respectively, compared to $2.88 and $2.74 in the prior year.
In 1996, net earnings increased $63.2 million and earnings per share
increased $.67 and $.58 on a primary and fully diluted basis, respectively.
Unusual items in 1995 included after-tax restructuring provisions of $70.0
million in Battery Products, an after-tax gain on the sale of Continental
Baking Company (CBC) of $42.0 million and an extraordinary loss on early debt
retirement of $3.7 million, after taxes. Additionally, 1995 results include net
earnings from the discontinued Soy Protein Products and Agricultural Products
operations of $67.4 million. Exclusive of these unusual items, 1996 earnings
from continuing operations increased on higher operating profit in Pet Products
and Battery Products, a lower tax rate and increased IBC equity earnings.
Transactions Affecting Comparability of Results
...............................................
Discontinued Operations
In December 1997, the Company reached agreement to sell its Soy Protein
Products operations to DuPont for approximately $1.5 billion comprised of
DuPont common stock and the assumption of certain liabilities. The amount
received will be recorded in the first quarter of fiscal 1998 and will result in
a gain for the Company. The Soy Protein Products business is the world's leading
producer and marketer of high-quality dietary isolated protein and fiber food
ingredients and a leading marketer of polymer products worldwide.
In addition, the Company has made significant progress in its efforts to
separate its Agricultural Products business in a tax-free spin-off to
shareholders. The spin-off is expected to be completed during the second
quarter of fiscal 1998 after receipt of a favorable tax ruling from the
Internal Revenue Service and final approval by the Board of Directors. The
Agricultural Products business is one of the world's largest producers and
marketers of formula feeds outside the United States.
The Soy Protein Products and Agricultural Products segments are accounted
for as discontinued operations, and accordingly, amounts in the financial
statements and related notes for all periods shown have been restated to
reflect discontinued operations accounting. Summarized results of these
businesses are shown separately as Discontinued Operations in the accompanying
consolidated financial statements.
Other Transactions Affecting Comparability
Effective July 22, 1995, the Company sold CBC to IBC for $220 million in
cash and 16,923,077 shares of common stock of IBC. The Company's earnings and
cash flows reflect the operations of CBC through July 22, 1995, and reflect an
equity interest in IBC thereafter.
On April 7, 1995, the Company acquired the assets of Golden Cat
Corporation, the leading manufacturer and marketer of branded cat box filler in
the United States and Canada, for $340 million.
16 ............................................................................
<PAGE> 4
R A L S T O N P U R I N A C O M P A N Y
...............................................................................
Operating Results from Continuing Operations
............................................
Net Sales
Net sales increased $184.9 million or 4.3% in 1997 due to increases in
Pet Products. In 1996, net sales decreased $1,343.5 million or 23.8% on the
exclusion of CBC sales, partially offset by increases in Pet Products and
Battery Products and the inclusion of Golden Cat sales for a full year.
Excluding CBC sales in 1995, net sales increased 6.0% in 1996. Comments on
changes in sales by Business Segment may be found on pages 22 and 23 of this
report.
Gross Profit
Gross profit increased 5.2% in 1997 due to an increase in Pet Products.
In 1996, gross profit decreased 24.2% on the exclusion of CBC. Excluding such
operations, gross profit increased 5.2% in 1996 on increases in both Pet
Products and Battery Products. Gross profit as a percentage of sales was 49.1%
in 1997 compared to 48.7% in 1996 and 49.1% in 1995, excluding CBC operations.
The increased percentage in 1997 reflects slightly improved margins in Pet
Products and increased sales in the higher margin Pet Products segment. The
decreased percentage in 1996 reflects a decreased percentage in Pet Products,
slightly offset by increased sales in the higher margin Pet Products' segment
and improvements in Battery Products. Pet Products' margins were unfavorably
impacted in 1996 by higher grain prices as price increases were insufficient to
maintain historical margin levels. In 1996, the Battery Products' 1995 plant
closings had a favorable impact on margins.
Cost of products sold in the Pet Products segment is somewhat dependent on
agricultural commodity market prices. Prices may fluctuate due to weather
conditions, government regulations, economic climate or other unforeseen
circumstances. The Company manages exposure to changes in the commodities
markets as considered necessary by hedging certain of its ingredient
requirements such as corn or soybean meal. Agricultural commodity costs of the
Pet Products' segment have represented approximately 19% to 24% of cost of
products sold during the three year period ended September 30, 1997. See Market
Risk Sensitive Instruments and Positions section of this financial review for
further discussion of commodities.
Operating Expenses
Selling, general and administrative expenses increased 6.2% in 1997
primarily due to increases in Pet Products, start-up expenses related to
capital projects and incremental expense associated with options and
mark-to-market adjustments on liabilities denominated in share equivalents.
Exclusive of CBC operations in 1995, selling, general and administrative
expenses increased 4.4% in 1996 primarily due to the inclusion of a full year
of Golden Cat expenses. Selling, general and administrative expenses, exclusive
of CBC operations in 1995, were 20.5%, 20.1% and 20.4% of sales in 1997, 1996
and 1995, respectively.
Advertising and promotion expense increased 13.1% in 1997 due to
additional promotional spending in Pet Products. In 1996, advertising and
promotion expense, exclusive of CBC operations in 1995, increased 7.0% on the
inclusion of Golden Cat and on increased brand development spending in Pet
Products. Excluding CBC operations in 1995, advertising and promotion expense
was 14.4% of sales in 1997 compared to 13.3% in 1996 and 13.2% in 1995.
Interest Expense and Other Income/Expense
Interest expense decreased in 1997 to $174.3 million compared to $190.3
million in 1996 and $199.8 million in 1995. The decrease from 1995 resulted
primarily from lower interest rates associated with the Company maintaining a
larger percentage of its total debt on a short-term basis during 1996 and much
of 1997. Additionally, the 1997 decrease resulted from a lower average debt
balance during the year. Other income/expense, net, was favorable by $16.8
million in 1997 due to higher prior year foreign currency translation and
exchange losses and higher returns on other investments in the current year. In
1996, other income/expense, net, was unfavorable by $11.9 million due primarily
to lower returns on other investments.
Income Taxes
Income taxes, which represent federal, state and foreign taxes, were 18.2%,
36.4% and 42.0% of pre-tax earnings before equity earnings and extraordinary
item in 1997, 1996 and 1995, respectively. Income taxes include certain unusual
items in all years. The first unusual item in 1997 was the recognition of
capital loss tax benefits of $61.7 million related to prior years'
restructuring actions. These capital loss tax benefits will be used to
partially offset taxes due upon the disposition of shares of IBC stock. The
second unusual item in 1997 was a tax benefit of $34.7 million related to tax
refund claims for 1993 through 1996 as a result of a change in the Company's
method of computing foreign tax credits. In addition, the income tax percentage
in each year was unfavorably impacted by pre-tax restructuring provisions which
did not result in tax benefits due to tax loss situations or particular
statutes of a country. In 1995, the income tax percentage was favorably
impacted by a lower tax rate on the gain on the sale of CBC. Income tax
percentages, excluding the impact of these unusual items in each year, were
36.2%, 35.7% and 41.0% in 1997, 1996 and 1995, respectively.
............................................................................ 17
<PAGE> 5
R A L S T O N P U R I N A C O M P A N Y
Financial Review (continued)
...............................................................................
Liquidity and Capital Resources
...............................
Cash flow from operations is the Company's primary source of liquidity.
Management continues to have a strong orientation toward cash flows and the
effective management of cash generated. In addition, the Company uses financial
leverage to minimize the overall cost of capital and maintain adequate
operating and financial flexibility. Management monitors leverage through its
interest coverage ratio, debt to internal funds ratio and total debt as a
percentage of total capitalization.
<TABLE>
<CAPTION>
DOLLARS IN MILLIONS 1997 1996 1995
- ------------------- ---- ---- ----
<S> <C> <C> <C>
Cash Flow from Continuing Operations........................ $451.1 $436.1 $384.2
Interest Coverage<Fa>....................................... 4.0 3.7 3.5
Debt to Internal Funds<Fb><Fc>.............................. 4.0 4.0 4.3
Total Debt as a Percentage of Total Capitalization<Fc>...... 67% 73% 78%
<FN>
- ---------
<Fa> Defined as earnings from continuing operations before extraordinary item, interest expense, amortization, provisions for
restructuring, gains on the sale of CBC and on IBC stock, income taxes and equity earnings divided by interest expense.
<Fb> Defined as average debt divided by net earnings before non-cash restructuring reserves, depreciation and amortization,
deferred income tax provision and gain on the sale of CBC (cash earnings).
<Fc> Excludes market value of $1.1 billion of IBC stock.
</TABLE>
On a current equity market basis, total debt as a percentage of total
capitalization was 20% at September 30, 1997 compared to 25% at September 30,
1996 and 28% at September 30, 1995. For purposes of the debt ratios, the
guarantee of the ESOP debt is treated as debt and redeemable preferred stock
and related unearned compensation are treated as capital. The historical cost
basis ratio is significantly influenced by the large amount of stock
repurchased by the Company.
Cash flow from continuing operations increased 3.4% in 1997 as changes in
cash earnings were largely offset by changes in working capital items. Cash
flow from continuing operations increased 13.5% in 1996 due primarily to
increased cash earnings. The interest coverage ratio improved in 1997 and in
1996 on lower interest expense, and, in 1996, on higher earnings. The debt to
internal funds ratio was flat in 1997 due to lower cash earnings, offset by a
lower average debt balance. In 1996, the debt to internal funds ratio improved
on higher cash earnings.
The Company's working capital requirement for inventories and receivables
is influenced by seasonality, the availability of raw materials and changes in
raw materials costs, and as a result, may fluctuate widely. The Company has
traditionally used short-term debt to finance these seasonal and other working
capital requirements and, from time to time, to finance capital expenditures on
a temporary basis. In addition, the Company is currently using international
short-term debt to minimize its overall after-tax cost of debt. Bank lines of
credit provide future credit availability and support the sale of commercial
paper. Payment for lines of credit is effected primarily through fees. At
September 30, 1997, total unused lines of credit were $429.0 million.
At September 30, 1997, working capital was $289.7 million. At September
30, 1996, current liabilities exceeded current assets by $230.3 million. The
increase in working capital is primarily due to the Company maintaining a
larger percentage of its total debt on a long-term basis at year-end 1997, as
compared to 1996, as a result of the Company's issuance of Stock Appreciation
Income Linked Securities (SAILS) in July 1997. See further discussion of the
SAILS in the financing section of this financial review.
Investing Activities
....................
Cash flow used for investing activities by continuing operations was
$223.4 million in 1997 compared to $213.8 million in 1996 and $372.4 million in
1995. In 1997, the increase in cash used for capital expenditures related to
the expansion of production capacity was largely offset by proceeds from the
sale of 1.0 million shares of IBC stock. The 1995 acquisition of the assets of
Golden Cat Corporation for $340 million represented a significant investment,
and the 1995 sale of CBC resulted in cash proceeds of $220 million. Capital
expenditures related to continuing operations were $282.9 million, $228.8
million and $235.2 million in fiscal years 1997, 1996 and 1995, respectively.
Anticipated capital expenditures of approximately $300 million in 1998 are
expected to be financed with funds generated from operations.
Financing Activities
....................
Long-term financings are arranged as necessary to meet the Company's
capital or other requirements, with the timing of issue, principal amount and
form depending on the prevailing securities markets and general economic
conditions. The Company received $541.1 million in proceeds from new debt
issuances in 1997 and made payments on long-term debt of $63.5 million. In July
of 1997, the Company issued $480 million of SAILS consisting of 7% exchangeable
notes due in 2000. At maturity, the notes are mandatorily exchangeable into a
number of shares of IBC common stock owned by the Company, or cash, at the
Company's option. The number of shares of IBC common stock to be exchanged will
depend upon the market price of the IBC stock at maturity of the notes, ranging
from one share per note if the price at maturity is less than or equal to the
initial price of
18 ............................................................................
<PAGE> 6
R A L S T O N P U R I N A C O M P A N Y
...............................................................................
approximately $62.00, to .82 of a share per note if the maturity price is
greater than or equal to $75.50 per share. Approximately 7.7 million notes were
issued. This transaction effectively limits the amount of appreciation on part
of the Company's investment in IBC and establishes a minimum gain on these same
shares should the Company elect to settle the SAILS with IBC common stock.
Effective November 3, 1997, IBC's stock split 2-for-1 which is not reflected in
the aforementioned share amounts. Proceeds from the SAILS transaction of $466
million were used to pay down short-term debt. In 1997, the Company reduced
short-term obligations by $508.7 million.
Simultaneous with the SAILS transaction, the Company sold 1.0 million
shares of its IBC stock back to IBC for $60.1 million. In accordance with the
Shareholder Agreement signed upon the closing of the sale of CBC to IBC, the
Company's investment in IBC must be reduced to no more than 14.9% of total
outstanding shares of IBC by July 2000. At September 30, 1997, the Company's
investment in IBC was $289.2 million compared to current market value of
$1,096.7 million.
New debt issuances totaled $199.7 million in 1996 and $272.8 million in
1995, while payments on long-term debt totaled $355.3 million in 1996 and
$318.1 million in 1995. The Company also increased short-term obligations by
$203.2 million and $222.6 million in 1996 and 1995, respectively.
The Company returned cash to its common shareholders during the three
years ended September 30, 1997 through common stock dividends and common stock
repurchases. These outflows totaled $122.4 million and $24.7 million in 1997
for dividends and stock repurchases, respectively, compared to $121.9 million
and $9.4 million in 1996 and $120.9 million and $15.3 million in 1995. As of
November 10, 1997, 1,130,400 shares of RAL Stock remained under the current
Board of Directors' authorization for the purchase of up to 3 million shares of
RAL Stock.
To meet ongoing share redemption requirements of the ESOP, in 1997 and in
1996 the Company converted shares of its Series A 6.75% Preferred Stock
(Redeemable Preferred Stock) and simultaneously repurchased all RAL Stock
issued in the conversion for $30.4 million and $24.3 million, respectively. In
connection with the sale of CBC in 1995, the Company converted $69.0 million of
allocated and $57.0 million of unallocated Redeemable Preferred Stock into RAL
Stock and simultaneously repurchased substantially all RAL Stock issued in the
conversion.
Year 2000 Costs
...............
Many computer systems process dates in application software and data
files based on two digits for the year of a transaction rather than a full four
digits. These systems are unable to properly process dates in the year 2000.
The Company has developed plans to address the impact of replacing or modifying
its key financial information and operational systems to deal with this issue.
Several new information technologies have been and are being installed to
achieve further productivity and cost improvements. These systems will be year
2000 compliant. The Company believes that all systems necessary to manage the
business effectively will be replaced, modified or upgraded before the year
2000. Because of the significant system replacement and business reengineering
expenditures currently underway, the Company believes the costs to modify
current systems to be year 2000 compliant will not be significant to the
Company's financial results.
Environmental Matters
.....................
The operations of the Company, like those of other companies engaged in
similar businesses, are subject to various federal, state, and local laws and
regulations intended to protect the public health and the environment,
including air and water quality, underground fuel storage tanks and waste
handling and disposal. The Company has received notices from the US
Environmental Protection Agency, state agencies, and/or private parties seeking
contribution, that it has been identified as a "potentially responsible
party" (PRP), under the Comprehensive Environmental Response, Compensation and
Liability Act, and may be required to share in the cost of cleanup with respect
to approximately 14 "Superfund" sites. The Company's ultimate liability in
connection with those sites may depend on many factors, including the volume of
material contributed to the site, the number of other PRP's and their financial
viability, and the remediation methods and technology to be used. While it is
difficult to quantify the potential financial impact of actions involving
environmental matters, particularly remediation costs at waste disposal sites
and future capital expenditures for environmental control equipment, in the
opinion of management, the ultimate liability arising from such environmental
matters, taking into account established accruals for estimated liabilities,
should not be material to the financial position of the Company, but could be
material to results of operations or cash flows for a particular quarter or
annual period.
Inflation
.........
Management recognizes that inflationary pressures may have an adverse
effect on the Company through higher asset replacement costs and related
depreciation and higher material costs. The Company tries to minimize these
effects through cost reductions and productivity improvements as well as price
increases to maintain reasonable profit margins. It is management's view,
however, that inflation has not had a significant impact on operations in the
three years ended September 30, 1997.
............................................................................ 19
<PAGE> 7
R A L S T O N P U R I N A C O M P A N Y
Financial Review (continued)
...............................................................................
Market Risk Sensitive Instruments and Positions
...............................................
The market risk inherent in the Company's financial instruments and
positions represents the potential loss arising from adverse changes in
interest rates, foreign currency exchange rates, commodity prices and
marketable equity securities.
Interest Rates
At September 30, 1997, the fair value of the Company's total debt is
estimated at $2,535.3 million using quoted market prices and yields obtained
through independent pricing sources for the same or similar types of borrowing
arrangements, taking into consideration the underlying terms of the debt, such
as the coupon rate, term to maturity, tax impact to investors and imbedded call
options. Such fair value exceeded the carrying value of debt at September 30,
1997 by $228.4 million. Market risk is estimated as the potential change in
fair value resulting from a hypothetical 10% adverse change in interest rates
and amounts to $75.0 million at September 30, 1997.
The Company had $472.0 million variable rate debt outstanding at September
30, 1997. A hypothetical 10% adverse change in interest rates would have a $3.4
million unfavorable impact on the Company's earnings and cash flows. The
primary interest rate exposures on floating rate debt are with respect to US
and European interbank rates and short-term local currency rates in certain
Asian countries.
Although the Company's SAILS are subject to a change in fair market value
due to interest rate risk, equity risk presents the more significant risk as
the value of these instruments are tied to the stock price of IBC. The effect
of the interest rate risk is included in the aforementioned discussion of the
fair value of the Company's total debt. See the discussion of these instruments
in the Investment in Interstate Bakeries Corporation and Long Term Debt notes
to the financial statements.
Foreign Currency Exchange Rates
The Company employs a foreign currency hedging strategy to limit potential
losses in earnings or cash flows from adverse foreign currency exchange rate
movements. Foreign currency exposures arise from transactions, including firm
commitments and anticipated transactions, denominated in a currency other than
an entity's functional currency and from foreign denominated revenues and
profits translated into US dollars. The primary currencies to which the Company
is exposed include the British pound and other European currencies, the Mexican
peso, the Australian dollar and the Philippine peso. The Company is also
exposed to other South American and Asian currencies. Exposures are hedged with
foreign currency forward contracts, put and call options with maturity dates of
generally less than one year. Company policy allows foreign currency
transactions only for identifiable foreign currency exposures and, therefore,
the Company does not enter into foreign currency contracts for trading purposes
where the objective is to generate profits. The potential loss in fair value at
September 30, 1997 for such net currency positions resulting from a
hypothetical 10% adverse change in all foreign currency exchange rates is $6.6
million.
The Company generally views as long-term its investments in foreign
subsidiaries with a functional currency other than the US dollar. As a result,
the Company does not generally hedge these net investments. However, the
Company uses capital structuring techniques to manage its net investment in
foreign currencies as considered necessary. Additionally, the Company attempts
to limit its US dollar net monetary liabilities in currencies of
hyperinflationary countries, primarily in Latin America. The net investment in
foreign subsidiaries and affiliates translated into dollars using the year end
exchange rates is $615.0 million at September 30, 1997. The potential loss in
value of the Company's net investment in foreign subsidiaries resulting from a
hypothetical 10% adverse change in quoted foreign currency exchange rates at
September 30, 1997 amounts to $55.9 million.
Commodity Prices
The availability and price of agricultural commodities are subject to wide
fluctuations due to unpredictable factors such as weather conditions,
government regulations, economic climate or other unforeseen circumstances. To
reduce price risk caused by market fluctuations, the Company enters into
commodity futures contracts to buy commodities at fixed prices, thereby
minimizing the risk of decreased Company margins.
A sensitivity analysis has been prepared to estimate the Company's
exposure to market risk of its agricultural commodities positions, excluding
inventory on hand and fixed price contracts. The fair value of the Company's
positions is a summation of the fair values calculated for each commodity by
valuing each net position at quoted futures prices. Market risk is estimated as
the potential loss in fair value resulting from a hypothetical 10% adverse
change in such prices. The results of this analysis are as follows for fiscal
1997:
<TABLE>
<CAPTION>
(IN MILLIONS)
FAIR MARKET
VALUE RISK
----- ------
<S> <C> <C>
Highest long position........................................................... $118.5 $11.9
Average long position........................................................... 38.3 3.8
Lowest long position............................................................ -- --
</TABLE>
20 ............................................................................
<PAGE> 8
R A L S T O N P U R I N A C O M P A N Y
...............................................................................
Forward-looking information
The above risk management discussion and the estimated amounts generated
from the sensitivity analyses for continuing operations are forward-looking
statements of market risk assuming certain adverse market conditions occur.
Actual results in the future may differ materially from these projected results
due to actual developments in the global financial markets. The analysis
methods used by the Company to assess and mitigate risks discussed above should
not be considered projections of future events or losses.
Restructuring Activities
........................
In 1997, the Company recorded provisions for restructuring which reduced
pre-tax and after-tax earnings from continuing operations and earnings from
continuing operations per primary share by $111.4 million, $36.3 million and
$.36, respectively. These charges are primarily associated with the continued
rationalization of Battery Products' production capacity and business structure
and provide for the termination of 1,340 employees and the closing of 3 plants.
The total pre-tax charge for restructuring consisted of termination benefits of
$50.5 million, other cash exit costs of $11.0 million, and non-cash charges of
$49.9 million, primarily related to impairment losses on land, buildings and
machinery and equipment. The income tax benefits of $75.1 million recorded
during the year associated with current and past restructuring actions include
current tax benefits of $13.4 million and the recognition of capital loss
benefits of $61.7 million. During 1997, 80 employees were severed in connection
with this charge.
These restructuring actions are expected to generate pre-tax cost savings
of $15 million in 1998 and ultimate annual savings of $35 million in fiscal
2000.
In 1996, the Company recorded provisions for restructuring which reduced
pre-tax and after-tax earnings from continuing operations and earnings from
continuing operations per primary share by $12.4 million, $11.0 million and
$.11, respectively. These charges are associated with the closing of the
Company's European cereal operations and additional Battery Products'
restructuring. The total 1996 pre-tax charge for restructuring consisted of
termination benefits of $5.2 million, relating to the termination of
approximately 170 employees, other cash exit costs of $1.8 million and non-cash
charges of $5.4 million, primarily related to impairment losses on land,
buildings and machinery and equipment. As of September 30, 1997, substantially
all actions associated with this charge have been completed.
Pre-tax cost savings from these restructuring actions have been or
are expected to be as follows: 1997--$4.7 million; and ultimate annual
reduction--$7.2 million.
During 1995, the Company recorded additional provisions for restructuring
of its world-wide carbon zinc battery production capacity and certain
administrative functions as part of a plan initiated in 1994. This plan
provided for the closing of a total of ten plants and the severance of
approximately 2,600 employees. The 1995 provisions reduced pre-tax and
after-tax earnings from continuing operations by $90.8 million and $70.0
million, respectively. The total 1995 pre-tax charge for restructuring
consisted of termination benefits of $46.2 million, other cash exit costs of
$11.6 million and non-cash charges of $33.0 million, primarily related to
impairment losses on land, buildings and machinery and equipment. As of
September 30, 1997, substantially all actions associated with this charge have
been completed.
As a result of the restructuring actions covered under the 1994 and 1995
provisions, pre-tax cost savings have been or are expected to be as follows:
1995--$9.1 million; 1996--$29.2 million; 1997--$44.9 million; and ultimate
annual reduction--$47.7 million.
Activity related to the restructuring provisions discussed above is
summarized as follows:
<TABLE>
<CAPTION>
(IN MILLIONS)
1997 1996
---- ----
<S> <C> <C>
Reserve balance at beginning of year............................................ $ 22.4 $ 43.9
Provision recorded.............................................................. 111.4 12.4
Portion of current period provision classified as property and other asset
impairments................................................................... (49.9) (5.4)
Termination benefits paid....................................................... (15.0) (22.0)
Other cash exit costs incurred.................................................. (3.9) (7.3)
Increase due to translation..................................................... 1.3 .8
------ ------
Reserve balance at September 30................................................. $ 66.3 $ 22.4
====== ======
</TABLE>
Restructuring actions represented by the September 30, 1997 reserve
balance are expected to be substantially completed in 1999, and the Company
expects to fund these costs from internal sources and available borrowing
capacity.
............................................................................ 21
<PAGE> 9
R A L S T O N P U R I N A C O M P A N Y
Financial Review (continued)
...............................................................................
Business Segment Information
............................
Summarized financial information on a worldwide basis by continuing
business segment and for discontinued operations for the three years ended
September 30, 1997 is set forth below. The segments comprise the following:
Pet Products -- pet foods and cat box filler
Pet Products is the world's largest producer of dry dog and dry and
soft-moist cat foods, the leading producer of soft-moist dog food in the United
States and the leading manufacturer and marketer of cat box filler in the
United States. Pet products are marketed primarily through a direct sales force
to grocery, mass merchandisers and specialty retailers, wholesalers and other
customers.
Battery Products -- alkaline, carbon zinc, miniatures, lithium and rechargeable
batteries, flashlights and other related products
Battery Products is the world's leading manufacturer of dry cell batteries
and flashlights and a global leader in the dynamic business of providing
portable power. Battery Products' brands are recognized around the world and
are marketed and sold in more than 160 countries. Battery products are
marketed through a direct sales force to mass merchandisers, wholesalers and
other customers.
Discontinued Segments
Soy Protein Products -- dietary soy protein, fiber food ingredients and polymer
products
Soy Protein Products is the world's leading producer and marketer of
high-quality dietary isolated soy protein and fiber food ingredients, and a
leading marketer of polymer products worldwide. Principal markets served
include food, meat, paper/paperboard and animal feed industries. Food protein
and industrial polymer products are marketed through a direct sales force.
Agricultural Products (International) -- animal feeds
Agricultural Products is one of the world's largest producers and
marketers of formula animal feeds and operates 73 manufacturing plants.
Agricultural products are marketed through a worldwide network of 3,300
independent dealers, as well as an independent and a direct sales force.
Divested Business
Bakery Products -- bread and sweet baked goods (sold as of July 22, 1995)
Pet Products includes restructuring provisions of $15.5 million in 1997
and $8.4 million in 1996. Battery Products includes restructuring provisions of
$95.9 million in 1997, $4.0 million in 1996 and $90.8 million in 1995.
Comments, amounts and percentages in the remaining Business Segment discussion
exclude the effects of restructuring provisions.
Pet Products
............
Sales for the Pet Products segment increased 9.0% in 1997 and 12.2% in
1996 on higher domestic and international pet food volume and pricing. The 1996
increase also reflected the inclusion of a full year's sales of Golden Cat,
acquired in April 1995.
Operating profit for the Pet Products segment was flat in 1997 as
increased sales were offset by higher ingredient costs, higher promotion
support and start-up expenses. In 1996, operating profit increased 3.7% on the
inclusion of a full year's results of Golden Cat. In addition, higher pet food
volume and pricing were offset by higher ingredient and advertising and
promotion costs. Gross profit margins increased slightly in 1997 after
declining significantly in 1996, reflecting the higher ingredient costs.
The domestic pet food and cat box filler industry is well developed and
non-cyclical with strong cash flows. In addition, the international pet food
market presents opportunities for growth for Pet Products. The improvement in
pet ownership trends in recent years is supporting volume growth in the
industry. The competitive environment continues to be challenging, particularly
as manufacturers consolidate. Consolidation of the retail industry, growth of
the mass merchandiser and category-dominant retailer segments and an increase
in store-branded product have resulted, and will continue to result, in
significant changes in the product distribution pattern and marketing practices
of the Company. Increased profitability depends on maintaining brand loyalty,
developing higher performance capabilities and on the successful development of
mutually beneficial trading relationships with our customers.
22 ............................................................................
<PAGE> 10
R A L S T O N P U R I N A C O M P A N Y
...............................................................................
Battery Products
................
Sales for the Battery Products segment were flat in 1997. Worldwide
branded alkaline volumes increased, particularly in North America and Asia
Pacific. These increases were offset by volume declines and unfavorable
exchange rates in Europe and the continued decline in carbon zinc sales. The
impact of the consolidation of the retail trade and increased competitive
pressures also negatively impacted results for the year. Sales for the Battery
Products' segment increased slightly in 1996 on higher volumes in the Asia
Pacific region and higher alkaline volume and prices and favorable mix in the
United States. These gains were nearly offset by sales declines in Europe and
South and Central America and by decreased sales of rechargeable batteries to
Original Equipment Manufacturer (OEM) customers.
Battery Products' operating profit was flat in 1997. Increased worldwide
alkaline volumes and improved results in the Asia Pacific region were offset by
an unfavorable package mix in the United States, decreased earnings in Europe,
decreased OEM rechargeable sales in the Asia Pacific region and start-up costs
associated with the lithium-ion rechargeable battery. Margins were flat in
1997. Operating profit increased 4.8% in 1996 on strong performances in Asia
Pacific and in the United States, partially offset by lower rechargeable sales
to the OEM market segment, declines in Europe due to poor economic conditions
and higher information systems development costs. Margin percentages in Europe
and Pan Am improved in 1996 reflecting benefits from the 1995 plant closings.
The Battery Products business faces intense competition. There has been a
shift within primary battery products from carbon zinc batteries to alkaline
batteries. As such, the Company has recorded provisions related to
restructuring its world-wide battery production capacity and certain
administrative functions in each of the last three years. Alkaline batteries
are now the dominant primary battery in all world areas with the exception of
Asia and Africa. The rechargeable battery products business is experiencing
rapid technological evolution, particularly within the lithium area. These
emerging rechargeable technologies are expected to play a predominant role in
the future of the rechargeable battery business. The Company continues to
review its battery production capacity and its business structure in light of
pervasive global trends, including the evolution of technology. (See
Restructuring Activities discussion in this section.)
Discontinued Operations
.......................
Soy Protein Products and Agricultural Products
Results of discontinued operations increased 14.5% in 1997 as decreased
operating profit for Soy Protein Products and Agricultural Products was more
than offset by lower translation and exchange losses and lower taxes. Results
of discontinued operations were flat in 1996 as operating profit in the Soy
Protein Products segment was flat and increased operating profit in the
Agricultural Products segment was offset by higher translation and exchange
losses and higher taxes.
............................................................................ 23
<PAGE> 11
R A L S T O N P U R I N A C O M P A N Y
Business Segment Information
...............................................................................
Export sales and sales between geographic segments were immaterial. One
single mass merchandiser accounted for 11.9%, 10.5% and 6.7% of total sales in
fiscal years 1997, 1996 and 1995, respectively.
<TABLE>
<CAPTION>
IN MILLIONS 1997 1996 1995
- ----------- ---- ---- ----
<S> <C> <C> <C>
SALES
Pet Products................................................ $2,308.9 $2,118.4 $1,888.8
Battery Products............................................ 2,177.9 2,183.5 2,168.4
-------- -------- --------
4,486.8 4,301.9 4,057.2
Divested Business<Fa>....................................... -- -- 1,588.2
-------- -------- --------
Total........................................... $4,486.8 $4,301.9 $5,645.4
======== ======== ========
OPERATING PROFIT
Pet Products
Operating profit before amortization.................... $ 384.2 <Fb> $ 392.9 <Fb> $ 381.7
Amortization of goodwill and other intangibles.......... (11.5) (11.8) (6.2)
-------- -------- --------
372.7 381.1 375.5
-------- -------- --------
Battery Products
Operating profit before amortization.................... 244.3 <Fc> 347.5 <Fc> 248.7 <Fc>
Amortization of goodwill and other intangibles.......... (32.8) (41.2) (43.4)
-------- -------- --------
211.5 306.3 205.3
-------- -------- --------
584.2 687.4 580.8
Divested Business<Fa>....................................... -- -- 7.1
-------- -------- --------
Total........................................... 584.2 687.4 587.9
Unallocated Corporate and Miscellaneous Expenses............ (48.2) (49.4) (38.8)
Interest Expense............................................ (174.3) (190.3) (199.8)
Gain on Sale of CBC......................................... -- -- 50.3
Gain on Sale of IBC Stock................................... 23.2 -- --
-------- -------- --------
Earnings from Continuing Operations before
Income Taxes, Equity Earnings and
Extraordinary Item............................ $ 384.9 $ 447.7 $ 399.6
======== ======== ========
<FN>
- ---------
<Fa> Effective July 22, 1995, the Company sold CBC. The Company's sales and earnings reflect the operations of CBC through
that date.
<Fb> Includes restructuring provisions of $15.5 in 1997 and $8.4 in 1996.
<Fc> Includes restructuring provisions of $95.9 in 1997, $4.0 in 1996 and $90.8 in 1995.
</TABLE>
24 ............................................................................
<PAGE> 12
R A L S T O N P U R I N A C O M P A N Y
...............................................................................
<TABLE>
<CAPTION>
IN MILLIONS 1997 1996 1995
- ----------- ---- ---- ----
<S> <C> <C> <C>
ASSETS AT YEAR END
Pet Products................................................ $ 1,077.2 $ 984.9 $ 940.4
Battery Products............................................ 2,026.1 2,107.8 2,098.9
--------- --------- ---------
Subtotal........................................ 3,103.3 3,092.7 3,039.3
Investment in Discontinued Operations<Fa>................... 592.3 587.1 469.8
Corporate................................................... 1,046.2 843.2 801.7
--------- --------- ---------
Total........................................... $ 4,741.8 $ 4,523.0 $ 4,310.8
========= ========= =========
DEPRECIATION AND AMORTIZATION EXPENSE
Pet Products................................................ $ 58.9 $ 55.2 $ 47.6
Battery Products............................................ 117.0 126.2 128.0
Divested Business<Fb>....................................... -- -- 65.9
--------- --------- ---------
Subtotal........................................ 175.9 181.4 241.5
Corporate................................................... 13.1 12.4 7.9
--------- --------- ---------
Total........................................... $ 189.0 $ 193.8 $ 249.4
========= ========= =========
PROPERTY ADDITIONS
Pet Products................................................ $ 135.2 $ 73.2 $ 66.6
Battery Products............................................ 141.9 150.2 100.7
Divested Business<Fb>....................................... -- -- 49.8
--------- --------- ---------
Subtotal........................................ 277.1 223.4 217.1
Corporate................................................... 5.8 5.4 18.1
--------- --------- ---------
Total........................................... $ 282.9 $ 228.8 $ 235.2
========= ========= =========
<FN>
- ---------
<Fa> See Discontinued Operations in the Notes to Financial Statements.
<Fb> See Note (a) on page 24.
</TABLE>
............................................................................ 25
<PAGE> 13
R A L S T O N P U R I N A C O M P A N Y
Business Segment Information
...............................................................................
Geographic Segment Information
..............................
Financial information by geographic location for the past three years is
set forth below.
<TABLE>
<CAPTION>
IN MILLIONS 1997 1996 1995
- ----------- ---- ---- ----
<S> <C> <C> <C>
SALES
United States..................................................... $2,950.8 $2,757.5 $4,125.2 <Fa>
Europe............................................................ 519.4 572.5 591.0
South & Central America........................................... 320.9 290.8 285.6
Asia Pacific...................................................... 534.7 529.6 499.7
Other............................................................. 161.0 151.5 143.9
-------- -------- --------
Total......................................................... $4,486.8 $4,301.9 $5,645.4
======== ======== ========
OPERATING PROFIT<Fb>
United States..................................................... $ 531.1 $ 555.8 $ 537.7 <Fa>
Europe............................................................ (56.9) 7.5 (9.2)
South & Central America........................................... 17.8 22.2 (2.8)
Asia Pacific...................................................... 84.3 91.7 55.9
Other............................................................. 7.9 10.2 6.3
-------- -------- --------
Total......................................................... $ 584.2 $ 687.4 $ 587.9
======== ======== ========
ASSETS
United States..................................................... $1,936.4 $1,847.1 $1,803.5
Europe............................................................ 563.8 666.0 701.5
South & Central America........................................... 200.8 166.1 157.1
Asia Pacific...................................................... 337.0 350.3 311.6
Other............................................................. 65.3 63.2 65.6
-------- -------- --------
Total......................................................... $3,103.3 $3,092.7 $3,039.3
======== ======== ========
<FN>
- ---------
<Fa> See Note (a) on page 24.
<Fb> Includes restructuring provisions of:
<CAPTION>
AREA 1997 1996 1995
---- ---- ---- ----
<S> <C> <C> <C>
United States.............................................................. $25.1 $ 1.5 $10.7
Europe..................................................................... 63.0 12.6 34.4
South & Central America.................................................... 3.5 -- 28.8
Asia Pacific............................................................... 15.3 -- 16.9
Other...................................................................... 4.5 (1.7) --
</TABLE>
26 ............................................................................
<PAGE> 14
R A L S T O N P U R I N A C O M P A N Y
Responsibility for Financial Statements
...............................................................................
The preparation and integrity of the financial statements of Ralston
Purina Company are the responsibility of its management. These statements have
been prepared in conformance with generally accepted accounting principles, and
in the opinion of management, fairly present the Company's financial position,
results of operations and cash flows.
The Company maintains accounting and internal control systems which it
believes are adequate to provide reasonable assurance that assets are
safeguarded against loss from unauthorized use or disposition and that the
financial records are reliable for preparing financial statements. The
selection and training of qualified personnel, the establishment and
communication of accounting and administrative policies and procedures, and an
extensive program of internal audits are important elements of these control
systems.
The report of Price Waterhouse LLP, independent accountants, on their
audits of the accompanying financial statements is shown below. This report
states that the audits were made in accordance with generally accepted auditing
standards. These standards include a study and evaluation of internal control
for the purpose of establishing a basis for reliance thereon relative to the
scope of their audits of the financial statements.
The Board of Directors, through its Audit Committee consisting solely of
nonmanagement directors, meets periodically with management, internal audit and
the independent accountants to discuss audit and financial reporting matters.
To assure independence, Price Waterhouse LLP has direct access to the Audit
Committee.
Report of Independent Accountants
...............................................................................
To the Shareholders and Board of Directors of
Ralston Purina Company
In our opinion, the accompanying consolidated balance sheet and the
related consolidated statements of earnings, of shareholders equity and of cash
flows present fairly, in all material respects, the financial position of
Ralston Purina Company and its subsidiaries at September 30, 1997 and 1996, and
the results of their operations and their cash flows for each of the three
years in the period ended September 30, 1997, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
St. Louis, Missouri
November 4, 1997, except the Discontinued Operations note which is as of
December 3, 1997
............................................................................ 27
<PAGE> 15
R A L S T O N P U R I N A C O M P A N Y
<TABLE>
Consolidated Statement of Earnings
................................................................................................................
Year ended September 30
<CAPTION>
(IN MILLIONS EXCEPT PER SHARE DATA) 1997 1996 1995
- ----------------------------------- ---- ---- ----
<S> <C> <C> <C>
Net Sales.................................................................. $4,486.8 $4,301.9 $5,645.4
-------- -------- --------
Costs and Expenses
Cost of products sold.................................................. 2,281.9 2,206.0 2,880.6
Selling, general and administrative.................................... 918.6 864.8 1,549.0
Advertising and promotion.............................................. 646.6 571.6 578.7
Interest............................................................... 174.3 190.3 199.8
Provisions for restructuring........................................... 111.4 12.4 90.8
Gain on sale of IBC stock.............................................. (23.2) -- --
Gain on sale of CBC.................................................... -- -- (50.3)
Other (income)/expense, net............................................ (7.7) 9.1 (2.8)
-------- -------- --------
4,101.9 3,854.2 5,245.8
-------- -------- --------
Earnings from Continuing Operations before Income Taxes, Equity Earnings
and Extraordinary Item................................................... 384.9 447.7 399.6
Income Taxes............................................................... (70.0) (162.9) (167.8)
-------- -------- --------
Earnings from Continuing Operations before Equity Earnings and
Extraordinary Item....................................................... 314.9 284.8 231.8
Equity Earnings, Net of Taxes.............................................. 34.0 11.6 0.9
-------- -------- --------
Earnings from Continuing Operations before Extraordinary Item.............. 348.9 296.4 232.7
Net Earnings from Discontinued Operations.................................. 74.8 65.3 67.4
-------- -------- --------
Earnings before Extraordinary Item......................................... 423.7 361.7 300.1
Extraordinary Item--Loss on Early Retirement of Debt....................... -- (2.1) (3.7)
-------- -------- --------
Net Earnings............................................................... 423.7 359.6 296.4
Preferred Stock Dividend, Net of Taxes..................................... (13.1) (14.1) (18.8)
-------- -------- --------
Earnings Available to Common Shareholders.................................. $ 410.6 $ 345.5 $ 277.6
======== ======== ========
Earnings Per Share of RAL stock (Pro forma in 1995 assuming one class of
common stock, unaudited):
Primary
Earnings from continuing operations................................ $ 3.29 $ 2.77 $ 2.10
Earnings from discontinued operations.............................. 0.73 0.64 0.66
Extraordinary item................................................. -- (0.02) (0.04)
-------- -------- --------
Net Earnings....................................................... $ 4.02 $ 3.39 $ 2.72
======== ======== ========
Fully Diluted
Earnings from continuing operations................................ $ 3.13 $ 2.64 $ 2.05
Earnings from discontinued operations.............................. 0.67 0.59 0.61
Extraordinary item................................................. -- (0.02) (0.03)
-------- -------- --------
Net Earnings....................................................... $ 3.80 $ 3.21 $ 2.63
======== ======== ========
Earnings Per Share of RAL stock (Based on RPG Group earnings through May
15, 1995 and consolidated Ralston Purina Company earnings thereafter):
Primary
Earnings from continuing operations................................ $ 2.22
Earnings from discontinued operations.............................. 0.67
Extraordinary item................................................. (0.04)
--------
Net Earnings....................................................... $ 2.85
========
Fully Diluted
Earnings from continuing operations................................ $ 2.15
Earnings from discontinued operations.............................. 0.62
Extraordinary item................................................. (0.03)
--------
Net Earnings....................................................... $ 2.74
========
- ------------------------------------------------------------------------------------------------------------------
Loss per share of CBG Stock (Through May 15, 1995):
Primary and Fully Diluted
Net Loss........................................................... $(0.45)
The above financial statement should be read in conjunction with the Notes
to Financial Statements.
</TABLE>
28 ............................................................................
<PAGE> 16
R A L S T O N P U R I N A C O M P A N Y
<TABLE>
Consolidated Balance Sheet
..........................................................................................................
September 30
<CAPTION>
(IN MILLIONS) 1997 1996
- ------------- ---- ----
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents................................................... $ 109.1 $ 62.3
Receivables, less allowance for doubtful accounts........................... 675.2 662.2
Inventories................................................................. 604.8 628.2
Other current assets........................................................ 116.4 120.0
-------- --------
Total Current Assets.................................................... 1,505.5 1,472.7
Investments and Other Assets.................................................... 1,530.3 1,412.3
Investment in Discontinued Operations........................................... 592.3 587.1
Property at Cost
Land........................................................................ 38.6 37.6
Buildings................................................................... 371.6 368.2
Machinery and Equipment..................................................... 1,546.1 1,518.1
Construction in Progress.................................................... 204.3 133.7
-------- --------
2,160.6 2,057.6
Accumulated depreciation................................................ 1,046.9 1,006.7
-------- --------
1,113.7 1,050.9
-------- --------
Total............................................................... $4,741.8 $4,523.0
======== ========
LIABILITIES AND SHAREHOLDERS EQUITY
Current Liabilities
Current maturities of long-term debt........................................ $ 106.2 $ 98.0
Notes payable............................................................... 340.3 881.9
Accounts payable and accrued liabilities.................................... 705.0 661.0
Dividends payable........................................................... 35.8 36.0
Income taxes................................................................ 28.5 26.1
-------- --------
Total Current Liabilities............................................... 1,215.8 1,703.0
Long-Term Debt.................................................................. 1,860.4 1,437.0
Other Liabilities............................................................... 507.4 481.1
Redeemable Preferred Stock--Series A 6.75%, $1 par value, issued 2,750,636 and
2,919,209 shares in 1997 and 1996, respectively............................... 304.9 323.5
Unearned ESOP Compensation...................................................... (63.8) (110.6)
Shareholders Equity
Preferred stock, $1 par value, none outstanding
Common stock--$.10 par value, issued 114,694,666 and 114,688,225 shares in
1997 and 1996, respectively................................................ 11.5 11.5
Capital in excess of par value.............................................. 320.0 217.3
Retained earnings........................................................... 1,566.7 1,302.9
Cumulative translation adjustment........................................... (129.8) (66.6)
Common stock in treasury, at cost, 8,116,407 and 8,739,872 shares in 1997
and 1996, respectively..................................................... (466.7) (482.3)
Unearned portion of restricted stock........................................ (3.4) (4.2)
Value of 4,307,214 and 4,228,314 shares of common stock held in Grantor
Trust in 1997 and 1996, respectively....................................... (381.2) (289.6)
-------- --------
Total Shareholders Equity............................................... 917.1 689.0
-------- --------
Total............................................................... $4,741.8 $4,523.0
======== ========
The above financial statement should be read in conjunction with the Notes
to Financial Statements.
</TABLE>
............................................................................ 29
<PAGE> 17
R A L S T O N P U R I N A C O M P A N Y
<TABLE>
Consolidated Statement of Cash Flows
.............................................................................................................
Year ended September 30
<CAPTION>
(IN MILLIONS) 1997 1996 1995
- ------------- ---- ---- ----
<S> <C> <C> <C>
Cash Flow from Operations
Net earnings........................................................... $ 423.7 $ 359.6 $ 296.4
Adjustments to reconcile net earnings to net cash flow provided by
operations
Net earnings from discontinued operations.......................... (74.8) (65.3) (67.4)
Extraordinary item................................................. -- 2.1 3.7
Non-cash restructuring charges..................................... 49.9 5.4 33.0
Depreciation and amortization...................................... 189.0 193.8 249.4
Deferred income tax provision...................................... (115.5) (1.8) (21.3)
Gain on sale of CBC................................................ -- -- (50.3)
Gain on sale of IBC stock.......................................... (23.2) -- --
Changes in assets and liabilities used in operations
Increase in accounts receivable................................ (39.9) (25.0) (46.9)
Increase in inventories........................................ (9.0) (9.7) (28.5)
Decrease in other current assets............................... 4.0 1.2 15.0
Increase (decrease) in accounts payable and accrued
liabilities.................................................. 63.8 (50.1) (34.8)
Increase in other current liabilities.......................... 15.3 25.6 18.8
Other, net......................................................... (32.2) .3 17.1
------- ------- -------
Cash flow from continuing operations........................... 451.1 436.1 384.2
Cash flow from discontinued operations......................... 156.5 28.3 89.5
------- ------- -------
Net cash flow from operations................................ 607.6 464.4 473.7
------- ------- -------
Cash Flow from Investing Activities
Property additions..................................................... (282.9) (228.8) (235.2)
Proceeds from the sale of property..................................... 10.4 18.4 10.3
Proceeds from sale of IBC stock........................................ 60.1 -- --
Proceeds from the sale of CBC.......................................... -- -- 220.0
Acquisitions of businesses............................................. -- -- (358.0)
Other, net............................................................. (11.0) (3.4) (9.5)
------- ------- -------
Cash used by investing activities - continuing operations...... (223.4) (213.8) (372.4)
Cash used by investing activities - discontinued operations.... (114.3) (93.7) (55.6)
------- ------- -------
Net cash used by investing activities........................ (337.7) (307.5) (428.0)
------- ------- -------
Cash Flow from Financing Activities
Proceeds from sale of long-term debt................................... 541.1 199.7 272.8
Principal payments on long-term debt, including current maturities..... (63.5) (355.3) (318.1)
Net increase (decrease) in notes payable............................... (508.7) 203.2 222.6
Treasury stock purchases............................................... (24.7) (9.4) (15.3)
Dividends paid......................................................... (143.9) (145.0) (153.8)
Stock repurchases in connection with the ESOP.......................... (30.4) (24.3) (126.0)
Other, net............................................................. 13.1 (3.8) (8.8)
------- ------- -------
Net cash used by financing activities........................ (217.0) (134.9) (126.6)
------- ------- -------
Effect of Exchange Rate Changes on Cash.................................... (6.1) (4.0) (0.8)
------- ------- -------
Net Increase (Decrease) in Cash and Cash Equivalents....................... 46.8 18.0 (81.7)
Cash and Cash Equivalents, Beginning of Period............................. 62.3 44.3 126.0
------- ------- -------
Cash and Cash Equivalents, End of Period................................... $ 109.1 $ 62.3 $ 44.3
======= ======= =======
The above financial statement should be read in conjunction with the Notes
to Financial Statements.
</TABLE>
30 ............................................................................
<PAGE> 18
R A L S T O N P U R I N A C O M P A N Y
<TABLE>
Consolidated Statement of Shareholders Equity
...........................................................................................................................
Three years ended September 30, 1997
<CAPTION>
NUMBER OF SHARES AMOUNT
(IN THOUSANDS) (IN MILLIONS)
-------------------------- --------------------------
1997 1996 1995 1997 1996 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Common Stocks:
RAL Stock:
Balance at beginning of year........................ 114,688 114,687 114,685 $ 11.5 $ 11.5 $ 11.5
Common stock issued on conversion of
debentures.................................... 7 1 2
------- ------- ------- ------- ------- -------
Balance at end of year.............................. 114,695 114,688 114,687 $ 11.5 $ 11.5 $ 11.5
======= ======= ======= ======= ======= =======
CBG Stock:
Balance at beginning of year........................ 20,857 $ 2.1
Common stock issued on conversion of
debentures.................................... 1
Exchange of CBG Stock for RAL Stock............ (20,858) (2.1)
------- -------
Balance at end of year.............................. -- $ --
======= =======
Common Stocks in Treasury:
RAL Stock:
Balance at beginning of year........................ (8,740) (8,831) (10,620) $(482.3) $(481.7) $(577.4)
Shares issued in connection with CBG Stock
exchange...................................... 1,816 98.7
Activity under stock plans..................... 932 237 210 49.1 11.7 12.6
Treasury stock purchased....................... (308) (146) (300) (24.7) (9.4) (15.3)
Shares issued in connection with preferred
stock redemption/conversion................... 386 391 2,319 21.7 21.4 125.7
Share repurchases in connection with the
ESOP.......................................... (386) (391) (2,256) (30.5) (24.3) (126.0)
------- ------- ------- ------- ------- -------
Balance at end of year.............................. (8,116) (8,740) (8,831) $(466.7) $(482.3) $(481.7)
======= ======= ======= ======= ======= =======
CBG Stock:
Balance at beginning of year........................ (270) $ (2.6)
Activity under stock plans..................... 2
Cancellation of shares......................... 268 2.6
------- -------
Balance at end of year.............................. -- $ --
======= =======
Grantor Trust:
Balance at beginning of year........................ (4,228) (4,135) (4,033) $(289.6) $(239.3) $(166.9)
Shares purchased............................... (79) (93) (102) (6.4) (6.0) (5.0)
Market value adjustment........................ (85.2) (44.3) (67.4)
------- ------- ------- ------- ------- -------
Balance at end of year.............................. (4,307) (4,228) (4,135) $(381.2) $(289.6) $(239.3)
======= ======= ======= ======= ======= =======
............................................................................ 31
<PAGE> 19
<CAPTION>
R A L S T O N P U R I N A C O M P A N Y
Consolidated Statement of Shareholders Equity (continued)
.........................................................................................................................
Three years ended September 30, 1997
AMOUNT
(IN MILLIONS)
----------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Capital in Excess of Par Value:
Balance at beginning of year....................................... $ 217.3 $ 169.6 $ 108.7
Effect of exchange of CBG Stock for RAL Stock................. (5.8)
Effect of preferred stock conversion.......................... (3.2)
Activity under stock plans.................................... 17.5 3.4 2.5
Market value adjustment of grantor trust...................... 85.2 44.3 67.4
-------- -------- --------
Balance at end of year............................................. $ 320.0 $ 217.3 $ 169.6
======== ======== ========
Retained Earnings:
Balance at beginning of year....................................... $1,302.9 $1,089.7 $1,043.2
Net earnings.................................................. 423.7 359.6 296.4
Effect of exchange of CBG Stock for RAL Stock................. (93.8)
Effect of preferred stock conversion.......................... (3.0) (2.5) (10.4)
Activity under stock plans.................................... (21.1) (7.7) (5.3)
Dividends declared on preferred stock, net of taxes........... (13.1) (14.1) (18.8)
Dividends declared on RAL Stock............................... (122.7) (122.1) (121.6)
-------- -------- --------
Balance at end of year............................................. $1,566.7 $1,302.9 $1,089.7
======== ======== ========
Unearned Portion of Restricted Stock:
Balance at beginning of year....................................... $ (4.2) $ (5.3) $ (4.3)
Activity under stock plans.................................... (.3) (1.2)
Market value adjustment on restricted stock................... (.5)
Amortization of restricted stock.............................. 1.1 1.1 .7
-------- -------- --------
Balance at end of year............................................. $ (3.4) $ (4.2) $ (5.3)
======== ======== ========
Cumulative Translation Adjustment:
Balance at beginning of year....................................... $ (66.6) $ (50.3) $ (58.7)
Translation adjustments....................................... (63.2) (16.3) 8.4
-------- -------- --------
Balance at end of year............................................. $ (129.8) $ (66.6) $ (50.3)
======== ======== ========
The above financial statement should be read in conjunction with the
Notes to Financial Statements.
</TABLE>
32 ............................................................................
<PAGE> 20
R A L S T O N P U R I N A C O M P A N Y
Notes to Financial Statements
...............................................................................
(Dollars in millions except per share data)
Summary of Accounting Policies
..............................
Ralston Purina Company's (the Company) significant accounting policies,
which conform to generally accepted accounting principles and are applied on a
consistent basis among years, except as indicated, are described below:
Principles of Consolidation -- The consolidated financial statements include
the accounts of the Company and its majority-owned subsidiaries. All
significant intercompany transactions are eliminated. Investments in affiliated
companies, 20% through 50%-owned, are carried at equity.
Foreign Currency Translation -- Financial statements of foreign operations
where the local currency is the functional currency are translated using
exchange rates in effect at period end for assets and liabilities and average
exchange rates during the period for results of operations. Related translation
adjustments are reported as a separate component of shareholders equity. For
foreign operations where the U.S. dollar is the functional currency and for
countries which are considered highly inflationary, translation practices
differ in that inventories, properties, accumulated depreciation and
depreciation accounts are translated at historical rates of exchange and
related translation adjustments are included in earnings. Gains and losses from
foreign currency transactions are generally included in earnings.
Financial Instruments -- The Company uses financial and commodities derivatives
in the management of foreign currency, commodities pricing and interest rate
risks that are inherent to its business operations. Such instruments are not
held or issued for trading purposes.
The Company uses foreign exchange (F/X) instruments, including currency
forwards, futures and options, to reduce transaction and translation exposures
resulting from its foreign currency activities. F/X instruments used are
selected based on their risk reduction attributes and the related market
conditions. Such instruments are marked-to-market, and the terms generally do
not exceed twelve months. Realized and unrealized gains and losses from
instruments qualifying as hedges are deferred as part of the cost basis of the
asset or liability being hedged and are recognized in the statement of earnings
in the same period as the underlying transaction. Realized and unrealized gains
or losses from F/X instruments used as economic hedges but not qualifying for
hedge accounting are recognized currently in the statement of earnings. Cash
flows from F/X instruments are classified in the same category in the statement
of cash flows as the underlying activities. F/X instruments are generally not
disposed of prior to the settlement date; however, if an F/X instrument and the
underlying hedged transaction were disposed of prior to the settlement date,
any gain or loss would be recognized immediately in the statement of earnings.
The Company uses commodities hedging instruments, including futures and
options, to reduce the risk of price fluctuations related to future raw
materials requirements for commodities such as corn, wheat and soybean meal.
The terms of such instruments generally do not exceed twelve months, and depend
on the commodity and other market factors. The instruments are
marked-to-market, and the gains and losses are deferred. Deferred gains and
losses are subsequently recorded as cost of products sold in the statement of
earnings when the inventory is sold. If the inventory is not acquired and the
hedge is disposed of, the deferred gain or loss is recognized immediately in
cost of products sold.
The Company uses interest rate swap and cap agreements in the management
of interest rate exposure. The interest rate differential to be paid or
received is normally accrued as interest rates change, and is recognized as a
component of interest expense over the life of the agreements. If an agreement
and the underlying hedged transaction were terminated prior to the maturity
date, any accrued rate differential would be recognized immediately as interest
expense in the statement of earnings.
Cash Equivalents for purposes of the statement of cash flows are considered to
be all highly liquid investments with a maturity of three months or less when
purchased.
Inventories are valued generally at the lower of cost or market, with cost
being determined using average cost or the first-in, first-out (FIFO) method.
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 dispositions 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.
Goodwill and Other Intangible Assets, which are included in Investments and
Other Assets, represent the excess of cost over the net tangible assets of
acquired businesses and are amortized over estimated periods of related benefit
ranging from 7 to 40 years.
Subsequent to acquisition, the Company continually evaluates whether later
events and circumstances have occurred that indicate the remaining estimated
useful life of an intangible asset may warrant revision or that the remaining
balance of an intangible asset may not be recoverable. The measurement of
possible impairment is based on the ability to recover the balance of
intangible assets from expected future operating cash flows on an undiscounted
basis. In the opinion of management, no such impairment existed as of September
30, 1997 and 1996.
............................................................................ 33
<PAGE> 21
R A L S T O N P U R I N A C O M P A N Y
Notes to Financial Statements (continued)
...............................................................................
(Dollars in millions except per share data)
Stock Appreciation Income Linked Securities (SAILS) -- SAILS debt was initially
recorded on the balance sheet at the principal amount of the issuance. At each
subsequent balance sheet date, the SAILS will be marked to the cash value of
the underlying IBC shares for which the SAILS may be exchanged. Any changes in
value will be recorded in earnings each period.
Advertising Costs -- The Company expenses advertising costs as incurred.
Research and Development costs are expensed as incurred and were $70.4, $65.3
and $62.6 in 1997, 1996 and 1995, respectively.
Use of 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 and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Income Taxes -- Deferred income taxes are recognized for the effect of
temporary differences between financial and tax reporting. No additional U.S.
taxes have been provided on earnings of foreign subsidiaries expected to be
reinvested indefinitely. Additional income taxes are provided, however, on
planned repatriations of foreign earnings after taking into account tax-exempt
earnings and applicable foreign tax credits.
Earnings per Share -- Primary earnings per share are based on the average
number of shares outstanding during the period for which earnings per share are
reported. The average number of shares of RAL Stock outstanding was 102,058,000
and 101,776,000 for the years ended September 30, 1997 and 1996, respectively.
As discussed in the CBG Stock Exchange note to the financial statements,
on May 15, 1995, the Company exchanged all outstanding shares of
Ralston-Continental Baking Group Common Stock (CBG Stock) for shares of
Ralston-Ralston Purina Group Common Stock (RAL Stock), which remains the
Company's sole outstanding class of common stock. The average number of shares
of RAL Stock outstanding for the year ended September 30, 1995 was 100,700,000.
For the period October 1, 1994 through May 15, 1995, the average number of
shares of CBG Stock outstanding was 20,589,000.
The 1995 pro forma earnings per share are based on the assumption that the
CBG Stock exchange had occurred as of the beginning of the period. The average
number of shares of RAL Stock assumed outstanding was 101,850,000 in 1995. The
pro forma earnings per share are not necessarily indicative of the results that
would have occurred had the RAL Stock been the sole class of common stock
outstanding during the period.
Fully diluted earnings per share assumes the conversion of the Series A
6.75% Preferred Stock (Redeemable Preferred Stock) and other dilutive
securities into common stock. For purposes of calculating fully diluted
earnings per share, net earnings have been adjusted for the additional
contribution to the ESOP portion of the Company's Savings Investment Plan and
its related trust (ESOP) that would have been required had the Redeemable
Preferred Stock been converted as of the beginning of the period.
Accounting for Stock-Based Compensation -- The Company accounts for stock
options using the intrinsic value method as prescribed by Accounting Principles
Board Opinion No. 25 (APB25). Pro forma disclosures required under Statement of
Financial Accounting Standards No. 123 (SFAS 123), as if the Company had
adopted the fair value based method of accounting for stock options, are
presented in the Notes to Financial Statements.
Other -- Statement of Financial Accounting Standards No. 128, "Earnings Per
Share", was issued in February 1997. Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income", and Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information", were issued in June 1997. The Company
expects the impact of adoption of these statements to be immaterial.
Business Segment Information
............................
The Business Segment Information and Geographic Segment Information
sections, appearing on pages 24 through 26 herein, are an integral part of
these financial statements.
Discontinued Operations
.......................
In December 1997, the Company reached agreement to sell its Soy Protein
Products operations to E. I. Du Pont de Nemours and Company (DuPont) for
approximately $1.5 billion comprised of DuPont common stock and the assumption
of certain liabilities. The amount received will be recorded in the first
quarter of fiscal 1998, and will result in a gain for the Company. The Soy
Protein Products business is the world's leading producer and marketer of
high-quality dietary isolated protein and fiber food ingredients, and a leading
marketer of polymer products worldwide. In addition, the Company has made
significant progress in its efforts to separate its Agricultural Products
business in a tax-free spin-off to shareholders. The spin-off is expected to be
completed during the second quarter of fiscal 1998 after receipt of a favorable
tax ruling from the Internal Revenue Service and approval by the Board of
Directors. The Agricultural Products business is one of the world's largest
producers and marketers of formula feeds outside the United States.
The Soy Protein Products and Agricultural Products segments are accounted
for as discontinued operations, and accordingly, amounts in the financial
statements and related notes for all periods shown have been restated to
reflect discontinued operations accounting. Summarized results of these
businesses are shown separately as Discontinued
34 ............................................................................
<PAGE> 22
R A L S T O N P U R I N A C O M P A N Y
...............................................................................
(Dollars in millions except per share data)
Operations in the accompanying consolidated financial statements. The
Investment in Discontinued Operations is primarily comprised of accounts
receivable, inventory, fixed assets and accounts payable. Operating results of
these businesses are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net Sales....................................................................... $1,983.8 $1,812.4 $1,526.2
======== ======== ========
Earnings before income taxes.................................................... $ 116.3 $ 114.6 $ 114.6
Income taxes.................................................................... 41.5 49.3 47.2
-------- -------- --------
Net Earnings from discontinued operations....................................... $ 74.8 $ 65.3 $ 67.4
======== ======== ========
</TABLE>
Acquisitions
............
On April 7, 1995, the Company purchased the assets of Golden Cat
Corporation, the leading manufacturer and marketer of branded cat box filler in
the United States and Canada for $340. Also in the third quarter of 1995, the
Company acquired the assets of a Mexican pet food company for $18.
These acquisitions were accounted for using the purchase method of
accounting, and accordingly, the results of operations are included in the
consolidated statement of earnings from the date of acquisition. Assuming these
acquisitions had occurred as of the beginning of the year, they would not have
had a material effect on net sales or net earnings.
CBG Stock Exchange
..................
On May 15, 1995, the Company exchanged each outstanding share of CBG
Stock for .0886 shares of RAL Stock as permitted by the Company's Restated
Articles of Incorporation (Articles). The exchange represented a 15% premium to
the relative trading values of the CBG Stock and RAL Stock for the period March
31 through April 6, 1995, as provided in the Articles.
Divestitures
............
Effective July 22, 1995, the Company sold its Continental Baking Company
(CBC) subsidiary to Interstate Bakeries Corporation (IBC) and its wholly owned
subsidiary, Interstate Brands Corporation, for $220.0 in cash and 16,923,077
shares of common stock of IBC (the IBC Stock). The Company recorded a pre-tax
and after-tax gain on the sale of CBC of $50.3 and $42.0, respectively, or $.41
per pro forma primary share. Due to the Company's continuing ownership interest
in IBC, an additional $18.5 after-tax gain was deferred. The Company's earnings
and cash flows reflect the operations of CBC through July 22, 1995.
Investment in Interstate Bakeries Corporation
.............................................
The Company's equity investments in affiliated companies includes a 43.5%
interest in IBC at September 30, 1997. The Company accounts for its investment
in IBC by the equity method of accounting. The carrying value of this
investment was $289.2 and $286.9 at September 30, 1997 and 1996, respectively.
The market value of the Company's investment in IBC was $1,096.7 and $617.7 at
September 30, 1997 and 1996, respectively. As of the July 1995 sale of CBC, the
market value of the IBC shares received exceeded the underlying net assets of
IBC by $95.2. This excess is included in the carrying value of the Company's
investment in IBC, and is amortized over 30 years and adjusted for changes in
our equity ownership. Cash dividends received from IBC were $9.1 and $8.5 in
1997 and 1996, respectively. In July 1997, the Company sold one million shares
of its IBC stock back to IBC for $60.1 and recognized a pre-tax gain of $23.2,
or $15.1 after tax.
Terms of a shareholder agreement provide that, with certain limited
exceptions, the Company will not acquire any additional shares of IBC stock for
a period of six years from the July 1995 closing of the sale of CBC. The
agreement also provides that within five years of closing, the Company's
ownership of IBC stock will be reduced to no more than 14.9% of the total
outstanding shares. The Company has registration rights with respect to the IBC
stock, but the shareholder agreement provides that, with certain limited
exceptions, the Company may not sell any of the IBC stock without first
offering the securities to IBC. IBC also has the right, during the fifth year
following closing, to acquire any of the IBC stock then held by the Company at
a price equal to 110% of its then current market price. The shareholder
agreement provides that the Company will vote the shares of IBC stock in
accordance with the recommendation of IBC's Board of Directors with respect to
shareholder proposals and nominations to that Board, and with respect to other
proposals, in proportion to the votes of all other shareholders; provided,
however, that the Company may vote as it deems appropriate with respect to
proposals for the merger of IBC, the sale of all IBC assets, or the issuance of
any other class of voting stock of IBC. The Company has one representative on
the IBC Board.
............................................................................ 35
<PAGE> 23
R A L S T O N P U R I N A C O M P A N Y
Notes to Financial Statements (continued)
...............................................................................
(Dollars in millions except per share data)
In July 1997, the Company issued $480 million of Stock Appreciation Income
Linked Securities (SAILS) consisting of 7% exchangeable notes due August 1,
2000. At maturity, the notes are mandatorily exchangeable into a number of
shares of IBC common stock owned by the Company or, cash, at the Company's
option. The number of shares or the amount of cash will be based on the average
market price of IBC stock on the 20 trading days prior to maturity on August 1,
2000 (the "IBC Maturity Price"). If the IBC Maturity Price is greater than or
equal to $75.5638, the SAILS will be exchanged at maturity into 6.35 million
shares of IBC stock. If the IBC Maturity Price is $61.9375 or less, the SAILS
will be exchangeable into 7.75 million shares of IBC stock. If the IBC Maturity
Price is between $61.9375 and $75.5638, the SAILS will be exchangeable into a
number of shares of IBC stock between 7.75 million and 6.35 million,
respectively, based on an exchange ratio. If the SAILS are redeemed for cash,
the amount of cash will be equal to the number of IBC shares exchangeable under
the terms of the SAILS times the IBC Maturity Price. This transaction
effectively limits the amount of appreciation on part of the Company's
investment in IBC and locks in a minimum gain at the issuance price of
$61.9375. Effective November 3, 1997, IBC's stock split 2-for-1 which is not
reflected in the aforementioned share amounts.
Presented below is summary financial information of IBC:
<TABLE>
<CAPTION>
AUGUST 23, AUGUST 24,
1997 1996
---------- ----------
<S> <C> <C>
Current assets........................................................ $ 328.1 $ 331.3
Noncurrent assets..................................................... 1,157.0 1,160.7
-------- --------
Total assets...................................................... $1,485.1 $1,492.0
======== ========
Current liabilities................................................... $ 356.4 $ 371.2
Noncurrent liabilities................................................ 624.9 644.8
Stockholders equity................................................... 503.8 476.0
-------- --------
Total liabilities and stockholders equity......................... $1,485.1 $1,492.0
======== ========
<CAPTION>
52 WEEKS 52 WEEKS 12 WEEKS
ENDED ENDED ENDED
AUGUST 23, AUGUST 24, AUGUST 26,
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Net sales............................................................. $3,222.5 $3,160.4 $471.4
Cost of products sold................................................. 1,554.3 1,586.0 241.3
-------- -------- ------
Gross profit.......................................................... $1,668.2 $1,574.4 $230.1
======== ======== ======
Net income............................................................ $ 108.4 $ 37.4 $ 5.7
======== ======== ======
Company equity income, net of taxes (1995 amount represents July 23
through August 26, 1995)............................................ $ 34.0 $ 11.6 $ .9
======== ======== ======
</TABLE>
Restructuring Activities
........................
In 1997, the Company recorded provisions for restructuring which reduced
pre-tax and after-tax earnings from continuing operations and earnings from
continuing operations per primary share by $111.4, $36.3 and $.36,
respectively. These charges are primarily associated with the continued
rationalization of Battery Products' production capacity and business structure
and provide for the termination of 1,340 employees and the closing of 3 plants.
The total pre-tax charge for restructuring consisted of termination benefits of
$50.5, other cash exit costs of $11.0, and non-cash charges of $49.9, primarily
related to impairment losses on land, buildings and machinery and equipment.
The income tax benefits of $75.1 recorded during the year associated with
current and past restructuring actions include current tax benefits of $13.4
and the recognition of capital loss benefits of $61.7. During 1997, 80
employees were severed in connection with this charge.
In 1996, the Company recorded provisions for restructuring which reduced
pre-tax and after-tax earnings from continuing operations and earnings from
continuing operations per primary share by $12.4, $11.0 and $.11, respectively.
These charges are associated with the closing of the Company's European cereal
operations and additional Battery Products' restructuring. The total 1996
pre-tax charge for restructuring consisted of termination benefits of $5.2,
relating to the termination of approximately 170 employees, other cash exit
costs of $1.8 and non-cash charges of $5.4, primarily related to impairment
losses on land, buildings and machinery and equipment. As of September 30,
1997, substantially all actions associated with this charge have been
completed.
During 1995, the Company recorded additional provisions for restructuring
of its world-wide carbon zinc battery production capacity and certain
administrative functions as part of a plan initiated in 1994. This plan
provided for the closing of a total of ten plants and the severance of
approximately 2,600 employees. The 1995 provisions reduced pre-tax
36 ............................................................................
<PAGE> 24
R A L S T O N P U R I N A C O M P A N Y
..............................................................................
(Dollars in millions except per share data)
and after-tax earnings from continuing operations by $90.8 and $70.0,
respectively. The total 1995 pre-tax charge for restructuring consisted of
termination benefits of $46.2, other cash exit costs of $11.6 and non-cash
charges of $33.0, primarily related to impairment losses on land, buildings and
machinery and equipment. As of September 30, 1997, substantially all actions
associated with this charge have been completed.
Activity related to the restructuring provisions discussed above is
summarized as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Reserve balance at beginning of year....................................... $ 22.4 $ 43.9
Provision recorded......................................................... 111.4 12.4
Portion of current period provision classified as property and other asset
impairments.............................................................. (49.9) (5.4)
Termination benefits paid.................................................. (15.0) (22.0)
Other cash exit costs incurred............................................. (3.9) (7.3)
Increase due to translation................................................ 1.3 .8
------ ------
Reserve balance at September 30............................................ $ 66.3 $ 22.4
====== ======
</TABLE>
Restructuring actions represented by the September 30, 1997 reserve
balance are expected to be substantially completed in 1999.
Income Taxes
............
The provisions for income taxes consisted of the following:
<TABLE>
<CAPTION>
1997 1996 1995
---------------------------- ---------------------------- ----------------------------
CONTINUING CONTINUING CONTINUING
OPERATIONS CONSOLIDATED OPERATIONS CONSOLIDATED OPERATIONS CONSOLIDATED
---------- ------------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Currently payable
United States............. $ 136.8 $ 151.1 $135.3 $153.5 $144.1 $159.0
State..................... 12.2 14.5 10.1 12.2 14.3 16.2
Foreign................... 36.5 61.0 19.3 48.6 30.7 46.1
------- ------- ------ ------ ------ ------
Total current......... 185.5 226.6 164.7 214.3 189.1 221.3
------- ------- ------ ------ ------ ------
Deferred
United States............. (114.4) (100.7) (9.1) (5.2) (10.1) (8.5)
State..................... (1.2) (1.2) -- -- (1.7) (1.7)
Foreign................... 0.1 1.1 7.3 4.4 (9.5) 2.1
------- ------- ------ ------ ------ ------
Total deferred........ (115.5) (100.8) (1.8) (0.8) (21.3) (8.1)
------- ------- ------ ------ ------ ------
Income taxes.................. $ 70.0 $ 125.8 $162.9 $213.5 $167.8 $213.2
======= ======= ====== ====== ====== ======
</TABLE>
Components of consolidated income taxes:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Continuing operations....................................... $ 70.0 $162.9 $167.8
Discontinued operations..................................... 41.5 49.3 47.2
Equity earnings............................................. 14.3 2.6 .5
Extraordinary item.......................................... -- (1.3) (2.3)
------ ------ ------
$125.8 $213.5 $213.2
====== ====== ======
</TABLE>
The source of pre-tax earnings follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------------------------- ---------------------------- ----------------------------
CONTINUING CONTINUING CONTINUING
OPERATIONS CONSOLIDATED OPERATIONS CONSOLIDATED OPERATIONS CONSOLIDATED
---------- ------------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
United States................. $352.4 $464.3 $367.4 $453.0 $401.1 $460.8
Foreign....................... 32.5 85.2 80.3 120.1 (1.5) 48.8
------ ------ ------ ------ ------ ------
Pre-tax earnings.............. $384.9 $549.5 $447.7 $573.1 $399.6 $509.6
====== ====== ====== ====== ====== ======
</TABLE>
............................................................................ 37
<PAGE> 25
R A L S T O N P U R I N A C O M P A N Y
Notes to Financial Statements (continued)
...............................................................................
(Dollars in millions except per share data)
A reconciliation of income taxes with the amounts computed at the
statutory federal rate follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------------ ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Computed tax at federal statutory
rate.................................. $134.7 35.0% $156.7 35.0% $139.9 35.0%
State income taxes, net of federal tax
benefit............................... 7.1 1.8 6.6 1.5 8.2 2.1
Foreign tax in excess of (less than)
domestic rate......................... 25.2 6.5 (1.5) (.3) 21.7 5.4
Taxes on repatriation of foreign
earnings.............................. 13.1 3.4 21.6 4.8 15.9 4.0
Taxes on gain on sale of CBC less than
domestic rate......................... -- -- -- -- (10.3) (2.6)
Foreign tax credit refunds.............. (34.7) (9.0) -- -- -- --
Recognition of capital losses related to
prior restructuring actions........... (61.7) (16.0) -- -- -- --
Non-taxable investment income........... (10.6) (2.7) (7.5) (1.7) (8.3) (2.1)
Other, net.............................. (3.1) (.8) (13.0) (2.9) .7 .2
------ ----- ------ ---- ------ ----
$ 70.0 18.2% $162.9 36.4% $167.8 42.0%
====== ===== ====== ==== ====== ====
</TABLE>
In 1997, the Company recognized capital loss benefits of $61.7 related to
past restructuring actions. These benefits will be used to partially offset
taxes due upon the disposition of IBC shares. In addition, the Company changed
its method of computing foreign tax credits. The Company recognized tax
benefits of $34.7 related to foreign tax credit refund claims for 1993 through
1996.
The effective rate for discontinued operations is higher than the federal
statutory rate due to foreign taxes in excess of the domestic rate and taxes on
repatriation of foreign earnings.
The deferred tax assets and deferred tax liabilities recorded on the
balance sheet as of September 30, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Deferred Tax Liabilities:
Depreciation and property differences....................................... $(114.0) $(121.1)
Pension plans............................................................... (84.9) (72.2)
Other....................................................................... (39.3) (48.9)
------- -------
Gross deferred tax liabilities.......................................... (238.2) (242.2)
------- -------
Deferred Tax Assets:
Postretirement benefits other than pensions................................. 201.3 177.1
Accrued liabilities......................................................... 82.3 72.0
Tax loss carryforwards and tax credits...................................... 46.9 55.2
Self-insurance reserves..................................................... 6.0 5.8
Recognized capital losses................................................... 58.5 --
Intangible assets........................................................... 31.9 34.7
Other....................................................................... 19.0 3.9
------- -------
Gross deferred tax assets............................................... 445.9 348.7
------- -------
Valuation allowance......................................................... (81.5) (58.4)
------- -------
Net deferred tax assets..................................................... $ 126.2 $ 48.1
======= =======
</TABLE>
Total net deferred tax assets shown above include current and noncurrent
elements.
Tax loss carryforwards and tax credits totaling $4.2 expired in 1997.
Future expiration of tax loss carryforwards and credits, if not utilized, are
as follows: 1998, $2.8; 1999, $2.1; 2000, $5.3; 2001, $4.5; 2002, $6.9;
thereafter or no expiration, $25.3. The valuation allowance is primarily
attributed to certain accrued liabilities, tax loss carryforwards and tax
credits outside the U.S. The valuation allowance increased in 1997 by $23.1,
primarily due to restructuring provisions recorded in the current year for
which no tax benefits are expected to be realized.
38 ............................................................................
<PAGE> 26
R A L S T O N P U R I N A C O M P A N Y
...............................................................................
(Dollars in millions except per share data)
At September 30, 1997, $122 of foreign subsidiary net earnings were
considered permanently invested in those businesses. Accordingly, U.S. income
taxes have not been provided for such earnings. It is not practicable to
determine the amount of unrecognized deferred tax liabilities associated with
such earnings.
Incentive Compensation
......................
The Company's 1996 Incentive Stock Plan (1996 Plan) was adopted in
February, 1996, and replaced the 1988 Incentive Stock Plan (1988 Plan). Awards
may be granted to officers and key employees. No additional awards may be
granted under the 1988 Plan, or the 1982 Incentive Stock Plan, both of which
will continue in existence until granted shares are exercised or terminated. A
maximum of 5 million shares of RAL Stock was approved to be issued under the
1996 Plan. At September 30, 1997, 1996 and 1995, respectively, there were 2.9
million, 3.1 million and 4.1 million shares available for future awards.
Options under the 1996 and 1988 Plan generally consist of two types of
grants. The first type are based on stock price or peer group performance
hurdles and generally vest in three tranches. The second type is fixed and
vests generally over five years. Each award generally has a maximum term of 10
years. The exercise price of each option is equal to the market price of RAL
Stock on the date of grant. The peer group performance and the 1995 stock price
performance option awards were modified on March 20, 1997. As a result, all of
the peer group and stock price performance options vest at year nine,
regardless of these hurdles.
Restricted stock awards may also be issued under the 1996 Plan.
Restrictions on shares of restricted stock issued to eligible employees lapse
over various periods, provided continued employment and, in certain cases,
minimum stock price requirements are met. 4,000 and 31,500 restricted stock
shares were granted in 1997 and 1995, respectively. No shares were granted in
1996. The weighted-average fair value for restricted stock granted in FY97 is
$84.03.
The Company continues to apply APB Opinion No. 25 and related
interpretations in accounting for its stock-based compensation. Accordingly,
charges to earnings for stock-based compensation were $13.8, $3.2, and $.7 in
1997, 1996 and 1995, respectively. Had compensation cost for stock-based
compensation been determined based on the fair value method set forth under
SFAS No. 123, the Company's net earnings and earnings per share would have been
reduced to the pro forma amounts indicated in the table below. The modification
of options noted above had an immaterial effect on pro forma calculations. The
pro forma results shown below reflect only the impact of options granted in
1996 and 1997. Since options in 1996 were granted at the end of the year, pro
forma impact for 1996 is immaterial. Pro forma amounts are for disclosure
purposes only and do not include options granted prior to fiscal year 1996, and
therefore may not be representative of future calculations.
<TABLE>
<CAPTION>
1997
----
<S> <C>
Net Earnings:
As reported........................................................ $423.7
Pro forma.......................................................... $417.9
Primary Earnings Per Share:
As reported........................................................ $ 4.02
Pro forma.......................................................... $ 3.97
Fully Diluted Earnings Per Share:
As reported........................................................ $ 3.80
Pro forma.......................................................... $ 3.75
</TABLE>
The weighted average fair value for options granted in 1997 and 1996 was
$29.06 and $22.40, respectively. This was estimated at the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Risk-free interest rate.................................................... 6.3% 6.7%
Expected life of option.................................................... 8 years 8 years
Expected volatility of RAL Stock........................................... 20.0% 20.0%
Expected dividend yield on RAL Stock....................................... 1.33% 1.75%
</TABLE>
............................................................................ 39
<PAGE> 27
R A L S T O N P U R I N A C O M P A N Y
Notes to Financial Statements (continued)
...............................................................................
(Dollars in millions except per share data)
A summary of nonqualified RAL Stock options outstanding is as follows
(shares in millions):
<TABLE>
<CAPTION>
1997 1996 1995<F1>
-------------------- -------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding beginning of year........... 6.72 $51.47 5.25 $44.85 3.81 $39.53
Granted................................. .02 82.90 1.93 67.25 1.90 54.21
Exercised............................... (1.03) 35.05 (.38) 34.82 (.37) 36.48
Cancelled............................... (.06) 64.09 (.08) 76.73 (.09) 51.52
----- ---- ----
Outstanding end of year................. 5.65 54.44 6.72 51.47 5.25 44.85
===== ==== ====
Exercisable on September 30,............ .82 46.47 .97 36.77 1.01 38.44
===== ==== ====
</TABLE>
Information about RAL Stock options at September 30, 1997 is summarized
below (shares in millions):
<TABLE>
<CAPTION>
OUTSTANDING STOCK OPTIONS EXERCISABLE STOCK OPTIONS
---------------------------------------------- --------------------------
WEIGHTED-AVERAGE
REMAINING
RANGE OF CONTRACTUAL LIFE WEIGHTED-AVERAGE WEIGHTED-AVERAGE
EXERCISE PRICES SHARES (YEARS) EXERCISE PRICE SHARES EXERCISE PRICE
--------------- ------ ---------------- ---------------- ------ ----------------
<S> <C> <C> <C> <C> <C>
$31.71-48.38............................ 2.48 4.5 $ 40.62 .68 $ 40.30
$58.00-76.13............................ 3.06 8.6 63.81 .09 60.63
$98.76-132.63........................... .11 3.5 104.13 .05 104.90
----
---
$31.71-132.63........................... 5.65 6.7 54.44 .82 46.47
==== ===
<FN>
<F1> As a result of the exchange of CBG Stock for shares of RAL Stock on May 15, 1995, each outstanding option to acquire
CBG Stock was converted, pursuant to existing antidilution provisions, into an option to acquire RAL Stock. In the
conversion, both the number of options and the exercise price were adjusted based upon the exchange ratio of .0886
share of RAL Stock per share of CBG Stock. Each outstanding restricted CBG Stock award was exchanged for restricted RAL
Stock based upon the same exchange ratio. CBG shares have been restated to RAL shares at October 1, 1994 for
comparative purposes only.
</TABLE>
Pension Plans
.............
The Company has several noncontributory defined benefit pension plans
covering substantially all regular employees in the United States not
participating in a multiemployer pension plan and certain employees in other
countries. The plans provide retirement benefits based on years of service and
earnings. It is the Company's practice to fund pension liabilities in the
United States in accordance with the minimum and maximum limits imposed by the
Employee Retirement Income Security Act of 1974 (ERISA) and federal income tax
laws. In prior years, the Company also contributed to jointly administered
multiemployer defined benefit pension plans covering certain CBC union
employees.
Certain foreign pension arrangements, which include various retirement and
termination benefit plans, some of which are required by local law or
coordinated with government-sponsored plans, are not material in the aggregate
and are not included in these disclosures.
40 ............................................................................
<PAGE> 28
R A L S T O N P U R I N A C O M P A N Y
..............................................................................
(Dollars in millions except per share data)
Pension cost and other retirement savings plan costs included the
following components:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Defined benefit plans
Service cost for benefits earned during the year........ $ 21.6 $ 20.0 $ 26.7
Interest cost on projected benefit obligation........... 65.8 63.1 62.7
Return on plan assets................................... (351.9) (165.8) (218.6)
Net amortization and deferral........................... 238.7 62.3 123.9
------- ------- -------
Total defined benefit plans................................. (25.8) (20.4) (5.3)
Multiemployer plans......................................... -- -- 46.9
Defined contribution plans.................................. 20.3 20.5 26.8
------- ------- -------
Total............................................... $ (5.5) $ .1 $ 68.4
======= ======= =======
</TABLE>
The following table presents the funded status of the Company's principal
defined benefit plans and amounts recognized in the balance sheet at September
30:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Actuarial present value of:
Vested benefits........................................................ $ (790.0) $ (730.1)
Nonvested benefits..................................................... (32.5) (28.8)
-------- --------
Accumulated benefit obligation......................................... (822.5) (758.9)
Effect of future salary increases...................................... (118.1) (115.5)
-------- --------
Projected benefit obligation........................................... (940.6) (874.4)
Plan assets at fair value.................................................. 1,645.8 1,345.5
-------- --------
Plan assets in excess of projected benefit obligation...................... 705.2 471.1
Unrecognized net gain...................................................... (481.3) (273.4)
Unrecognized prior service cost............................................ 5.0 5.9
Unrecognized net asset at transition, net of amortization.................. (8.9) (12.9)
-------- --------
Prepaid pension cost included in Investments and Other Assets.............. $ 220.0 $ 190.7
======== ========
</TABLE>
The assumptions used in determining the information above, which reflect
weighted averages for the component plans, were as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Discount rate......................................................... 7.8% 7.8%
Rate of increase of future compensation levels........................ 5.4% 5.5%
Long-term rate of return on assets.................................... 9.0% 8.9%
</TABLE>
Assets of the plans consist primarily of listed common stocks and bonds,
including 1,731,005 shares of RAL Stock with a market value of $153.2 at
September 30, 1997.
Substantially all U.S. regular employees are eligible to participate in
the Company-sponsored leveraged ESOP. The Company makes a matching contribution
of up to 100% of the participant's contribution based on specified limits of
the participant's salary. The cost of the ESOP is recognized as incurred and
was $18.2 for 1997, $18.3 for 1996 and $24.6 for 1995.
............................................................................ 41
<PAGE> 29
R A L S T O N P U R I N A C O M P A N Y
Notes to Financial Statements (continued)
...............................................................................
(Dollars in millions except per share data)
Postretirement Benefits Other Than Pensions
...........................................
The Company currently provides health care and life insurance benefits
for certain groups of retired employees who meet specified age and years of
service requirements. The Company also sponsors plans whereby certain
management employees may defer compensation in exchange for cash benefits after
retirement.
The net periodic costs for postretirement benefits included the following
components for the year ended September 30:
<TABLE>
<CAPTION>
1997 1996 1995
--------------------- --------------------- ---------------------
MEDICAL OTHER MEDICAL OTHER MEDICAL OTHER
------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
Service cost............. $ .5 $ 2.5 $ .6 $ 3.2 $ 1.0 $ 3.5
Interest cost............ 8.5 18.5 8.1 17.4 12.4 16.5
Net amortization......... (1.6) -- (1.8) -- (.8) --
----- ------ ----- ------ ----- ------
$ 7.4 $ 21.0 $ 6.9 $ 20.6 $12.6 $ 20.0
===== ====== ===== ====== ===== ======
</TABLE>
The following table presents the status of the Company's postretirement
benefit plans at September 30:
<TABLE>
<CAPTION>
1997 1996
---------------------- ----------------------
MEDICAL OTHER MEDICAL OTHER
------- ----- ------- -----
<S> <C> <C> <C> <C>
Accumulated benefit obligation
Retirees................................................ $ 68.1 $201.8 $ 66.8 $154.1
Fully eligible plan participants........................ 31.0 28.3 33.5 57.8
Other active plan participants.......................... 7.2 30.0 10.1 28.8
------ ------ ------ ------
Accumulated benefit obligation.............................. 106.3 260.1 110.4 240.7
Fair value of plan assets................................... 5.1 -- 5.1 --
------ ------ ------ ------
Accumulated benefit obligation in excess of plan assets..... 101.2 260.1 105.3 240.7
Unrecognized experience gain (loss)......................... 36.2 (23.1) 28.2 (12.4)
Unrecognized prior service gain............................. 8.8 -- 9.4 --
------ ------ ------ ------
Accrued postretirement benefit liability.................... 146.2 237.0 142.9 228.3
Less current portion........................................ (4.0) (13.9) (3.7) (12.0)
------ ------ ------ ------
Non-current portion included in Other Liabilities........... $142.2 $223.1 $139.2 $216.3
====== ====== ====== ======
</TABLE>
The discount rate used in determining the information above was 7.9% in
1997 and 1996. The assumed health care cost trend rate for participants under
age 65 is 8% for 1998, declining 1% per year to 6% in 2000 and thereafter. For
participants age 65 and over, the trend rate is 6% in 1998 and thereafter.
If the assumed health care cost trend rate increased by 1 percentage
point, the accumulated benefit obligation as of September 30, 1997 would
increase by approximately $11.5 and expense would increase by $1.3 annually.
Coincident with the adoption of the ESOP in January of 1989, the Company
began phasing out its subsidy of medical benefits for future retirees. In
addition, retiree contributions are adjusted periodically and it is expected
that such adjustments will continue in the future.
Notes Payable
.............
Notes payable at September 30, 1997 and 1996 consisted of notes payable
to financial institutions and had a weighted average interest rate of 7% and 6%
at September 30, 1997 and 1996, respectively.
At September 30, 1997, total unused lines of credit were $429.0.
42 ............................................................................
<PAGE> 30
R A L S T O N P U R I N A C O M P A N Y
...............................................................................
(Dollars in millions except per share data)
Long-Term Debt
..............
The detail of long-term debt as of September 30 follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Debentures
9 1/4% due 2009................................................... $ 181.0 $ 181.0
9.30% due 2021.................................................... 200.0 200.0
8 5/8% due 2022................................................... 250.0 250.0
8 1/8% due 2023................................................... 175.0 175.0
7 7/8% due 2025................................................... 225.0 225.0
7 3/4% due 2015................................................... 175.0 175.0
Other Debt
ESOP loan guarantee (through 1998)................................ 63.8 110.6
Medium-term Notes, 8.52% to 10.18%................................ 49.4 84.5
SAILS, 7%......................................................... 480.0 --
LIBOR + 15 basis points, or 5.8375% at September 30, 1997......... 50.0 --
Industrial revenue bonds, 4.5% to 12.75%.............................. 29.1 29.1
Other................................................................. 88.3 104.8
-------- --------
1,966.6 1,535.0
Less current portion.............................................. (106.2) (98.0)
-------- --------
$1,860.4 $1,437.0
======== ========
</TABLE>
Aggregate maturities on all long-term debt, exclusive of debentures held
in treasury, are $41.8, $545.6, $6.6 and $11.5 for the years ending September
30, 1999 through 2002, respectively. These aggregate maturities do not include
the future maturities of the ESOP loan guarantee.
To fund its purchase of the Company's Redeemable Preferred Stock, the
trust for the Company-sponsored ESOP borrowed $500.0 principal amount in
ten-year 8.25% notes (ESOP loan). The ESOP loan is unconditionally guaranteed
by the Company and is included in the Company's consolidated balance sheet as
long-term debt, along with corresponding unearned ESOP compensation. In
connection with the sale of CBC in 1995, approximately $56.7 of the ESOP loan
was assigned to the Company's Employee Stock Ownership Plan for Continental
Baking Company Employees (CBC ESOP) which utilized the proceeds of unallocated
Redeemable Preferred Stock held in that plan to prepay such portion of the ESOP
loan. Both the remaining long-term debt and the unearned ESOP compensation will
be reduced as employee and employer contributions to the ESOP are used to
reduce the outstanding ESOP loan. During 1997 and 1996, the ESOP incurred $8.2
and $12.2, respectively, of interest expense on the ESOP loan.
In July 1997, the Company issued $480 of SAILS consisting of 7%
exchangeable notes due August 1, 2000. At maturity, the notes are mandatorily
exchangeable into a number of shares of IBC common stock owned by the Company
or, cash, at the Company's option. Approximately 7.7 million notes were issued.
Net proceeds of $466 from the transaction were primarily used to reduce
short-term debt. SAILS debt was initially recorded on the balance sheet at the
principal amount of the issuance. At each subsequent balance sheet date, the
SAILS are marked to the cash value of the underlying IBC shares for which the
SAILS may be exchanged. Any change in value is recorded in earnings each
period. At September 30, 1997, the Company's SAILS debt was $480.0, which
includes no change in the market value of the IBC common stock that is
exchangeable into SAILS. Effective November 3, 1997, IBC's stock split 2-for-1
which is not reflected in the aforementioned share amounts. (Please see the
"Investment in Interstate Bakeries Corporation Note" for more information on
SAILS.)
Redeemable Preferred Stock
..........................
At September 30, 1997, the Company had 10,600,000 shares of $1 par value
preferred stock authorized, of which 4,600,000 shares were authorized as Series
A 6.75% Preferred Stock (Redeemable Preferred Stock). Redeemable Preferred
Stock has a guaranteed minimum value of $110.83 per share and is convertible
into the Company's $.10 par value RAL Stock at the ratio of 2.29 shares of RAL
Stock for each share of Redeemable Preferred Stock. The shares have a
preference in liquidation and each share has one voting right. Dividends are
cumulative, compounded and payable semi-annually. In accordance with financial
reporting requirements of the Securities and Exchange Commission, the
Redeemable Preferred Stock has been classified outside of permanent equity.
............................................................................ 43
<PAGE> 31
R A L S T O N P U R I N A C O M P A N Y
Notes to Financial Statements (continued)
..............................................................................
(Dollars in millions except per share data)
Approximately 168,573 shares of its Redeemable Preferred Stock in 1997 and
227,000 shares in 1996 were redeemed or converted to meet ongoing share
redemption requirements of the ESOP. In addition, as a result of the 1995 sale
of CBC, 1,012,503 shares of Redeemable Preferred Stock were converted into
shares of RAL Stock. Following the above described redemptions and conversions,
2,750,636 shares of Redeemable Preferred Stock remained issued and outstanding
and continued to be held by the ESOP at September 30, 1997. Of these shares,
approximately 2,174,600 shares have been allocated to participant accounts at
September 30, 1997.
Redeemable Preferred Stock shares are held, on behalf of the ESOP, by the
ESOP's trustee and are allocated to individual participants' accounts based on
the amount of employee and employer matching contributions to the ESOP.
Dividends on unallocated Redeemable Preferred Stock are used to fund the debt
service requirements of the ESOP. The trustee, as holder of Redeemable
Preferred Stock, may convert its shares into RAL Stock at any time, or may
require the Company to redeem the Redeemable Preferred Stock shares, under
certain limited circumstances, at the guaranteed minimum value, in cash or in
shares of RAL Stock. The Company may elect to redeem the Redeemable Preferred
Stock, under limited circumstances, in cash or in shares of RAL Stock.
Shareholders Equity
...................
From July 30, 1993 through May 15, 1995, the Company had two classes of
common stock, RAL Stock and CBG Stock. The CBG Stock was intended to reflect
the performance of the CBG Group, which consisted of the Company's bakery
products business. The RAL Stock was intended to reflect the performance of the
RPG Group, which consisted of the Company's other businesses.
On May 15, 1995, the Company exchanged each outstanding share of CBG Stock
for .0886 shares of RAL Stock, now the Company's sole outstanding class of
common stock. The exchange represented a 15% premium to the relative trading
values of the CBG Stock and the RAL Stock for the period March 31 through April
6, 1995, as provided in the Company's Articles.
On February 1, 1996, shareholders approved the amendment of the Company's
Restated Articles of Incorporation to reduce the number of authorized shares of
common stock from 730,600,000 to 610,600,000 (reflecting the elimination of the
authorization to issue 120,000,000 shares of CBG Stock), redesignate the
Company's Ralston-Ralston Purina Group Common Stock as Ralston Purina Common
Stock, and eliminate various provisions relating to CBG Stock. The amendments
did not change the voting power or other rights of holders of RAL Stock nor the
rights of the Company with respect to the outstanding RAL Stock.
On March 28, 1996, the Board of Directors declared a dividend distribution
of one share purchase right ("Right") for each outstanding share of RAL
Stock. The Rights were intended to replace the previously issued share purchase
rights which were initially distributed in January of 1986 and which expired on
March 28, 1996.
Each Right entitles a shareholder of RAL Stock to purchase an additional
share of RAL Stock at an exercise price of $200 per share, subject to
antidilution adjustments. The Rights, however, only become exercisable at the
time a person or group acquires, or commences a public tender for, shares of
RAL Stock representing 20% or more of the RAL Stock then outstanding (except
pursuant to a tender or exchange offer which is for all outstanding shares of
RAL Stock at a price and on terms which a majority of the Board of Directors
determines to be adequate and in the best interests of shareholders). If an
acquiring person or group acquires shares representing 20% or more of the RAL
Stock then outstanding, the exercise price will be further adjusted so that a
holder of a Right (other than the acquiring person or group) may purchase a
share of RAL Stock at one-third of its then market price. In the event that the
Company merges with, or transfers 50% or more of its assets or earnings power
to, any person or group after the Rights become exercisable, holders of Rights
may purchase, at the exercise price, common stock of the acquiring entity
having a value equal to twice the exercise price. The Rights can be redeemed by
the Board of Directors at $.01 per Right, only up to the date a person or group
acquires shares representing 20% or more of the RAL Stock then outstanding.
Also, following the acquisition by a person or group of beneficial ownership of
shares representing 20% but less than 50% of the RAL Stock then outstanding,
the Board may exchange each Right for one share of RAL Stock. The terms of the
Rights may be amended by the Board of Directors at any time prior to the
acquisition by a person or group of beneficial ownership of shares representing
20% of the RAL Stock then outstanding, including an amendment to lower such
threshold to not less than the greater of (i) any percentage greater than the
largest percentage then held by any shareholder, or (ii) 10%. The Rights expire
on March 28, 2006. At September 30, 1997, 122,925,172 shares of RAL Stock have
been reserved for issuance upon exercise of the Rights.
At September 30, 1997, there were 6,298,956 shares of RAL Stock reserved
for conversion of Redeemable Preferred Stock, 13,637 shares of RAL Stock
reserved for conversion of the 5 3/4% subordinated debentures and 10,034,320
shares of RAL Stock reserved under various employee incentive compensation and
benefit plans.
Grantor Trust
.............
On September 15, 1994, the Company established the Ralston Purina Company
Grantor Trust (the Trust) to provide a source of funds to assist the Company in
meeting its obligations under various employee benefit plans and programs. The
Trust supports certain employee benefit plans and does not change those plans
or the amounts of stock expected to be issued for those plans. However, payment
of certain benefits would be accelerated if minimum funding requirements of the
Trust are not met.
44 ............................................................................
<PAGE> 32
R A L S T O N P U R I N A C O M P A N Y
...............................................................................
(Dollars in millions except per share data)
For financial reporting purposes, the Trust is consolidated with the
Company. The fair market value of the shares held by the Trust is shown as a
reduction to shareholders equity. Any dividend transactions between the Company
and the Trust are eliminated, and the difference between the fair value of the
shares on the date of contribution to the Trust, plus the fair value of shares
on the date of purchase by the Trust, and the fair value of the shares at
September 30 is included in consolidated additional paid-in capital. RAL Stock
held in the Trust is not considered outstanding in the computation of earnings
per share. The Trust held 4,307,214 and 4,228,314 shares of RAL Stock at a fair
market value of $381.2 and $289.6 at September 30, 1997 and 1996, respectively.
The Trustee, an independent party, is responsible for voting the shares of
RAL Stock held in the Trust.
Commitments and Contingencies
.............................
Legal and Environmental Matters -- The Company is a party to a number of legal
proceedings in various state, federal and foreign 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.
The operations of the Company, like those of other companies engaged in
similar businesses, are subject to various federal, state, and local laws and
regulations intended to protect the public health and the environment,
including regulations related to air and water quality, underground fuel
storage tanks and waste handling and disposal. The Company has received notices
from the U.S. Environmental Protection Agency, state agencies, and/or private
parties seeking contribution, that it has been identified as a "potentially
responsible party" (PRP), under the Comprehensive Environmental Response,
Compensation and Liability Act, and may be required to share in the cost of
cleanup with respect to 14 "Superfund" sites. The Company's ultimate
liability in connection with those sites may depend on many factors, including
the volume of material contributed to the site, the number of other PRP's and
their financial viability, and the remediation methods and technology to be
used.
In the opinion of management, based on the information presently known,
the ultimate liability for all such matters, together with the liability for
all other pending legal proceedings, asserted legal claims and known potential
legal claims which are probable of assertion, taking into account established
accruals of $10.4 for estimated liabilities, should not be material to the
financial position of the Company, but could be material to results of
operations or cash flows for a particular quarter or annual period.
Other Commitments -- At September 30, 1997, the Company had third party
guarantees outstanding in the aggregate amount of approximately $86.1. These
guarantees relate primarily to workers compensation claims associated with CBC
prior to the sale, and revenue bonds for various facilities.
Future minimum rental commitments under noncancellable operating leases in
effect as of September 30, 1997 were: 1998--$9.8, 1999--$8.8, 2000--$6.4,
2001--$4.6, 2002--$3.9 and thereafter--$20.4.
Total rental expense for all operating leases was $36.7 in 1997, $38.7 in
1996 and $59.9 in 1995, of which $20.1 in 1995 related to CBC operations.
Financial Instruments and Risk Management
.........................................
Foreign Currency Contracts -- The Company enters into foreign exchange forward
contracts and options to mitigate the Company's economic exposure to changes in
exchange rates. The Company views these exposures as arising from three major
areas: (a) non-U.S. dollar cash flows to the U.S. from foreign subsidiaries
expected within a year or less, (b) cash flows to a foreign country in a
currency other than the subsidiary's functional currency, and (c) future cash
flows at the operating margin level. The level of such actions is dependent on
seasonality of the Company's activities and on specific market conditions
involving various currencies.
............................................................................ 45
<PAGE> 33
R A L S T O N P U R I N A C O M P A N Y
Notes to Financial Statements (continued)
...............................................................................
(Dollars in millions except per share data)
The tables below summarize by instrument and by major currency the
contractual amounts of the Company's forward exchange contracts and purchased
currency options in U.S. dollar equivalents at year end. These contractual
amounts represent transaction volume outstanding, and do not represent the
amount of the Company's exposure to credit or market loss. Foreign currency
contracts are generally for one year or less.
<TABLE>
<CAPTION>
INSTRUMENT 1997 1996
---- ----
<S> <C> <C>
Forwards................................................ $330.4 $293.0
Options................................................. 19.6 11.5
CURRENCY
French franc............................................ 101.3 156.8
Swiss franc............................................. 93.0 70.4
British pound........................................... 55.3 7.2
Belgian franc........................................... 26.1 8.0
German mark............................................. 21.8 15.9
Indonesian rupiah....................................... 13.5 10.5
Other currencies........................................ 39.0 35.7
</TABLE>
Interest Rate Swap Agreements -- The Company utilizes interest rate swap
agreements to reduce exposure to changes in interest rates and manage the mix
of fixed and variable rate debt. The swaps mature in fiscal 1998.
The Company had $33.7 and $41.6 notional amount of interest rate swap
agreements outstanding at September 30, 1997 and 1996, respectively. The
underlying debt of these swaps is included in Notes Payable. These agreements
effectively convert Swiss franc variable rate debt into fixed rate debt and had
a weighted average pay rate of 4.2% in 1997 and 1996.
Concentration of Credit Risk -- The counterparties to foreign currency
contracts and interest rate swap agreements consist of a number of major
international financial institutions and are generally institutions with which
the Company maintains lines of credit. The Company does not enter into foreign
exchange contracts through brokers nor does it trade foreign exchange contracts
on any other exchange or over the counter markets. Risk of currency positions
and mark-to-market valuation of positions are strictly monitored at all times.
The Company continually monitors the credit ratings of its counterparties both
internally and by using outside rating agencies. The Company has implemented
policies which limit the amount of agreements it enters into with any one
party. While nonperformance by these counterparties exposes the Company to
potential credit losses, such losses are not anticipated due to the control
features mentioned.
Concentrations of credit risk with respect to accounts receivable are
limited due to the large number of customers, generally short payment terms and
their dispersion across geographic areas.
Fair Value of Financial Instruments -- The Company's financial instruments
include cash and cash equivalents, short- and long-term debt, Redeemable
Preferred Stock, foreign currency contracts and interest rate swap agreements.
As of September 30, 1997 and 1996, the fair value of debt was $2,535.3 and
$2,512.4, respectively, compared to its carrying value of $2,306.9 and
$2,416.9, respectively. The fair value of the Company's long-term debt has been
estimated using quoted market prices and yields obtained through independent
pricing sources for the same or similar types of borrowing arrangements, taking
into consideration the underlying terms of the debt, such as the coupon rate,
term to maturity, tax impact to investors and imbedded call options.
Redeemable Preferred Stock had a fair value of $557.5 and $457.9 at
September 30, 1997 and 1996, respectively, compared to its carrying value of
$304.9 and $323.5, respectively. The fair value is based upon the greater of
the fair market value of RAL Stock into which the Redeemable Preferred Stock
may be converted or the guaranteed minimum value.
Due to the nature of cash equivalents and short-term borrowings, including
current notes payable, carrying amounts on the balance sheet approximate fair
value.
The fair value of foreign currency contracts and interest rate management
agreements is the amount that the Company would receive or pay to terminate the
specific agreements, considering first, quoted market prices of comparable
agreements, or in the absence of quoted market prices, such factors as interest
rates, currency exchange rates and remaining maturities. Based on these
considerations, the calculated fair values of foreign currency contracts and
interest rate management agreements outstanding at September 30, 1997 and 1996
were not material.
46 ............................................................................
<PAGE> 34
R A L S T O N P U R I N A C O M P A N Y
...............................................................................
(Dollars in millions except per share data)
Other Income and Expense
........................
Other (income)/expense, net consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Translation and exchange loss.................................... $ 6.0 $12.4 $11.1
Investment income................................................ (4.3) (4.2) (3.8)
Return on other investments...................................... (8.3) (1.7) (9.0)
Miscellaneous (income)/expense................................... (1.1) 2.6 (1.1)
----- ----- -----
$(7.7) $ 9.1 $(2.8)
===== ===== =====
</TABLE>
Supplemental Balance Sheet Information
......................................
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------------
1997 1996
---- ----
<S> <C> <C>
Receivables (current)--
Trade....................................................................... $ 635.8 $ 638.3
Notes and other............................................................. 64.2 50.6
Allowance for doubtful accounts............................................. (24.8) (26.7)
-------- --------
$ 675.2 $ 662.2
======== ========
Inventories--
Raw materials and supplies.................................................. $ 119.7 $ 123.4
Work in process............................................................. 115.8 123.6
Finished products........................................................... 369.3 381.2
-------- --------
$ 604.8 $ 628.2
======== ========
Other Current Assets--
Prepaid expenses............................................................ $ 54.7 $ 63.6
Deferred income tax benefits................................................ 61.7 56.4
-------- --------
$ 116.4 $ 120.0
======== ========
Investments and Other Assets--
Goodwill (net of accumulated amortization: 1997--$111.3 and 1996--$95.7).... $ 446.5 $ 478.3
Other intangible assets (net of accumulated amortization: 1997--$332.9 and
1996--$309.5).............................................................. 236.4 259.4
Equity investments in affiliated companies.................................. 299.9 295.2
Deferred charges and other assets........................................... 547.5 379.4
-------- --------
$1,530.3 $1,412.3
======== ========
Accounts Payable and Accrued Liabilities--
Trade accounts payable...................................................... $ 264.0 $ 293.5
Incentive compensation, salaries and vacations.............................. 63.3 94.6
Accrued interest............................................................ 42.9 39.9
Restructuring reserves...................................................... 66.3 22.4
Other....................................................................... 268.5 210.6
-------- --------
$ 705.0 $ 661.0
======== ========
Other Liabilities--
Postretirement medical benefits............................................. $ 142.2 $ 139.2
Other postretirement benefits............................................... 223.1 216.3
Minority interests.......................................................... 6.5 9.4
Other....................................................................... 135.6 116.2
-------- --------
$ 507.4 $ 481.1
======== ========
</TABLE>
............................................................................ 47
<PAGE> 35
R A L S T O N P U R I N A C O M P A N Y
Notes to Financial Statements (continued)
...............................................................................
(Dollars in millions except per share data)
Supplemental Cash Flow Statement Information
............................................
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Interest paid......................................................... $154.2 $166.7 $182.4
Income taxes paid..................................................... 166.7 168.9 183.0
</TABLE>
Allowance for Doubtful Accounts
...............................
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Balance, beginning of year............................................ $26.7 $25.5 $24.7
Provision charged to expense.......................................... 3.1 6.2 7.1
Writeoffs, less recoveries............................................ (5.0) (5.0) (6.3)
----- ----- -----
Balance, end of year.................................................. $24.8 $26.7 $25.5
===== ===== =====
</TABLE>
48 ............................................................................
<PAGE> 36
R A L S T O N P U R I N A C O M P A N Y
<TABLE>
Quarterly Financial Information
....................................................................................................................................
(UNAUDITED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
<CAPTION>
FISCAL 1997 FIRST SECOND THIRD<Fa> FOURTH<Fa>
- ----------- ----- ------ --------- ----------
<S> <C> <C> <C> <C>
Net sales......................................... $1,260.5 $1,048.4 $1,041.8 $1,136.1
Gross profit...................................... 615.1 518.0 518.1 553.7
Earnings from continuing operations............... 114.3 59.0 80.2 95.4
Earnings from discontinued operations............. 23.1 17.7 20.5 13.5
Net earnings...................................... 137.4 76.7 100.7 108.9
Earnings per share of RAL Stock
Primary
Earnings from continuing operations....... 1.09 .55 .76 .90
Earnings from discontinued operations..... .23 .17 .20 .13
Net earnings.............................. 1.32 .72 .96 1.03
Fully diluted
Earnings from continuing operations....... 1.02 .53 .73 .87
Earnings from discontinued operations..... .21 .16 .18 .12
Net earnings.............................. 1.23 .69 .91 .99
Dividends paid per share...................... .30 .30 .30 .30
Market price range of RAL Stock......... 78- 87 3/8- 87 1/4- 94 5/16-
65 1/2 71 1/8 74 3/4 80 1/16
<FN>
<Fa> Earnings from continuing operations and earnings per share in 1997 were reduced due to provisions for restructuring and
increased due to income tax benefits on income tax claims and a gain on the sale of IBC stock by the following amounts:
<CAPTION>
EARNINGS FROM
CONTINUING PRIMARY FULLY
OPERATIONS EPS DILUTED EPS
------------- ------- -----------
<S> <C>
Third Quarter
Restructuring................................. $29.1 $(.28) $(.27)
Income tax benefits........................... 34.7 .34 .32
Fourth Quarter
Restructuring................................. 7.2 $(.07) $(.06)
Gain on sale of stock......................... 15.1 .15 .14
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
FISCAL 1996 FIRST SECOND THIRD FOURTH<Fa>
- ----------- ----- ------ ----- ----------
<S> <C> <C> <C> <C>
Net sales......................................... $1,217.6 $993.9 $1,001.7 $1,088.7
Gross profit...................................... 608.3 480.4 483.7 523.5
Earnings from continuing operations before
extraordinary item.............................. 110.4 43.7 67.0 75.3
Earnings from discontinued operations............. 18.1 15.4 17.3 14.5
Net earnings...................................... 128.5 59.1 82.2 89.8
Earnings per share of RAL Stock
Primary
Earnings from continuing operations before
extraordinary item...................... 1.05 .40 .62 .71
Earnings from discontinued operations..... .18 .15 .17 .14
Net earnings.............................. 1.23 .55 .77 .85
Fully diluted
Earnings from continuing operations before
extraordinary item...................... .99 .38 .60 .67
Earnings from discontinued operations..... .16 .14 .15 .13
Net earnings.............................. 1.15 .52 .73 .80
Dividends paid per share...................... .30 .30 .30 .30
Market price range of RAL Stock......... 67- 69- 67 3/4- 68 7/8-
57 1/4 57 7/8 56 57 3/4
<FN>
<Fa> Earnings from continuing operations before the extraordinary item in the fourth quarter were reduced by $11.0 or $.11 and
$.10 per primary and fully diluted share, respectively, due to restructuring charges.
</TABLE>
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