-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ViRwoBv8W2kXhcvIRIPxjfYiOePn7PFw/T14AL1mO8MdjvYpi/AVYn5dQwY9vBrZ boft4efcI37a3p9YPKiECA== 0000950124-97-000790.txt : 19970222 0000950124-97-000790.hdr.sgml : 19970222 ACCESSION NUMBER: 0000950124-97-000790 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970213 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: RALCORP HOLDINGS INC /MO CENTRAL INDEX KEY: 0001029506 STANDARD INDUSTRIAL CLASSIFICATION: GRAIN MILL PRODUCTS [2040] IRS NUMBER: 431766315 STATE OF INCORPORATION: MO FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12619 FILM NUMBER: 97531589 BUSINESS ADDRESS: STREET 1: 800 MARKET STREET STREET 2: SUITE 2900 CITY: ST LOUIS STATE: MO ZIP: 63101 BUSINESS PHONE: 3148777000 MAIL ADDRESS: STREET 1: 800 MARKET STREET STREET 2: SUITE 2900 CITY: ST LOUIS STATE: MO ZIP: 63101 FORMER COMPANY: FORMER CONFORMED NAME: NEW RALCORP HOLDINGS INC DATE OF NAME CHANGE: 19961223 10-Q 1 10-Q DATED 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1996. [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________ TO _________. Commission file number: 1-12619. RALCORP HOLDINGS, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) Missouri 43-1766315 (State of Incorporation) (I.R.S. Employer Identification No.) 800 Market Street, Suite 2900 St. Louis, MO 63101 (Address of principal (Zip Code) executive offices) (314) 877-7000 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ ] No [X] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock Outstanding Shares at par value $.01 per share February 12, 1997 33,011,317 2 RALCORP HOLDINGS, INC. INDEX PART I. FINANCIAL INFORMATION PAGE Consolidated Statement of Earnings 1 Condensed Consolidated Balance Sheet 2 Condensed Consolidated Statement of Cash Flows 3 Notes to Condensed Consolidated Financial Statements 4 Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Unaudited Pro Forma Combined Financial Information 12 PART II. OTHER INFORMATION Other Information 17 Exhibits and Reports on Form 8-K 17 (i) 3 RALCORP HOLDINGS, INC. CONSOLIDATED STATEMENT OF EARNINGS (Dollars in millions except per share data)
Three Months Ended December 31, ----------------------- 1996 1995 ------- ------- Net Sales $ 292.9 $ 295.3 ------- ------- Costs and Expenses Cost of products sold 141.2 142.3 Selling, general and administrative 38.4 43.7 Advertising and promotion 80.3 77.4 Interest 6.9 7.0 Restructuring charge 4.6 0.9 ------- ------- 271.4 271.3 ------- ------- Earnings before Income Taxes 21.5 24.0 Income Taxes 8.4 9.3 ------- ------- Net Earnings $ 13.1 $ 14.7 ======= ======= Earnings per Common Share $ .40 $ .44 ======= =======
See Accompanying Notes to Condensed Consolidated Financial Statements. 1 4 RALCORP HOLDINGS, INC. CONSOLIDATED BALANCE SHEET (Condensed) (Dollars in millions)
Dec. 31, Sept. 30, 1996 1996 -------- --------- ASSETS Current Assets Cash Receivables, less allowance for doubtful accounts of $1.2 and $1.0, respectively $ 74.0 $ 75.5 Inventories - Raw materials and supplies 26.6 26.5 Finished products 65.8 76.8 Prepaid expenses 14.5 14.2 ------- ------- Total Current Assets 180.9 193.0 ------- ------- Investments and Other Assets 105.6 88.1 ------- ------- Deferred income taxes 22.6 23.4 ------- ------- Property at Cost 530.3 537.0 Accumulated depreciation 222.9 214.4 ------- ------- 307.4 322.6 ------- ------- Total $ 616.5 $ 627.1 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Current maturities of long-term debt $ .3 $ 1.8 Accounts payable 43.9 54.7 Income tax payable 1.0 Other current liabilities 73.3 45.9 ------- ------- Total Current Liabilities 118.5 102.4 ------- ------- Long-Term Debt 335.0 376.6 ------- ------- Other Liabilities 42.3 40.7 ------- ------- Shareholders' Equity Common stock 0.3 0.3 Capital in excess of par value 130.7 130.9 Retained earnings (deficit) 12.9 (0.2) Common stock in treasury, at cost (22.4) (22.7) Unearned portion of restricted stock (.8) (.9) ------- ------- Total Shareholders' Equity 120.7 107.4 ------- ------- Total $ 616.5 $ 627.1 ======= =======
See Accompanying Notes to Condensed Consolidated Financial Statements. 2 5 RALCORP HOLDINGS, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (Condensed) (Dollars in millions)
Three Months Ended December 31, ------------------ 1996 1995 ------ ------ Cash Flow from Operations Net earnings $ 13.1 $ 14.7 Non-cash items included in income 10.7 11.5 Restructuring charge 4.6 .9 Changes in assets and liabilities used in operations 25.1 13.3 Other, net 1.9 3.3 ------ ------ Net cash flow from operations 55.4 43.7 ------ ------ Cash Flow from Investing Activities Property additions, net (11.0) (16.0) Other, net (1.3) (0.6) ------ ------ Net cash used by investing activities (12.3) (16.6) ------ ------ Cash Flow from Financing Activities Net cash flow used by debt (43.1) (21.3) Treasury stock purchases - (5.8) ------ ------ Net cash used by financing activities (43.1) (27.1) ------ ------ Net Increase in Cash and Cash Equivalents - - Cash and Cash Equivalents, Beginning of Year ------ ------ Cash and Cash Equivalents, End of Quarter $ - $ - ====== ======
See Accompanying Notes to Condensed Consolidated Financial Statements. 3 6 RALCORP HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1996 (Dollars in millions except per share data) NOTE 1 - SUBSEQUENT EVENTS On January 3, 1997, the United States Department of Justice gave final approval to the sale of Ralcorp's ski resort holdings to Vail Resorts, Inc. Effective on this date, the sale transaction, pending since first announced in July 1996, was closed. The value of this transaction was approximately $310 million, comprised of Vail assuming $165 million in Ralcorp debt and the balance being realized through the Company's approximate 22.7% ownership interest in the newly combined ski company, after giving effect to Vail's public stock offering. Vail stock began trading on the New York Stock Exchange on February 4, 1997. On January 31, 1997, the original Ralcorp Holdings, Inc. (Old Ralcorp) was merged with a subsidiary of General Mills, Inc. (the Merger). Immediately prior to the Merger, Old Ralcorp spun-off its private label cereal, branded baby food and private label cracker and cookie businesses (the Spin-Off) by distributing one share of New Ralcorp Holdings, Inc. Common Stock for each share of Old Ralcorp Common Stock owned as of the close of business on January 31, 1997. Immediately prior to the Spin-Off, New Ralcorp Holdings, Inc. (Ralcorp) changed its name to Ralcorp Holdings, Inc. and in the Merger, Old Ralcorp changed its name to General Mills Missouri, Inc. This completes the $570 transaction with General Mills that was first announced in August 1996. The $570 value was reached by General Mills assuming $215 in Ralcorp debt and funding the remaining $355 through the distribution of General Mills stock to Ralcorp shareholders of record on January 31, 1997. For financial reporting purposes, Ralcorp is a "successor registrant" to Old Ralcorp and, as such, the accompanying Ralcorp financial statements represent the historical financial position and results of operations of Old Ralcorp. Therefore, references to the "Company", for periods prior to January 31, 1997, are references to Old Ralcorp, without giving effect to the Merger or the Spin-Off. NOTE 2 - PRESENTATION OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The accompanying unaudited historical financial statements of the Company have been prepared in accordance with the instructions for Form 10-Q and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments considered necessary for a fair presentation, have been included. Operating results for any quarter are not necessarily indicative of the results for any other quarter or for the full year. These statements should be read in connection with the financial statements and notes included in the Company's Annual Report on Form 10-K for the year ended September 30, 1996. NOTE 3 - RESTRUCTURING CHARGE During the quarter ended December 31, 1996, the Company recorded a pre-tax restructuring charge of $4.6 ($2.9 after taxes or $.09 per common share) to cover expenses related to severance costs for certain employees whose jobs were eliminated in recent downsizing initiatives. In addition, during the fourth quarter of fiscal 1996 the Company recorded a pre-tax charge of $16.5 ($10.4 after taxes or $.31 per common share) to recognize the costs related to the restructuring of its ready-to-eat cereal subsidiary, Ralston Foods, as well as its corporate support groups. The restructuring charges and their utilization are summarized in the following table. 4 7 RALCORP HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1996 (Dollars in millions except per share data) 1st Qtr. Utilized in
FY 1996 Utilized in FY 1997 1st Qtr. Balance of Charges FY 1996 Charges FY 1997 Reserve -------- ----------- -------- ----------- ---------- Salaries, severance and benefits $ 8.0 $ (5.0) $4.6 $(1.8) $5.8 Asset writedowns 7.3 (7.3) - - Other 1.2 (.5) - .7 ----- ------ ---- ----- ---- Total restructuring charge $16.5 $(12.8) $4.6 $(1.8) $6.5 ===== ====== ==== ===== ====
NOTE 4 - EARNINGS PER SHARE Earnings per common share for the quarters ended December 31, 1996 and 1995 are computed by using the weighted average number of shares of Ralcorp Common Stock outstanding for the periods then ended. Earnings per common share is computed independently for all of the periods presented, therefore, the sum of earnings per common share amounts for the quarters may not total the year-to-date. The weighted average numbers of common shares used for all periods are as follows: Quarter ended December 31, 1996................................32,883,000 Quarter ended December 31, 1995................................33,116,000 Actual outstanding shares of Ralcorp Common Stock at December 31, 1996 were 32,883,000. NOTE 5 - INVESTMENTS AND OTHER ASSETS consists of the following:
Dec. 31, Sept. 30, 1996 1996 ----------- ----------- Intangible assets $42.8 $43.2 Property held for development 28.9 12.4 Investments in affiliated companies 30.5 29.1 Deferred charges and other assets 3.4 3.4 $105.6 $88.1 =========== ===========
NOTE 6 - OTHER CURRENT LIABILITIES consists of the following:
Dec. 31, Sept. 30, 1996 1996 ----------- ------------ Accrued advertising and promotion $31.4 $ 9.6 Restructuring and shutdown reserves 9.5 7.6 Other items 32.4 28.7 $73.3 $45.9 =========== ============
5 8 RALCORP HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1996 (Dollars in millions except per share data) NOTE 7 - LONG-TERM DEBT The Company had available certain borrowings under credit agreements with a number of banks (Bank Credit Agreements). Provisions of the Bank Credit Agreements require that the Company maintain certain financial ratios and a minimum level of shareholders' equity. There is $275 available under the Bank Credit Agreements, as amended in March 1996, with a maturity date of March 12, 2001. At December 31, 1996 and September 30, 1996, long-term debt associated with the Company's businesses consisted of the following:
Dec. 31, Sept. 30, 1996 1996 ---------- ---------- 8.75% Notes due 2004 $150.0 $150.0 Bank Credit Agreements 160.0 200.1 10.85% and 11.15% Notes due 9/30/97 and 9/30/98 3.0 Refunding Revenue Bonds Series 90 7.20%-7.875% due 9/2/98, 9/1/06 and 9/1/08 20.4 20.4 Refunding Revenue Bonds Series 91 7.125%-7.375% due 9/1/02 and 9/1/10 3.0 3.0 Other 1.9 1.9 ------ ------ 335.3 378.4 Less Current Portion (.3) (1.8) ------ ------ $335.0 $376.6 ====== ======
Included in the Bank Credit Agreements line item, at December 31, 1996 and September 30, 1996, is $140.0 of bank debt that has been borrowed directly by the Company's Resort Operations and is fully guaranteed by the Company. Subsequent to December 31, 1996, as a result of completing the sale transactions described in "Note 1 - Subsequent Events" of this Form 10-Q, substantially all outstanding debt of the Company was assumed by Vail Resorts, Inc. and General Mills, Inc. as determined by the terms of the individual sale agreements. 6 9 RALCORP HOLDINGS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS For financial reporting purposes, Ralcorp is a "successor registrant" to the Ralcorp Holdings, Inc. that was acquired by General Mills, Inc. on January 31, 1997 (Old Ralcorp) and, as such, all financial information of Ralcorp included in this discussion and the accompanying financial statements represent the historical financial information of Old Ralcorp. Therefore, references to the "Company", as they relate to financial information for periods prior to January 31, 1997, are references to Old Ralcorp. HIGHLIGHTS For the quarter ended December 31, 1996, sales and net earnings, excluding a restructuring charge against earnings, were $292.9 million and $16.0 million compared to $295.3 million and $15.3 million for the comparable prior year period, which also excludes a restructuring charge. Earnings per share excluding the charges in both periods were $.49 for the three months ended December 31, 1996 compared to $.46 in the prior year quarter. In the quarter ended December 31, 1996 the Company recorded a pre-tax restructuring charge of $4.6 million ($2.9 million after-tax or $.09 per share) to cover expenses related to severance costs for certain employees whose jobs were eliminated in recent downsizing initiatives. The pre-tax charge of $.9 million ($.6 million after-tax or $.02 per share) taken in the quarter ended December 31, 1995 was to cover employee-related expenses including, severance payments and out-placement costs related to the elimination of jobs at the Company's Cedar Rapids, Iowa oats manufacturing facility. Including these charges in both periods, net earnings and earnings per share for the first quarter of the current fiscal year were reduced to $13.1 million and $.40, respectively, compared to $14.7 million and $.44 for the same prior year period. The Unaudited Pro Forma Combined Financial Information included elsewhere in this document, reflects the pro forma results of operations and financial position of the Ralcorp businesses assuming the sales of the Company's Branded Business and Resort Operations were completed as of the beginning of the periods presented, for combined statements of earnings purposes, and as of December 31, 1996, for combined balance sheet purposes. The sale of Resort Operations to Vail Resorts, Inc. was completed on January 3, 1997 and the sale of the Branded Business to General Mills, Inc. was completed on January 31, 1997. On a pro forma basis, excluding the above mentioned restructuring charges, sales, net earnings and earnings per share for the quarter ended December 31, 1996 were $121.8 million, $1.8 million and $.06, respectively, compared to sales of $124.5 million, a net loss of $3.3 million and a loss per share of $.10 for the same period of the prior year. On a pro forma basis, including the restructuring charges, operations for the quarter ended December 31, 1996 resulted in a net loss of $1.1 million, or $.03 per share, compared to a net loss of $3.9 million, or $.12 per share for the prior year quarter ended December 31, 1995. Since Ralcorp did not operate during the periods shown, the unaudited pro forma information may not necessarily reflect future results of operations or what the results of operations would have been had the formation of Ralcorp and its related businesses occurred at the beginning of the periods shown. 7 10
BUSINESS SEGMENT INFORMATION THREE MONTHS ENDED DECEMBER 31 Sales Operating Profit 1996 1995 1996 1995 ------------ ------------ ------------- ------------- Consumer Foods $263.7 $267.9 $36.2 * $33.2 ** Resort Operations 29.2 27.4 (1.3) .6 ------ ------ ----- ----- $292.9 $295.3 $34.9 $33.8 ====== ====== ===== ===== * Excludes $4.6 million pre-tax restructuring charge related to employee severance. ** Excludes $.9 million pre-tax Cedar Rapids restructuring charge.
CONSUMER FOODS Consumer Foods sales decreased 1.6% or $4.2 million when comparing the first quarter of fiscal 1997 to the first quarter of fiscal 1996, primarily on lower branded and private label cereal sales, partially offset by the continued strong performance from the CHEX MIX snack product line and volume gains by the Bremner private label cracker and cookie and Beech-Nut baby food businesses. Although private label cereal volume declined approximately 4.5% in the current year's first quarter, it faced a difficult comparison due to the favorable volume performance in the same quarter of the prior year. A strong CHEX Winter Party Mix promotion resulted in comparable quarter to quarter volume levels for the mainline CHEX product line. The branded cereal volume decline again came from the continued weakening of the smaller fractional share brands. Consumer Foods operating profit, excluding restructuring charges in both periods, increased $3.0 million in the current quarter over the same prior year period due primarily to the performance improvements in the CHEX MIX snack product line, partially offset by higher advertising and promotion spending and volume declines in branded and private label cereals. Beech-Nut baby food operating profit for the first quarter of fiscal 1997 was even with last year as favorable volume increases were offset by similar rises in ingredient and production costs. Operating profit of the Bremner cracker and cookie operation increased slightly on a quarter to quarter comparison as improved volumes and a favorable product mix were partially offset by higher costs. RESORT OPERATIONS Resort Operations recorded a first quarter fiscal 1997 operating loss of $1.3 million compared to an operating profit for the same period of the prior year of $.6 million. The operating profit in the first quarter of fiscal 1996 was the first time in its history Resort Operations recorded operating profit in the three-month period ended December 31st. An increase in skier visits in the current quarter resulted in a $1.8 million sales improvement, higher operating costs and lower room nights, however, more than offset the sales gains. In addition, bitterly cold temperatures over the important Christmas holiday and the fact that Christmas fell mid-week, also hampered performance. As mentioned earlier, the Company completed the sale of its Resort Operations to Vail Resorts, Inc. on January 3, 1997. Following the sale, and after giving effect to Vail's public stock offering, Ralcorp retained an approximate 22.7% ownership interest in the newly formed ski company, which is now the largest in North America. Vail stock began trading on the New York Stock Exchange on February 4, 1997. 8 11 RESULTS OF OPERATIONS Cost of products sold as a percentage of sales for the quarters ended December 31, 1996 and 1995 were 48.2%. Selling, general and administrative expense as a percent of sales declined to 13.1% in the first quarter of the current year compared to 14.8% in the prior period. This decline is due to reduced systems costs in the current quarter as the prior year's first quarter included significant new system implementation costs. In addition, the first quarter of fiscal 1997 benefited from reduced depreciation expense, a result of the fixed asset impairment charge taken by the Company in the fourth quarter of fiscal 1996. See "Note 4 - Nonrecurring Charges" in the "Notes to Consolidated Financial Statements" included in the Company's Annual Report on Form 10-K for additional discussion of this impairment charge. Advertising and promotion expenses increased to 27.4% of sales from 26.2% in the prior year period due to increased spending to support the CHEX Winter Party Mix promotion and maintain branded cereal volumes. Income taxes were 39.1% of earnings before income taxes in the current quarter compared to 38.7% in the year ago period. FINANCIAL CONDITION The Company's primary source of liquidity is cash flow from operations, which increased to $55.4 million for the three months ended December 31, 1996 compared to $43.7 million for the same period in the prior year, primarily due to a current year decline in inventory balances and a less significant decline in accounts payable. Net working capital, excluding cash and current maturities of long-term debt, was $62.7 million at December 31, 1996 compared to $92.4 million at September 30, 1996. Property additions decreased to $11.0 million for the first quarter of fiscal 1997 compared to $16.0 million in the prior year quarter. During the first quarter of fiscal 1996 the Company repurchased $5.8 million of its Common Stock. The Company transacted no stock repurchases during the quarter ended December 31, 1996. As a result of first quarter activity, total debt declined by $43.1 million to $335.3 million compared to $378.4 million at September 30, 1996. As a percent of total capitalization, total debt improved in the quarter to 73.5% compared to 77.9% at September 30, 1996. OUTLOOK Management expects that Ralcorp will be negatively affected by the competitive environment that exists in the ready-to-eat cereal category. To be successful, Ralcorp must achieve and maintain an effective price gap between its private label products and those products of top branded cereal competitors. Ralcorp management intends to take the steps necessary to remove excess costs from its cereal operations in order to attain a cost basis that will allow maintenance of an adequate price gap and still provide a quality alternative to branded cereals. However, management anticipates that it will take time to identify and act on those cost saving initiatives, and that during this transition, the financial results of Ralcorp's cereal operations will be under significant pressure. In light of the anticipated cost restructuring during the transition described above, Ralcorp will take a restructuring charge in the second quarter of fiscal 1997, after completion of the Spin-Off and the Merger. The amount of the restructuring charge is currently estimated to be in the range of $20-$25 million and will cover both process efficiency initiatives and headcount reductions throughout all cereal operations and corporate support groups. This restructuring charge has not been recorded as of December 31, 1996 since the Merger was subject to shareholder approval and any restructuring charge is directly attributable to completion of the Merger. Accordingly, by attaining the approval of shareholders through a special shareholder vote on January 31, 1997, the restructuring charge will be recorded in the second quarter of fiscal 1997. The outlook for the remainder of Ralcorp's businesses is generally positive. In baby foods, despite a declining birth rate in the United States, Beech-Nut has been able to record operating profit increases by 9 12 continuing to focus on the production of high quality baby food products. The production of quality products, maintaining its presence in key regional areas and continued emphasis on controlling and cutting costs, create a positive outlook for Beech-Nut. Based on its position in the baby food category, however, Beech-Nut will continue to face significant competitive pressures, principally from the baby food market leader, Gerber Products Company. The Bremner cracker and cookie business has performed well over the last two full fiscal years, recording improvements in both sales and operating profit. With regard to the Bremner cracker and cookie business, management anticipates continuing to improve earnings through new product introductions, adding new customers and improving sales mix towards higher margin products. In addition, a major capital project at the Bremner manufacturing plant completed during the fourth quarter of fiscal 1996 has allowed the production and shipping of private label shredded wheat cereals and crackers to begin during the first quarter of fiscal 1997. Bremner does face significant competition, however, from large branded and regional private label cracker and cookie manufacturers. RALCORP LIQUIDITY As a result of the sales of the Branded Business and Resort Operations, Ralcorp has emerged as an essentially debt free company, which provides Ralcorp financial flexibility. To meet its on-going working capital needs Ralcorp has obtained a $50 million working capital credit facility. The proceeds of the facility may be used to fund Ralcorp's working capital needs, capital expenditures, and other general corporate purposes. Provisions of the $50 million credit facility require Ralcorp to maintain certain financial ratios and a minimum level of shareholders' equity. Management believes that Ralcorp will be able to generate positive operating cash flows through its mix of businesses and expects that future liquidity requirements will be met through a combination of existing cash balances, operating cash flow and, as necessary, use of borrowings available under its working capital credit facility. CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS Forward-looking statements, within the meaning of Section 21E of the Securities Exchange Act of 1934, are made throughout this Management's Discussion and Analysis. The Company's results of operations and liquidity status may differ materially from those in the forward-looking statements. Such statements are based on management's current views and assumptions, and involve risks and uncertainties that could affect expected results. For example any of the following factors cumulatively or individually may impact expected results: (i) If the Company is unable to maintain a meaningful price gap between its private label cereal products and the branded products of its competitors, then the Company's cereal business could continue incurring significant operating losses; (ii) If the Company's cereal business incurs losses more than offsetting the combined profits of its other businesses, then the Company will be unable to borrow under its credit facility and the repayment of outstanding borrowings, if any, at that time could be accelerated by the lenders; (iii) If the events in (ii) above occur, the Company would have to renegotiate its credit facility or obtain alternate sources of financing on terms significantly more restrictive (such as being secured) and expensive than the Company's existing credit facility; and (iv) The Company's businesses compete in mature segments with competitors having large percentages of segment sales and profit growth depends largely on the ability to successfully introduce new products and manage costs across all parts of the Company. 10 13 RALCORP HOLDINGS, INC. UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION Ralcorp was organized for the purpose of effecting the Spin-Off and the Merger and has no operating history as an independent company. The Ralcorp historical financial statements presented in the "Ralcorp Historical" columns on the following unaudited pro forma combined financial statements reflect periods during which the various spun-off businesses operated as divisions or subsidiaries of Old Ralcorp. Because these historical financial statements are the historical financial statements of Old Ralcorp, they also include the results of operations and financial position of the branded cereal and snack businesses (the Branded Business), which Ralcorp has agreed to sell to General Mills and the Resort Operations, which Ralcorp has agreed to sell to Vail Resorts, Inc. Therefore, the historical financial statements do not reflect the combined results of operations or financial position that would have existed had Ralcorp been an independent company. Since Ralcorp did not operate during the periods shown, the unaudited pro forma information may not necessarily reflect future results of operations or what the results of operations would have been had the formation of Ralcorp and its related businesses occurred at the beginning of the periods shown. The pro forma combined statement of earnings for the three months ended December 31, 1996 presents the combined results of Ralcorp's operations assuming that the sale of the Branded Business and the sale of the Resort Operations had occurred as of October 1, 1996. The pro forma combined statement of earnings for the year ended September 30, 1996 presents the combined results of Ralcorp's operations assuming that both sale transactions had occurred as of October 1, 1995. Both statements of earnings have been prepared by adjusting the historical statements of earnings for the effect of costs and expenses and the recapitalization which might have occurred had the Spin-Off and the sale of the Resort Operations occurred at the beginning of each respective period. The pro forma combined balance sheet at December 31, 1996 presents the combined financial position of Ralcorp assuming the Spin-Off and the sale of the Resort Operations had occurred at that date. This balance sheet data has been prepared by adjusting the historical balance sheet for the effect of assets, liabilities and recapitalization which might have occurred had the Spin-Off and the sale of the Resort Operations occurred on December 31, 1996. The "Branded Business" and "Resort Operations" columns in the pro forma combined statements of earnings represent the combined historical results of operations of the Branded Business and the consolidated historical results of operations of the Resort Operations, respectively. The "Branded Business" column in the pro forma combined balance sheet at December 31, 1996 represents the specific assets and liabilities of the Branded Business that will be acquired by General Mills. The "Resort Operations" column in the pro forma combined balance sheet at December 31, 1996 represents the consolidated financial position of the Resort Operations at December 31, 1996. Please read the Notes to the Unaudited Pro Forma Combined Financial Information for a discussion of adjustments made to the historical financial information in order to calculate the Ralcorp pro forma financial information. 11 14 RALCORP HOLDINGS, INC. PRO FORMA COMBINED STATEMENT OF EARNINGS (in millions except per share data) Three Months Ended December 31, 1996
Pro Forma Adjustments Ralcorp Branded Resort ------------------------- Pro Forma Historical Business Operations Debit Credit Ralcorp ------------ --------- ---------- -------- --------- ---------- Net Sales $ 292.9 $ (141.9) $ (29.2) $ 121.8 ------------ --------- ---------- -------- --------- -------- Costs and Expenses Cost of products sold 141.2 (34.7) (25.7) 1.0 (a) 81.8 Selling, general and administrative 38.4 (14.9) (3.4) 5.5 (a) 25.6 Advertising and promotion 80.3 (66.5) (1.4) 12.4 Equity earnings in Vail Resorts 1.2 (b) (1.2) Interest expense 6.9 (1.1) (2.8) 2.7 (c) 0.3 Restructuring charge 4.6 -- 4.6 ------------ --------- ---------- -------- --------- -------- 271.4 (117.2) (33.3) 6.5 3.9 123.5 ------------ --------- ---------- -------- --------- -------- Earnings before Income Taxes 21.5 (24.7) 4.1 (6.5) (3.9) (1.7) Income Taxes 8.4 (9.5) 1.6 1.1 (d) (0.6) ------------ --------- ---------- -------- --------- -------- Net Earnings $ 13.1 $ (15.2) $ 2.5 $ (6.5) $ (5.0) $ (1.1) ============ ========= ========== ======== ========= ======== Earnings per common share (e) $ .40 $ (.03) ============ ======== Outstanding shares of common stock (e) 32.9 32.9 ============ ========
12 15 RALCORP HOLDINGS, INC. PRO FORMA COMBINED STATEMENT OF EARNINGS (in millions except per share data) Year Ended September 30, 1996
Pro Forma Adjustments Ralcorp Branded Resort ------------------------ Pro Forma Historical Business Operations Debit Credit Ralcorp ---------- -------- ---------- ------- ------- -------- Net Sales $ 1,027.4 $ (386.7) $ (135.4) $ 505.3 ---------- -------- ---------- ------- ------- -------- Costs and Expenses Cost of products sold 536.8 (114.1) (91.7) 5.7 (a) 336.7 Selling, general and administrative 177.6 (52.5) (14.6) 15.3 (a) 125.8 Advertising and promotion 233.3 (162.5) (6.1) 64.7 Equity earnings in Vail Resorts 4.5 (b) (4.5) Interest expense 26.8 (4.2) (10.5) 11.1 (c) 1.0 Nonrecurring charge 109.5 109.5 Restructuring charge 16.5 (2.5) 14.0 ---------- -------- ---------- ------- ------- -------- 1,100.5 (335.8) (122.9) 21.0 15.6 647.2 ---------- -------- ---------- ------- ------- -------- Earnings before Income Taxes (73.1) (50.9) (12.5) (21.0) (15.6) (141.9) Income Taxes (26.3) (19.3) (5.3) 2.1 (d) (53.0) ---------- -------- ---------- ------- ------- -------- Net Earnings $ (46.8) $ (31.6) $ (7.2) $ (21.0) $ (17.7) $ (88.9) ========== ======== ========== ======= ======= ======== Earnings per common share (e) $ (1.42) $ (2.69) ========== ======== Outstanding shares of common stock (e) 33.0 33.0 ========== ========
13 16 RALCORP HOLDINGS, INC. PRO FORMA COMBINED BALANCE SHEET (in millions except shares) December 31, 1996
Pro Forma Ralcorp Branded Resort Adjustments Pro Forma Historical Business Operations Debit Credit Ralcorp ---------- -------- ---------- ----------- ------ ---------- Assets D Current assets: Cash $ - $ - $ - $ 17.7 (f) $ 17.7 (g) $ - Receivables, less allowance for doubtful accounts 74.0 (7.8) 66.2 Inventories 92.4 (14.9) (5.5) 72.0 Prepaid expenses 14.5 (0.3) 0.7 (h) 13.5 -------- ------ ------- ------ ------ ------ Total current assets 180.9 (14.9) (13.6) 17.7 18.4 151.7 Equity investment in Vail Resorts 37.3 (i) 37.3 Deferred income taxes 22.6 12.3 2.8 (h) 37.7 Investments and other assets 105.6 (24.4) (95.2) 24.4 (f) 10.4 -------- ------ ------- ------ ------ ------ Property at cost 530.3 (85.8) (209.1) 235.4 Accumulated depreciation 222.9 (49.8) (74.6) 98.5 -------- ------ ------- ------ ------ ------ 307.4 (36.0) (134.5) - - 136.9 -------- ------ ------- ------ ------ ------ Total assets $616.5 $(75.3) $(231.0) $ 82.2 $ 18.4 $374.0 ======== ====== ======= ====== ====== ====== Liabilities and Shareholders' Equity Current Liabilities: Current maturities of long-term debt $0.3 ($0.3) $0.0 Accounts payable and accrued liabilities 118.2 (29.2) (26.7) 62.3 -------- ------ ------- ------ ------ ------ Total current liabilities 118.5 (29.2) (27.0) - - 62.3 Long-term debt 335.0 (164.7) $212.4 (j) 42.1 (f) - Other liabilities 42.3 (4.2) (2.0) 36.1 Commitments and contingencies General Mills common stock 357.6 (j) 357.6 (k) - Equity: Shareholders' equity: Common stock -- $.01 par value, issued shares 33,924,848, outstanding shares 32,883,355 0.3 0.3 Capital in excess of par value 130.7 22.4 (l) 108.3 Retained (deficit) earnings 12.9 4.7 (g) 516.4 (j) 167.0 357.6 (k) Common stock in treasury, at cost -- 989,742 shares (22.4) 22.4 (l) - Unearned portion of restricted stock awards (0.8) 0.8 (m) - -------- ------ ------- ------ ------ ------ Total shareholders' equity 120.7 - - 384.7 539.6 275.6 -------- ------ ------- ------ ------ ------ Total liabilities and shareholder's equity $616.5 $(33.4) $(193.7) $597.1 $581.7 $374.0 ======== ====== ======= ====== ====== ======
14 17 RALCORP HOLDINGS, INC. Notes to Unaudited Pro Forma Combined Financial Information (a) To reflect the fixed costs (i.e., fixed manufacturing, information systems, general administrative and corporate overhead) included in the combined historical results of operations of the Branded Business that will be absorbed by Ralcorp upon completion of the sale of the Branded Business. (b) To reflect Ralcorp's equity earnings in Vail Resorts. The equity earnings include $.5 million, for the three months ended December 31, 1996, and $1.9 million, for the fiscal year ended September 30, 1996, of amortization income. The amortization income is the result of the basis difference between the net book value of the Resort Operations' net assets contributed to Vail Resorts and Ralcorp's approximate 22% equity interest in Vail Resorts' net assets. This basis difference is being amortized ratably over 20 years. (c) To reduce interest expense due to General Mills assuming $212.4 million of Ralcorp debt upon completion of the sale of the Branded Business. Residual interest expense shown of $.3 million, for the three months ended December 31, 1996, and $1.0 million, for the fiscal year ended September 30, 1996, is related to estimated revolving credit facility debt needed to finance working capital. (d) To reflect the tax effect of the pro forma adjustments shown at an effective rate of 38%. (e) The weighted average number of shares used to compute Ralcorp earnings per share is based on the weighted average number of Ralcorp common shares outstanding during the three months ended December 31, 1996 and during the fiscal year ended September 30, 1996. (f) To record $42.1 million of new indebtedness to be incurred by Ralcorp immediately prior to the merger and to be assumed by General Mills as a result of the merger. Cash proceeds from this debt will be primarily used for the settlement of transaction expenses described in footnote (g). (g) Adjustment to reflect payment of transaction expenses. Expenses incurred in connection with the dispositions are estimated at approximately $42.1 million, consisting of payments for legal, accounting and investment banking fees, redemption of common stock purchase rights, accelerated vesting and cash settlement of stock options and the net assets adjustment. Payments estimated at $4.7 million for the accelerated vesting and cash settlement of stock options will not be recorded as a reduction to the gain described in footnote (j). (h) To reflect the write off of the current and deferred tax assets and liabilities associated with the specific assets and liabilities of the Branded Business that will be acquired by General Mills once the distribution has been effected. (i) To record Ralcorp's equity investment in Vail Resorts, which represents the book value of the net assets contributed to Vail Resorts, as presented in the "Resorts Operations" column of the pro forma combined balance sheet. Due to the structure of the transaction, it is accounted for as a non-monetary exchange. Accordingly, no gain or loss on sale will be recorded by Ralcorp. (j) To record the disposition of the Branded Business and the related gain on sale. Proceeds of $570 million are comprised of approximately $357.6 million of General Mills common stock, received by Ralcorp shareholders, and the assumption of approximately $212.4 million in debt and accrued interest by General Mills. Following is the calculation of the gain on sale to be recorded by Ralcorp (in millions): Proceeds $570.0 Net assets of Branded Business (41.9) (n) Current deferred tax assets (.7) (h) Deferred tax liabilities 2.8 (h) Transaction expenses (17.7) (g) Cash settlement of stock options 4.7 (g) Accelerated amortization of restricted stock awards (.8) (m) ---------- Gain on sale $516.4 (j) ==========
(k) To reflect the deemed distribution of approximately $357.6 million of the proceeds from the sale of the Branded Business. These proceeds are in the form of General Mills common stock distributed by General Mills directly to Ralcorp shareholders in the merger. 15 18 (l) To retire treasury stock outstanding as of the merger date. (m) To record the accelerated amortization of restricted stock awards. (n) Amount represents the specific net assets of the Branded Business, which are reflected in the "Branded Business" column of the pro forma combined balance sheet, that will be acquired by General Mills once the distribution has been effected. While General Mills will acquire all the operations of the Branded Business, certain assets and of the Branded Business will not be transferred to General Mills. The most significant items not transferred are (i) the historical receivables associated with the Branded Business, which are being retained by Ralcorp because it is impracticable to separate the Branded Business receivables from the receivables associated with Ralcorp's remaining private label foods businesses, and (ii) the fixed assets associated with manufacturing plants (other than Ralcorp's Cincinnati plant, which will be transferred to General Mills) that historically have produced both Branded Business products and private label products, and that will be retained by Ralcorp. In addition, a portion of Ralcorp's long-term debt was allocated to the Branded Business for purposes of the historical balance sheet, but is not reflected under the "Branded Business" column because the transfer of Ralcorp debt is separately reflected under the column "Pro Forma Adjustments." 16 19 PART II OTHER INFORMATION There is no information to be reported under any items except indicated below. Item 6 Exhibits and Reports on Form 8-K. (a) Exhibits 3.1 Restated Articles of Incorporation of the Company 10.1 Credit Agreement dated as of January 31, 1997 among Ralcorp Holdings, Inc., the Lenders named therein and the First National Bank of Chicago, as Agent 10.2 Reorganization Agreement dated as of January 31, 1997 by and among Ralcorp Holdings, Inc., New Ralcorp Holdings, Inc., Ralston Foods, Inc., Chex, Inc. and General Mills, Inc. 10.3 Trademark Agreement dated as of January 31, 1997 by and among Ralcorp Holdings, Inc., New Ralcorp Holdings, Inc. and Chex, Inc. 10.4 Technology Agreement dated as of January 31, 1997 by and among Ralcorp Holdings, Inc., New Ralcorp Holdings, Inc. and Chex, Inc. 10.5 Tax Sharing Agreement dated as of January 31, 1997 between Ralcorp Holdings, Inc. and New Ralcorp Holdings, Inc. 10.6 Transition Services - Supply Agreement dated as of January 31, 1997 between Chex, Inc. and New Ralcorp Holdings, Inc. 10.7 Second Amendment to Agreement and Plan of Merger dated January 29, 1997 by and among Ralcorp Holdings, Inc., General Mills, Inc. and General Mills Missouri, Inc. 10.8 Third Amendment to Agreement and Plan of Merger dated January 31, 1997 by and among Ralcorp Holdings, Inc., General Mills, Inc. and General Mills Missouri, Inc. 10.9 Shareholder Agreement dated as of January 3, 1997 among Vail Resorts Inc., Ralston Foods, Inc. and Apollo Ski Partners L.P. 27 Financial Data Schedule (b) Reports of Form 8-K (i) On January 31, 1997, the Company filed a report on Form 8-K announcing the completion of its spin-off and the change of the Company's name from "New Ralcorp Holdings, Inc." to "Ralcorp Holdings, Inc." SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. RALCORP HOLDINGS, INC. By: /s/ T. G. Granneman ---------------------------------- Duly Authorized Signatory, and Chief Accounting Officer February 13, 1997 17 20 RALCORP HOLDINGS, INC. FORM 10-Q DECEMBER 31, 1996 EXHIBIT INDEX 3.1 Restated Articles of Incorporation of the Company 10.1 Credit Agreement dated as of January 31, 1997 among Ralcorp Holdings, Inc., the Lenders named therein and the First National Bank of Chicago, as Agent 10.2 Reorganization Agreement dated as of January 31, 1997 by and among Ralcorp Holdings, Inc., New Ralcorp Holdings, Inc., Ralston Foods, Inc., Chex, Inc. and General Mills, Inc. 10.3 Trademark Agreement dated as of January 31, 1997 by and among Ralcorp Holdings, Inc., New Ralcorp Holdings, Inc. and Chex, Inc. 10.4 Technology Agreement dated as of January 31, 1997 by and among Ralcorp Holdings, Inc., New Ralcorp Holdings, Inc. and Chex, Inc. 10.5 Tax Sharing Agreement dated as of January 31, 1997 between Ralcorp Holdings, Inc. and New Ralcorp Holdings, Inc. 10.6 Transition Services - Supply Agreement dated as of January 31, 1997 between Chex, Inc. and New Ralcorp Holdings, Inc. 10.7 Second Amendment to Agreement and Plan of Merger dated January 29, 1997 by and among Ralcorp Holdings, Inc., General Mills, Inc. and General Mills Missouri, Inc. 10.8 Third Amendment to Agreement and Plan of Merger dated January 31, 1997 by and among Ralcorp Holdings, Inc., General Mills, Inc. and General Mills Missouri, Inc. 10.9 Shareholder Agreement dated as of January 3, 1997 among Vail Resorts Inc., Ralston Foods, Inc. and Apollo Ski Partners L.P. 27 Financial Data Schedule EX-3.1 2 RESTATED ARTICLES OF INCORPORATION 1 EXHIBIT 3.1 RESTATED ARTICLES OF INCORPORATION OF RALCORP HOLDINGS, INC. * * * ARTICLE ONE - NAME The name of the corporation is Ralcorp Holdings, Inc. (herein referred to as the "Corporation"). ARTICLE TWO - OFFICE The registered office of the Corporation in the State of Missouri is located at 906 Olive Street, St. Louis, Missouri 63101, and the name of its initial registered agent at such address is CT Corporation System. ARTICLE THREE - AUTHORIZED SHARES A. CLASSES AND NUMBER OF SHARES The aggregate number of shares of capital stock which the Corporation is authorized to issue is 310,000,000 shares, consisting of: (i) 300,000,000 shares of Common Stock, par value $.01 per share ("Common Stock"); and (ii) 10,000,000 shares of Preferred Stock, par value $.01 per share ("Preferred Stock"). B. NO PREEMPTIVE RIGHTS All preemptive rights are hereby denied, so that none of the Common Stock, the Preferred Stock or any other security or securities of the Corporation shall carry with it and no holder or owner of any Common Stock, Preferred Stock or any other security or securities of the Corporation shall have any preferential or preemptive right to acquire any additional shares of Common Stock, Preferred Stock or any other security or securities of the Corporation. C. NO CUMULATIVE VOTING All cumulative voting rights are hereby denied, so that none of the Common Stock, the Preferred Stock or any other security or securities of the Corporation shall carry with it and no holder or owner of any Common Stock, Preferred Stock or any other security of the Corporation shall have any right to vote cumulatively in the election of directors or for any other purpose. D. TERMS OF PREFERRED STOCK The terms of the shares of each series of Preferred Stock shall be as stated and expressed in these Restated Articles of Incorporation or any amendment thereto, or in the resolution or resolutions providing for the issuance of such series of Preferred Stock adopted by the Board of Directors. Subject 2 to the requirements of the GBCL and the provisions of these Restated Articles of Incorporation, the Board of Directors is expressly authorized to cause any number of authorized and undesignated shares of Preferred Stock to be issued from time to time in one or more series of Preferred Stock with such voting powers, full or limited, or no voting powers, and such designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, if any, as the Board of Directors may fix by resolution or resolutions, prior to the issuance of any shares of such series of Preferred Stock, each of which series may differ from any and all other series, including, without limiting the generality of the foregoing, the following: (i) The number of shares constituting such series of Preferred Stock and the designation thereof; (ii) The dividend rate, if any, on the shares of such series of Preferred Stock, whether and the extent to which any such dividends shall be cumulative or non-cumulative, the relative rights of priority, if any, of payments of any dividends, and the time at which, and the terms and conditions on which, any dividends shall be paid; (iii) The right, if any, of the holders of such series of Preferred Stock to vote and the manner of voting, except as may otherwise be provided by the GBCL and the provisions of these Restated Articles of Incorporation; (iv) Whether or not the shares of such series shall be made convertible into or exchangeable for other securities of the Corporation, including shares of the Common Stock or shares of any other series of the Preferred Stock, now or hereafter authorized, the price or prices or the rate or rates at which conversion or exchange may be made, any provision for future adjustment in the conversion or exchange rate, and the terms and conditions upon which the conversion or exchange right shall be exercised; (v) The redemption or purchase price or prices of the shares of the series of Preferred Stock, if any, and the times at which, and the terms and conditions under which, the shares of such series of Preferred Stock may be redeemed or purchased; (vi) The terms of the sinking fund, if any, to be provided for such series of Preferred Stock, and the terms and amount of any such sinking fund; (vii) The rights of the holders of shares of such series of Preferred Stock in the event of a voluntary or involuntary liquidation, dissolution or winding up of the Corporation and the relative rights of priority, if any, of such holders with respect thereto; (viii) From time to time to include additional authorized and undesignated shares of Preferred Stock in such series; and (ix) Any other relative powers, preferences and rights, and any qualifications, limitations or restrictions thereof, of such series of Preferred Stock. 2 3 ARTICLE FOUR - INCORPORATOR The name and place of residence of the incorporator of the Corporation is: R. W. Lockwood 18 Oleander Drive St. Louis, MO 63128 ARTICLE FIVE - DIRECTORS A. Number and Classification The number of directors to constitute the Board of Directors of the Corporation shall be three. Hereafter, the number of directors shall be fixed by, or in the manner provided in, the Bylaws of the Corporation, but shall not be less than three. Any changes in the number of directors shall be reported to the Secretary of State of Missouri within thirty calendar days of such change, if required by the GBCL. The directors shall be divided into three classes, as nearly equal in number as reasonably possible, except that one class may be one greater or one less in number than the other two classes. At each annual meeting of shareholders, successors to the class of directors whose term expires at that annual meeting shall be elected for a three (3) year term (and until their respective successors shall have been elected and qualified in each class or until their earlier death, resignation or removal), so that the term of one class of directors shall expire in each year. Notwithstanding the foregoing, whenever the holders of any one or more classes or series of stock of the Corporation, other than shares of Common Stock, shall have the right, voting separately by class or series, to elect directors, the election, term of office, filling of vacancies and other features of such directorship shall be governed by the terms of these Restated Articles of Incorporation or any Certificate of Designation thereunder applicable thereto; and such directors so elected shall not be divided into classes pursuant to this Article unless expressly provided by such terms. As used in these Restated Articles of Incorporation, the term "entire Board of Directors" means the total number of directors fixed by, or in accordance with, these Restated Articles of Incorporation and the Bylaws of the Corporation. B. Removal of Directors At a meeting called expressly for that purpose, one or more members of the Board of Directors may be removed only for cause and only by the affirmative vote of at least (i) two-thirds of all members of the Corporation's Board of Directors, and (ii) two-thirds of all of the then outstanding shares of capital stock of the Corporation then entitled to vote generally in the election of directors, voting together as a single class (such vote being in addition to any required class or other vote). Whenever the holders of the shares of any class are entitled to elect one or more directors, the provisions of this Article shall apply in respect of the removal of a director or directors so elected, to the vote of the holders of the outstanding shares of that class and not to the vote of the holders of the outstanding shares as a whole. In addition, any director may be removed from office by the affirmative vote of a majority of the entire Board of Directors at any time prior to the expiration of the director's term of office, as provided by law, in the event that the director fails, at the time of removal, to meet any qualifications stated in the Bylaws of the Corporation for election as a director or shall be in breach of any agreement between the director and the Corporation relating to the director's service as a director or employee of the Corporation. 3 4 C. Vacancies Subject to the rights, if any, of the holders of any class of capital stock of the Corporation (other than the Common Stock) then outstanding, any vacancies in the Board of Directors which occur for any reason prior to the expiration of the term of office of the class in which the vacancy occurs, including vacancies which occur by reason of an increase in the number of directors, may be filled only by the Board of Directors, acting by the affirmative vote of a majority of the remaining directors then in office (although less than a quorum), until the next election of directors by the shareholders of the Corporation. D. Amendment This Article may be amended, altered, changed or repealed only upon the affirmative vote of not less than two-thirds of all of the outstanding shares of capital stock of the Corporation then entitled to vote generally in the election of directors voting together as a single class; provided, however, that whenever the holders of shares of any class are entitled to elect one or more directors, such amendment, alternation, change or repeal shall also require the affirmative vote of not less than two-thirds of the outstanding shares of each such class entitled to vote at such meeting. ARTICLE SIX - TERM OF EXISTENCE The Corporation shall have a perpetual existence. ARTICLE SEVEN - PURPOSES The purposes of the Corporation are to engage in any lawful act or activity for which a corporation now or hereafter may be organized under the GBCL. ARTICLE EIGHT - BYLAWS The Bylaws of the Corporation may be amended, altered, changed or repealed, and a provision or provisions inconsistent with the provisions of the Bylaws as they may exist from time to time may be adopted, only by two-thirds of all of the members of the Board of Directors. ARTICLE NINE - CERTAIN BUSINESS COMBINATIONS A. Approval The approval of any Business Combination shall, in addition to any affirmative vote otherwise required by the GBCL, require the recommendation of the Board of Directors and the affirmative vote of the holders of not less than 85% of all of the outstanding shares of capital stock of the Company then entitled to vote at a meeting of shareholders called for such purpose of which an Interested Shareholder is not the Beneficial Owner; provided, however, that, notwithstanding the foregoing, any such Business Combination may be approved on any affirmative vote required by the GBCL if: (a) There are one or more Continuing Directors and the Business Combination shall have been approved by a majority of them; or (b) (1) The consideration to be received by shareholders of each class of stock of the Corporation shall be in cash or in the same form as the Interested Shareholder and its 4 5 affiliates have previously paid for a majority of the shares of such class of stock owned by the Interested Shareholder; and (2) the cash, or Market Value of the property, securities or other shareholders of each class of stock of the Corporation in the Business Combination is not less than the higher of: (i) the highest per share price paid by the Interested Shareholder for the acquisition of any shares of such class in the two years immediately preceding the announcement date of the Business Combination, with appropriate adjustments for stock splits, stock dividends and like distributions, or (ii) the Market Value of such shares, on the date the Business Combination is approved by the Board of Directors. B. Definitions (a) For purposes of this Article any terms not otherwise defined herein shall have the meanings set forth in Section 351.459 of the GBCL as in effect on October 1, 1996. (b) The term "Continuing Director" shall mean any member of the Board of Directors of the Corporation who is not an Affiliate or Associate of the Interested Shareholder and who was a member of the Board of Directors prior to the time that the Interested Shareholder became an Interested Shareholder, and any successor of a Continuing Director if the successor is not an Affiliate or Associate of the Interested Shareholder and is recommended or elected to succeed a Continuing Director by a majority of Continuing Directors. C. Amendment This Article may be amended, altered, changed or repealed only upon the affirmative vote of not less than 85% of all of the outstanding shares of capital stock of the Corporation entitled to vote at a meeting called for such purpose of which an Interested Shareholder is not the Beneficial Owner; provided, however, that this Article may be amended, altered, changed or repealed upon any affirmative vote required by the GBCL, if such amendment, alternation, change or repeal has been approved by a majority of the Board of Directors, if there is not an Interested Shareholder, or if there is an Interested Shareholder, by a majority of the Continuing Directors. ARTICLE TEN - INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS A. Actions Involving Directors and Officers The Corporation shall indemnify each person (other than a party plaintiff suing on his or her behalf or in the right of the Corporation) who at any time is serving or has served as a director or officer of the Corporation against any claim, liability or expense incurred as a result of such service, or as a result of any other service on behalf of the Corporation, or service at the request of the Corporation as a director, officer, employee, member, or agent of another corporation, partnership, joint venture, trust, trade or industry association, or other enterprise (whether incorporated or unincorporated, for-profit or not-for-profit), to the maximum extent permitted by law. Without limiting the generality of the foregoing, the Corporation shall indemnify any such person who was or is a party (other than a party 5 6 plaintiff suing on his or her behalf or in the right of the Corporation), or is threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (including, but not limited to, an action by or in the right of the Corporation) by reason of such service, against expenses (including, without limitation, attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit or proceeding. B. Actions Involving Employees or Agents 1. Permissive Indemnification. The Corporation may, if it deems appropriate and as may be permitted by this Article, indemnify any person (other than a party plaintiff suing on his or her own behalf or in the right of the Corporation) who at any time is serving or has served as an employee or agent of the Corporation against any claim, liability or expense incurred as a result of such service, or as a result of any other service on behalf of the Corporation, or service at the request of the Corporation as a director, officer, employee, member, or agent of another corporation, partnership, joint venture, trust, trade or industry association, or other enterprise (whether incorporated or unincorporated, for-profit or not-for-profit), to the maximum extent permitted by law or to such lesser extent as the Corporation, in its discretion, may deem appropriate. Without limiting the generality of the foregoing, the Corporation may indemnify any such person who was or is a party (other than a party plaintiff suing on his or her own behalf or in the right of the Corporation), or is threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (including, but not limited to, an action by or in the right of the Corporation) by reason of such service, against expenses (including, without limitation, attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit or proceeding. 2. Mandatory Indemnification. To the extent that an employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section B.1 of this Article, or in defense of any claim, issue or matter therein, he or she shall be indemnified against expenses (including, without limitation, attorneys' fees) actually and reasonably incurred by him or her in connection with the action, suit or proceeding. C. Determination of Right to Indemnification in Certain Circumstances Any indemnification required under Section A of this Article or authorized by the Corporation in a specific case pursuant to Section B of this Article (unless ordered by a court) shall be made by the Corporation unless a determination is made reasonably and promptly that indemnification of the director, officer, employee or agent is not proper under the circumstances because he or she has not met the applicable standard of conduct set forth in or established pursuant to this Article. Such determination shall be made (1) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (2) if such a quorum is not obtainable, or even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (3) by majority vote of the shareholders; provided that no such determination shall preclude an action brought in an appropriate court to challenge such determination. D. Standard of Conduct Except as may otherwise be permitted by law, no person shall be indemnified pursuant to this Article (including without limitation pursuant to any agreement entered into pursuant to Section G of this 6 7 Article) from or on account of such person's conduct which is finally adjudged to have been knowingly fraudulent, deliberately dishonest or willful misconduct. The Corporation may (but need not) adopt a more restrictive standard of conduct with respect to the indemnification of any employee or agent of the Corporation. E. Advance Payment of Expenses Expenses incurred by a person who is or was a director or officer of the Corporation in defending a civil or criminal action, suit, proceeding or claim shall be paid by the Corporation in advance of the final disposition of such action, suit, proceeding or claim, and expenses incurred by a person who is or was an employee or agent of the Corporation in defending a civil or criminal action, suit, proceeding or claim may be paid by the Corporation in advance of the final disposition of such action, suit, proceeding or claim as authorized by or at the direction of the Board of Directors, in either case upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation as authorized in or pursuant to this Article. F. Rights Not Exclusive The indemnification and other rights provided by this Article shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any agreement, vote of shareholders or disinterested directors or otherwise, and the Corporation is hereby specifically authorized to provide such indemnification and other rights by any agreement, vote of shareholders or disinterested directors or otherwise. G. Indemnification Agreements Authorized Without limiting the other provisions of this Article, the Corporation is authorized from time to time, without further action by the shareholders of the Corporation, to enter into agreements with any director, officer, employee or agent of the Corporation providing such rights of indemnification as the Corporation may deem appropriate, up to the maximum extent permitted by law. Any agreement entered into by the Corporation with a director may be authorized by the other directors, and such authorization shall not be invalid on the basis that similar agreements may have been or may thereafter be entered into with other directors. H. Insurance The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or who is or was otherwise serving on behalf of the Corporation in any capacity or at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, trade or industry association or other enterprise (whether incorporated or unincorporated, for-profit or not-for-profit) against any claim, liability or expense asserted against such person and incurred by such person in any such capacity, or arising out of such person's status as such, whether or not the Corporation would have the power to indemnify such person against such liability under the provisions of this Article. 7 8 I. Certain Definitions For the purpose of this Article: (i) Any director, officer, employee or agent of the Corporation who shall serve as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise of which the Corporation, directly or indirectly, is or was the owner of 20% or more of the outstanding voting stock (or comparable interests), shall be deemed to be so serving at the request of the Corporation, unless the Board of Directors of the Corporation shall determine otherwise. In all other instances when any person shall serve as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, trade or industry association or other enterprise of which the Corporation is or was a stockholder or creditor, or in which it is or was otherwise interested, if it is not otherwise established that such person is or was serving as a director, officer, employee or agent at the request of the Corporation, the Board of Directors of the Corporation may determine whether such service is or was at the request of the Corporation, and it shall not be necessary to show any actual or prior request for such service. (ii) References to a corporation include all constituent corporations absorbed in a consolidation or merger as well as the resulting or surviving corporation so that any person who is or was a director, officer, employee or agent of a constituent corporation or is or was serving at the request of a constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, trade or industry association or other enterprise shall stand in the same position under the provisions of this Article with respect to the resulting or surviving corporation as such person would if such person had served the resulting or surviving corporation in the same capacity. (iii) The term "other enterprise" shall include, without limitation, employee benefit plans and voting or taking action with respect to stock or other assets therein; the term "serving at the request of the Corporation" shall include, without limitation, any service as a director, officer, employee or agent of a corporation which imposes duties on, or involves services by, a director, officer, employee or agent of the Corporation with respect to any employee benefit plan, its participants, or beneficiaries; and unless a person's conduct in connection with an employee benefit plan is finally adjudicated to have been knowingly fraudulent, deliberately dishonest or willful misconduct, such person shall be deemed to have satisfied any standard of care required by or pursuant to this Article in connection with such plan; the term "fines" shall include, without limitation, any excise taxes assessed on a person with respect to an employee benefit plan and shall also include any damages (including treble damages) and any other civil penalties. J. Survival The indemnification and other rights provided pursuant to this Article shall apply both to action by any director, officer, employee or agent of the Corporation in an official capacity and to action in another capacity while holding such office or position, and shall continue as to a person who has ceased to be a director, officer, employee or agent of the Corporation and shall inure to the benefit of the heirs, 8 9 executors and administrators of such a person. Notwithstanding any other provision in these Restated Articles of Incorporation, any indemnification rights arising under or granted pursuant to this Article shall survive amendment or repeal of this Article with respect to any acts or omissions occurring prior to the effective time of such amendment or repeal and persons to whom such indemnification rights are given shall be entitled to rely upon such indemnification rights with respect to such acts or omissions as a binding contract with the Corporation. K. Liability of the Directors It is the intention of the Corporation to limit the liability of the directors of the Corporation, in their capacity as such, whether to the Corporation, its shareholders or otherwise, to the fullest extent permitted by law. Consequently, should the GBCL or any other applicable law be amended or adopted hereafter so as to permit the elimination or limitation of such liability, the liability of the directors of the Corporation shall be so eliminated or limited without the need for amendment of these Restated Articles of Incorporation or further action on the part of the shareholders of the Corporation. L. Amendment This Article may be amended, altered, changed or repealed only upon the affirmative vote of not less than 85% of all of the outstanding shares of capital stock of the Corporation then entitled to vote generally in the election of directors voting together as a single class. ARTICLE ELEVEN - AMENDMENT OF RESTATED ARTICLES OF INCORPORATION The Corporation reserves the right to amend, alter, change or repeal any provision contained in these Restated Articles of Incorporation in the manner prescribed herein for amendment of such provision and if not so prescribed then in the manner now or hereafter prescribed by law and all rights and powers conferred herein on shareholders, directors and officers of the Corporation are subject to this reserved power. 9 EX-10.1 3 CREDIT AGREEMENT 1 EXHIBIT 10.1 $50,000,000 CREDIT AGREEMENT AMONG RALCORP HOLDINGS, INC. as Borrower, THE LENDERS NAMED HEREIN and THE FIRST NATIONAL BANK OF CHICAGO, as Agent DATED AS OF January 31, 1997 ARRANGED BY FIRST CHICAGO CAPITAL MARKETS, INC. 2 TABLE OF CONTENTS ARTICLE I DEFINITIONS 1 ARTICLE II THE FACILITY 17 2.1. The Facility 17 2.1.1. Description of Facility 17 2.1.2. Facility Amount 18 2.1.3. Availability of Facility 18 2.2. Ratable Advances 18 2.2.1. Ratable Advances 18 2.2.2 Ratable Advance Rate Options 18 2.2.3. Method of Selecting Types and Interest Periods for Ratable Advances 19 2.2.4. Conversion and Continuation of Outstanding Ratable Advances 19 2.3. Competitive Bid Advances 20 2.3.1. Competitive Bid Option 20 2.3.2. Competitive Bid Quote Request 20 2.3.3. Invitation for Competitive Bid Quotes 21 2.3.4. Submission and Contents of Competitive Bid Quotes 21 2.3.5. Notice to Borrower 22 2.3.6. Acceptance and Notice by Borrower 22 2.3.7. Allocation by Agent 23 2.4. Swing Line Loans 23 2.5. Availability of Funds 25 2.6. Commitment Fee; Reductions in Aggregate Commitment 26 2.7. Minimum Amount of Each Ratable Advance 26 2.8. Optional Principal Payments 26 2.9. Changes in Interest Rate, etc. 26 2.10. Rates Applicable After Default 27 2.11. Method of Payment 27 2.12. Notes; Telephonic Notices 27 2.13. Interest Payment Dates; Interest and Fee Basis 27 2.14. Notification of Advances, Interest Rates, Prepayments, Commitment Reductions and Issuance Requests 28 2.15. Lending Installations 28 2.16. Non-Receipt of Funds by the Agent 28 2.17. Taxes 29 2.18. Agent's Fees 30 2.19. Facility Letters of Credit 30 2.19.1. Issuance of Facility Letters of Credit 30 2.19.2 Participating Interests 30
-i- 3 2.19.3 Facility Letter of Credit Reimbursement Obligations 31 2.19.4 Procedure for Issuance 32 2.19.5 Nature of the Lenders' Obligations 33 2.19.6 Facility Letter of Credit Fees 33 2.20. Extension of Facility Termination Date 34 ARTICLE III CHANGE IN CIRCUMSTANCES 34 3.1. Yield Protection 34 3.2. Changes in Capital Adequacy Regulations 35 3.3. Availability of Types of Advances 35 3.4. Funding Indemnification 36 3.5. Lender Statements; Survival of Indemnity 36 ARTICLE IV CONDITIONS PRECEDENT 36 4.1. Initial Loans and Facility Letters of Credit 36 4.2. Each Future Advance and Facility Letter of Credit 38 ARTICLE V REPRESENTATIONS AND WARRANTIES 39 5.1. Corporate Existence and Standing 39 5.2. Authorization and Validity 39 5.3. Compliance with Laws and Contracts 39 5.4. Governmental Consents 40 5.5. Financial Statements 40 5.6. Material Adverse Change 40 5.7. Taxes 40 5.8. Litigation and Contingent Obligations 41 5.9. Subsidiaries and Capitalization 41 5.10. ERISA 41 5.11. Defaults 42 5.12. Federal Reserve Regulations 42 5.13. Investment Company; Public Utility Holding Company Act 42 5.14. Certain Fees 42 5.15. Solvency 42 5.16. Ownership of Properties 43 5.17. Indebtedness 43 5.18. Subordinated Indebtedness 43 5.19. Employee Controversies 43 5.20. Material Agreements 43 5.22. Environmental Laws 44
-ii- 4 5.23. Insurance 44 5.24. Disclosure 44 ARTICLE VICOVENANTS 44 6.1. Financial Reporting 44 6.2. Use of Proceeds 46 6.3. Notice of Default. 46 6.4. Conduct of Business 46 6.5. Taxes 46 6.6. Insurance 46 6.7. Compliance with Laws 46 6.8. Maintenance of Properties 47 6.9. Inspection 47 6.10. Capital Stock and Dividends 47 6.11. Indebtedness 47 6.12. Merger 48 6.13. Sale of Assets 48 6.14. Sale of Accounts 48 6.15. Investments and Purchases 48 6.16. Contingent Obligations 49 6.17. Liens 49 6.18. Lease Rentals 50 6.19. Affiliates 50 6.20. Subordinated Indebtedness; Other Indebtedness 51 6.21. Environmental Matters 51 6.22. Change in Corporate Structure; Fiscal Year 51 6.23. Inconsistent Agreements 51 6.24. Financial Covenants 51 6.24.1. Adjusted Net Worth 51 6.24.2. Leverage Ratio 52 6.24.3. Interest Expense Coverage Ratio 52 6.25. ERISA Compliance 52 6.26. Material Subsidiaries 53 ARTICLE VII DEFAULTS 53 ARTICLE VIII ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES 54 8.1. Acceleration 54 8.2. Amendments 55 8.3. Preservation of Rights 56
-iii- 5 ARTICLE IX GENERAL PROVISIONS 56 9.1. Survival of Representations 56 9.2. Governmental Regulation 56 9.3. Taxes 56 9.4. Headings 56 9.5. Entire Agreement 56 9.6. Several Obligations; Benefits of this Agreement 57 9.7. Expenses; Indemnification 57 9.8. Numbers of Documents 57 9.9. Accounting 57 9.10. Severability of Provisions 57 9.11. Nonliability of Lenders 58 9.12. CHOICE OF LAW 58 9.13. CONSENT TO JURISDICTION 58 9.14. WAIVER OF JURY TRIAL 58 9.15. Disclosure 59 9.16. Counterparts 59 9.17. Confidentiality 59 ARTICLE X THE AGENT 59 10.1. Appointment 59 10.2. Powers 60 10.3. General Immunity 60 10.4. No Responsibility for Loans, Recitals, etc. 60 10.5. Action on Instructions of Lenders 60 10.6. Employment of Agents and Counsel 60 10.7. Reliance on Documents; Counsel 61 10.8. Agent's Reimbursement and Indemnification 61 10.9. Notice of Default 61 10.10. Rights as a Lender 61 10.11. Lender Credit Decision 61 10.12. Successor Agent 62 ARTICLE XI SETOFF; RATABLE PAYMENTS 62 11.1. Setoff 62 11.2. Ratable Payments 62
-iv- 6 ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS 63 12.1. Successors and Assigns 63 12.2. Participations. 63 12.2.1. Permitted Participants; Effect. 63 12.2.2. Voting Rights 64 12.2.3. Benefit of Setoff 64 12.3. Assignments 64 12.3.1. Permitted Assignments 64 12.3.2. Effect; Effective Date 64 12.4. Dissemination of Information 64 12.5. Tax Treatment 65 ARTICLE XIII NOTICES 65 13.1. Giving Notice 65 13.2. Change of Address 65 -v- 7 EXHIBITS Exhibit A - Note (Ratable Loan) Exhibit B - Note (Competitive Bid Loan) Exhibit C - Competitive Bid Quote Request Exhibit D - Invitation for Competitive Bid Quotes Exhibit E - Competitive Bid Quote Exhibit F - Note (Swing Line Loan) Exhibit G - Compliance Certificate Exhibit H - Assignment Agreement SCHEDULES Schedule 5.5 - Borrower Consolidated Pro Forma Schedule 5.8 - Material Contingent Obligations Schedule 5.9 - Subsidiaries and Capitalization Schedule 5.10 - ERISA Schedule 5.14 - Brokers' Fees Schedule 5.16 - Properties Schedule 5.17 - Indebtedness Schedule 6.15 - Investments Schedule 6.17 - Liens -vi- 8 CREDIT AGREEMENT This Credit Agreement, dated as of January 31, 1997, is among RALCORP HOLDINGS, INC., a Missouri corporation, the Lenders and THE FIRST NATIONAL BANK OF CHICAGO, individually and as Agent. R E C I T A L S: A. The Borrower has requested the Lenders to make financial accommodations to it in the aggregate principal amount of $50,000,000, the proceeds of which the Borrower will use for the general corporate needs of the Borrower and its Subsidiaries. A. The Lenders are willing to extend such financial accommodations on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the mutual covenants and undertakings herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrower, the Lenders and the Agent hereby agree as follows: I. ARTICLE DEFINITIONS As used in this Agreement: "Absolute Rate" means, with respect to an Absolute Rate Loan made by a given Lender for the relevant Absolute Rate Interest Period, the rate of interest per annum (rounded to the nearest 1/100 of 1%) offered by such Lender and accepted by the Borrower. "Absolute Rate Advance" means a borrowing hereunder consisting of the aggregate amount of the several Absolute Rate Loans made by some or all of the Lenders to the Borrower at the same time and for the same Interest Period. "Absolute Rate Auction" means a solicitation of Competitive Bid Quotes setting forth Absolute Rates pursuant to Section 2.3. "Absolute Rate Interest Period" means, with respect to an Absolute Rate Advance, a period of not less than 7 and not more than 180 days commencing on a Business Day selected by the Borrower pursuant to this Agreement. If such Absolute Rate Interest -1- 9 Period would end on a day which is not a Business Day, such Absolute Rate Interest Period shall end on the next succeeding Business Day. "Absolute Rate Loan" means a Loan which bears interest at the Absolute Rate. "Adjusted Net Income" means, for any computation period (a) Net Income for such period, minus (plus) (b) earnings (losses) during such period attributable to the equity investment by the Borrower and its Subsidiaries in Vail Resorts, Inc. and included in the computation of Net Income for such period, plus (c) to the extent not included in the computation of Net Income for such period, the sum of all proceeds in excess of book value (net of related costs, expenses, fees and taxes) received by the Borrower or any Subsidiary of the Borrower during such period from the sale or other disposition of the capital stock of Vail Resorts, Inc. "Adjusted Net Worth" means at any date (a) Net Worth minus (b) the value of the equity investment of the Borrower and its Subsidiaries in Vail Resorts, Inc. included in the computation of Net Worth at such date. "Advance" means a borrowing hereunder consisting of the aggregate amount of the several Loans made by some or all of the Lenders to the Borrower on the same Borrowing Date, of the same Type (or on the same interest basis in the case of Competitive Bid Advances) and, when applicable, for the same Interest Period and includes a Competitive Bid Advance and a Swing Line Loan. "Affiliate" of any Person means any other Person directly or indirectly controlling, controlled by or under common control with such Person. A Person shall be deemed to control another Person if the controlling Person owns 10% or more of any class of voting securities (or other ownership interests) of the controlled Person or possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of stock, by contract or otherwise. "Agent" means First Chicago in its capacity as agent for the Lenders pursuant to Article X, and not in its individual capacity as a Lender, and any successor Agent appointed pursuant to Article X. "Aggregate Commitment" means the aggregate of the Commitments of all the Lenders hereunder. The initial Aggregate Commitment is $50,000,000. "Agreement" means this Credit Agreement, as it may be amended, modified or restated and in effect from time to time. "Agreement Accounting Principles" means generally accepted accounting principles as in effect from time to time, applied in a manner consistent with those used in preparing the Financial Statements; provided, however, that for purposes of all computations required to be made with respect to compliance by the Borrower with -2- 10 Section 6.24, such term shall mean generally accepted accounting principles as in effect on the date hereof, applied in a manner consistent with those used in preparing the Financial Statements. "Alternate Base Rate" means, for any day, a rate of interest per annum equal to the sum of (a) the higher of (i) the Corporate Base Rate for such day and (ii) the sum of the Federal Funds Effective Rate for such day plus 1/2% per annum plus (b) except in the case of Swing Line Loans, the Utilization Margin for such day. "Alternate Base Rate Advance" means a Ratable Advance which bears interest at the Alternate Base Rate. "Alternate Base Rate Loan" means a Ratable Loan which bears interest at the Alternate Base Rate. "Alternate Swing Line Rate" means a rate agreed upon from time to time by the Borrower and the Swing Line Lender. "Applicable Commitment Fee Percentage" means, subject to the last sentence of this definition, for any period, the applicable of the following percentages in effect with respect to such period as the Leverage Ratio shall fall within the indicated ranges: Leverage Ratio Applicable Commitment Fee - --------------------------------------------------------------------------- Percentage - ---------- Greater than But less than or Equal to - ------------ ------------------------- 2.0:1.0 ------- .20% 1.0:1.0 2.0:1.0 .175% .5:1.0 1.0:1.0 .15% -- .5:1.0 .125% The Leverage Ratio shall be calculated by the Borrower as of the end of each of its Fiscal Quarters commencing June 30, 1997 and shall be reported to the Agent pursuant to a certificate executed by the chief financial officer, treasurer or controller of the Borrower and delivered in accordance with Section 6.1(d) hereof. The Applicable Commitment Fee Percentage shall be adjusted, if necessary, quarterly as of the tenth day after the required delivery date for the certificate referenced above; provided, that if such certificate, together with the financial statements to which such certificate relates, are not delivered by such tenth day, then the Applicable Commitment Fee Percentage shall be equal to .20% for the relevant quarter. Until adjusted as described above after June 30, 1997 the Applicable Commitment Fee Percentage shall be equal to .175%. "Applicable Eurodollar Margin" means, subject to the last sentence of this definition, for any period, the applicable of the following percentages in effect with respect to such period as the Leverage Ratio shall fall within the indicated ranges: -3- 11 Leverage Ratio Applicable Eurodollar Margin --------------------------------------------------------------------------- Greater than But less than or Equal to ------------ ------------------------- 2.0:1.0 ------- .625% 1.0:1.0 2.0:1.0 .50% .5:1.0 1.0:1.0 .375% -- .5:1.0 .25% The Leverage Ratio shall be calculated by the Borrower as of the end of each of its Fiscal Quarters commencing June 30, 1997 and shall be reported to the Agent pursuant to a certificate executed by the chief financial officer, treasurer or controller of the Borrower and delivered in accordance with Section 6.1(d) hereof. The Applicable Eurodollar Margin shall be adjusted, if necessary, quarterly as of the tenth day after the required delivery date for the certificate referenced above; provided, that if such certificate, together with the financial statements to which such certificate relates, are not delivered by such tenth day, then the Applicable Eurodollar Margin shall be equal to .625% for the relevant quarter. Until adjusted as described above after June 30, 1997, the Applicable Eurodollar Margin shall be equal to .50%. "Arranger" means First Chicago Capital Markets, Inc. and its successors. "Article" means an article of this Agreement unless another document is specifically referenced. "Asset Disposition" means any sale, transfer or other disposition of any asset of the Borrower or any Subsidiary in a single transaction or in a series of related transactions (other than the sale of inventory or unused or obsolete equipment in the ordinary course). "Authorized Officer" means any of the president, chief financial officer, treasurer or controller of the Borrower, acting singly. "Bankruptcy Code" means Title 11, United States Code, sections 1 et seq., as the same may be amended from time to time, and any successor thereto or replacement therefor which may be hereafter enacted. "Borrower" means Ralcorp Holdings, Inc., a Missouri corporation formerly known as New Ralcorp Holdings, Inc., and its successors and assigns. "Borrowing Date" means a date on which an Advance is made or a Facility Letter of Credit is issued hereunder. "Business Day" means (a) with respect to any borrowing, payment or rate selection of Eurodollar Advances, a day (other than a Saturday or Sunday) on which banks generally are open in Chicago for the conduct of substantially all of their commercial lending activities and on which dealings in United States dollars are carried -4- 12 on in the London interbank market, and (b) for all other purposes, a day (other than a Saturday or Sunday) on which banks generally are open in Chicago for the conduct of substantially all of their commercial lending activities. "Capitalized Lease" of a Person means any lease of Property by such Person as lessee which would be capitalized on a balance sheet of such Person prepared in accordance with Agreement Accounting Principles. "Capitalized Lease Obligations" of a Person means the amount of the obligations of such Person under Capitalized Leases which would be shown as a liability on a balance sheet of such Person prepared in accordance with Agreement Accounting Principles. "Change" is defined in Section 3.2. "Change in Control" means (a) the acquisition by any Person, or two or more Persons acting in concert, including without limitation any acquisition effected by means of any transaction contemplated by Section 6.12, of beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934) of 20% or more of the outstanding shares of voting stock of the Borrower, or (b) during any period of 25 consecutive calendar months, commencing on the date of this Agreement, the ceasing of those individuals (the "Continuing Directors") who (i) were directors of the Borrower on the first day of each such period or (ii) subsequently became directors of the Borrower and whose initial election or initial nomination for election subsequent to that date was approved by a majority of the Continuing Directors then on the board of directors of the Borrower, to constitute a majority of the board of directors of the Borrower. "Code" means the Internal Revenue Code of 1986, as amended, reformed or otherwise modified from time to time. "Commercial Letter of Credit" means a trade or commercial Facility Letter of Credit issued by an Issuer pursuant to Section 2.19 hereof. "Commitment" means, for each Lender, the obligation of such Lender to make Loans (other than Swing Line Loans) and participate in Facility Letters of Credit not exceeding the amount set forth opposite its signature below and as set forth in any Notice of Assignment relating to any assignment which has become effective pursuant to Section 12.3.2, as such amount may be modified from time to time pursuant to the terms hereof. "Competitive Bid Advance" means a borrowing hereunder consisting of the aggregate amount of the several Competitive Bid Loans made by some or all of the Lenders to the Borrower at the same time and for the same Interest Period. "Competitive Bid Borrowing Notice" is defined in Section 2.3.6. -5- 13 "Competitive Bid Loan" means a Eurodollar Bid Rate Loan or an Absolute Rate Loan, or both, as the case may be. "Competitive Bid Margin" means the margin above or below the applicable Eurodollar Base Rate offered for a Eurodollar Bid Rate Loan, expressed as a percentage (rounded to the nearest 1/100 of 1%) to be added or subtracted from such Eurodollar Base Rate. "Competitive Bid Note" means a promissory note in substantially the form of Exhibit B hereto, with appropriate insertions, duly executed and delivered to the Agent by the Borrower for the account of a Lender and payable to the order of such Lender, including any amendment, modification, renewal or replacement of such promissory note. "Competitive Bid Quote" means a Competitive Bid Quote substantially in the form of Exhibit E hereto completed and delivered by a Lender to the Agent in accordance with Section 2.3.4. "Competitive Bid Quote Request" means a Competitive Bid Quote Request substantially in the form of Exhibit C hereto completed and delivered by the Borrower to the Agent in accordance with Section 2.3.2. "Condemnation" is defined in Section 7.8. "Consolidated" or "consolidated", when used in connection with any calculation, means a calculation to be determined on a consolidated basis for the Borrower and its Subsidiaries in accordance with Agreement Accounting Principles. "Consolidated Person" means, for the taxable year of reference, each Person which is a member of the affiliated group of the Borrower if Consolidated returns are or shall be filed for such affiliated group for federal income tax purposes or any combined or unitary group of which the Borrower is a member for state income tax purposes. "Contingent Obligation" of a Person means any agreement, undertaking or arrangement by which such Person assumes, guarantees, endorses, contingently agrees to purchase or provide funds for the payment of, or otherwise becomes or is contingently liable upon, the obligation or liability of any other Person, or agrees to maintain the net worth or working capital or other financial condition of any other Person, or otherwise assures any creditor of such other Person against loss, including, without limitation, any comfort letter, operating agreement or take-or-pay contract or application for a Letter of Credit. "Controlled Group" means all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower or any of its Subsidiaries, are treated as a single employer under Section 414 of the Code. -6- 14 "Conversion/Continuation Notice" is defined in Section 2.9. "Corporate Base Rate" means a rate per annum equal to the corporate base rate of interest announced by First Chicago from time to time, changing when and as said corporate base rate changes. The Corporate Base Rate is a reference rate and does not necessarily represent the lowest or best rate of interest actually charged to any customer. First Chicago may make commercial loans or other loans at rates of interest at, above or below the Corporate Base Rate. "Default" means an event described in Article VII. "Divestitures" means collectively, the sale by Old Ralcorp of its brand-name cereal and snack food businesses to General Mills Missouri, Inc. and the sale by the Borrower of stock of Ralston Resorts, Inc. to Vail Resorts, Inc. "EBIT" means, for any applicable computation period, the Borrower's and Subsidiaries' Net Income on a consolidated basis, plus (a) Federal, state, local and foreign income and franchise taxes paid or accrued during such period and (b) interest expenses paid or accrued during such period. "EBITDA" means, for any applicable computation period, the Borrower's and Subsidiaries' Net Income on a consolidated basis, plus (a) Federal, state, local and foreign income and franchise taxes paid or accrued during such period, (b) interest expenses paid or accrued during such period, and (c) amortization and depreciation deducted in determining Net Income for such period. "Environmental Claims" means all claims, investigations, litigation, administrative proceedings, notices, requests for information, whether pending or threatened, or judgements or orders, however asserted, by any Governmental Authority or other Person alleging potential liability or responsibility for any violation of any Environmental Laws, or for any Release or injury to the environment. "Environmental Laws" means all federal, state and local laws, statutes, common law duties, rules, regulations, ordinances and codes, together with all administrative orders, direct duties, requests, licenses, approvals, certificates, decrees, standards, permits and other authorizations of, and agreements with, any Governmental Authority, in each case relating to environmental, health, safety and land use matters, including without limitations, chemical substances, air emissions, effluent discharges and the storage, treatment, transport and disposal of Hazardous Materials. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. "Eurodollar Advance" means a Eurodollar Bid Rate Advance or a Eurodollar Ratable Advance, or both, as the case may be. -7- 15 "Eurodollar Auction" means a solicitation of Competitive Bid Quotes setting forth Eurodollar Bid Rates pursuant to Section 2.3. "Eurodollar Base Rate" means, with respect to a Eurodollar Advance for the relevant Eurodollar Interest Period, the rate determined by the Agent to be the rate at which deposits in U.S. dollars are offered by First Chicago to first-class banks in the London interbank market at approximately 11 a.m. (London time) two Business Days prior to the first day of such Eurodollar Interest Period, in the approximate amount of First Chicago's relevant Eurodollar Ratable Loan (or in the case of a Eurodollar Bid Rate Advance, in an amount comparable to the amount of such Advance) and having a maturity approximately equal to such Eurodollar Interest Period; provided, that the Eurodollar Base Rate for a Eurodollar Ratable Advance having a seven day Interest Period shall be determined by reference to a maturity of one month. "Eurodollar Bid Rate" means, with respect to a Eurodollar Bid Rate Loan made by a given Lender for the relevant Eurodollar Interest Period, the sum of (a) the Eurodollar Base Rate and (b) the Competitive Bid Margin offered by such Lender and accepted by the Borrower. "Eurodollar Bid Rate Advance" means a Competitive Bid Advance which bears interest at a Eurodollar Bid Rate. "Eurodollar Bid Rate Loan" means a Loan which bears interest at the Eurodollar Bid Rate. "Eurodollar Interest Period" means, with respect to a Eurodollar Ratable Advance or a Eurodollar Bid Rate Advance, a period of seven days or one, two, three or six months commencing on a Business Day selected by the Borrower pursuant to this Agreement. A Eurodollar Interest Period of one, two, three or six months shall end on (but exclude) the day which corresponds numerically to such date one, two, three or six months thereafter; provided, however, that if there is no such numerically corresponding day in such next, second, third or sixth succeeding month, such Eurodollar Interest Period shall end on the last Business Day of such next, second, third or sixth succeeding month. If a Eurodollar Interest Period would otherwise end on a day which is not a Business Day, such Eurodollar Interest Period shall end on the next succeeding Business Day; provided, however, that if, with respect to a Eurodollar Default Period of one, two, three or six month, said next succeeding Business Day falls in a new month, such Eurodollar Interest Period shall end on the immediately preceding Business Day. "Eurodollar Loan" means a Eurodollar Ratable Loan or Eurodollar Bid Rate Loan, or both, as the case may be. "Eurodollar Ratable Advance" means an Advance which bears interest at a Eurodollar Rate requested by the Borrower pursuant to Section 2.2.3. -8- 16 "Eurodollar Ratable Loan" means a Loan requested by the Borrower pursuant to Section 2.2.3 which bears interest at a Eurodollar Rate. "Eurodollar Rate" means, with respect to a Eurodollar Ratable Advance for the relevant Eurodollar Interest Period, the sum of (a) the quotient of (i) the Eurodollar Base Rate applicable to such Eurodollar Interest Period, divided by (ii) one minus the Reserve Requirement (expressed as a decimal) applicable to such Eurodollar Interest Period, plus (b) the Applicable Eurodollar Margin plus (c) the Utilization Margin plus (d) only in the case of Eurodollar Ratable Advances having a seven day Interest Period, .125%. The Eurodollar Rate shall be rounded to the next higher multiple of 1/16 of 1% if the rate is not such a multiple. "Facility Letter of Credit" means a Letter of Credit issued pursuant to Section 2.19. "Facility Letter of Credit Obligations" means as at the time of determination thereof, the sum of (a) the Reimbursement Obligations then outstanding and (b) the aggregate then undrawn face amount of the then outstanding Facility Letters of Credit. "Facility Letter of Credit Sublimit" means an aggregate amount of $10,000,000. "Facility Termination Date" means January 31, 2000, as such date may be extended pursuant to Section 2.20. "Federal Funds Effective Rate" means, for any day, an interest rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published for such day (or, if such day is not a Business Day, for the immediately preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations at approximately 10 a.m. (Chicago time) on such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by the Agent in its sole discretion. "Financial Statements" is defined in Section 5.5. "First Chicago" means The First National Bank of Chicago in its individual capacity, and its successors. "Fiscal Quarter" means one of the four three-month accounting periods comprising a Fiscal Year. "Fiscal Year" means the twelve-month accounting period ending September 30 of each year. -9- 17 "Form 10" means the Registration Statement on Form 10 for Ralcorp Holdings, Inc. dated December 27, 1996. "Governmental Authority" means any government (foreign or domestic) or any state or other political subdivision thereof or any governmental body, agency, authority, department or commission (including without limitation any taxing authority or political subdivision) or any instrumentality or officer thereof (including without limitation any court or tribunal) exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and any corporation, partnership or other entity directly or indirectly owned or controlled by or subject to the control of any of the foregoing. "Guarantors" means Bremner, Inc., Beech-Nut Nutrition Corporation and each other Material Subsidiary. "Hazardous Materials" means any toxic or hazardous waste, substance or chemical or any pollutant, contaminant, chemical or other substance defined or regulated pursuant to any Environmental Laws, including, without limitation, asbestos, petroleum or crude oil. "Indebtedness" of a Person means such Person's (a) obligations for borrowed money, (b) obligations representing the deferred purchase price of Property or services (other than accounts payable arising in the ordinary course of such Person's business payable on terms customary in the trade), (c) obligations, whether or not assumed, secured by Liens or payable out of the proceeds or production from Property now or hereafter owned or acquired by such Person, (d) obligations which are evidenced by notes, acceptances, or similar instruments, (e) Capitalized Lease Obligations, (f) Rate Hedging Obligations, (g) Contingent Obligations, (h) obligations for which such Person is obligated pursuant to or in respect of a Facility Letter of Credit and the face amount of any other Letter of Credit, (i) obligations under so-called "synthetic leases" and (j) repurchase obligations or liabilities of such Person with respect to accounts or notes receivable sold by such Person. "Interest Expense Coverage Ratio" means for any applicable computation period of the Borrower, the ratio of EBIT to the Borrower's and its Subsidiaries' gross interest expenses on a consolidated basis for such period, all as determined in accordance with Agreement Accounting Principles. "Interest Period" means a Eurodollar Interest Period or an Absolute Rate Interest Period. Notwithstanding the foregoing, each Swing Line Loan bearing interest at the Alternate Swing Line Rate shall be deemed to have an Interest Period of from one to seven days as agreed upon between the Borrower and the Swing Line Lender. "Investment" of a Person means any loan, advance (other than commission, travel and similar advances to officers and employees made in the ordinary course of business), extension of credit (other than accounts receivable arising in the ordinary course of -10- 18 business on terms customary in the trade), deposit account or contribution of capital by such Person to any other Person or any investment in, or purchase or other acquisition of, the stock, partnership interests, notes, debentures or other securities of any other Person made by such Person. "Invitation for Competitive Bid Quotes" means an Invitation for Competitive Bid Quotes substantially in the form of Exhibit D hereto, completed and delivered by the Agent to the Lenders in accordance with Section 2.3.3. "Issuance Request" is defined in Section 2.19.4. "Issuer" means First Chicago. "Lenders" means the lending institutions listed on the signature pages of this Agreement and their respective successors and assigns. "Lending Installation" means, with respect to a Lender or the Agent, any office, branch, subsidiary or affiliate of such Lender or the Agent. "Letter of Credit" of a Person means a letter of credit or similar instrument which is issued upon the application of such Person or upon which such Person is an account party or for which such Person is in any way liable. "Letter of Credit Cash Collateral Account" is defined in Section 8.1. Such account and the related cash collateralization shall be subject to documentation satisfactory to the Agent. "Leverage Ratio" means, with respect to the Borrower on a consolidated basis with its Subsidiaries, at the end of any Fiscal Quarter, the ratio of (a) Total Debt at the end of such Fiscal Quarter to (b) EBITDA (i) for the two months ending March 31, 1997 multiplied by 6 in the case of the Fiscal Quarter ending on such date, (ii) for the five months ending June 30, 1997 multiplied by 12/5 in the case of the Fiscal Quarter ending on such date, (iii) for the eight months ending September 30, 1997 multiplied by 3/2 in the case of the Fiscal Quarter ending on such date, (iv) for the eleven months ending December 31, 1997 multiplied by 12/11 in the case of the Fiscal Quarter ending on such date and (v) for the four Fiscal Quarters then ending in the case of each Fiscal Quarter ending thereafter. "Lien" means any security interest, lien (statutory or other), mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, the interest of a vendor or lessor under any conditional sale, Capitalized Lease or other title retention agreement). "Loan" means, with respect to a Lender, such Lender's portion of any Advance and "Loans" means, with respect to the Lenders, the aggregate of all Advances. The terms "Loan" and "Loans" shall also include any Swing Line Loans. -11- 19 "Loan Documents" means this Agreement, the Notes, the Reimbursement Agreements and the other documents and agreements contemplated hereby and executed by the Borrower in favor of the Agent or any Lender. "Margin Stock" has the meaning assigned to that term under Regulation U. "Material Adverse Effect" means a material adverse effect on (a) the business, Property, condition (financial or other) and results of operations of the Borrower and its Subsidiaries taken as a whole, (b) the ability of the Borrower to perform its obligations under the Loan Documents, or (c) the validity or enforceability of any of the Loan Documents or the rights or remedies of the Agent or the Lenders thereunder. "Material Subsidiary" means a Subsidiary of the Borrower organized under the laws of a jurisdiction located within the United States and at any time having assets with a fair market value in excess of $10,000,000. "Moody's" means Moody's Investor Services, Inc. "Net Income" means, for any computation period, with respect to the Borrower on a consolidated basis with its Subsidiaries (other than any Subsidiary which is restricted from declaring or paying dividends or otherwise advancing funds to its parent whether by contract or otherwise), cumulative net income earned during such period as determined in accordance with Agreement Accounting Principles, but excluding any non-cash charges or gains which are unusual, non-recurring or extraordinary. "Net Worth" means at any date the consolidated common stockholders' equity of the Borrower and its consolidated Subsidiaries determined in accordance with Agreement Accounting Principles. "Notes" means, collectively, the Competitive Bid Notes, the Ratable Notes and the Swing Line Note; and "Note" means any one of the Notes. "Notice of Assignment" is defined in Section 12.3.2. "Obligations" means all unpaid principal of and accrued and unpaid interest on the Notes, the Facility Letter of Credit Obligations and all other liabilities (if any), whether actual or contingent, of the Borrower with respect to Facility Letters of Credit, all accrued and unpaid fees and all expenses, reimbursements, indemnities and other obligations of the Borrower to the Lenders or to any Lender, the Agent or any indemnified party hereunder arising under any of the Loan Documents. "Old Ralcorp" means the Missouri corporation named Ralcorp Holdings, Inc., which was merged with General Mills Missouri, Inc. on January 31, 1997. "Participants" is defined in Section 12.2.1. -12- 20 "Payment Date" means the last day of each March, June, September and December. "PBGC" means the Pension Benefit Guaranty Corporation or any successor thereto. "Person" means any natural person, corporation, firm, joint venture, partnership, association, enterprise, limited liability company, trust or other entity or organization, or any government or political subdivision or any agency, department or instrumentality thereof. "Plan" means an employee pension benefit plan, as defined in Section 3(2) of ERISA, as to which the Borrower or any member of the Controlled Group may have any liability. "Property" of a Person means any and all property, whether real, personal, tangible, intangible, or mixed, of such Person, or other assets owned, leased or operated by such Person. "Pro Forma" is defined in Section 5.5. "pro-rata" means, when used with respect to a Lender, and any described aggregate or total amount, an amount equal to such Lender's pro-rata share or portion based on its percentage of the Aggregate Commitment or if the Aggregate Commitment has been terminated, its percentage of the aggregate principal amount of outstanding Advances and Facility Letter of Credit Obligations. "Purchase" means any transaction, or any series of related transactions, consummated on or after the date of this Agreement, by which the Borrower or any of its Subsidiaries (a) acquires any going business or all or substantially all of the assets of any firm, corporation or division or line of business thereof, whether through purchase of assets, merger or otherwise, or (b) directly or indirectly acquires (in one transaction or as the most recent transaction in a series of transactions) at least a majority (in number of votes) of the securities of a corporation which have ordinary voting power for the election of directors (other than securities having such power only by reason of the happening of a contingency) or a majority (by percentage or voting power) of the outstanding partnership interests of a partnership. "Purchasers" is defined in Section 12.3.1. "Ralston Obligations" means the indemnification obligations of the Borrower existing on the date hereof in favor of Ralston Purina Company with respect to its guaranty of the obligations of Ralston Resorts, Inc. under the Sports Facilities Refunding Revenue Bonds identified on Schedule 5.8. -13- 21 "Ratable Advance" means a borrowing hereunder consisting of the aggregate amount of the several Ratable Loans made by the Lenders to the Borrower at the same time, of the same Type and for the same Interest Period. "Ratable Borrowing Notice" is defined in Section 2.2.3. "Ratable Loan" means a Loan made by a Lender pursuant to Section 2.2 hereof. "Ratable Note" means a promissory note in substantially the form of Exhibit A hereto, duly executed and delivered to the Agent by the Borrower for the account of each Lender and payable to the order of a Lender in the amount of its Commitment, including any amendment, modification, renewal or replacement of such promissory note. "Rate Hedging Obligations" of a Person means any and all obligations of such Person, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (a) any and all agreements, devices or arrangements designed to protect at least one of the parties thereto from the fluctuations of interest rates, exchange rates or forward rates applicable to such party's assets, liabilities or exchange transactions, including, but not limited to, dollar-denominated or cross-currency interest rate exchange agreements, forward currency exchange agreements, interest rate cap or collar protection agreements, forward rate currency or interest rate options, puts and warrants, and (b) any and all cancellations, buybacks, reversals, terminations or assignments of any of the foregoing. "Regulation D" means Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor thereto or other regulation or official interpretation of said Board of Governors relating to reserve requirements applicable to depositary institutions. "Regulation G" means Regulation G of the Board of Governors of the Federal Reserve System as from time to time in effect and shall include any successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by Persons other than banks, brokers and dealers for the purpose of purchasing or carrying margin stocks applicable to such Persons. "Regulation T" means Regulation T of the Board of Governors of the Federal Reserve System as from time to time in effect and shall include any successor or other regulation or official interpretation of such Board of Governors relating to the extension of credit by securities brokers and dealers for the purpose of purchasing or carrying margin stocks applicable to such Persons. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by banks for the purpose of purchasing or carrying margin stocks applicable to such Persons. -14- 22 "Regulation X" means Regulation X of the Board of Governors of the Federal Reserve System as from time to time in effect and shall include any successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by the specified lenders for the purpose of purchasing or carrying margin stocks applicable to such Persons. "Reimbursement Agreement" means a letter of credit application and reimbursement agreement in such form as the Issuer may from time to time employ in the ordinary course of business. "Reimbursement Obligations" means, at any time, the aggregate (without duplication) of the Obligations of the Borrower to the Lenders, the Issuer and/or the Agent in respect of all unreimbursed payments or disbursements made by the Lenders, the Issuer and/or the Agent under or in respect of draws made under the Facility Letters of Credit. "Release" is defined in the Comprehensive Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C. 39601 et seq. "Rentals" of a Person means the aggregate fixed amounts payable by such Person under any operating lease of Property. "Reportable Event" means a reportable event as defined in Section 4043 of ERISA and the regulations issued under such section, with respect to a Plan, excluding, however, such events as to which the PBGC has by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of such event; provided, that a failure to meet the minimum funding standard of Section 412 of the Code and of Section 302 of ERISA shall be a Reportable Event regardless of the issuance of any such waiver of the notice requirement in accordance with either Section 4043(a) of ERISA or Section 412(d) of the Code. "Required Lenders" means Lenders in the aggregate having at least 66-2/3% of the Aggregate Commitment or, if the Aggregate Commitment has been terminated, 66-2/3% of the sum of (a) the aggregate unpaid principal amount of the outstanding Loans plus (b) the aggregate amount of the outstanding Facility Letter of Credit Obligations. "Reserve Requirement" means, with respect to an Interest Period, the maximum aggregate reserve requirement (including all basic, supplemental, marginal and other reserves) which is imposed under Regulation D on Eurocurrency liabilities. "Risk-Based Capital Guidelines" is defined in Section 3.2. "S&P" means Standard & Poor's Ratings Group, a division of the McGraw-Hill Companies. -15- 23 "Section" means a numbered section of this Agreement, unless another document is specifically referenced. "Single Employer Plan" means a Plan subject to Title IV of ERISA maintained by the Borrower or any member of the Controlled Group for employees of the Borrower or any member of the Controlled Group, other than a Multiemployer Plan. "Solvent" means, when used with respect to a Person, that (a) the fair saleable value of the assets of such Person is in excess of the total amount of the present value of its liabilities (including for purposes of this definition all liabilities (including loss reserves as determined by such Person), whether or not reflected on a balance sheet prepared in accordance with Agreement Accounting Principles and whether direct or indirect, fixed or contingent, secured or unsecured, disputed or undisputed), (b) such Person is able to pay its debts or obligations in the ordinary course as they mature and (c) such Person does not have unreasonably small capital to carry out its business as conducted and as proposed to be conducted. "Solvency" shall have a correlative meaning. "Standby Letter of Credit" means a Facility Letter of Credit which is not a Commercial Letter of Credit. "Subordinated Indebtedness" of a Person means any Indebtedness of such Person the payment of which is subordinated to payment of the Obligations to the written satisfaction of the Agent. "Subsidiary" of a Person means (a) any corporation more than 50% of the outstanding securities having ordinary voting power of which shall at the time be owned or controlled, directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries, or (b) any partnership, association, joint venture, limited liability company or similar business organization more than 50% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled. Unless otherwise expressly provided, all references herein to a "Subsidiary" shall mean a Subsidiary of the Borrower. "Subsidiary Guaranty" means that certain Guaranty, dated as of the date hereof, duly executed and delivered by the Guarantors in favor of the Agent, on behalf of the Lenders, as the same may be amended, supplemented or otherwise modified from time to time. "Substantial Portion" means, with respect to the Property of the Borrower and its Subsidiaries, Property which (a) represents more than 15% of the consolidated tangible assets of the Borrower and its Subsidiaries, as would be shown in the consolidated financial statements of the Borrower and its Subsidiaries as at the end of the Fiscal Quarter next preceding the date on which such determination is made, or (b) is responsible for more than 5% of the consolidated Net Income from continuing operations of the Borrower and its Subsidiaries for the 12-month period ending as of the end of the Fiscal Quarter next preceding the date of determination. -16- 24 "Swing Line Lender" means First Chicago or any other Lender as a successor Swing Line Lender. "Swing Line Commitment" means the obligation of the Swing Line Lender to make Swing Line Loans hereunder in an aggregate amount at any one time outstanding not to exceed $5,000,000. The Swing Line Commitment will automatically and permanently terminate on the Facility Termination Date. "Swing Line Loan" means a Loan made by the Swing Line Lender pursuant to Section 2.4. "Swing Line Note" means a promissory note substantially in the form of Exhibit F hereto, duly executed and delivered to the Administrative Agent by the Borrower and payable to the order of the Swing Line Lender in the amount of its Swing Line Commitment, including any amendment, modification, renewal or replacement of such promissory note. "Termination Event" means, with respect to a Plan which is subject to Title IV of ERISA, (a) a Reportable Event, (b) the withdrawal of the Borrower or any other member of the Controlled Group from such Plan during a plan year in which the Borrower or any other member of the Controlled Group was a "substantial employer" as defined in Section 4001(a)(2) of ERISA or was deemed such under Section 4068(f) of ERISA, (c) the termination of such Plan, the filing of a notice of intent to terminate such Plan or the treatment of an amendment of such Plan as a termination under Section 4041 of ERISA, (d) the institution by the PBGC of proceedings to terminate such Plan or (e) any event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or appointment of a trustee to administer, such Plan. "Thomson" means Thomson BankWatch Inc. "Total Debt" means (a) all Indebtedness of the Borrower and its Subsidiaries, on a consolidated basis, reflected on a balance sheet prepared in accordance with Agreement Accounting Principles, plus, without duplication (b) the face amount of all outstanding Letters of Credit in respect of which the Borrower or any Subsidiary has any reimbursement obligation and the principal amount of all Contingent Obligations of the Borrower and its Subsidiaries minus (c) to the extent included in clause (b) above, (i) up to $15,000,000 in aggregate face or principal amount of surety bonds and Letters of Credit relating to workers' compensation and similar benefits and (ii) the Ralston Obligations. "Transferee" is defined in Section 12.4. "Type" means, with respect to any Advance, its nature as an Alternate Base Rate Advance, Eurodollar Advance or Absolute Rate Advance. -17- 25 "UCC" means the Illinois Uniform Commercial Code as amended or modified and in effect from time to time. "Unfunded Liability" means the amount (if any) by which the present value of all vested and unvested accrued benefits under a Single Employer Plan exceeds the fair market value of assets allocable to such benefits, all determined as of the then most recent valuation date for such Plans using PBGC actuarial assumptions for single employer plan terminations. "Unmatured Default" means an event which but for the lapse of time or the giving of notice, or both, would constitute a Default. "Utilization Margin" means (a) .05% at all times when the sum of the aggregate principal amount of all outstanding Loans and the aggregate amount of Facility Letter of Credit Obligations equals or exceeds 50% of the Aggregate Commitment and (b) 0% at all other times. "Wholly-Owned Subsidiary" of a Person means (a) any Subsidiary all of the outstanding voting securities of which shall at the time be owned or controlled, directly or indirectly, by such Person or one or more Wholly-Owned Subsidiaries of such Person, or by such Person and one or more Wholly-Owned Subsidiaries of such Person, or (b) any partnership, association, joint venture, limited liability company or similar business organization 100% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled. "Unrefunded Swing Line Loans" is defined in Section 2.4(d). The foregoing definitions shall be equally applicable to both the singular and plural forms of the defined terms. I. ARTICLE THE FACILITY A. The Facility. 2.1.1. Description of Facility. The Lenders hereby establish in favor of the Borrower a revolving credit facility pursuant to which, and upon the terms and subject to the conditions herein set out: 1. each Lender severally agrees to make Ratable Loans to the Borrower in accordance with Section 2.2 in amounts not to exceed in the aggregate at any one time outstanding the amount of its Commitment less (i) the amount of such Lender's pro-rata share of the outstanding principal amount of all Competitive Bid Advances (regardless of which Lender or Lenders made such -18- 26 Competitive Bid Advances) exclusive of Competitive Bid Advances being repaid substantially contemporaneously with the making of any such Ratable Loans plus (ii) the amount of such Lender's pro-rata share of the outstanding principal amount of all Swing Line Loans exclusive of Swing Line Loans being repaid substantially contemporaneously with the making of any such Ratable Loans; 1. each Lender may, in its sole discretion, make bids to make Competitive Bid Loans to the Borrower, and make such Loans, in accordance with Section 2.3; and (c) the Swing Line Lender agrees to make Swing Line Loans to the Borrower in accordance with Section 2.4. 2.1.2. Facility Amount. In no event may the sum of (a) the aggregate principal amount of all outstanding Advances (including the Ratable Advances, the Competitive Bid Advances and the Swing Line Loans) plus (b) the outstanding amount of Facility Letter of Credit Obligations at any time exceed the Aggregate Commitment. If at any time the aggregate amount of the sum of the Loans and the Facility letter of Credit Obligations exceeds the Aggregate Commitment, the Borrower shall repay immediately its then outstanding Loans (first Swing Line Loans, then Ratable Loans and then Competitive Bid Loans) in such amount as may be necessary to eliminate such excess; provided, that if an excess remains after repayment of all outstanding Loans, then the Borrower shall cash collateralize the Facility Letter of Credit Obligations by depositing into the Letter of Credit Cash Collateral Account such amount as may be necessary to eliminate such excess. 2.1.3. Availability of Facility. Subject to the terms of this Agreement, from and including the date hereof to, but not including the Facility Termination Date the Borrower may borrow, repay and reborrow Advances hereunder. All outstanding Loans and Advances and all other unpaid Obligations shall be due and payable in full by the Borrower on the Facility Termination Date. A. Ratable Advances. 2.2.1. Ratable Advances. Each Ratable Advance hereunder shall consist of borrowings made from the several Lenders ratably in proportion to the amounts of their respective Commitments. The Borrower's obligation to pay the principal of, and interest on, the Ratable Advances shall be evidenced by the Ratable Notes. Although the Ratable Notes shall be dated the date of the initial Advance, interest in respect thereof shall be payable only for the periods during which the Loans evidenced thereby are outstanding and, although the stated amount of each Ratable Note shall be equal to the applicable Lender's Commitment, each Ratable Note shall be enforceable, with respect to the Borrower's obligation to pay the principal amount thereof, only to the extent of the unpaid principal amount of the Ratable Loans at the time evidenced thereby. -19- 27 2.2.2 Ratable Advance Rate Options. The Ratable Advances may be Alternate Base Rate Advances or Eurodollar Ratable Advances, or a combination thereof, selected by the Borrower in accordance with Section 2.2.3 or 2.2.4. No Ratable Advance may mature after, or have an Interest Period which extends beyond, the Facility Termination Date. 2.2.3. Method of Selecting Types and Interest Periods for Ratable Advances. The Borrower shall select the Type of each Ratable Advance and, in the case of each Eurodollar Ratable Advance, the Eurodollar Interest Period applicable to such Ratable Advance from time to time. The Borrower shall give the Agent irrevocable notice (a "Ratable Borrowing Notice") not later than 10:00 a.m. (Chicago time) on the Borrowing Date of each Alternate Base Rate Advance and three Business Days before the Borrowing Date for each Eurodollar Ratable Advance. Notwithstanding the foregoing, a Ratable Borrowing Notice for an Alternate Base Rate Advance may be given not later than 30 minutes after the time which the Borrower is required to reject one or more bids offered in connection with an Absolute Rate Auction pursuant to Section 2.3.6 and a Ratable Borrowing Notice for a Eurodollar Ratable Advance may be given not later than 30 minutes after the time the Borrower is required to reject one or more bids offered in connection with a Eurodollar Auction pursuant to Section 2.3.6. A Ratable Borrowing Notice shall specify: 1. the Borrowing Date, which shall be a Business Day, of such Ratable Advance; 1. the aggregate amount of such Ratable Advance, which, when added to all outstanding Ratable Advances, Swing Line Loans and Competitive Bid Advances and after giving effect to the repayment of any such outstanding Advances or Loans out of the proceeds of the requested Ratable Advance, shall not exceed the Aggregate Commitment; 1. the Type of Advance selected; and 1. in the case of each Eurodollar Ratable Advance, the Eurodollar Interest Period applicable thereto (which may not end after the Facility Termination Date). 2.2.4. Conversion and Continuation of Outstanding Ratable Advances. Alternate Base Rate Advances shall continue as Alternate Base Rate Advances unless and until such Alternate Base Rate Advances are converted into Eurodollar Ratable Advances. Each Eurodollar Ratable Advance shall continue as a Eurodollar Ratable Advance until the end of the then applicable Eurodollar Interest Period therefor, at which time such Eurodollar Ratable Advance shall be automatically converted into an Alternate Base Rate Advance unless the Borrower shall have given the Agent a Conversion/Continuation Notice requesting that, at the end of such Eurodollar Interest Period, such Eurodollar Ratable Advance continue as a Eurodollar Ratable Advance for the same or another Eurodollar Interest Period. Subject to the terms of Section 2.7, the -20- 28 Borrower may elect from time to time to convert all or any part of a Ratable Advance of any Type into any other Type or Types of Ratable Advances; provided that any conversion of any Eurodollar Ratable Advance shall be made on, and only on, the last day of the Eurodollar Interest Period applicable thereto. The Borrower shall give the Agent irrevocable notice (a "Conversion/Continuation Notice") of each conversion of a Ratable Advance or continuation of a Eurodollar Ratable Advance not later than 10:00 a.m. (Chicago time) at least one Business Day, in the case of a conversion into an Alternate Base Rate Advance, or at least three Business Days, in the case of a conversion into or continuation of a Eurodollar Ratable Advance, prior to the date of the requested conversion or continuation, specifying: 1. the requested date, which shall be a Business Day, of such conversion or continuation; 1. the aggregate amount and Type of Ratable Advance which is to be converted or continued; and 1. the amount and Type(s) of Ratable Advance(s) into which such Ratable Advance is to be converted or continued and, in the case of a conversion into or continuation of an Eurodollar Ratable Advance, the duration of the Eurodollar Interest Period applicable thereto. A. Competitive Bid Advances. 2.3.1. Competitive Bid Option. In addition to Ratable Advances pursuant to Section 2.2, but subject to the terms and conditions of this Agreement (including, without limitation, the limitation set forth in Section 2.1.2 as to the maximum aggregate principal amount of all outstanding Advances and Facility Letter of Credit Obligations hereunder), prior to the Facility Termination Date the Borrower may, as set forth in this Section 2.3, request the Lenders to make offers to make Competitive Bid Advances to the Borrower. Each Lender may, but shall have no obligation to, make such offers and the Borrower may, but shall have no obligation to, accept any such offers in the manner set forth in this Section 2.3. The Borrower's obligation to pay the principal of, and interest on, the Competitive Bid Advances shall be evidenced by the Competitive Bid Notes. Although the Competitive Bid Notes shall be dated the date of the initial Advance, interest in respect thereof shall be payable only for the periods during which the Loans evidenced thereby are outstanding. Each Competitive Bid Loan shall be repaid in full by the Borrower on the last day of the Interest Period applicable thereto. 2.3.2. Competitive Bid Quote Request. When the Borrower wishes to request offers to make Competitive Bid Loans under this Section 2.3, it shall transmit to the Agent by telecopy a Competitive Bid Quote Request substantially in the form of Exhibit C hereto so as to be received no later than (a) 10:00 a.m. (Chicago time) at least five Business Days prior to the Borrowing Date proposed therein, in the case of a Eurodollar Auction or (b) 9:00 a.m. (Chicago time) at least one Business Day prior to the Borrowing Date proposed therein, in the case of an Absolute Rate Auction specifying: -21- 29 1. the proposed Borrowing Date, which shall be a Business Day, for the proposed Competitive Bid Advance; 1. the aggregate principal amount of such Competitive Bid Advance; 1. whether the Competitive Bid Quotes requested are to set forth a Eurodollar Bid Rate, an Absolute Rate, or both; and 2. the Interest Period applicable thereto (which may not end after the Facility Termination Date). The Borrower may request offers to make Competitive Bid Loans for more than one Interest Period in a single Competitive Bid Quote Request. No Competitive Bid Quote Request shall be given within 5 Business Days (or such other number of days as the Borrower and the Agent may agree) of any other Competitive Bid Quote Request. A Competitive Bid Quote Request that does not conform substantially to the format of Exhibit C hereto shall be rejected, and the Agent shall promptly notify the Borrower of such rejection by telecopy. 2.3.3. Invitation for Competitive Bid Quotes. Promptly and in any event before the close of business on the same Business Day of receipt of a Competitive Bid Quote Request that is not rejected pursuant to Section 2.3.2, the Agent shall send to each of the Lenders by telex or telecopy an Invitation for Competitive Bid Quotes substantially in the form of Exhibit D hereto, which shall constitute an invitation by the Borrower to each Lender to submit Competitive Bid Quotes offering to make the Competitive Bid Loans to which such Competitive Bid Quote Request relates in accordance with this Section 2.3. -22- 30 2.3.4. Submission and Contents of Competitive Bid Quotes. 1. Each Lender may, in its sole discretion, submit a Competitive Bid Quote containing an offer or offers to make Competitive Bid Loans in response to any Invitation for Competitive Bid Quotes. Each Competitive Bid Quote must comply with the requirements of this Section 2.3.4 and must be submitted to the Agent by telex or telecopy at its offices specified in or pursuant to Article XIII not later than (i) 9:00 a.m. (Chicago time) at least four Business Days prior to the proposed Borrowing Date, in the case of a Eurodollar Auction or (ii) 9:00 a.m. (Chicago time) on the proposed Borrowing Date, in the case of an Absolute Rate Auction (or, in either case upon reasonable prior notice to the Lenders, such other time and date as the Borrower and the Agent may agree); provided that Competitive Bid Quotes submitted by First Chicago may only be submitted if the Agent or First Chicago notifies the Borrower of the terms of the offer or offers contained therein not later than 15 minutes prior to the latest time at which the relevant Competitive Bid Quotes must be submitted by the other Lenders. Subject to Articles IV and VIII, any Competitive Bid Quote so made shall be irrevocable except with the written consent of the Agent given on the instructions of the Borrower. 1. Each Competitive Bid Quote shall be in substantially the form of Exhibit E hereto and shall in any case specify: a) the proposed Borrowing Date, which shall be the same as that set forth in the applicable Invitation for Competitive Bid Quotes; (a) the principal amount of the Competitive Bid Loan for which each such offer is being made, which principal amount may be greater than, less than or equal to the Commitment of the quoting Lender, must be at least $5,000,000 and an integral multiple of $1,000,000, and may not exceed the principal amount of Competitive Bid Loans for which offers were requested; a) in the case of a Eurodollar Auction, the Competitive Bid Margin offered for each such Competitive Bid Loan; a) the minimum amount, if any, of the Competitive Bid Loan which may be accepted by the Borrower; a) in the case of an Absolute Rate Auction, the Absolute Rate offered for each such Competitive Bid Loan; and a) the identity of the quoting Lender. -23- 31 1. The Agent shall reject any Competitive Bid Quote that: a) is not substantially in the form of Exhibit E hereto or does not specify all of the information required by Section 2.3.4(b); a) contains qualifying, conditional or similar language, other than any such language contained in Exhibit E hereto; a) proposes terms other than or in addition to those set forth in the applicable Invitation for Competitive Bid Quotes; or a) arrives after the time set forth in Section 2.3.4(a). If any Competitive Bid Quote shall be rejected pursuant to this Section 2.3.4(c), then the Agent shall promptly notify the relevant Lender of such rejection. 2.3.5. Notice to Borrower. The Agent shall promptly notify the Borrower of the terms (a) of any Competitive Bid Quote submitted by a Lender that is in accordance with Section 2.3.4 and (b) of any Competitive Bid Quote that amends, modifies or is otherwise inconsistent with a previous Competitive Bid Quote submitted by such Lender with respect to the same Competitive Bid Quote Request. Any such subsequent Competitive Bid Quote shall be disregarded by the Agent unless such subsequent Competitive Bid Quote specifically states that it is submitted solely to correct a manifest error in such former Competitive Bid Quote. The Agent's notice to the Borrower shall specify the aggregate principal amount of Competitive Bid Loans for which offers have been received for each Interest Period specified in the related Competitive Bid Quote Request and the respective principal amounts and Eurodollar Bid Rates or Absolute Rates, as the case may be, so offered. 2.3.6. Acceptance and Notice by Borrower. Not later than (a) 10:00 a.m. (Chicago time) at least three Business Days prior to the proposed Borrowing Date, in the case of a Eurodollar Auction or (b) 10:00 a.m. (Chicago time) on the proposed Borrowing Date, in the case of an Absolute Rate Auction (or, in either case upon reasonable prior notice to the Lenders, such other time and date as the Borrower and the Agent may agree), the Borrower shall notify the Agent of its acceptance or rejection of the offers so notified to it pursuant to Section 2.3.5; provided, however, that the failure by the Borrower to give such notice to the Agent shall be deemed to be a rejection of all such offers. In the case of acceptance, such notice (a "Competitive Bid Borrowing Notice") shall specify the aggregate principal amount of offers for each Interest Period that are accepted. The Borrower may accept any Competitive Bid Quote in whole or in part (subject to the terms of Section 2.3.4(b)(iv)); provided that: -24- 32 1. the aggregate principal amount of each Competitive Bid Advance may not exceed the applicable amount set forth in the related Competitive Bid Quote Request, 1. acceptance of offers may only be made on the basis of ascending Eurodollar Bid Rates or Absolute Rates, as the case may be, and 1. the Borrower may not accept any offer that is described in Section 2.3.4(c) or that otherwise fails to comply with the requirements of this Agreement. 2.3.7. Allocation by Agent. If offers are made by two or more Lenders with the same Eurodollar Bid Rates or Absolute Rates, as the case may be, for a greater aggregate principal amount than the amount in respect of which offers are accepted for the related Interest Period, the principal amount of Competitive Bid Loans in respect of which such offers are accepted shall be allocated by the Agent among such Lenders as nearly as possible (in such multiples, not greater than $1,000,000, as the Agent may deem appropriate) in proportion to the aggregate principal amount of such offers; provided, however, that no Lender shall be allocated a portion of any Competitive Bid Advance which is less than the minimum amount which such Lender has indicated that it is willing to accept. Allocations by the Agent of the amounts of Competitive Bid Loans shall be conclusive in the absence of manifest error. The Agent shall promptly, but in any event on the same Business Day, notify each Lender of its receipt of a Competitive Bid Borrowing Notice and the aggregate principal amount of such Competitive Bid Advance allocated to each participating Lender. A. Swing Line Loans. 1. On the terms and subject to the conditions and relying upon the representations and warranties herein set forth, the Swing Line Lender agrees at any time and from time to time from and including the date hereof to but excluding the earlier of the Facility Termination Date and the termination of the Commitments or the Swing Line Commitment, in accordance with the terms hereof, to make Swing Line Loans to the Borrower in an aggregate principal amount at any time outstanding not to exceed the lesser of (i) the amount of its Swing Line Commitment at such time and (ii) an amount equal to (A) the Aggregate Commitment at such time minus (B) the sum of the aggregate principal amounts of all Ratable Loans, Competitive Bid Loans and Swing Line Loans outstanding at such time. The Swing Line Loans shall be made by the Swing Line Lender, at the option of the Borrower, either at the Alternate Base Rate or at the Alternate Swing Line Rate. All Swing Line Loans shall be in a minimum amount of $1,000,000 and in any integral multiple of $100,000 if in excess thereof. In no event shall any Swing Line Loan be made hereunder if (i) the Agent and the Swing Line Lender shall have received notice from the Required Lenders prior to any such Swing Line Loan that a condition specified in Section 4.1 or 4.2 has not been satisfied and (ii) such condition shall not have been subsequently waived in compliance with Section 8.2. -25- 33 1. The Borrower shall give the Swing Line Lender (with a copy to the Agent) telephonic, written or telecopy notice (in the case of telephonic notice, such notice shall be promptly confirmed in writing or by telecopy) not later than noon, Chicago time, on the day of a proposed Swing Line Loan. Such notice shall be delivered on a Business Day, shall be irrevocable and shall refer to this Agreement and shall specify the requested Borrowing Date (which shall be a Business Day) and amount of such Swing Line Loan. 1. The Swing Line Lender shall by 2:00 p.m., Chicago time, on the requested Borrowing Date, make the requested Swing Line Loan by crediting the principal amount thereof, in immediately available funds, to the account of the Borrower maintained with the Swing Line Lender or to such other account as may be designated by the Borrower and be acceptable to the Swing Line Lender. 1. The Swing Line Loans shall be evidenced by the Swing Line Note and each Swing Line Loan shall be paid in full by the Borrower on the earlier of the Facility Termination Date and the date five Business Days after the making of such Swing Line Loan. 1. Notwithstanding the occurrence of any Default or Unmatured Default or noncompliance with the conditions precedent set forth in Article IV, if (i) by 10:00 a.m. Chicago time on the fourth Business Day following the Borrowing Date of any Swing Line Loan the Agent shall not have received a Ratable Borrowing Notice delivered by the Borrower pursuant to Section 2.2.3 requesting that Ratable Loans be made pursuant to Section 2.2 on the immediately succeeding Business Day in an amount at least equal to the aggregate principal amount of such Swing Line Loan or (ii) on any date the Swing Line Lender in its sole discretion shall so request with respect to the outstanding Swing Line Loans, the Agent shall be deemed to have received a Ratable Borrowing Notice from the Borrower pursuant to Section 2.2.3 requesting that a Ratable Advance of Alternate Base Rate Loans be made pursuant to Section 2.2 on such immediately succeeding Business Day in an amount equal to the aggregate amount of such Swing Line Loans, and the procedures set forth in Section 2.5 shall be followed in making such Alternate Base Rate Loans. The proceeds of such Alternate Base Rate Loans (or other Loans described in Section 2.4(e)(i), if requested) received by the Agent shall be immediately delivered to the Swing Line Lender and applied to the direct repayment of such Swing Line Loans to the extent thereof. Effective on the day such Ratable Loans are made, the portion of the Swing Line Loans so paid shall no longer be outstanding as Swing Line Loans and shall be outstanding as Ratable Loans of the Lenders bearing interest at a rate determined by reference to the Alternate Base Rate, in accordance with the provisions of this Article II. The Borrower authorizes the Agent and the Swing Line Lender to charge the Borrower's account maintained with the Swing Line Lender (up to the amount available in such account) in order to immediately pay the amount of the Swing Line Loans to the extent amounts received from the Lenders are not sufficient to repay in full such Swing Line Loans. If any portion of any such amount paid (or deemed paid) to the Swing Line Lender should be recovered by or on behalf of the Borrower from the Swing Line Lender in the event of the bankruptcy or reorganization of -26- 34 the Borrower or otherwise, the loss of the amount so recovered shall be ratably shared among all Lenders in the manner contemplated by Section 11.2. 1. If, for any reason (including, without limitation, the occurrence of a Default described in Section 7.6 or 7.7 of Article VII), Alternate Base Rate Loans may not be, or are not, made pursuant to paragraph (e) of this Section 2.4 to repay Swing Line Loans as required by such paragraph, effective on the date such Alternate Base Rate Loans would otherwise have been made, (i) each Lender severally, unconditionally and irrevocably agrees that it shall, without regard to the occurrence of any Unmatured Default or Default, purchase a participating interest in such Swing Line Loans ("Unrefunded Swing Line Loans") in an amount equal to the amount of Alternate Base Rate Loans which would otherwise have been made by such Lender pursuant to paragraph (e) of this Section 2.4 and (ii) each Unrefunded Swing Line Loan previously bearing interest at the Alternate Swing Line Rate shall commence accruing interest at the Alternate Base Rate. Each Lender will immediately transfer to the Agent, in immediately available funds, the amount of its participation, and the proceeds of such participation shall be distributed by the Agent to the Swing Line Lender in such amount as will reduce the amount of the participating interest retained by the Swing Line Lender in the Swing Line Loans to the amount of the Alternate Base Rate Loans which were to have been made by the Swing Line Lender pursuant to paragraph (e) of this Section 2.4. In the event a Lender fails to make available to the Swing Line Lender the amount of such Lender's participation as provided in this paragraph (f), the Swing Line Lender shall be entitled to recover such amount on demand from such Lender together with interest at the customary rate set by the Swing Line Lender for correction of errors among banks for one Business Day and thereafter at the Alternate Base Rate then in effect. All payments in respect of Unrefunded Swing Line Loans and participations therein shall be made in accordance with Section 2.12. 1. Each Lender's obligation to make Ratable Loans pursuant to paragraph (e) of this Section 2.4 and to purchase participating interests pursuant to paragraph (f) of this Section 2.4 shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation, (i) any setoff, counterclaim, recoupment, defense or other right which such Lender or the Borrower may have against the Swing Line Lender, the Borrower or any other Person, as the case may be, for any reason whatsoever; (ii) the occurrence or continuance of a Default or Unmatured Default; (iii) any adverse change in the condition (financial or otherwise) of the Borrower or any of its Subsidiaries; (iv) any breach of this Agreement by the Borrower, any of its Subsidiaries or any Lender; or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. A. Availability of Funds. Not later than noon (Chicago time) on each Borrowing Date, each Lender (or in the case of a Competitive Bid Advance, each Lender making a portion of such Advance) shall make available its Loan or Loans (other than Swing Line Loans), in funds immediately available in Chicago to the Agent at its address specified pursuant to Article XIII. The Agent will make the funds so received from the Lenders available to the Borrower at the Agent's aforesaid address. -27- 35 A. Commitment Fee; Reductions in Aggregate Commitment. 1. The Borrower agrees to pay to the Agent for the ratable account of each Lender a commitment fee equal to the Applicable Commitment Fee Percentage per annum on the daily unborrowed portion of such Lender's Commitment (without giving effect to any outstanding Swing Line Loans or Competitive Bid Loans) from the date hereof to and including the Facility Termination Date applicable to such Lender, payable in arrears on each Payment Date hereafter and on the Facility Termination Date. 1. The Borrower may permanently reduce the Aggregate Commitment in whole, or in part ratably among the Lenders, in a minimum amount of $5,000,000 or any integral multiple of $1,000,000 in excess thereof, upon at least three Business Days' written notice to the Agent, which notice shall specify the amount of any such reduction; provided, however, that the amount of the Aggregate Commitment may not be reduced below the sum of (i) the aggregate principal amount of the outstanding Loans, plus (ii) the aggregate amount of the outstanding Facility Letter of Credit Obligations. All accrued commitment fees shall be payable on the effective date of any termination of the obligations of the Lenders to make Loans hereunder. A. Minimum Amount of Each Ratable Advance. Each Ratable Advance shall be in the minimum amount of $5,000,000 (and in integral multiples of $1,000,000 if in excess thereof); provided, however, that (a) any Alternate Base Rate Advance may be in the amount of the unused Aggregate Commitment or in an amount borrowed pursuant to Section 2.4(e) and (b) in no event shall more than six (6) Eurodollar Advances be permitted to be outstanding at any time. A. Optional Principal Payments. The Borrower may from time to time pay, without penalty or premium, all outstanding Advances (other than Competitive Bid Advances, which may not be voluntarily prepaid), or, in a minimum aggregate amount of $5,000,000 or any integral multiple of $1,000,000 in excess thereof, any portion of the outstanding Advances (other than Competitive Bid Advances) upon one Business Day's prior notice to the Agent in the case of an Alternate Base Rate Advance or three Business Days' prior notice to the Agent in the case of a Eurodollar Advance. Any prepayment of a Eurodollar Advance prior to the last day of the applicable Eurodollar Interest Period shall be subject to the indemnity provisions of Section 3.4. A. Changes in Interest Rate, etc. Each Alternate Base Rate Advance shall bear interest at the Alternate Base Rate from and including the date of such Advance or the date on which such Advance was converted into an Alternate Base Rate Advance to (but not including) the date on which such Alternate Base Rate Advance is paid or converted to a Eurodollar Ratable Advance. Changes in the rate of interest on that portion of any Advance maintained as an Alternate Base Rate Advance will take effect simultaneously with each change in the Alternate Base Rate. Each Eurodollar Advance, Absolute Rate Advance and Swing Line Loan shall bear interest from and including the -28- 36 first day of the Interest Period applicable thereto to, but not including, the last day of such Interest Period at the interest rate determined as applicable to such Eurodollar Advance, Absolute Rate Advance or Swing Line Loan. No Interest Period may end after the Facility Termination Date. A. Rates Applicable After Default. Notwithstanding anything to the contrary contained in Section 2.2.3 and 2.2.4, no Advance may be made as, converted into or continued as a Eurodollar Ratable Advance (except with the consent of the Agent and the Required Lenders) when any Default or Unmatured Default has occurred and is continuing. During the continuance of a Default the Required Lenders may, at their option, by notice to the Borrower (which notice may be revoked at the option of the Required Lenders notwithstanding any provision of Section 8.2 requiring unanimous consent of the Lenders to changes in interest rates), declare that each Eurodollar Advance, Alternate Base Rate Advance and Swing Line Loan shall bear interest (for the remainder of the applicable Interest Period in the case of Eurodollar Advances and Absolute Rate Advances) at a rate per annum equal to the rate otherwise applicable plus two percent (2%) per annum; provided, however, that such increased rate shall automatically and without action of any kind by the Lenders become and remain applicable until revoked by the Required Lenders in the event of a Default described in Section 7.6 or 7.7. A. Method of Payment. All payments of the Obligations hereunder shall be made, without setoff, deduction or counterclaim, in immediately available funds to the Agent at the Agent's address specified pursuant to Article XIII, or at any other Lending Installation of the Agent specified in writing by the Agent to the Borrower, by noon (Chicago time) on the date when due and shall be applied ratably by the Agent among the Lenders. Each payment delivered to the Agent for the account of any Lender shall be delivered promptly by the Agent to such Lender in the same type of funds that the Agent received at its address specified pursuant to Article XIII or at any Lending Installation specified in a notice received by the Agent from such Lender. The Agent is hereby authorized to charge the account of the Borrower maintained with First Chicago for each payment of principal, interest and fees as it becomes due hereunder, if the Agent has provided the Borrower with notice of each such payment at least one day prior to its becoming due hereunder. A. Notes; Telephonic Notices. Each Lender is hereby authorized to record the principal amount of each of its Loans and each repayment on the schedule attached to its Note; provided, however, that neither the failure to so record nor any error in such recordation shall affect the Borrower's obligations under such Note. The Borrower hereby authorizes the Lenders and the Agent to extend, convert or continue Advances, effect selections of Types of Advances, submit Competitive Bid Quotes and to transfer funds based on telephonic notices made by any person or persons the Agent or any Lender in good faith believes to be acting on behalf of the Borrower. The Borrower agrees to deliver promptly to the Agent a written confirmation, if such confirmation is requested by the Agent or any Lender, of each telephonic notice signed by an Authorized Officer or another management level employee designated in writing by an Authorized Officer to the Agent. If the written confirmation differs in any material respect from the -29- 37 action taken by the Agent and the Lenders, the records of the Agent and the Lenders shall govern absent manifest error. A. Interest Payment Dates; Interest and Fee Basis. Interest accrued on each Alternate Base Rate Advance shall be payable on each Payment Date, commencing with the first such date to occur after the date hereof, on any date on which an Alternate Base Rate Advance is prepaid, whether due to acceleration or otherwise, and at maturity. Interest upon each Swing Line Loan shall be payable upon the date such Swing Line Loan is repaid and at its maturity. Interest accrued on each Eurodollar Advance or Absolute Rate Advance shall be payable on the last day of its applicable Interest Period, on any date on which the Eurodollar Advance or Absolute Rate Advance is prepaid, whether by acceleration or otherwise, and at maturity. Interest accrued on each Eurodollar Advance or Absolute Rate Advance having an Interest Period longer than three months shall also be payable on the last day of each three-month interval during such Interest Period. Interest and commitment fees shall be calculated for actual days elapsed on the basis of a 360-day year. Interest shall be payable for the day an Advance is made but not for the day of any payment on the amount paid if payment is received prior to noon (Chicago time) at the place of payment. If any payment of principal of or interest on an Advance shall become due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and, in the case of a principal payment, such extension of time shall be included in computing interest in connection with such payment. A. Notification of Advances, Interest Rates, Prepayments, Commitment Reductions and Issuance Requests. Promptly after receipt thereof, the Agent will notify each Lender of the contents of each Aggregate Commitment reduction notice, Ratable Borrowing Notice, Conversion/Continuation Notice, Invitation for Competitive Quotes, Issuance Request and repayment notice received by it hereunder. The Agent will notify each Lender of the interest rate applicable to each Eurodollar Advance promptly upon determination of such interest rate and will give each Lender prompt notice of each change in the Alternate Base Rate. A. Lending Installations. Each Lender may book its Loans at any Lending Installation selected by such Lender and may change its Lending Installation from time to time. All terms of this Agreement shall apply to any such Lending Installation and the Notes shall be deemed held by each Lender for the benefit of such Lending Installation. Each Lender may, by written or telex notice to the Agent and the Borrower, designate a Lending Installation through which Loans will be made by it and for whose account Loan payments are to be made. A. Non-Receipt of Funds by the Agent. Unless the Borrower or a Lender, as the case may be, notifies the Agent prior to the date on which it is scheduled to make payment to the Agent of (a) in the case of a Lender, the proceeds of a Loan, or (b) in the case of the Borrower, a payment of principal, interest or fees to the Agent for the account of the Lenders, that it does not intend to make such payment, the Agent may assume that such payment has been made. The Agent may, but shall not be obligated to, -30- 38 make the amount of such payment available to the intended recipient in reliance upon such assumption. If the Borrower has not in fact made such payment to the Agent, the Lenders shall, on demand by the Agent, repay to the Agent the amount so made available together with interest thereon in respect of each day during the period commencing on the date such amount was so made available by the Agent until the date the Agent recovers such amount at a rate per annum equal to the Federal Funds Effective Rate for such day. If any Lender has not in fact made such payment to the Agent, such Lender or the Borrower shall, on demand by the Agent, repay to the Agent the amount so made available together with interest thereon in respect of each day during the period commencing on the date such amount was so made available by the Agent until the date the Agent recovers such amount at a rate per annum equal to (a) in the case of payment by a Lender, the Federal Funds Effective Rate for such day, or (b) in the case of payment by the Borrower, the interest rate applicable to the relevant Loan. A. Taxes. 1. Any payments made by the Borrower under this Agreement shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding net income taxes and franchise taxes or any other tax based upon any income imposed on the Agent or any Lender by the jurisdiction in which the Agent or such Lender is incorporated or has its principal place of business. If any such non-excluded taxes, levies, imposts, duties, charges, fees, deductions or withholdings ("Non-Excluded Taxes") are required to be withheld from any amounts payable to the Agent or any Lender hereunder, the amounts so payable to the Agent or such Lender shall be increased to the extent necessary to yield to the Agent or such Lender (after payment of all Non-Excluded Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in or pursuant to this Agreement; provided, however, that the Borrower shall not be required to increase any such amounts payable to any Lender that is not organized under the laws of the U.S. or a state thereof if such Lender fails to comply with the requirements of paragraph (b) of this Section 2.17. Whenever any Non-Excluded Taxes are payable by the Borrower, as promptly as practicable thereafter the Borrower shall send to the Agent for its own account or for the account of such Lender, as the case may be, a certified copy of an original official receipt received by the Borrower showing payment thereof. If the Borrower fails to pay any Non-Excluded Taxes when due to the appropriate taxing authority or fails to remit to the Agent the required receipts or other required documentary evidence, the Borrower shall indemnify the Agent and the Lenders for any incremental taxes, interest or penalties that may become payable by any Agent or any Lender as a result of any such failure. The agreements in this Section 2.17 shall survive the termination of this Agreement and the payment of all other amounts payable hereunder. 1. At least five Business Days prior to the first date on which interest or fees are payable hereunder for the account of any Lender, each Lender that is -31- 39 not incorporated under the laws of the United States of America, or a state thereof, agrees that it will deliver to each of the Borrower and the Agent two duly completed copies of United States Internal Revenue Service Form 1001 or 4224, certifying in either case that such Lender is entitled to receive payments under this Agreement and the Notes without deduction or withholding of any United States federal income taxes. Each Lender which so delivers a Form 1001 or 4224 further undertakes to deliver to each of the Borrower and the Agent two additional copies of such form (or a successor form) on or before the date that such form expires (currently, three successive calendar years for Form 1001 and one calendar year for Form 4224) or becomes obsolete or after the occurrence of any event requiring a change in the most recent forms so delivered by it, and such amendments thereto or extensions or renewals thereof as may be reasonably requested by the Borrower or the Agent, in each case certifying that such Lender is entitled to receive payments under this Agreement and the Notes without deduction or withholding of any United States federal income taxes, unless an event (including, without limitation, any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form with respect to it and such Lender advises the Borrower and the Agent that it is not capable of receiving payments without any deduction or withholding of United States federal income tax. B. Agent's Fees. The Borrower shall pay to the Agent those fees, in addition to the commitment fees referenced in Section 2.6(a), in the amounts and at the times separately agreed to between the Agent and the Borrower. A. Facility Letters of Credit. 2.19.1. Issuance of Facility Letters of Credit. (a) From and after the date hereof, the Issuer agrees, upon the terms and conditions set forth in this Agreement, to issue at the request and for the account of the Borrower, one or more Facility Letters of Credit; provided, however, that the Issuer shall not be under any obligation to issue, and shall not issue, any Facility Letter of Credit if (i) any order, judgment or decree of any governmental authority or other regulatory body with jurisdiction over the Issuer shall purport by its terms to enjoin or restrain such Issuer from issuing such Facility Letter of Credit, or any law or governmental rule, regulation, policy, guideline or directive (whether or not having the force of law) from any governmental authority or other regulatory body with jurisdiction over the Issuer shall prohibit, or request that the Issuer refrain from, the issuance of Facility Letters of Credit in particular or shall impose upon the Issuer with respect to any Facility Letter of Credit any restriction or reserve or capital requirement (for which the Issuer is not otherwise compensated) or any unreimbursed loss, cost or expense which was not applicable, in effect and known to the Issuer as of the date of this Agreement and which the Issuer in good faith deems material to it; (ii) one or more of the conditions to such issuance contained in Section 4.2 is not then satisfied; or (iii) after giving effect to such issuance, the aggregate outstanding amount of the Facility Letter of Credit Obligations would exceed the Facility Letter of Credit Sublimit. -32- 40 (b) In no event shall: (i) the aggregate amount of the Facility Letter of Credit Obligations at any time exceed the Facility Letter of Credit Sublimit; (ii) the sum at any time of (A) the aggregate amount of Facility Letter of Credit Obligations and (B) the aggregate principal balance of outstanding Advances exceed the amount of the Aggregate Commitment; or (iii) the expiration date of any Facility Letter of Credit (including, without limitation, Facility Letters of Credit issued with an automatic "evergreen" provision providing for renewal absent advance notice by the Borrower or the Issuer), or the date for payment of any draft presented thereunder and accepted by the Issuer, be later than the date five (5) Business Days before the Facility Termination Date. 2.19.2 Participating Interests. Immediately upon the issuance by the Issuer of a Facility Letter of Credit in accordance with Section 2.19.4, each Lender shall be deemed to have irrevocably and unconditionally purchased and received from the Issuer, without recourse, representation or warranty, an undivided participation interest equal to its pro-rata share of the Aggregate Commitment of the face amount of such Facility Letter of Credit and each draw paid by the Issuer thereunder. Each Lender's obligation to pay its proportionate share of all draws under the Facility Letters of Credit, absent gross negligence or willful misconduct by the Issuer in honoring any such draw, shall be absolute, unconditional and irrevocable and in each case shall be made without counterclaim or set-off by such Lender. -33- 41 2.19.3 Facility Letter of Credit Reimbursement Obligations. (a) The Borrower agrees to pay to the Issuer of a Facility Letter of Credit (i) on each date that any amount is drawn under each Facility Letter of Credit a sum (and interest on such sum as provided in clause (ii) below) equal to the amount so drawn plus all other charges and expenses with respect thereto specified in Section 2.19.6 or in the applicable Reimbursement Agreement and (ii) interest on any and all amounts remaining unpaid under this Section 2.19.3 until payment in full at the Alternate Base Rate plus the margin specified in Section 2.10. The Borrower agrees to pay to the Issuer the amount of all Facility Letter of Credit Reimbursement Obligations owing in respect of any Facility Letter of Credit immediately when due, under all circumstances, including, without limitation, any of the following circumstances: (w) any lack of validity or enforceability of this Agreement or any of the other Loan Documents; (x) the existence of any claim, set-off, defense or other right which the Borrower may have at any time against a beneficiary named in a Facility Letter of Credit, any transferee of any Facility Letter of Credit (or any Person for whom any such transferee may be acting), any Lender or any other Person, whether in connection with this Agreement, any Facility Letter of Credit, the transactions contemplated herein or any unrelated transactions (including any underlying transaction between the Borrower and the beneficiary named in any Facility Letter of Credit); (y) the validity, sufficiency or genuineness of any document which the Issuer has determined in good faith complies on its face with the terms of the applicable Facility Letter of Credit, even if such document should later prove to have been forged, fraudulent, invalid or insufficient in any respect or any statement therein shall have been untrue or inaccurate in any respect; or (z) the surrender or impairment of any security for the performance or observance of any of the terms hereof. (b) Notwithstanding any provisions to the contrary in any Reimbursement Agreement, the Borrower agrees to reimburse the Issuer for amounts which the Issuer pays under such Facility Letter of Credit no later than the time specified in this Agreement. If the Borrower does not pay any such Facility Letter of Credit Reimbursement Obligations when due, the Borrower shall be deemed to have immediately requested that the Lenders make an Alternate Base Rate Advance under this Agreement in a principal amount equal to such unreimbursed Facility Letter of Credit Reimbursement Obligations. The Agent shall promptly notify the Lenders of such deemed request and, without the necessity of compliance with the requirements of Sections 2.2.3 and 4.2, each Lender shall make available to the Agent its Loan in the manner prescribed for Alternate Base Rate Advances. The proceeds of such Loans shall be paid over by the Agent to the Issuer for the account of the Borrower in satisfaction of such unreimbursed Facility Letter of Credit Reimbursement Obligations, which shall thereupon be deemed satisfied by the proceeds of, and replaced by, such Alternate Base Rate Advance. (c) If the Issuer makes a payment on account of any Facility Letter of Credit and is not concurrently reimbursed therefor by the Borrower and if for any -34- 42 reason an Alternate Base Rate Advance may not be made pursuant to paragraph (b) above, then as promptly as practical during normal banking hours on the date of its receipt of such notice or, if not practicable on such date, not later than noon (Chicago time) on the Business Day immediately succeeding such date of notification, each Lender shall deliver to the Agent for the account of the Issuer, in immediately available funds, the purchase price for such Lender's interest in such unreimbursed Facility Letter of Credit Obligations, which shall be an amount equal to such Lender's pro-rata share of such payment. Each Lender shall, upon demand by the Issuer, pay the Issuer interest on such Lender's pro-rata share of such draw from the date of payment by the Issuer on account of such Facility Letter of Credit until the date of delivery of such funds to the Issuer by such Lender at a rate per annum, computed for actual days elapsed based on a 360-day year, equal to the Federal Funds Effective Rate for such period; provided, that such payments shall be made by the Lenders only in the event and to the extent that the Issuer is not reimbursed in full by the Borrower for interest on the amount of any draw on the Facility Letters of Credit. (d) At any time after the Issuer has made a payment on account of any Facility Letter of Credit and has received from any other Lender such Lender's pro-rata share of such payment, such Issuer shall, forthwith upon its receipt of any reimbursement (in whole or in part) by the Borrower for such payment, or of any other amount from the Borrower or any other Person in respect of such payment (including, without limitation, any payment of interest or penalty fees and any payment under any collateral account agreement of the Borrower or any Loan Document but excluding any transfer of funds from any other Lender pursuant to Section 2.19.3(b)), transfer to such other Lender such other Lender's ratable share of such reimbursement or other amount; provided, that interest shall accrue for the benefit of such Lender from the time such Issuer has made a payment on account of any Facility Letter of Credit; provided, further, that in the event that the receipt by the Issuer of such reimbursement or other amount is found to have been a transfer in fraud of creditors or a preferential payment under the United States Bankruptcy Code or is otherwise required to be returned, such Lender shall promptly return to the Issuer any portion thereof previously transferred by the Issuer to such Lender, but without interest to the extent that interest is not payable by the Issuer in connection therewith. 2.19.4 Procedure for Issuance. Prior to the issuance of each Facility Letter of Credit, and as a condition of such issuance, the Borrower shall deliver to the Issuer (with a copy to the Agent) a Reimbursement Agreement signed by the Borrower, together with such other documents or items as may be required pursuant to the terms thereof, and the proposed form and content of such Facility Letter of Credit shall be reasonably satisfactory to the Issuer. Each Facility Letter of Credit shall be issued no earlier than two (2) Business Days after delivery of the foregoing documents, which delivery may be by the Borrower to the Issuer by telecopy, telex or other electronic means followed by delivery of executed originals within five (5) days thereafter. The documents so delivered shall be in -35- 43 compliance with the requirements set forth in Section 2.19.1(b), and shall specify therein (i) the stated amount of the Facility Letter of Credit requested, (ii) the effective date of issuance of such requested Facility Letter of Credit, which shall be a Business Day, (iii) the date on which such requested Facility Letter of Credit is to expire, which shall be a Business Day prior to the date five (5) Business Days prior to the Facility Termination Date, (iv) the entity for whose benefit the requested Facility Letter of Credit is to be issued, which shall be the Borrower or a Subsidiary, and (v) the aggregate amount of Facility Letter of Credit Obligations which are outstanding and which will be outstanding after giving effect to the requested Facility Letter of Credit issuance. The delivery of the foregoing documents and information shall constitute an "Issuance Request" for purposes of this Agreement. Subject to the terms and conditions of Section 2.19.1 and provided that the applicable conditions set forth in Section 4.2 hereof have been satisfied, the Issuer shall, on the requested date, issue a Facility Letter of Credit on behalf of the Borrower in accordance with the Issuer's usual and customary business practices. In addition, any amendment of an existing Facility Letter of Credit shall be deemed to be an issuance of a new Facility Letter of Credit and shall be subject to the requirements set forth above. The Issuer shall give the Agent prompt written notice of the issuance of any Facility Letter of Credit. 2.19.5 Nature of the Lenders' Obligations. (a) As between the Borrower and the Lenders, the Borrower assumes all risks of the acts and omissions of, or misuse of the Facility Letters of Credit by, the respective beneficiaries of the Facility Letters of Credit. In furtherance and not in limitation of the foregoing, the Lenders shall not be responsible for (i) the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for an issuance of a Facility Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Facility Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) the failure of the beneficiary of a Facility Letter of Credit to comply fully with conditions required to be satisfied by any Person other than the Issuer in order to draw upon such Facility Letter of Credit; (iv) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise; (v) errors in the interpretation of technical terms; (vi) the misapplication by the beneficiary of a Facility Letter of Credit of the proceeds of any drawing under such Facility Letter of Credit; or (vii) any consequences arising from causes beyond control of the Issuer. (b) In furtherance and extension and not in limitation of the specific provisions hereinabove set forth, any action taken or omitted by the Issuer under or in connection with the Facility Letters of Credit or any related certificates, if taken or omitted in good faith, shall not put the Agent or any Lender under any -36- 44 resulting liability to the Borrower or relieve the Borrower of any of its obligations hereunder to the Issuer or any such Person. 2.19.6 Facility Letter of Credit Fees. The Borrower hereby agrees to pay to the Agent for the account of the Issuer or the Lenders, as applicable, letter of credit fees with respect to each Facility Letter of Credit from and including the date of issuance thereof until the date such Facility Letter of Credit is fully drawn, cancelled or expired, (a) for the account of the Issuer, computed at such rate as may be agreed upon between the Issuer and the Borrower, on the aggregate initial face amount of such Facility Letter of Credit payable on the date of issuance, and (b) for the ratable account of the Lenders, equal to (i) in the case of Commercial Letters of Credit, 50% of the Applicable Eurodollar Margin times the aggregate initial face amount of such Commercial Letter of Credit, payable upon the date of issuance thereof, and (ii) in the case of Standby Letters of Credit, the Applicable Eurodollar Margin times the aggregate amount from time to time available to be drawn on such Standby Facility Letter of Credit, calculated with respect to actual days elapsed on the basis of a 360-day year and payable quarterly in arrears on each Payment Date in each year and upon the expiration, cancellation or utilization in full of such Facility Letter of Credit. In addition to the foregoing, the Borrower agrees to pay the Issuer any other fees customarily charged by it in respect of Letters of Credit issued by it. A. Extension of Facility Termination Date. The Borrower may request an extension of the Facility Termination Date by submitting a request for an extension to the Agent (an "Extension Request") no more than 60 days but no less than 40 days prior to the then effective Facility Termination Date. The Extension Request must specify the new Facility Termination Date requested by the Borrower and the date (which must be at least 30 days after the Extension Request is delivered to the Agent) as of which the Lenders must respond to the Extension Request (the "Extension Date"). The new Facility Termination Date shall be no more than 364 days after the Extension Date, including the Extension Date as one of the days in the calculation of the days elapsed. Promptly upon receipt of an Extension Request, the Agent shall notify each Lender of the contents thereof and shall request each Lender to approve the Extension Request. Each Lender may, in its sole discretion, elect to approve or deny such Extension Request. Failure of a Lender to respond to an Extension Request by the Extension Date shall be deemed a refusal to approve such Extension Request. Each Lender approving the Extension Request shall deliver its written consent no later than the Extension Date. Any consent delivered by a Lender to the Agent prior to the Extension Date may be revoked prior to the Extension Date by the Lender giving written notice of such revocation to the Agent before the Extension Date. If the consent of each of the Lenders is received by the Agent and remains in effect on the Extension Date, the Facility Termination Date specified in the Extension Request shall become effective on the Extension Date and the Agent shall promptly notify the Borrower and each Lender of the new Facility Termination Date. Otherwise, the then effective Facility Termination Date shall be unchanged. In no event shall the Borrower be entitled to seek or obtain more than two extensions pursuant to this Section 2.20. -37- 45 I. ARTICLE CHANGE IN CIRCUMSTANCES A. Yield Protection. If, after the date hereof, the adoption of or any change in any law or any governmental or quasi-governmental rule, regulation, policy, guideline or directive (whether or not having the force of law), or any interpretation thereof, or the compliance of any Lender therewith, 1. subjects any Lender or any applicable Lending Installation to any tax, duty, charge or withholding on or from payments due from the Borrower (excluding taxation of the overall net income of any Lender or applicable Lending Installation imposed by the jurisdiction in which such Lender or Lending Installation is incorporated or has its principal place of business), or changes (excluding increases in the income tax rates imposed by the jurisdiction in which the applicable Lender or Lending Installation is incorporated or has its principal place of business) the basis of taxation of principal, interest or any other payments to any Lender or Lending Installation in respect of its Loans, its interest in the Facility Letters of Credit or other amounts due it hereunder, or 1. imposes or increases or deems applicable any reserve, assessment, insurance charge, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender or any applicable Lending Installation (other than reserves and assessments taken into account in determining the interest rate applicable to Eurodollar Advances), or 1. imposes any other condition the result of which is to increase the cost to any Lender or any applicable Lending Installation of making, funding or maintaining Loans or issuing Facility Letters of Credit or reduces any amount receivable by any Lender or any applicable Lending Installation in connection with any Loans or Facility Letters of Credit, or requires any Lender or any applicable Lending Installation to make any payment calculated by reference to the amount of Loans held, Facility Letters of Credit issued or participated in or interest received by it, by an amount deemed material by such Lender, then, within 15 days of demand by such Lender, the Borrower shall pay such Lender that portion of such increased expense incurred or resulting in an amount received which such Lender determines is attributable to making, funding and maintaining its Loans, its interest in the Facility Letters of Credit and its Commitment. A. Changes in Capital Adequacy Regulations. If a Lender determines the amount of capital required or expected to be maintained by such Lender, any Lending Installation of such Lender or any corporation controlling such Lender is increased as a result of a Change, then, within 15 days of demand by such Lender, the Borrower shall -38- 46 pay such Lender the amount necessary to compensate for any shortfall in the rate of return on the portion of such increased capital which such Lender determines is attributable to this Agreement, its Loans, its interest in the Facility Letters of Credit or its obligation to make Loans or participate in or issue Facility Letters of Credit hereunder (after taking into account such Lender's policies as to capital adequacy). "Change" means (a) any change after the date of this Agreement in the Risk-Based Capital Guidelines, or (b) any adoption of or change in any other law, governmental or quasi-governmental rule, regulation, policy, guideline, interpretation, or directive (whether or not having the force of law) after the date of this Agreement which affects the amount of capital required or expected to be maintained by any Lender or any Lending Installation or any corporation controlling any Lender. "Risk-Based Capital Guidelines" means (a) the risk-based capital guidelines in effect in the United States on the date of this Agreement and (b) the corresponding capital regulations promulgated by regulatory authorities outside the United States implementing the July 1988 report of the Basle Committee on Banking Regulation and Supervisory Practices entitled "International Convergence of Capital Measurements and Capital Standards" and any amendments to such regulations adopted prior to the date of this Agreement. A. Availability of Types of Advances. If any Lender determines that maintenance of its Eurodollar Loans at a suitable Lending Installation would violate any applicable law, rule, regulation, or directive, whether or not having the force of law, or if the Required Lenders determine that (a) deposits of a type and maturity appropriate to match fund Eurodollar Advances are not available, or (b) the interest rate applicable to a Type of Advance does not accurately or fairly reflect the cost of making or maintaining such Advance, then the Agent shall suspend the availability of the affected Type of Advance until such circumstance no longer exists and require any Eurodollar Advances of the affected Type to be repaid. A. Funding Indemnification. If any payment of a Eurodollar Advance or Swing Line Advance bearing interest at the Alternate Swing Line Rate occurs on a date which is not the last day of the applicable Interest Period, whether because of acceleration, prepayment or otherwise, or any such Advance is not made on the date specified by the Borrower for any reason other than default by the Lenders, the Borrower will indemnify the Agent and each Lender for any loss or cost incurred by it resulting therefrom, including, without limitation, any loss or cost in liquidating or employing deposits acquired to fund or maintain such Advance. A. Lender Statements; Survival of Indemnity. To the extent reasonably possible, each Lender shall designate an alternate Lending Installation with respect to its Eurodollar Loans to reduce any liability of the Borrower to such Lender under Sections 3.1 and 3.2 or to avoid the unavailability of a Type of Advance under Section 3.3, so long as such designation is not disadvantageous to such Lender. Each Lender shall deliver a written statement of such Lender to the Borrower (with a copy to the Agent) as to the amount due, if any, under Section 3.1, 3.2 or 3.4. Such written statement shall set forth in reasonable detail the calculations upon which such Lender determined such amount and shall be final, conclusive and binding on the Borrower in the -39- 47 absence of manifest error. Determination of amounts payable under such Sections in connection with a Eurodollar Loan shall be calculated as though each Lender funded its Eurodollar Loan through the purchase of a deposit of the type and maturity corresponding to the deposit used as a reference in determining the Eurodollar Rate applicable to such Loan, whether in fact that is the case or not. Unless otherwise provided herein, the amount specified in the written statement of any Lender shall be payable on demand after receipt by the Borrower of the written statement. The obligations of the Borrower under Sections 3.1, 3.2 and 3.4 shall survive payment of the Obligations and termination of this Agreement. I. ARTICLE CONDITIONS PRECEDENT A. Initial Loans and Facility Letters of Credit. The Lenders shall not be required to make the initial Advance hereunder and the Issuer shall not be required to issue any Facility Letter of Credit hereunder unless the Borrower has furnished the following to the Agent with sufficient copies for the Lenders and the other conditions set forth below have been satisfied, in each case on or before March 3, 1997: 1. Charter Documents; Good Standing Certificates. Copies of the certificate of incorporation of the Borrower, together with all amendments and other modifications thereto (including the Borrower's name change from New Ralcorp Holdings, Inc.), certified by the appropriate governmental officer in its jurisdiction of incorporation, together with a good standing certificate issued by the Secretary of State of the jurisdiction of its incorporation and such other jurisdictions as shall be requested by the Agent. 1. By-Laws and Resolutions. Copies, certified by the Secretary or Assistant Secretary of the Borrower, of its by-laws and of its Board of Directors' resolutions authorizing the execution, delivery and performance of the Loan Documents to which the Borrower is a party. 1. Secretary's Certificate. An incumbency certificate, executed by the Secretary or Assistant Secretary of the Borrower, which shall identify by name and title and bear the signature of the officers of the Borrower authorized to sign the Loan Documents and to make borrowings hereunder, upon which certificate the Agent and the Lenders shall be entitled to rely until informed of any change in writing by the Borrower. 1. Officer's Certificate. A certificate, dated the date hereof, signed by an Authorized Officer of the Borrower, in form and substance satisfactory to the Agent, to the effect that: (i) on the initial Borrowing Date (both before and after giving effect to the making of any Loans (or issuance of any Facility Letters of Credit hereunder) no Default or Unmatured Default has occurred and is continuing; (ii) no -40- 48 injunction or temporary restraining order which would prohibit the making of any Loans (or issuance of any Facility Letters of Credit) or other litigation which could reasonably be expected to have a Material Adverse Effect is pending or, to the best of such Person's knowledge, threatened; (iii) the Divestitures have been consummated on terms satisfactory to the Lenders; (iv) each of the representations and warranties set forth in Article V of this Agreement is true and correct on and as of the initial Borrowing Date; and (viii) since December 31, 1996, no event or change has occurred that has caused or evidences a Material Adverse Effect. 1. Legal Opinions. A written opinion of R. W. Lockwood, General Counsel for the Borrower and the Guarantors, addressed to the Agent and the Lenders in form and substance acceptable to the Agent and its counsel. 1. Notes. Notes payable to the order of each of the Lenders duly executed by the Borrower. 1. Loan Documents. Executed originals of this Agreement and each of the Loan Documents, which shall be in full force and effect, together with all schedules, exhibits, certificates, instruments, opinions, documents and financial statements required to be delivered pursuant hereto and thereto. 1. Letters of Direction. Written money transfer instructions with respect to Advances in form and substance acceptable to the Agent and its counsel addressed to the Agent and signed by an Authorized Officer, together with such other related money transfer authorizations as the Agent may have reasonably requested. 1. Financial Statements. The Agent and the Required Lenders shall have received (i) the Pro Forma which must not be materially less favorable, in the Agent's and Required Lenders' reasonable judgment, than the projections previously provided to them and which must demonstrate, in their reasonable judgment, together with all other information then available to the Agent and the Required Lenders, that the Borrower and its Subsidiaries can repay their debts and satisfy their respective other obligations as and when due, and can comply with the financial covenants set forth herein and (ii) such information as the Agent and the Required Lenders could reasonably request to confirm the tax, legal and business assumptions made in the Pro Forma. 1. Guarantor Charter Documents; Good Standing Certificates. Copies of the articles or certificates of incorporation of each Guarantor, together with all amendments thereto, both certified by the Secretary or Assistant Secretary of such Guarantor, together with a good standing certificate issued by the Secretary of State of the jurisdiction of its incorporation and such other jurisdictions as shall be requested by the Agent. 1. Guarantor By-Laws and Resolutions. Copies, certified by the Secretary or Assistant Secretary of each Guarantor, of its by-laws and Board of Directors' resolutions of such Guarantor (and resolutions of other bodies, if any are -41- 49 deemed necessary by counsel for the Agent) authorizing the execution, delivery and performance of the Loan Documents to which each such Guarantor is a party. 1. Guarantor Secretary's Certificate. An incumbency certificate, executed by the Secretary or Assistant Secretary of each Guarantor, which shall identify by name and title and bear the signature of the officers of such Guarantor authorized to sign the Loan Documents upon which certificate the Agent and the Lenders shall be entitled to rely until informed of any change in writing by the Borrower. 1. Lien Searches. Copies of searches of financing statements filed under the Uniform Commercial Code, together with tax lien and judgment searches with respect to the assets of the Borrower and the Guarantors, in both cases in such jurisdictions as the Agent may request. 1. Other. Such other documents as the Agent, any Lender or their counsel may have reasonably requested. A. Each Future Advance and Facility Letter of Credit. The Lenders shall not be required to make any Advance and the Issuer shall not be obligated to issue any future Facility Letter of Credit unless on the applicable Borrowing Date: 1. There exists no Default or Unmatured Default and none would result from such Advance or issuance of such Facility Letter of Credit; 1. The representations and warranties contained in Article V are true and correct as of such Borrowing Date; 1. A Borrowing Notice or Issuance Request, as applicable, shall have been properly submitted; and 1. All legal matters incident to the making of such Advance or issuance of such Facility Letter of Credit shall be satisfactory to the Lenders and their counsel. Each Ratable Borrowing Notice and Competitive Bid Quote Request with respect to each such Advance and each Issuance Request with respect to each such Facility Letter of Credit shall constitute a representation and warranty by the Borrower that the conditions contained in Section 4.2 have been satisfied. Any Lender may require a duly completed compliance certificate in substantially the form of Exhibit G hereto as a condition to making an Advance or issuing a Facility Letter of Credit. -42- 50 I. ARTICLE REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants to the Agent and the Lenders that: A. Corporate Existence and Standing. Each of the Borrower and each Material Subsidiary is a corporation duly incorporated, validly existing and in good standing under the laws of its respective jurisdiction of incorporation and is duly qualified and in good standing as a foreign corporation and is duly authorized to conduct its business in each jurisdiction in which its business is conducted or proposed to be conducted except where the failure to be so qualified or authorized could not reasonably be expected to have a Material Adverse Effect. A. Authorization and Validity. The Borrower and each Guarantor have all requisite power and authority (corporate and otherwise) and legal right to execute and deliver (or file, as the case may be) each of the Loan Documents to which it is a party and to perform its obligations thereunder. The execution and delivery (or filing, as the case may be) by the Borrower and each Guarantor of the Loan Documents to which it is a party and the performance of their respective obligations thereunder have been duly authorized by proper corporate proceedings and the Loan Documents constitute legal, valid and binding obligations of the Borrower or such Guarantor, as applicable, enforceable against the Borrower or such Guarantor, as applicable, in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally or by general principles of equity. A. Compliance with Laws and Contracts. The Borrower and its Subsidiaries have complied in all material respects with all applicable statutes, rules, regulations, orders and restrictions of any domestic or foreign government or any instrumentality or agency thereof, having jurisdiction over the conduct of their respective businesses or the ownership of their respective properties, except where the failure to so comply could not reasonably be expected to have a Material Adverse Effect. Neither the execution and delivery by the Borrower or any Guarantor of the Loan Documents to which it is a party, the application of the proceeds of the Loans and the Facility Letters of Credit, the consummation of any transaction contemplated in the Loan Documents, nor compliance with the provisions of the Loan Documents will, or at the relevant time did, (a) violate any law, rule, regulation (including Regulations G, T, U and X), order, writ, judgment, injunction, decree or award binding on the Borrower or any Subsidiary or the Borrower's or any Subsidiary's charter, articles or certificate of incorporation or by-laws, (b) violate the provisions of or require the approval or consent of any party to any indenture, instrument or agreement to which the Borrower or any Subsidiary is a party or is subject, or by which it, or its property, is bound, or conflict with or constitute a default thereunder, or result in the creation or imposition of any Lien (other than Liens permitted by, the Loan Documents) in, of or on the property of the Borrower or any Subsidiary -43- 51 pursuant to the terms of any such indenture, instrument or agreement, or (c) require any consent of the stockholders of any Person. A. Governmental Consents. No order, consent, approval, qualification, license, authorization, or validation of, or filing, recording or registration with, or exemption by, or other action in respect of, Governmental Authority, or any subdivision thereof, any securities exchange or other Person is or at the relevant time was required to authorize, or is or at the relevant time was required in connection with the execution, delivery, consummation or performance of, or the legality, validity, binding effect or enforceability of, any of the Loan Documents, the application of the proceeds of the Loans or the Facility Letters of Credit or any other transaction contemplated in the Loan Documents. A. Financial Statements. The Borrower has heretofore furnished to each of the Lenders (a) the September 30, 1996 audited consolidated financial statements of Old Ralcorp and its Subsidiaries, and (b) the unaudited consolidated financial statements of Old Ralcorp and its Subsidiaries through December 31, 1996 (collectively, the "Financial Statements"). The pro forma balance sheet and related profit and loss statement (the "Pro Forma") of the Borrower and its Subsidiaries on a consolidated basis as of December 31, 1996 is attached hereto as Schedule 5.5. As of the date of this Agreement, the Pro Forma is complete and accurate and fairly represents in all material respects the Borrower's and the Subsidiaries' assets, liabilities, financial condition and results of operations on a consolidated basis in accordance with Agreement Accounting Principles, consistently applied, and taking into account the Divestitures. Each of the Financial Statements was prepared in accordance with Agreement Accounting Principles and fairly presents the consolidated financial condition and operations of the Borrower and its Subsidiaries at such dates and the consolidated results of their operations for the respective periods then ended (except, in the case of such unaudited statements, for normal year-end audit adjustments). A. Material Adverse Change. Since December 31, 1996, there has been no change from that reflected in the Pro Forma in the business, Property, condition (financial or otherwise) or results of operations of the Borrower and its Subsidiaries taken as a whole which could reasonably be expected to have a Material Adverse Effect. A. Taxes. The Borrower and its Subsidiaries have filed or caused to be filed in correct form all United States federal and applicable foreign, state and local tax returns and all other tax returns which are required to be filed and have paid all taxes due pursuant to said returns or pursuant to any assessment received by the Borrower or any Subsidiary, except such taxes, if any, as are being contested in good faith and as to which adequate reserves have been provided in accordance with Agreement Accounting Principles and as to which no Lien exists. No tax liens have been filed and no claims are being asserted with respect to any such taxes which could reasonably be expected to have a Material Adverse Effect. The charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of any taxes or other governmental charges are in accordance with Agreement Accounting Principles. -44- 52 A. Litigation and Contingent Obligations. There is no litigation, arbitration, proceeding, inquiry or governmental investigation (including, without limitation, by the Federal Trade Commission) pending or, to the knowledge of any of their officers, threatened against or affecting the Borrower or any Subsidiary or any of their respective Properties which could reasonably be expected to have a Material Adverse Effect or to prevent, enjoin or unduly delay the making of the Loans or the issuance of Facility Letters of Credit under this Agreement. Neither the Borrower nor any Subsidiary has any material Contingent Obligations except as set forth on Schedule 5.8. A. Subsidiaries and Capitalization. Schedule 5.9 hereto contains an accurate list of all of the existing Subsidiaries as of the date of this Agreement after giving effect to the Divestitures, setting forth their respective jurisdictions of incorporation and the percentage of their capital stock owned by the Borrower or other Subsidiaries. All of the issued and outstanding shares of capital stock of each Subsidiary have been duly authorized and validly issued, are fully paid and non-assessable, and are free and clear of all Liens, other than the Liens created by the Loan Documents. No authorized but unissued or treasury shares of capital stock of or any Subsidiary are subject to any option, warrant, right to call or commitment of any kind or character. Except as set forth on Schedule 5.9, neither the Borrower nor any Subsidiary has any outstanding stock or securities convertible into or exchangeable for any shares of its capital stock, or any right issued to any Person (either preemptive or other) to subscribe for or to purchase, or any options for the purchase of, or any agreements providing for the issuance (contingent or otherwise) of, or any calls, commitments or claims of any character relating to any of its capital stock or any stock or securities convertible into or exchangeable for any of its capital stock other than as expressly set forth in the certificate or articles of incorporation of the Borrower or such Subsidiary. Neither the Borrower nor any Subsidiary is subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of its capital stock or any convertible securities, rights or options of the type described in the preceding sentence except as otherwise set forth on Schedule 5.9. Except as set forth on Schedule 5.9, as of the date hereof the Borrower does not own or hold, directly or indirectly, any capital stock or equity security of, or any equity or partnership interest in any Person other than such Subsidiaries and Vail Resorts, Inc. A. ERISA. Except as disclosed on Schedule 5.10, neither the Borrower nor any other member of the Controlled Group maintains any Single Employer Plans, and no Single Employer Plan has any Unfunded Liability. Neither the Borrower nor any other member of the Controlled Group maintains, or is obligated to contribute to, any Multiemployer Plan or has incurred, or is reasonably expected to incur, any withdrawal liability to any Multiemployer Plan. Each Plan complies in all respects with all applicable requirements of law and regulations, except where the failure to so comply could not reasonably be expected to cause the relevant Plan to become disqualified under the Code. Neither the Borrower nor any member of the Controlled Group has, with respect to any Plan, failed to make any contribution or pay any amount required under -45- 53 Section 412 of the Code or Section 302 of ERISA or the terms of such Plan. There are no pending or, to the knowledge of the Borrower, threatened claims, actions, investigations or lawsuits against any Plan, any fiduciary thereof, or the Borrower or any member of the Controlled Group with respect to a Plan which could reasonably be expected to have a Material Adverse Effect. Neither the Borrower nor any member of the Controlled Group has engaged in any prohibited transaction (as defined in Section 4975 of the Code or Section 406 of ERISA) in connection with any Plan which would subject such Person to any material liability. Within the last five years neither the Borrower nor any member of the Controlled Group has engaged in a transaction which resulted in a Single Employer Plan with an Unfunded Liability being transferred out of the Controlled Group. No Termination Event has occurred or is reasonably expected to occur with respect to any Plan which is subject to Title IV of ERISA. A. Defaults. No Default or Unmatured Default has occurred and is continuing. A. Federal Reserve Regulations. Neither the Borrower nor any Subsidiary is engaged, directly or indirectly, principally, or as one of its important activities, in the business of extending, or arranging for the extension of, credit for the purpose of purchasing or carrying Margin Stock. Neither the making of any Advance or issuance of any Facility Letters of Credit hereunder, the use of the proceeds thereof, will violate or be inconsistent with the provisions of Regulation G, Regulation T, Regulation U or Regulation X. Following the application of the proceeds of the Loans, less than 25% of the value (as determined by any reasonable method) of the assets of the Borrower and its Subsidiaries which are subject to any limitation on sale, pledge, or other restriction hereunder taken as a whole have been, and will continue to be, represented by Margin Stock. A. Investment Company; Public Utility Holding Company Act. Neither the Borrower nor any Subsidiary is, or after giving effect to any Advance will be, an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. Neither the Borrower nor any Subsidiary is a "holding company" or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. A. Certain Fees. Other than as disclosed on Schedule 5.14, no broker's or finder's fee or commission was, is or will be payable by the Borrower or any Subsidiary with respect to the Divestitures or any of the transactions contemplated by this Agreement. The Borrower hereby agrees to indemnify the Agent and the Lenders against and agrees that it will hold each of them harmless from any claim, demand or liability for broker's or finder's fees or commissions alleged to have been incurred by the Borrower in connection with any of the transactions contemplated by this Agreement and any expenses (including, without limitation, attorneys' fees and time charges of attorneys for the Agent or any Lender, which attorneys may be employees of the Agent or any Lender) -46- 54 arising in connection with any such claim, demand or liability. No other similar fee or commissions will be payable by the Borrower or any Subsidiary for any other services rendered to the Borrower or any Subsidiary ancillary to the Divestitures or any of the transactions. A. Solvency. As of the date hereof, after giving effect to the consummation of the transactions contemplated by the Loan Documents and the Divestitures and the payment of all fees, costs and expenses payable by the Borrower or its Subsidiaries with respect to the transactions contemplated by the Loan Documents and the Transaction Documents, each of the Borrower and each Guarantor is Solvent. A. Ownership of Properties. Except as set forth on Schedule 5.16 hereto, the Borrower and its Subsidiaries have a subsisting leasehold interest in, or good and marketable title, free of all Liens, other than those permitted by Section 6.17 or by any of the other Loan Documents, to all of the properties and assets reflected in the Financial Statements as being owned by it, except for assets sold, transferred or otherwise disposed of in the Divestitures or in the ordinary course of business since the date thereof. To the knowledge of the Borrower, there are no actual, threatened or alleged defaults with respect to any leases of real property under which the Borrower or any Subsidiary is lessee or lessor which could reasonably be expected to have a Material Adverse Effect. The Borrower and its Subsidiaries own or possess rights to use all material licenses, patents, patent applications, copyrights, service marks, trademarks and trade names necessary to continue to conduct their business as heretofore conducted, and no such license, patent or trademark has been declared invalid, been limited by order of any court or by agreement or is the subject of any infringement, interference or similar proceeding or challenge, except for proceedings and challenges which could not reasonably be expected to have a Material Adverse Effect. A. Indebtedness. Attached hereto as Schedule 5.17 is a complete and correct list of all Indebtedness of the Borrower and its Subsidiaries outstanding on the date of this Agreement (other than Indebtedness in a principal amount not exceeding $100,000 for a single item of Indebtedness and $500,000 in the aggregate for all such Indebtedness listed), showing the aggregate principal amount which was outstanding on such date. A. Subordinated Indebtedness. The principal of and interest on the Notes and all other Obligations will constitute "senior debt" as that or any similar term is or may be used in any other instrument evidencing or applicable to any Subordinated Indebtedness of the Borrower. A. Employee Controversies. There are no strikes, work stoppages or controversies pending or threatened between the Borrower or any Subsidiary and any of its employees, other than strikes, work stoppages or controversies arising in the ordinary course of business, which, in the aggregate, could not reasonably be expected to have a Material Adverse Effect. -47- 55 A. Material Agreements. Neither the Borrower nor any Subsidiary is a party to any agreement or instrument or subject to any charter or other corporate restriction which could reasonably be expected to have a Material Adverse Effect or which restricts or imposes conditions upon the ability of the Borrower or any Subsidiary to (a) pay dividends or make other distributions on its capital stock (b) make loans or advances to the Borrower, (c) repay loans or advances from Borrower or (d) grant Liens to the Agent to secure the Obligations. Neither the Borrower nor any Subsidiary is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement to which it is a party, which default could reasonably be expected to have a Material Adverse Effect. A. Divestiture Documents. The Borrower has delivered to each of the Lenders true, complete and correct copies of the documents pursuant to which the Divestitures were consummated (including all schedules, exhibits, annexes, amendments, supplements, modifications, and all other material documents delivered pursuant thereto or in connection therewith). Each of the representations and warranties of the Borrower and its Subsidiaries therein is true and correct in all material aspects as of the date of the closing of the Divestitures. The Divestitures were consummated in accordance with applicable laws and regulations. A. Environmental Laws. The Borrower and its Material Subsidiaries each conduct in the ordinary course of business a review of the effects of then existing Environmental Laws and then existing Environmental Claims on its business, condition (financial and other), results of operations and Property, and as a result thereof the Borrower and its Material Subsidiaries have reasonably concluded that the application of such Environmental Laws and the existence of such Environmental Claims, in the aggregate, could not reasonably be expected to have a Material Adverse Effect. A. Insurance. The Borrower and its Subsidiaries maintain with financially sound and reputable insurance companies insurance on their Property in such amounts and covering such risks as is consistent with sound business practice. A. Disclosure. None of the (a) information, exhibits or reports furnished or to be furnished by the Borrower or any Subsidiary to the Agent or to any Lender in connection with the negotiation of the Loan Documents, or (b) representations or warranties of the Borrower or any Subsidiary contained in this Agreement, the other Loan Documents or any certificate or other written information furnished to the Agent or the Lenders by or on behalf of the Borrower or any Subsidiary pursuant to a request from the Agent or the Lenders permitted hereunder and for use in connection with the transactions contemplated by this Agreement, contained, contains or will contain any untrue statement of a material fact or omitted, omits or will omit to state a material fact necessary in order to make the statements contained herein or therein not misleading in light of the circumstances in which the same were made. The pro forma financial information contained in such materials is based upon good faith estimates and assumptions believed by the Borrower to be reasonable at the time made. There is no fact known to the Borrower (other than matters of a general economic nature) that has had or -48- 56 could reasonably be expected to have a Material Adverse Effect and that has not been disclosed herein or in such other documents, certificates and other written information furnished to the Lenders for use in connection with the transactions contemplated by this Agreement or the Form 10. I. ARTICLE COVENANTS During the term of this Agreement, unless the Required Lenders shall otherwise consent in writing: A. Financial Reporting. The Borrower will maintain, for itself and each Subsidiary, a system of accounting established and administered in accordance with generally accepted accounting principles, consistently applied, and furnish to the Lenders: 1. As soon as practicable and in any event within 95 days after the close of each of its Fiscal Years, an unqualified audit report certified by independent certified public accountants, acceptable to the Lenders, prepared in accordance with Agreement Accounting Principles on a consolidated and consolidating basis (consolidating statements need not be certified by such accountants) for itself and its Subsidiaries, including balance sheets as of the end of such period and related statements of income, retained earnings and cash flows accompanied by a certificate of said accountants that, in the course of the examination necessary for their certification of the foregoing, they have obtained no knowledge of any Default or Unmatured Default, or if, in the opinion of such accountants, any Default or Unmatured Default shall exist, stating the nature and status thereof. 1. As soon as practicable and in any event within 50 days after the close of the first three Fiscal Quarters of each of its Fiscal Years, for itself and its Subsidiaries, consolidated and consolidating unaudited balance sheets as at the close of each such period and consolidated and consolidating statements of income, retained earnings and cash flows for the period from the beginning of such Fiscal Year to the end of such quarter, all certified by its chief financial officer, controller or treasurer. 1. As soon as available, but in any event not later than the last Business Day in November of each year, a copy of the plan and forecast (including a projected consolidated and consolidating balance sheet, income statement and funds flow statement) of the Borrower and its Subsidiaries for the next Fiscal Year. 1. Together with the financial statements required by clauses (a) and (b) above, a compliance certificate in substantially the form of Exhibit G hereto signed by its chief financial officer, controller or treasurer showing the calculations necessary to determine compliance with this Agreement and stating that no Default or Unmatured Default exists, or if any Default or Unmatured Default exists, stating the nature and status thereof. -49- 57 1. Within 270 days after the close of each Fiscal Year, a statement of the Unfunded Liabilities of each Single Employer Plan, certified as correct by an actuary enrolled under ERISA. 1. As soon as possible and in any event within 10 days after the Borrower knows that any Termination Event has occurred with respect to any Plan, a statement, signed by the chief financial officer, treasurer or controller of the Borrower, describing said Termination Event and the action which the Borrower proposes to take with respect thereto. 1. As soon as possible and in any event within 10 days after the Borrower learns thereof, notice of the assertion or commencement of any claims, action, suit or proceeding against or affecting the Company or any Subsidiary which could reasonably be expected to have a Material Adverse Effect. 1. Promptly upon the furnishing thereof to the shareholders of the Borrower, copies of all financial statements, reports and proxy statements so furnished. 1. Promptly upon the filing thereof, copies of all registration statements and annual, quarterly, monthly or other regular reports which the Borrower or any of its Subsidiaries files with the Securities and Exchange Commission. 1. Such other information (including non-financial information) as the Agent or any Lender may from time to time reasonably request. A. Use of Proceeds. The Borrower will, and will cause each Subsidiary to, use the proceeds of the Advances to meet the general corporate needs of the Borrower and its Subsidiaries, including the making of Investments and Purchases permitted hereunder; provided, however, that in no event may more than $10,000,000 in the aggregate of Loan Proceeds be used to make stock redemptions or repurchases. The Borrower will not, nor will it permit any Subsidiary to, use any of the proceeds of the Advances or any Facility Letter of Credit to purchase or carry any "margin stock" (as defined in Regulation U) or to finance the Purchase of any Person which has not been approved and recommended by the board of directors (or functional equivalent thereof) of such Person. A. Notice of Default. The Borrower will give prompt notice in writing to the Lenders of the occurrence of (a) any Default or Unmatured Default and (b) of any other event or development, financial or other, relating specifically to the Borrower or any of its Subsidiaries (and not of a general economic or political nature) which could reasonably be expected to have a Material Adverse Effect. A. Conduct of Business. The Borrower will, and will cause each Subsidiary to, carry on and conduct its business in substantially the same manner and in -50- 58 substantially the same fields of enterprise as it is presently conducted and to do all things necessary to remain duly incorporated, validly existing and in good standing as a domestic corporation in its jurisdiction of incorporation and maintain all requisite authority to conduct its business in each jurisdiction in which its business is conducted, except where the failure to maintain such authority could not reasonably be expected to have a Material Adverse Effect. A. Taxes. The Borrower will, and will cause each Subsidiary to, timely file complete and correct United States federal and applicable foreign, state and local tax returns required by applicable law and pay when due all material taxes, assessments and governmental charges and levies upon it or its income, profits or Property, except those which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves have been set aside. A. Insurance. The Borrower will, and will cause each Subsidiary to, maintain with financially sound and reputable insurance companies insurance on all their Property in such amounts and covering such risks as is consistent with sound business practice for similarly situated businesses in the industries in which the Borrower and its Subsidiaries operate, and the Borrower will furnish to the Agent and any Lender upon request full information as to the insurance carried. A. Compliance with Laws. The Borrower will, and will cause each Subsidiary to, comply with all laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject, the failure to comply with which could reasonably be expected to have a Material Adverse Effect. A. Maintenance of Properties. The Borrower will, and will cause each Subsidiary to, do all things necessary to maintain, preserve, protect and keep its Property in good repair, working order and condition, and make all necessary and proper repairs, renewals and replacements so that its business carried on in connection therewith may be properly conducted at all times, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect. A. Inspection. The Borrower will, and will cause each Subsidiary to, permit the Agent and the Lenders, by their respective representatives and agents, to inspect any of the Property, corporate books and financial records of the Borrower and each Subsidiary, to examine and make copies of the books of accounts and other financial records of the Borrower and each Subsidiary, and to discuss the affairs, finances and accounts of the Borrower and each Subsidiary with, and to be advised as to the same by, their respective officers at such reasonable times and intervals as the Lenders may designate. The Borrower will keep or cause to be kept, and cause each Subsidiary to keep or cause to be kept, appropriate records and books of account in which complete entries are to be made reflecting its and their business and financial transactions, such entries to be made in accordance with Agreement Accounting Principles consistently applied. -51- 59 A. Capital Stock and Dividends. The Borrower will not, nor will it permit any Subsidiary to, (a) issue or have outstanding any preferred stock, other than preferred stock not having mandatory redemption, retirement and other repurchase dates commencing less than 91 days after the Facility Termination Date then in effect or (b) declare or pay any dividends or make any distributions on its capital stock (other than dividends payable in its own capital stock) or redeem, repurchase or otherwise acquire or retire any of its capital stock or any options or other rights in respect thereof at any time outstanding, except that (i) any Subsidiary may declare and pay dividends or make distributions to the Borrower or to a Guarantor and (ii) so long as no Default or Unmatured Default exists before or after giving effect to the declaration or payment of such dividends or repurchase or redemption of such stock, the Borrower may repurchase or redeem its capital stock or declare and, within 45 days thereafter, pay dividends on its capital stock in an amount which, when added to the amount of all prior dividends and stock repurchases or redemptions does not exceed 10% of Net Worth at such time (before giving effect to such dividend, repurchase or redemption). A. Indebtedness. The Borrower will not, nor will it permit any Subsidiary to, create, incur or suffer to exist any Indebtedness, except: 1. the Loans; 1. Indebtedness existing on the date hereof and described in Schedule 5.17; 1. Contingent Obligations permitted by Section 6.16; 1. outstanding borrowings under working capital facilities (other than pursuant to this Agreement) having individual maturities of not more than 30 days, which Indebtedness, when considered together with the Obligations outstanding hereunder, at no time exceeds $50,000,000 in aggregate principal amount; 1. Rate-Hedging Obligations incurred in the ordinary course of business; 1. other Indebtedness at no time exceeding $10,000,000 in aggregate principal amount. A. Merger. The Borrower will not, nor will it permit any Subsidiary to, merge or consolidate with or into any other Person, except that (a) a Wholly-Owned Subsidiary may merge into the Borrower or any Wholly-Owned Subsidiary of the Borrower, (b) the Borrower or any Subsidiary may merge or consolidate with any other Person so long as the Borrower or such Subsidiary is the continuing or surviving corporation and, prior to and after giving effect to such merger or consolidation, no Default or Unmatured Default shall exist, and (c) any Subsidiary may enter into a merger or consolidation as a means of effecting a disposition permitted by Section 6.13. -52- 60 A. Sale of Assets. The Borrower will not, nor will it permit any Subsidiary to, lease, sell, transfer or otherwise dispose of its Property to any other Person except for (a) sales of inventory or unused or obsolete equipment in the ordinary course of business, and (b) leases, sales, transfers or other dispositions of its Property that, together with all other Property of the Borrower and its Subsidiaries previously leased, sold, transferred or otherwise disposed of (other than inventory or unused or obsolete equipment sold in the ordinary course of business) as permitted by this Section 6.13 since the date hereof, do not constitute a Substantial Portion of the Property of Borrower and its Subsidiaries. A. Sale of Accounts. The Borrower will not, nor will it permit any Subsidiary to, sell or otherwise dispose of any notes receivable or accounts receivable, with or without recourse. A. Investments and Purchases. The Borrower will not, nor will it permit any Subsidiary to, make or suffer to exist any Investments (including, without limitation, loans and advances to, and other Investments in, Subsidiaries), or commitments therefor, or to create any Subsidiary or to become or remain a partner in any partnership or joint venture, or to make any Purchases, except: 1. Short-term obligations of, or fully guaranteed by, the United States of America; 1. Commercial paper rated A-1 or better by S&P or P-1 or better by Moody's; 1. Demand deposit and money market bank accounts maintained in the ordinary course of business with commercial banks which are members of the Federal Deposit Insurance Corporation; 1. Certificates of deposit issued by and time deposits with commercial banks (whether domestic or foreign) rated B or better by Thomson, A or better by S&P or A2 or better by Moody's; 1. Repurchase agreements with commercial banks (whether domestic or foreign) rated B or better by Thomson, A or better by S&P or A2 or better by Moody's, so long at least 102% of the principal amount of each repurchase agreement is collateralized by obligations of, or fully guaranteed by, the United States of America or by commercial paper rated A-1 or better by S&P or P-1 or better by Moody's; 1. Loan participations and master notes with corporations rated A-1 or better by S&P or P-1 or better by Moody's and with commercial banks rated B or better by Thomson, A or better by S&P or A2 or better by Moody's; 1. Money market preferred stock accounts in corporations rated A or better by S&P or A2 or better by Moody's or in other corporations so long as -53- 61 such Investments are secured by Letters of Credit issued by commercial banks rated B or better by Thomson, A or better by S&P or A2 or better by Moody's; 1. Existing Investments in Subsidiaries and additional Investments in Guarantors; 1. Other Investments in existence on the date hereof and described in Schedule 6.15 hereto; 1. Additional equity Investments in Vail Resorts, Inc. necessary to permit the Borrower to retain equity accounting treatment for such Investment; and 1. Purchases not exceeding $50,000,000 in the case of any single Purchase or series of related Purchases provided that there shall exist no Default or Unmatured Default either immediately before or immediately after giving effect to any such Purchase. A. Contingent Obligations. The Borrower will not, nor will it permit any Subsidiary to, make or suffer to exist any Contingent Obligation (including, without limitation, any Contingent Obligation with respect to the obligations of a Subsidiary), except (a) by endorsement of instruments for deposit or collection in the ordinary course of business, (b) the Subsidiary Guaranty and (c) the Ralston Obligations. A. Liens. The Borrower will not, nor will it permit any Subsidiary to, create, incur, or suffer to exist any Lien in, of or on the Property of the Borrower or any of its Subsidiaries, except: 1. Liens for taxes, assessments or governmental charges or levies on its Property if the same shall not at the time be delinquent or thereafter can be paid without penalty, or are being contested in good faith and by appropriate proceedings and for which adequate reserves in accordance with generally accepted principles of accounting shall have been set aside on its books; 2. Liens imposed by law, such as carriers', warehousemen's and mechanics' liens and other similar liens arising in the ordinary course of business which secure the payment of obligations not more than 60 days past due or which are being contested in good faith by appropriate proceedings and for which adequate reserves shall have been set aside on its books; 1. Liens arising out of pledges or deposits under worker's compensation laws, unemployment insurance, old age pensions, or other social security or retirement benefits, or similar legislation; 1. Liens arising out of good faith deposits in connection with or to secure performance of statutory obligations, surety and appeal bonds, government -54- 62 contracts, leases otherwise permitted hereunder, performance and return of money bonds and other similar obligations incurred in the ordinary course of business; 1. Easements, minor defects or irregularities in title, building restrictions and such other encumbrances or charges against real property, all of which as are of a nature generally existing with respect to properties of a similar character and which do not in any material way affect the marketability of the same or interfere with the use thereof in the business of the Borrower or the Subsidiaries; 1. Liens existing on the date hereof and described in Schedule 6.17 hereto, including extensions, renewals and replacements thereof in whole or in part, so long as the principal amount of the Indebtedness secured thereby at the time of such extension, renewal or replacement is limited to all or any part of the Property (including improvements thereon) securing the Lien so extended, renewed or replaced; 1. Liens on the Property of a Subsidiary of the Borrower and exclusively securing Indebtedness of such Subsidiary to the Borrower or any Guarantor; and 1. Other Liens securing aggregate principal Indebtedness at no time exceeding $10,000,000. A. Lease Rentals. The Borrower will not, nor will it permit any Subsidiary to, create, incur or suffer to exist obligations for Rentals in excess of $10,000,000 during any one Fiscal Year on a non-cumulative basis in the aggregate for the Borrower and its Subsidiaries. A. Affiliates. The Borrower will not, and will not permit any Subsidiary to, enter into any transaction (including, without limitation, the purchase or sale of any Property or service) with, or make any payment or transfer to, any Affiliate except (a) in the ordinary course of business and pursuant to the reasonable requirements of the Borrower's or such Subsidiary's business and upon fair and reasonable terms no less favorable to the Borrower or such Subsidiary than the Borrower or such Subsidiary would obtain in a comparable arms-length transaction and (b) transactions among the Borrower and Guarantors. A. Subordinated Indebtedness; Other Indebtedness. The Borrower will not, and will not permit any Subsidiary to, make any amendment or modification to the indenture, note or other agreement evidencing or governing any Subordinated Indebtedness, or directly or indirectly voluntarily prepay, defease or in substance defease, purchase, redeem, retire or otherwise acquire, any Subordinated Indebtedness. A. Environmental Matters. The Borrower shall and shall cause each of its Material Subsidiaries to conduct in the ordinary course of its business reviews of the effects of then existing Environmental Laws and then existing Environmental Claims on its business, condition (financial and other), results of operations and Property and to -55- 63 take all actions required by such Environmental Laws and in respect of such Environmental Claims, except where the failure to so act could not reasonably be expected to have a Material Adverse Effect. A. Change in Corporate Structure; Fiscal Year. The Borrower shall not, nor shall it permit any Subsidiary to, (a) permit any amendment or modification to be made to its certificate or articles of incorporation or by-laws which is materially adverse to the interests of the Lenders (provided that the Borrower shall notify the Agent of any other amendment or modification thereto as soon as practicable thereafter) or (b) change its Fiscal Year to end on any date other than September 30 of each year. A. Inconsistent Agreements. The Borrower shall not, nor shall it permit any Subsidiary to, enter into any indenture, agreement, instrument or other arrangement which, (a) directly or indirectly prohibits or restrains, or has the effect of prohibiting or restraining, or imposes materially adverse conditions upon, the incurrence of the Obligations, the granting of Liens to secure the Obligations, the provision of the Subsidiary Guaranty, the amending of the Loan Documents or the ability of any Subsidiary to (i) pay dividends or make other distributions on its capital stock, (ii) make loans or advances to the Borrower or (iii) repay loans or advances from the Borrower or (b) contains any provision which would be violated or breached by the making of Advances, by the issuance of Facility Letters of Credit or by the performance by the Borrower or any Subsidiary of any of its obligations under any Loan Document. A. Financial Covenants. The Borrower on a consolidated basis with its Subsidiaries shall: 6.24.1. Adjusted Net Worth. At all times after the date hereof, maintain a minimum Adjusted Net Worth at least equal to the sum of (a) (i) at all times prior to 10 days after receipt of the financial information described in subclause (B) below, $214,500,000 and (ii) at all other times, the greater of (A) $169,500,000 and (B) 90% of Adjusted Net Worth determined for the Borrower and its Subsidiaries on a pro forma basis as of January 31, 1997 based on financial information received by the Agent from the Borrower within 90 days from the date hereof in form and substance acceptable to the Required Lenders, plus (b) the sum of all proceeds (net of related costs, expenses, fees and taxes) received by the Borrower or any Subsidiary of the Borrower from the issuance of its capital stock, plus (c) for each Fiscal Quarter ending after the date hereof and prior to the time of determination, 50% of the Borrower's positive Adjusted Net Income for such Fiscal Quarter. 6.24.2. Leverage Ratio. As of the end of each Fiscal Quarter, maintain a Leverage Ratio of not more than 2.5:1.0. 6.24.3. Interest Expense Coverage Ratio. As of the end of each Fiscal Quarter, maintain an Interest Expense Coverage Ratio for the period indicated of not less than the following: -56- 64 Period ------ Ratio - ----- For the two months ending March 31, 1997..............2.50:1.00 For the five months ending June 30, 1997..............2.50:1.00 For the eight months ending September 30, 1997........2.50:1.00 For the eleven months ending December 31, 1997........2.75:1.00 For the four Fiscal Quarters ending each of March 31, 1998, June 30, 1998 and September 30, 1998..2.75:1.00 For each four Fiscal Quarters ending thereafter.......3.00:1.00 A. ERISA Compliance. With respect to any Plan, neither the Borrower nor any Subsidiary shall: 1. engage in any "prohibited transaction" (as such term is defined in Section 406 of ERISA or Section 4975 of the Code) for which a civil penalty pursuant to Section 502(i) of ERISA or a tax pursuant to Section 4975 of the Code in excess of $1,000,000 could be imposed; 1. incur any "accumulated funding deficiency" (as such term is defined in Section 302 of ERISA) in excess of $1,000,000, whether or not waived, or permit any Unfunded Liability to exceed $1,000,000; 1. permit the occurrence of any Termination Event which could result in a liability to the Borrower or any other member of the Controlled Group in excess of $1,000,000; 1. be an "employer" (as such term is defined in Section 3(5) of ERISA) required to contribute to any Multiemployer Plan or a "substantial employer" (as such term in defined in Section 4001(a)(2) of ERISA) required to contribute to any Multiple Employer Plan; or 1. permit the establishment or amendment of any Plan or fail to comply with the applicable provisions of ERISA and the Code with respect to any Plan -57- 65 which could result in liability to the Borrower or any other member of the Controlled Group which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. A. Material Subsidiaries. The Borrower shall cause each of its Subsidiaries which becomes a Material Subsidiary on or after the date hereof to join the Subsidiary Guaranty as a Guarantor pursuant to a joinder agreement in the form attached to the Subsidiary Guaranty within thirty (30) days of such Person becoming a Material Subsidiary. I. ARTICLE DEFAULTS The occurrence of any one or more of the following events shall constitute a Default: A. Any representation or warranty made or deemed made by or on behalf of the Borrower or any of its Subsidiaries to the Lenders or the Agent under or in connection with this Agreement, any other Loan Document, any Loan, any Facility Letter of Credit or any certificate or information delivered in connection with this Agreement or any other Loan Document shall be false in any material respect on the date as of which made or deemed made. A. Nonpayment of (a) any principal of any Note or any Reimbursement Obligation when due, or (b) any interest upon any Note or any commitment fee or other fee or obligations under any of the Loan Documents within five days after the same becomes due. A. The breach by the Borrower of any of the terms or provisions of Section 6.2, Section 6.3(a) or Sections 6.10 through 6.24. A. The breach by the Borrower (other than a breach which constitutes a Default under Section 7.1, 7.2 or 7.3) of any of the terms or provisions of this Agreement which is not remedied within thirty (30) days after written notice from the Agent or any Lender. A. Failure of the Borrower or any of its Subsidiaries to pay any Indebtedness aggregating in excess of $10,000,000 when due; or the default by the Borrower or any of its Subsidiaries in the performance of any term, provision or condition contained in any agreement or agreements under which any such Indebtedness was created or is governed, or the occurrence of any other event or existence of any other condition, the effect of any of which is to cause, or to permit the holder or holders of such Indebtedness to cause, such Indebtedness to become due prior to its stated maturity; or any such Indebtedness of the Borrower or any of its Subsidiaries shall be declared to be -58- 66 due and payable or required to be prepaid (other than by a regularly scheduled payment) prior to the stated maturity thereof. A. The Borrower or any of its Subsidiaries shall (a) have an order for relief entered with respect to it under the Federal bankruptcy laws as now or hereafter in effect, (b) make an assignment for the benefit of creditors, (c) apply for, seek, consent to, or acquiesce in, the appointment of a receiver, custodian, trustee, examiner, liquidator or similar official for it or any Substantial Portion of its Property, (d) institute any proceeding seeking an order for relief under the Federal bankruptcy laws as now or hereafter in effect or seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution, winding up, liquidation, reorganization, arrangement, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or fail to file an answer or other pleading denying the material allegations of any such proceeding filed against it, (e) take any corporate action to authorize or effect any of the foregoing actions set forth in this Section 7.6, (f) fail to contest in good faith any appointment or proceeding described in Section 7.7 or (g) become unable to pay, not pay, or admit in writing its inability to pay, its debts generally as they become due. A. Without the application, approval or consent of the Borrower or any of its Subsidiaries, a receiver, trustee, examiner, liquidator or similar official shall be appointed for the Borrower or any of its Subsidiaries or any Substantial Portion of its Property, or a proceeding described in Section 7.6(d) shall be instituted against the Borrower or any of its Subsidiaries and such appointment continues undischarged or such proceeding continues undismissed or unstayed for a period of thirty consecutive days. A. Any court, government or governmental agency shall condemn, seize or otherwise appropriate, or take custody or control of (each a "Condemnation"), all or any portion of the Property of the Borrower and its Subsidiaries which, when taken together with all other Property of the Borrower and its Subsidiaries so condemned, seized, appropriated, or taken custody or control of, during the twelve-month period ending with the month in which any such Condemnation occurs, constitutes a Substantial Portion. A. The Borrower or any of its Subsidiaries shall fail within thirty days to pay, bond or otherwise discharge any judgments or orders for the payment of an aggregate amount in excess of $10,000,000, which is not covered by undisputed insurance or stayed on appeal or otherwise being appropriately contested in good faith and as to which no enforcement actions have been commenced. A. Any Change in Control shall occur. A. The Subsidiary Guaranty shall fail to remain in full force or effect or any action shall be taken to discontinue or to assert the invalidity or unenforceability of the Subsidiary Guaranty, or any Guarantor shall fail to comply with any of the terms or -59- 67 provisions of the Subsidiary Guaranty, or any Guarantor denies that it has any further liability under the Subsidiary Guaranty, or gives notice to such effect. I. ARTICLE ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES A. Acceleration. If any Default described in Section 7.6 or 7.7 occurs with respect to the Borrower, the obligations of the Lenders to make Loans or issue Facility Letters of Credit hereunder shall automatically terminate and the Obligations shall immediately become due and payable without any election or action on the part of the Agent or any Lender. If any other Default occurs, the Required Lenders (or the Agent with the consent of the Required Lenders) may terminate or suspend the obligations of the Lenders to make Loans or issue Facility Letters of Credit hereunder, or declare the Obligations to be due and payable, or both, whereupon the Obligations shall become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which the Borrower hereby expressly waives. In addition to the foregoing, following the occurrence and during the continuance of a Default, so long as any Facility Letter of Credit has not been fully drawn and has not been cancelled or expired by its terms, upon demand by the Agent, the Borrower shall deposit in an account (the "Letter of Credit Cash Collateral Account") maintained with First Chicago in the name of the Agent, for the ratable benefit of the Lenders and the Agent, cash in an amount equal to the aggregate undrawn face amount of all outstanding Facility Letters of Credit and all fees and other amounts due or which may become due with respect thereto. The Borrower shall have no control over funds in the Letter of Credit Cash Collateral Account, which funds shall be invested by the Agent from time to time in its discretion in certificates of deposit of First Chicago having a maturity not exceeding thirty days. Such funds shall be promptly applied by the Agent to reimburse the Issuer for drafts drawn from time to time under the Facility Letters of Credit. Such funds, if any, remaining in the Letter of Credit Cash Collateral Account following the payment of all Obligations in full or the earlier termination of all Defaults shall, unless the Agent is otherwise directed by a court of competent jurisdiction, be promptly paid over to the Borrower. If, within ten Business Days after acceleration of the maturity of the Obligations or termination of the obligations of the Lenders to make Loans hereunder as a result of any Default (other than any Default as described in Section 7.6 or 7.7 with respect to the Borrower) and before any judgment or decree for the payment of the Obligations due shall have been obtained or entered, the Required Lenders (in their sole discretion) shall so direct, the Agent shall, by notice to the Borrower, rescind and annul such acceleration and/or termination. A. Amendments. Subject to the provisions of this Article VIII, the Required Lenders (or the Agent with the consent in writing of the Required Lenders) and the Borrower may enter into agreements supplemental hereto for the purpose of adding or modifying any provisions to the Loan Documents or changing in any manner the rights of -60- 68 the Lenders or the Borrower hereunder or waiving any Default hereunder; provided, however, that no such supplemental agreement shall, without the consent of each Lender: 1. Extend the final maturity of any Loan or Note or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest or fees thereon; 1. Reduce the percentage specified in the definition of Required Lenders; 1. Reduce the amount of or extend the date for the mandatory payments required under Section 2.1.2, or increase the amount of the Commitment of any Lender hereunder; 1. Subject to Section 2.20, extend the Facility Termination Date or permit any Facility Letter of Credit to have an expiry date beyond the Facility Termination Date then in effect; 1. Amend this Section 8.2; 1. Release any Guarantor from the Subsidiary Guaranty; or 1. Permit any assignment by the Borrower of its Obligations or its rights hereunder. No amendment of any provision of this Agreement relating to (i) the Agent shall be effective without the written consent of the Agent (ii) the Issuer or the Facility Letters of Credit shall be effective without the consent of the Issuer or (iii) Swing Line Loans shall be effective without the consent of the Swing Line Lender. The Agent may waive payment of the fee required under Section 12.3.2 without obtaining the consent of any other party to this Agreement. A. Preservation of Rights. No delay or omission of the Lenders or the Agent to exercise any right under the Loan Documents shall impair such right or be construed to be a waiver of any Default or an acquiescence therein, and the making of a Loan notwithstanding the existence of a Default or the inability of the Borrower to satisfy the conditions precedent to such Loan shall not constitute any waiver or acquiescence. Any single or partial exercise of any such right shall not preclude other or further exercise thereof or the exercise of any other right, and no waiver, amendment or other variation of the terms, conditions or provisions of the Loan Documents whatsoever shall be valid unless in writing signed by the Lenders required pursuant to Section 8.2, and then only to the extent in such writing specifically set forth. All remedies contained in the Loan Documents or by law afforded shall be cumulative and all shall be available to the Agent and the Lenders until the Obligations have been paid in full. -61- 69 I. ARTICLE GENERAL PROVISIONS A. Survival of Representations. All representations and warranties of the Borrower contained in this Agreement or of the Borrower or any Subsidiary contained in any Loan Document shall survive delivery of the Notes and the making of the Loans herein contemplated. A. Governmental Regulation. Anything contained in this Agreement to the contrary notwithstanding, no Lender shall be obligated to extend credit to the Borrower in violation of any limitation or prohibition provided by any applicable statute or regulation. A. Taxes. Any stamp, documentary or similar taxes, assessments or charges payable or ruled payable by any governmental authority in respect of the Loan Documents shall be paid by the Borrower, together with interest and penalties, if any. A. Headings. Section headings in the Loan Documents are for convenience of reference only, and shall not govern the interpretation of any of the provisions of the Loan Documents. A. Entire Agreement. The Loan Documents embody the entire agreement and understanding among the Borrower, the Agent and the Lenders and supersede all prior agreements and understandings among the Borrower, the Agent and the Lenders relating to the subject matter thereof other than the fee letter dated January 23, 1997 in favor of First Chicago. A. Several Obligations; Benefits of this Agreement. The respective obligations of the Lenders hereunder are several and not joint and no Lender shall be the partner or agent of any other (except to the extent to which the Agent is authorized to act as such). The failure of any Lender to perform any of its obligations hereunder shall not relieve any other Lender from any of its obligations hereunder. This Agreement shall not be construed so as to confer any right or benefit upon any Person other than the parties to this Agreement and their respective successors and assigns. A. Expenses; Indemnification. The Borrower shall reimburse the Agent and the Arranger for any costs, internal charges and out-of-pocket expenses (including attorneys' fees and time charges of attorneys for the Agent and the Arranger, which attorneys may be employees of the Agent or the Arranger) paid or incurred by the Agent or the Arranger in connection with the preparation, negotiation, execution, delivery, review, amendment, modification, syndication and administration of the Loan Documents. The Borrower also agrees to reimburse the Agent, the Arranger and the Lenders for any costs, internal charges and out-of-pocket expenses (including attorneys' -62- 70 fees and time charges of attorneys for the Agent, the Arranger and the Lenders, which attorneys may be employees of the Agent, the Arranger or the Lenders) paid or incurred by the Agent, the Arranger or any Lender in connection with the collection and enforcement of the Loan Documents. The Borrower further agrees to indemnify the Agent, the Arranger and each Lender, its directors, officers and employees against all losses, claims, damages, penalties, judgments, liabilities and expenses (including, without limitation, all expenses of litigation or preparation therefor whether or not the Agent, the Arranger or any Lender is a party thereto) which any of them may pay or incur arising out of or relating to this Agreement, the other Loan Documents or the Transaction Documents, the transactions contemplated hereby or thereby or the direct or indirect application or proposed application of the proceeds of any Loan hereunder or the use or intended use of any Facility Letter of Credit, except to the extent that they arise out of the gross negligence or willful misconduct of the party seeking indemnification. The obligations of the Borrower under this Section shall survive the termination of this Agreement. A. Numbers of Documents. All statements, notices, closing documents, and requests hereunder shall be furnished to the Agent with sufficient counterparts so that the Agent may furnish one to each of the Lenders. A. Accounting. Except as provided to the contrary herein, all accounting terms used herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with Agreement Accounting Principles. A. Severability of Provisions. Any provision in any Loan Document that is held to be inoperative, unenforceable, or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or invalid without affecting the remaining provisions in that jurisdiction or the operation, enforceability, or validity of that provision in any other jurisdiction, and to this end the provisions of all Loan Documents are declared to be severable. A. Nonliability of Lenders. The relationship between the Borrower and the Lenders and the Agent shall be solely that of borrower and lender. Neither the Agent nor any Lender shall have any fiduciary responsibilities to the Borrower. Neither the Agent nor any Lender undertakes any responsibility to the Borrower to review or inform the Borrower of any matter in connection with any phase of the Borrower's business or operations. The Borrower shall rely entirely upon its own judgment with respect to its business, and any review, inspection or supervision of, or information supplied to the Borrower by the Agent or the Lenders is for the protection of the Agent and the Lenders and neither the Borrower nor any other Person is entitled to rely thereon. The Borrower agrees that neither the Agent nor any Lender shall have any liability with respect to, and the Borrower hereby waives, releases and agrees not to sue for, any punitive, special, indirect or consequential damages suffered by the Borrower in connection with, arising out of, or in any way related to the Loan Documents or the transactions contemplated thereby or the relationship established by the Loan Documents, or any act, omission or event occurring in connection therewith. -63- 71 B. CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS, WITHOUT REGARD TO CONFLICT OF LAWS PROVISIONS, OF THE STATE OF ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS. A. CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE COURT SITTING IN CHICAGO IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS AND THE BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE BORROWER AGAINST THE AGENT OR ANY LENDER OR ANY AFFILIATE OF THE AGENT OR ANY LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS; PROVIDED, THAT SUCH PROCEEDINGS MAY BE BROUGHT IN OTHER COURTS IF JURISDICTION MAY NOT BE OBTAINED IN A COURT IN CHICAGO, ILLINOIS. A. WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT AND EACH LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER. B. Disclosure. The Borrower and each Lender hereby (a) acknowledge and agree that First Chicago and/or its Affiliates from time to time may hold other investments in, make other loans to or have other relationships with the Borrower, including, without limitation, in connection with any interest rate hedging instruments or agreements or swap transactions, and (b) waive any liability of First Chicago or such Affiliate to the Borrower or any Lender, respectively, arising out of or resulting from such investments, loans or relationships other than liabilities arising out of the gross negligence or willful misconduct of First Chicago or its Affiliates. A. Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one agreement, and any of the parties hereto may execute this Agreement by signing any such counterpart. This -64- 72 Agreement shall be effective when it has been executed by the Borrower, the Agent and the Lenders and each party has notified the Agent that it has taken such action. A. Confidentiality. Each Lender agrees to take normal and reasonable precautions and exercise due care to maintain the confidentiality of all information provided to it by the Borrower, or by the Agent on the Borrower's behalf, in connection with this Agreement or any other Loan Document, and no Lender shall use any such information for any purpose or in any manner other than pursuant to the terms contemplated by this Agreement, except to the extent such information (a) was or becomes generally available to the public other than as a result of a disclosure by such Lender, or (b) was or becomes available on a non-confidential basis from a source other than the Borrower, provided that such source is not bound by a confidentiality agreement with the Borrower or its agents known to such Lender; provided, further, however, that any Lender may disclose such information (i) after being advised by counsel (including internal counsel), at the request or pursuant to any requirement of any governmental or regulatory authority to which such Lender is subject or in connection with an examination of such Lender by any such authority; (ii) pursuant to subpoena or other court process, provided that, if it is lawful to do so, such Lender shall give prompt notice to the Borrower of service thereof so that the Borrower may seek a protective order or other appropriate remedy or waive compliance with the provisions of this Section 9.17; (iii) after being advised by counsel (including internal counsel), when required to do so in accordance with the provisions of any applicable requirement of law; (iv) to the extent reasonably required in connection with any litigation or proceeding involving the Borrower or any of its Subsidiaries to which the Agent, any Lender or their respective Affiliates may be party, (v) to the extent reasonably required in connection with the exercise of any remedy hereunder or under any other Loan Document, and (vi) to such Lender's independent auditors and other professional advisors as to which such information has been identified as confidential. I. ARTICLE THE AGENT A. Appointment. First Chicago is hereby appointed Agent hereunder and under each other Loan Document, and each of the Lenders authorizes the Agent to act as the agent of such Lender. The Agent agrees to act as such upon the express conditions contained in this Article X. The Agent shall not have a fiduciary relationship in respect of the Borrower or any Lender by reason of this Agreement. A. Powers. The Agent shall have and may exercise such powers under the Loan Documents as are specifically delegated to the Agent by the terms of each thereof, together with such powers as are reasonably incidental thereto. The Agent shall have no implied duties to the Lenders, or any obligation to the Lenders to take any action thereunder, except any action specifically provided by the Loan Documents to be taken by the Agent. -65- 73 A. General Immunity. Neither the Agent nor any of its directors, officers, agents or employees shall be liable to the Borrower or any Lender for any action taken or omitted to be taken by it or them hereunder or under any other Loan Document or in connection herewith or therewith except for its or their own gross negligence or willful misconduct. A. No Responsibility for Loans, Recitals, etc. Neither the Agent nor any of its directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into, or verify (a) any statement, warranty or representation made in connection with any Loan Document or any borrowing hereunder, (b) the performance or observance of any of the covenants or agreements of any obligor under any Loan Document, including, without limitation, any agreement by an obligor to furnish information directly to each Lender; (c) the satisfaction of any condition specified in Article IV, except receipt of items required to be delivered to the Agent and not waived at closing, or (d) the validity, effectiveness, sufficiency, enforceability or genuineness of any Loan Document or any other instrument or writing furnished in connection therewith. The Agent shall have no duty to disclose to the Lenders information that is not required to be furnished by the Borrower to the Agent at such time, but is voluntarily furnished by the Borrower to the Agent (either in its capacity as Agent or in its individual capacity). A. Action on Instructions of Lenders. The Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder and under any other Loan Document in accordance with written instructions signed by the Required Lenders (or, to the extent required by Section 8.2, all Lenders), and such instructions and any action taken or failure to act pursuant thereto shall be binding on all of the Lenders and on all holders of Notes. The Agent shall be fully justified in failing or refusing to take any action hereunder and under any other Loan Document unless it shall first be indemnified to its satisfaction by the Lenders pro rata against any and all liability, cost and expense that it may incur by reason of taking or continuing to take any such action. A. Employment of Agents and Counsel. The Agent may execute any of its duties as Agent hereunder and under any other Loan Document by or through employees, agents and attorneys-in-fact and shall not be answerable to the Lenders, except as to money or securities received by it or its authorized agents, for the default or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. The Agent shall be entitled to advice of counsel concerning all matters pertaining to the agency hereby created and its duties hereunder and under any other Loan Document. A. Reliance on Documents; Counsel. The Agent shall be entitled to rely upon any Note, notice, consent, certificate, affidavit, letter, telegram, statement, paper or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and, in respect to legal matters, upon the opinion of counsel selected by the Agent, which counsel may be employees of the Agent. -66- 74 A. Agent's Reimbursement and Indemnification. The Lenders agree to reimburse and indemnify the Agent ratably in proportion to their respective Commitments (or, if the Commitments have been terminated, in proportion to their Commitments immediately prior to such termination) (a) for any amounts not reimbursed by the Borrower for which the Agent is entitled to reimbursement by the Borrower under the Loan Documents, (b) for any other expenses incurred by the Agent on behalf of the Lenders, in connection with the preparation, execution, delivery, administration and enforcement of the Loan Documents, and (c) for any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of the Loan Documents or any other document delivered in connection therewith or the transactions contemplated thereby, or the enforcement of any of the terms thereof or of any such other documents; provided, that no Lender shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the Agent. The obligations of the Lenders under this Section 10.8 shall survive payment of the Obligations and termination of this Agreement. A. Notice of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Unmatured Default hereunder unless the Agent has received written notice from a Lender or the Borrower referring to this Agreement describing such Default or Unmatured Default and stating that such notice is a "notice of default". In the event that the Agent receives such a notice, the Agent shall give prompt notice thereof to the Lenders. A. Rights as a Lender. In the event the Agent is a Lender, the Agent shall have the same rights and powers hereunder and under any other Loan Document as any Lender and may exercise the same as though it were not the Agent, and the term "Lender" or "Lenders" shall, at any time when the Agent is a Lender, unless the context otherwise indicates, include the Agent in its individual capacity. The Agent may accept deposits from, lend money to, and generally engage in any kind of trust, debt, equity or other transaction, in addition to those contemplated by this Agreement or any other Loan Document, with the Borrower or any of its Subsidiaries in which the Borrower or such Subsidiary is not restricted hereby from engaging with any other Person. The Agent, in its individual capacity, is not obligated to remain a Lender. A. Lender Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon the Agent or any other Lender and based on the financial statements prepared by the Borrower and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and the other Loan Documents. Each Lender also acknowledges that it will, independently and without reliance upon the Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and the other Loan Documents. -67- 75 A. Successor Agent. The Agent may resign at any time by giving written notice thereof to the Lenders and the Borrower, such resignation to be effective upon the appointment of a successor Agent or, if no successor Agent has been appointed, forty-five days after the retiring Agent gives notice of its intention to resign. Upon any such resignation, the Required Lenders shall have the right to appoint, on behalf of the Lenders, a successor Agent. If no successor Agent shall have been so appointed by the Required Lenders and shall have accepted such appointment within thirty days after the resigning Agent's giving notice of its intention to resign, then the resigning Agent may appoint, on behalf of the Borrower and the Lenders, a successor Agent. If the Agent has resigned and no successor Agent has been appointed, the Lenders may perform all the duties of the Agent hereunder and the Borrower shall make all payments in respect of the Obligations to the applicable Lender and for all other purposes shall deal directly with the Lenders. No successor Agent shall be deemed to be appointed hereunder until such successor Agent has accepted the appointment. Any such successor Agent shall be a commercial bank having capital and retained earnings of at least $50,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the resigning Agent. Upon the effectiveness of the resignation of the Agent, the resigning Agent shall be discharged from its duties and obligations hereunder and under the Loan Documents. After the effectiveness of the resignation of an Agent, the provisions of this Article X shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Agent hereunder and under the other Loan Documents. I. ARTICLE SETOFF; RATABLE PAYMENTS A. Setoff. In addition to, and without limitation of, any rights of the Lenders under applicable law, if the Borrower becomes insolvent, however evidenced, or any Default or Unmatured Default occurs, any and all deposits (including all account balances, whether provisional or final and whether or not collected or available) and any other Indebtedness at any time held or owing by any Lender to or for the credit or account of the Borrower may be offset and applied toward the payment of the Obligations owing to such Lender, whether or not the Obligations, or any part hereof, shall then be due. A. Ratable Payments. If any Lender, whether by setoff or otherwise, has payment made to it upon its Loans (other than payments received pursuant to Section 3.1, 3.2 or 3.4) in a greater proportion than its pro-rata share of such Loans, such Lender agrees, promptly upon demand, to purchase a portion of the Loans held by the other Lenders so that after such purchase each Lender will hold its ratable proportion of Loans. If any Lender, whether in connection with setoff or amounts which might be subject to setoff or otherwise, receives collateral or other protection for its Obligations or such amounts which may be subject to setoff, such Lender agrees, promptly upon demand, to take such action necessary such that all Lenders share in the benefits of such collateral -68- 76 ratably in proportion to their Loans. In case any such payment is disturbed by legal process, or otherwise, appropriate further adjustments shall be made. If an amount to be setoff is to be applied to Indebtedness of the Borrower to a Lender, other than Indebtedness evidenced by any of the Notes held by such Lender, such amount shall be applied ratably to such other Indebtedness and to the Indebtedness evidenced by such Notes. I. ARTICLE BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS A. Successors and Assigns. The terms and provisions of the Loan Documents shall be binding upon and inure to the benefit of the Borrower and the Lenders and their respective successors and assigns, except that (a) the Borrower shall not have the right to assign its rights or obligations under the Loan Documents, and (b) any assignment by any Lender must be made in compliance with Section 12.3. Notwithstanding clause (b) of this Section, any Lender may at any time, without the consent of the Borrower or the Agent, assign all or any portion of its rights under this Agreement and its Notes to a Federal Reserve Bank; provided, however, that no such assignment to a Federal Reserve Bank shall release the transferor Lender from its obligations hereunder. The Agent may treat the payee of any Note as the owner thereof for all purposes hereof unless and until such payee complies with Section 12.3 in the case of an assignment thereof or, in the case of any other transfer, a written notice of the transfer is filed with the Agent. Any assignee or transferee of a Note agrees by acceptance thereof to be bound by all the terms and provisions of the Loan Documents. Any request, authority or consent of any Person, who at the time of making such request or giving such authority or consent is the holder of any Note, shall be conclusive and binding on any subsequent holder, transferee or assignee of such Note or of any Note or Notes issued in exchange therefor. -69- 77 A. Participations. 12.2.1. Permitted Participants; Effect. Any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time sell to one or more banks or other entities ("Participants") participating interests in any Loan owing to such Lender, any Note held by such Lender, any Lender's interest in any Facility Letter of Credit Obligation, any Commitment of such Lender or any other interest of such Lender under the Loan Documents. In the event of any such sale by a Lender of participating interests to a Participant, such Lender's obligations under the Loan Documents shall remain unchanged, such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, such Lender shall remain the holder of any such Note for all purposes under the Loan Documents, all amounts payable by the Borrower under this Agreement shall be determined as if such Lender had not sold such participating interests, and the Borrower and the Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under the Loan Documents. 12.2.2. Voting Rights. Each Lender shall retain the sole right to approve, without the consent of any Participant, any amendment, modification or waiver of any provision of the Loan Documents other than any amendment, modification or waiver which effects any of the modifications referenced in clauses (a) through (g) of Section 8.2. 12.2.3. Benefit of Setoff. The Borrower agrees that each Participant shall be deemed to have the right of setoff provided in Section 11.1 in respect of its participating interest in amounts owing under the Loan Documents to the same extent as if the amount of its participating interest were owing directly to it as a Lender under the Loan Documents; provided, that each Lender shall retain the right of setoff provided in Section 11.1 with respect to the amount of participating interests sold to each Participant. The Lenders agree to share with each Participant, and each Participant, by exercising the right of setoff provided in Section 11.1, agrees to share with each Lender, any amount received pursuant to the exercise of its right of setoff, such amounts to be shared in accordance with Section 11.2 as if each Participant were a Lender. A. Assignments. 12.3.1. Permitted Assignments. Any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time assign to one or more banks or other entities ("Purchasers") all or any part of its rights and obligations under the Loan Documents; provided, however, that in the case of an assignment to an entity which is not a Lender or an Affiliate of a lender, such assignment shall be in a minimum amount of $5,000,000. Such assignment shall be substantially in the form of Exhibit H hereto or in such other form as may be agreed to by the parties thereto. The consent of the Agent and, so long as no Default is continuing, the Borrower shall be required prior to an assignment becoming effective with respect to a Purchaser which is not a Lender or an Affiliate thereof. Such consent shall not be unreasonably withheld. -70- 78 12.3.2. Effect; Effective Date. Upon (a) delivery to the Agent of a notice of assignment, substantially in the form attached as Exhibit I to Exhibit H hereto (a "Notice of Assignment"), together with any consents required by Section 12.3.1, and (b) payment of a $3,500 fee to the Agent for processing such assignment, such assignment shall become effective on the effective date specified in such Notice of Assignment. On and after the effective date of such assignment, (a) such Purchaser shall for all purposes be a Lender party to this Agreement and any other Loan Document executed by the Lenders and shall have all the rights and obligations of a Lender under the Loan Documents, to the same extent as if it were an original party hereto, and (b) the transferor Lender shall be released with respect to the percentage of the Aggregate Commitment and Loans assigned to such Purchaser without any further consent or action by the Borrower, the Lenders or the Agent. Upon the consummation of any assignment to a Purchaser pursuant to this Section 12.3.2, the transferor Lender, the Agent and the Borrower shall make appropriate arrangements so that replacement Notes are issued to such transferor Lender and new Notes or, as appropriate, replacement Notes, are issued to such Purchaser, in each case, to the extent applicable, in principal amounts reflecting their Commitment, as adjusted pursuant to such assignment. A. Dissemination of Information. The Borrower authorizes each Lender to disclose to any Participant or Purchaser or any other Person acquiring an interest in the Loan Documents by operation of law (each a "Transferee") and any prospective Transferee any and all information in such Lender's possession concerning the creditworthiness of the Borrower and its Subsidiaries. A. Tax Treatment. If any interest in any Loan Document is transferred to any Transferee which is organized under the laws of any jurisdiction other than the United States or any State thereof, the transferor Lender shall cause such Transferee, concurrently with the effectiveness of such transfer, to comply with the provisions of Section 2.17. I. ARTICLE NOTICES A. Giving Notice. Except as otherwise permitted by Section 2.12 with respect to borrowing notices, all notices and other communications provided to any party hereto under this Agreement or any other Loan Document shall be in writing, by facsimile, first class U.S. mail or overnight courier and addressed or delivered to such party at its address set forth below its signature hereto or at such other address as may be designated by such party in a notice to the other parties. Any notice, if mailed and properly addressed with first class postage prepaid, return receipt requested, shall be deemed given three (3) Business Days after deposit in the U.S. mail; any notice, if transmitted by facsimile, shall be deemed given when transmitted; and any notice given by overnight courier shall be deemed given when received by the addressee. -71- 79 A. Change of Address. The Borrower, the Agent and any Lender may each change the address for service of notice upon it by a notice in writing to the other parties hereto. [signature pages to follow] -72- 80 IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent have executed this Agreement as of the date first above written. RALCORP HOLDINGS, INC. By: Print Name: Title: Address: 800 Market Street St. Louis, Missouri 63101 Attn: Daniel J. Sescleifer Telecopy: (314) 877-7729 Telephone: (314) 877-7113 Commitment $50,000,000 THE FIRST NATIONAL BANK OF CHICAGO, Individually and as Agent By: Print Name: Title: Address: One First National Plaza Chicago, Illinois 60670 Attn: William J. Oleferchik Telecopy: (312) 732-5296 Telephone: (312) 732-2947 Initial Aggregate Commitment $50,000,000 =========== -73- EX-10.2 4 REORGANIZATION AGREEMENT 1 EXHIBIT 10.2 REORGANIZATION AGREEMENT This Reorganization Agreement (the "Agreement"), dated as of January , 1997, by and among Ralcorp Holdings, Inc., a Missouri corporation ("Ralcorp"), New Ralcorp Holdings, Inc., a Missouri corporation ("New Ralcorp"), Ralston Foods, Inc., a Nevada corporation ("Foods"), Chex Inc., a Delaware corporation wholly owned by New Ralcorp (the "Branded Subsidiary"), and General Mills, Inc., a Delaware corporation ("Acquiror"). WITNESSETH: WHEREAS, Ralcorp holds all of the issued and outstanding capital stock of Foods and all of the issued and outstanding capital stock of New Ralcorp; and WHEREAS, New Ralcorp holds all of the issued and outstanding capital stock of the Branded Subsidiary; and WHEREAS, Ralcorp's Board of Directors has approved, and on August 13, 1996 Ralcorp entered into, an Agreement and Plan of Merger (as amended from time to time, the "Merger Agreement") among Ralcorp, Acquiror and General Mills Missouri, Inc., a Missouri corporation ("Merger Sub"), pursuant to which this Agreement and certain other related agreements will be executed to accomplish the following transactions: (i) Ralcorp will cause Foods to be merged with and into New Ralcorp, with New Ralcorp as the surviving corporation of the merger (the "Internal Merger"). (ii) Ralcorp will cause New Ralcorp to contribute, as a capital contribution, the assets and liabilities specified or described herein to the Branded Subsidiary. (iii) Ralcorp will contribute, as a capital contribution, the assets and liabilities specified or described herein to New Ralcorp. (iv) New Ralcorp will distribute all of the issued and outstanding shares of the capital stock of the Branded Subsidiary to Ralcorp (the "Internal Spinoff"). (v) Ralcorp will distribute (the "Distribution") all of the issued and outstanding shares of capital stock of New Ralcorp (the "Common Stock") to the holders of Ralcorp's $.01 par value common stock (the "Ralcorp Stock"). (vi) Acquiror will acquire Ralcorp (and the Branded Subsidiary) by virtue of a merger of Merger Sub with and into Ralcorp pursuant to the Merger Agreement. 2 WHEREAS, the transfer of assets and liabilities of the Branded Business to the Branded Subsidiary, the Internal Merger and the Internal Spinoff, are intended to qualify for non-recognition treatment under Sections 368(a)(1)(D) and 355(a) of the Code; WHEREAS, in order to effect the Distribution, the Ralcorp Board (as hereinafter defined) has determined that it is necessary and desirable to distribute the outstanding shares of Common Stock on a pro rata basis to the holders of Ralcorp Stock; WHEREAS, the Distribution is intended to qualify for non-recognition treatment under Section 355 of the Code (as hereinafter defined); WHEREAS, in preparation for the Distribution, Ralcorp and New Ralcorp have prepared and filed with the SEC (as hereinafter defined), and the SEC has declared effective, a Registration Statement on Form 10 ("Form 10") pursuant to Section 12(b) of the Exchange Act with respect to the Common Stock and associated Rights; and WHEREAS, the parties hereto have determined that it is necessary and desirable to set forth the principal corporate transactions required to effect the Distribution and the other transactions contemplated hereby and to set forth other agreements that will govern certain other matters relating to the Distribution and such other transactions and the relationship of the parties following the Distribution. NOW THEREFORE, in consideration of the premises and the mutual covenants herein contained and intending to be legally bound thereby, the parties hereto agree as follows: ARTICLE I DEFINITIONS 1.1 GENERAL. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): ACQUIROR: as defined in the recitals to this Agreement. ACTION: any action, claim, suit, arbitration, inquiry, proceeding or investigation by or before any court, governmental or other regulatory or administrative agency or commission or any arbitration or other tribunal. AFFILIATE: with respect to any specified Person, an "affiliate" as defined in Rule 405 promulgated pursuant to the Securities Act (as hereinafter defined); provided, however, that for purposes of this Agreement (i) Affiliates of Foods or New Ralcorp shall 3 not be deemed to include Ralcorp or the Branded Subsidiary, and (ii) Affiliates of Ralcorp shall not be deemed to include Foods, New Ralcorp or any of their direct or indirect subsidiaries (except the Branded Subsidiary). ANCILLARY AGREEMENTS: all of the agreements, instruments, understandings, assignments and other arrangements (excluding the Merger Agreement) entered into in connection with the transactions contemplated hereby, including, without limitation, this Agreement, the Supply Agreement, the Tax Sharing Agreement, the Technology Agreement and the Trademark Agreement. ASSET: any and all assets and properties, tangible or intangible, including the following: (i) certificates of deposit, bankers' acceptances, stock, debentures, evidences of indebtedness, certificates of interest or participation in profit-sharing agreements, collateral-trust certificates, preorganization certificates, investment contracts, voting-trust certificates; (ii) except as otherwise provided in the following sentence, trade secrets, confidential information, registered and unregistered trademarks, service marks, service names, trade styles and trade names and associated goodwill; statutory, common law and registered copyrights; applications for any of the foregoing, rights to use any of the foregoing and other rights in, to and under any of the foregoing; (iii) rights under Contracts and permits; (iv) real estate and buildings and other improvements thereon and timber and mineral rights of every kind; (v) leasehold improvements, fixtures, trade fixtures, machinery, equipment (including transportation and office equipment), tools, dies and furniture; (vi) office supplies, production supplies, spare parts, other miscellaneous supplies and other tangible property of any kind; (vii) raw materials, work-in-process, finished goods, consigned goods and other inventories; (viii) prepayments or prepaid expenses; (ix) claims, causes of action, choses in action, rights of recovery and rights of set-off of any kind; (x) the right to receive mail and other communications; (xi) lists of advertisers, records pertaining to advertisers and accounts, lists and records pertaining to suppliers and agents, and books, ledgers, files and business records of every kind; (xii) advertising materials and other recorded, printed or written materials; (xiii) except as otherwise provided in the following sentence, goodwill as a going concern and other intangible properties; (xiv) personnel records and employee contracts, including any rights thereunder to restrict an employee from competing in certain respects; and (xv) licenses and authorizations issued by any governmental authority. Notwithstanding the foregoing definition, "Assets" shall not include (i) any of the intellectual and proprietary property, rights and obligations that are the subjects of the Technology Agreement and the Trademark Agreement (which shall be governed by the Technology Agreement and the Trademark Agreement, respectively), or (ii) any cash, notes and trade and customer accounts receivable (whether current or non-current and including all rights with respect thereto). ASSIGNMENT AND ASSUMPTION AGREEMENT: as defined in Section 6.2 of this Agreement. BRANDED ASSETS: all of the Assets listed on Schedule 1.1(a). 4 BRANDED BALANCE SHEET: as defined in the Merger Agreement. BRANDED BUSINESS: the business of manufacturing, distributing and selling branded ready-to-eat cereal (excluding Non-Branded Cereals) and branded cereal-based snacks and snack mixes, as conducted by any member of either Group immediately prior to the Distribution Date. BRANDED EMPLOYEE: any individual who on the Distribution Date is an officer or employee of any member of either Group and (a) who is actively employed at the Branded Plant, or (b) who is set forth on Schedule 1.1(b) (which Schedule will be updated by mutual agreement of New Ralcorp and Acquiror prior to the Effective Time), or (c) who is on leave or layoff (with recall rights) from active employment but who, immediately prior to commencement of such leave or layoff, was employed at the Branded Plant, except that a Branded Employee shall not include any individual who, as of the Distribution Date, (i) has been determined to be disabled under the Ralcorp Holdings Long Term Disability Plan ("LTD Plan"), the Ralcorp Holdings Group Life Insurance Plan or the Ralcorp Holdings Retirement Plan for Sales, Administrative, Clerical and Production Employees, or (ii) is on leave during a waiting period prior to a determination of disability under the LTD Plan. BRANDED INDIVIDUAL: any individual who is a Branded Employee or a beneficiary of a Branded Employee. BRANDED LIABILITIES: (i) all of the Liabilities arising out of, relating to or resulting from the ownership, use or possession of the Branded Assets or the operation of the Branded Business other than those portions of the Branded Business that are not conveyed to or retained by Ralcorp and the Branded Subsidiary hereunder as of immediately after the Distribution Time, whether arising prior to or after the Closing Date, (ii) the Scheduled Branded Litigation, and (iii) the Known Branded Liabilities. For purposes of clarification, the Liabilities referred to in clause (i) shall include product liability claims relating to Branded Business products produced prior to the Distribution Time regardless of whether such products were produced at the Branded Plant, but shall not include employee, environmental, occupational safety, health and similar liabilities related to any facility other than the Branded Plant. BRANDED PLANT: the manufacturing facility located at 11301 Mosteller Road, Sharonville, Ohio. BRANDED SUBSIDIARY: as defined in the recitals to this Agreement. BUSINESS DAY: any day other than a Saturday, a Sunday or a day on which banking institutions located in the State of Missouri are obligated by law or executive order to close. CLOSING: as defined in the Merger Agreement. 5 CLOSING DATE: as defined in the Merger Agreement. CLOSING DATE BALANCE SHEET: as defined in Schedule 2.3 to the Merger Agreement. CODE: the Internal Revenue Code of 1986, as amended, or any successor legislation. COLLECTIVE BARGAINING AGREEMENT: any collective bargaining or other labor agreement to which any member of either Group is a party, including those listed on Schedule 8.9. COMMON STOCK: as defined in the recitals to this Agreement. CONTRACT: any written or oral contract, agreement, lease, indenture or evidence of indebtedness. CONTROL BRAND: as defined in the Trademark Agreement. CURRENT PLAN YEAR: the plan year or fiscal year, to the extent applicable with respect to any Plan, during which the Distribution Date occurs. DELAYED ASSET: as defined in Section 3.5 of this Agreement. DELAYED LIABILITY: as defined in Section 3.5 of this Agreement. DISTRIBUTION: as defined in the recitals to this Agreement. DISTRIBUTION DATE: the date, to be determined by the Ralcorp Board consistent with the Merger Agreement, as of which the Distribution shall be effected. DISTRIBUTION TIME: the close of business on the Distribution Date. DISTRIBUTORSHIP AGREEMENT: as defined in Section 10.4 of this Agreement. EFFECTIVE TIME: as defined in the Merger Agreement. ERISA: the Employee Retirement Income Security Act of 1974, as amended, or any successor legislation. EXCHANGE ACT: the Securities Exchange Act of 1934, as amended, together with the rules and regulations promulgated thereunder. FOODS: as defined in the recitals to this Agreement. FORM 10: as defined in the recitals to this Agreement. 6 GROUP: the New Ralcorp Group or the Ralcorp Group. INDEMNIFIABLE LOSS: with respect to any claim by an Indemnitee for indemnification hereunder, any and all losses, liabilities, claims, damages, obligations, payments, costs and expenses (including, without limitation, the costs and expenses of any and all Actions, demands, claims and assessments, and any and all judgments, settlements and compromises related thereto and reasonable attorney's fees and expenses in connection therewith) incurred or suffered by such Indemnitee with respect to such claim. INDEMNITEE: as defined in Section 9.3 of this Agreement. INDEMNITOR: as defined in Section 9.3 of this Agreement. INFORMATION: as defined in Section 7.2 of this Agreement. INTERNAL MERGER: as defined in the recitals to this Agreement. INTERNAL SPINOFF: as defined in the recitals to this Agreement. IRS: the Internal Revenue Service. ISP: the Ralcorp Holdings Incentive Stock Plan. KNOWN BRANDED LIABILITIES: the Branded Liabilities included in the Closing Date Balance Sheet (but not the notes thereto), regardless of the sufficiency of the amount of any accrual thereon, and the Branded Liabilities set forth on Schedule 1.1(c). LIABILITIES: all claims, debts, liabilities, royalties, license fees, losses, costs, expenses, deficiencies, litigation proceedings, taxes, levies, imposts, duties, deficiencies, assessments, attorneys' fees, charges, allegations, demands, damages, judgments or obligations, whether absolute or contingent, matured or unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown and whether or not the same would properly be reflected on a balance sheet, including all costs and expenses relating thereto. MERGER: as defined in the Merger Agreement. MERGER AGREEMENT: as defined in the recitals to this Agreement. MERGER SUB: as defined in the recitals to this Agreement. NEW RALCORP: as defined in the recitals to this Agreement. 7 NEW RALCORP ASSETS: all of the Assets used or held by any member of either Group immediately prior to the Closing Date, except for the Branded Assets. NEW RALCORP BILL OF SALE: as defined in Section 6.2 of this Agreement. NEW RALCORP BUSINESS: any business conducted by any member of either Group, except for the Branded Business. NEW RALCORP DEFERRED COMPENSATION PLANS: as defined in Section 8.5 of this Agreement. NEW RALCORP DOCUMENTS: as defined in Section 5.1(b) of this Agreement. NEW RALCORP EMPLOYEE: any individual who at any time is or was an officer or employee of any member of either Group, other than a Branded Employee. NEW RALCORP GROUP: New Ralcorp and all other direct and indirect subsidiaries of Ralcorp other than the Branded Subsidiary. NEW RALCORP INDIVIDUAL: any individual who is a New Ralcorp Employee or a beneficiary of a New Ralcorp Employee. NEW RALCORP LIABILITIES: all of the Liabilities of any member of either Group, except for the Branded Liabilities. NEW RALCORP OBLIGATIONS: as defined in Article XI of this Agreement. NEW RALCORP OFFICERS: the individuals listed on Schedule 4.2 to this Agreement. NEW RALCORP RETIREMENT PLAN: as defined in Section 8.1 of this Agreement. NEW RALCORP SHARE PURCHASE RIGHTS AGREEMENT: as defined in Section 2.2 of this Agreement. NON-BRANDED CEREALS: Cereals sold exclusively under Control Brands or Private Label Trademarks. NOTICE OF CLAIM: as defined in Section 9.3 of this Agreement. NYSE: the New York Stock Exchange. PERSON: an individual, a partnership, a joint venture, a corporation, a trust or other entity, an unincorporated organization or a government or any department or agency thereof. 8 PLAN: any plan, policy, arrangement, contract or agreement providing benefits (including salary, bonuses, deferred compensation, incentive compensation, savings, stock purchases, pensions, profit sharing, welfare benefits or retirement or other retiree benefits, including retiree medical benefits) for any group of employees or former employees or individual employee or former employee, or the beneficiary or beneficiaries of any such employee or former employee, whether formal or informal or written or unwritten and whether or not legally binding, and including any means, whether or not legally required, pursuant to which any benefit is provided by an employer to any employee or former employee or the beneficiary or beneficiaries of any such employee or former employee. POST-CLOSING BRANDED LIABILITIES: all Branded Liabilities relating to or arising from the ownership, use or possession of the Branded Assets or the operation of the Branded Business after the Effective Time. PRIVATE LABEL TRADEMARK: as defined in the Trademark Agreement. QUALIFIED PLAN: a Plan which is an employee pension benefit plan (within the meaning of Section 3(2) of ERISA) and which constitutes or is intended in good faith to constitute a qualified plan under Section 401(a) of the Code. RALCORP: as defined in the recitals to this Agreement. RALCORP BILL OF SALE: as defined in Section 6.2 of this Agreement. RALCORP BOARD: the Board of Directors of Ralcorp and their duly elected or appointed successors. RALCORP DEFERRED COMPENSATION PLANS: as defined in Section 8.5 of this Agreement. RALCORP DOCUMENTS: as defined in Section 5.2(b) of this Agreement. RALCORP GROUP: Ralcorp and the Branded Subsidiary. RALCORP OPTIONS: as defined in Section 8.4 of this Agreement. RALCORP RETIREMENT PLAN: as defined in Section 8.1 of this Agreement. RALCORP STOCK: as defined in the recitals to this Agreement. RECORD DATE: the date to be determined by the Ralcorp Board, as the record date for determining shareholders of Ralcorp Stock entitled to receive the Distribution. RIGHTS: the rights to be issued by New Ralcorp pursuant to the New Ralcorp Share Purchase Rights Agreement. 9 RIGHTS PAYMENT: as defined in the Merger Agreement. RIP: as defined in Section 8.1 of this Agreement. SEC: the Securities and Exchange Commission. SCHEDULED BRANDED LITIGATION: the Liabilities listed on Schedule 1.1(d). SECURITIES ACT: the Securities Act of 1933, as amended, together with the rules and regulations promulgated thereunder. SUBSIDIARY: with respect to any specified Person, any corporation or other legal entity of which such Person or any of its Subsidiaries controls or owns, directly or indirectly, more than 50% of the stock or other equity interest entitled to vote on the election of members to the board of directors or similar governing body of such corporation or other legal entity. SUPPLY AGREEMENT: as defined in Section 6.2 of this Agreement. TAX SHARING AGREEMENT: as defined in Section 6.2 of this Agreement. TECHNOLOGY AGREEMENT: as defined in Section 6.2 of this Agreement. THIRD PARTY CLAIM: any Action or claim by a third party against or otherwise involving an Indemnitee for which indemnification may be sought pursuant to Article IX hereof. TRADEMARK AGREEMENT: as defined in Section 6.2 of this Agreement. UNKNOWN BRANDED LIABILITIES: all Branded Liabilities other than (i) the Known Branded Liabilities, (ii) the Scheduled Branded Litigation and (iii) the Post-Closing Branded Liabilities. WELFARE PLAN: any Plan, including but not limited to the Plans listed on Schedule 8.3, which is not a Qualified Plan and which provides medical, health, disability, accident, life insurance, death, dental or other welfare benefits, including any post-employment benefits or retiree medical benefits. 1.2 REFERENCES TO TIME. All references to times of the day in this Agreement shall refer to St. Louis, Missouri time. ARTICLE II CERTAIN TRANSACTIONS PRIOR TO THE DISTRIBUTION 10 2.1 INTERNAL MERGER; SPINOFF TO RALCORP. Prior to the transactions contemplated by Article III, Ralcorp shall merge Foods into New Ralcorp with New Ralcorp surviving the Internal Merger. After the Internal Merger and the transactions contemplated by Article III but prior to the Distribution Time, New Ralcorp shall distribute all of the issued and outstanding shares of capital stock of the Branded Subsidiary to Ralcorp. 2.2 ISSUANCE OF STOCK. Prior to the Distribution Time, Ralcorp shall take all steps necessary so that immediately prior to the Distribution Time the number of shares of Common Stock outstanding and held by Ralcorp shall equal the number of shares necessary to effect the Distribution. The Distribution shall be effected as described in Article IV. 2.3 NEW RALCORP SHARE PURCHASE RIGHTS AGREEMENT; ARTICLES OF INCORPORATION; BYLAWS. Prior to the Distribution Date, Ralcorp shall cause New Ralcorp to adopt a New Ralcorp Share Purchase Rights Agreement in substantially the form filed with the SEC as an exhibit to the Form 10, and Ralcorp shall cause the Board of Directors of New Ralcorp to authorize a distribution of one Right to every share of outstanding Common Stock, such distribution to occur prior to the Distribution. Ralcorp shall take all action necessary so that, at the Distribution Date, the Articles of Incorporation and Bylaws of New Ralcorp shall be substantially in the forms filed with the SEC as exhibits to the Form 10. ARTICLE III CONTRIBUTION AND ASSUMPTION OF ASSETS AND LIABILITIES 3.1 CONTRIBUTION OF THE BRANDED ASSETS. Upon the terms and subject to the conditions of this Agreement, New Ralcorp shall assign, transfer, convey and contribute to the Branded Subsidiary, effective immediately prior to the Distribution Time, all of New Ralcorp's right, title and interest in, to and under the Branded Assets. 3.2 ASSUMPTION OF THE BRANDED LIABILITIES. Upon the terms and subject to the conditions of this Agreement, effective immediately prior to the Distribution Time, the Branded Subsidiary shall assume and agree to pay, perform and discharge when due the Branded Liabilities, subject to the indemnification obligations of New Ralcorp set forth in Section 9.1(b) hereof. 3.3 CONTRIBUTION OF THE NEW RALCORP ASSETS. Upon the terms and subject to the conditions of this Agreement, Ralcorp shall assign, transfer, convey and contribute to New Ralcorp, effective immediately prior to the Distribution Time, all of Ralcorp's right, title and interest in, to and under the New Ralcorp Assets. 3.4 ASSUMPTION OF THE NEW RALCORP LIABILITIES. Upon the terms and subject to the conditions of this Agreement, effective immediately prior to the Distribution Time, New 11 Ralcorp shall assume and agree to pay, perform and discharge when due the New Ralcorp Liabilities. 3.5 DELAYED ASSETS AND LIABILITIES. (a) To the extent that any required consent or waiver with respect to a Contract or other instrument included in the Branded Assets or the New Ralcorp Assets has not been obtained on or prior to the Closing Date, such Contract or instrument (a "Delayed Asset") shall not be transferred hereunder, and any related liability that constitutes a Branded Liability or New Ralcorp Liability, as the case may be (a "Delayed Liability"), shall not be assumed hereunder by the Branded Subsidiary or New Ralcorp, as the case may be, unless and until such required consent or waiver has been obtained. Notwithstanding the foregoing, if such a required consent or waiver is not obtained, the party required to transfer such Delayed Asset will reasonably cooperate with the party entitled to receive such Delayed Asset to attempt to provide such party with the benefits under or of any such Delayed Asset as long as the party entitled to receive such Delayed Asset shall assume, pay and perform any corresponding Delayed Liabilities. Ralcorp, the Branded Subsidiary and New Ralcorp each agrees that, in any such event, they shall work in good faith to cause such arrangement to reflect as nearly as possible the respective benefits and obligations that would have been in effect had such consent or waiver been obtained. (b) At such time and on each occasion after the Closing Date that a required consent or waiver shall be obtained with respect to a Delayed Asset, such Delayed Asset shall forthwith be transferred and assigned to the party entitled to receive it hereunder, and all related Delayed Liabilities shall be simultaneously assumed by such party hereunder, whereupon (i) such Delayed Asset shall constitute for all purposes an Asset acquired hereunder and (ii) such Delayed Liabilities shall constitute for all purposes Liabilities assumed hereunder. 3.6 ACCOUNTS RECEIVABLE. The customer accounts receivable (including for any products of the Branded Business shipped but not invoiced, which products shall be relieved from inventory) outstanding at the close of business on the Distribution Date shall remain assets of New Ralcorp. New Ralcorp shall be entitled to collection and receipt of all such receivables, provided that (a) to the extent that a customer takes a justifiable deduction against an invoice related to products of the Branded Business invoiced prior to the close of business on the Distribution Date, which deduction is related to products of the Branded Business shipped after the close of business on the Distribution Date, the Branded Subsidiary will promptly reimburse New Ralcorp for any such deduction and (b) to the extent that a customer takes a justifiable deduction against an invoice relating to products of the Branded Business shipped and invoiced by the Branded Subsidiary after the close of business on the Distribution Date, which deduction is related to products of the Branded Business shipped prior to the close of business on the Distribution Date, New Ralcorp will promptly reimburse the Branded Subsidiary for any such deduction, except to the extent the deduction constitutes a Known Branded Liability. New Ralcorp and the Branded Subsidiary shall cooperate in good faith in order 12 to ensure that New Ralcorp receives payment of the customer accounts receivable outstanding immediately prior to the close of business on the Distribution Date, that the Branded Subsidiary receives payment of accounts receivable of the Branded Business issued from and after the close of business on the Distribution Date, and in order to determine whether any deductions from invoices are justifiable. To the extent that either receives payment of receivables owned by the other party, the Branded Subsidiary and New Ralcorp agree to promptly (within ten Business Days) remit the proceeds to the designated bank account of New Ralcorp or the Branded Subsidiary, as applicable. New Ralcorp shall direct all trade debtors to make payment on such customer account receivables outstanding as of the close of business on the Distribution Date to New Ralcorp's specified address and/or account. ARTICLE IV THE DISTRIBUTION 4.1 DISTRIBUTION DATE. Subject to the satisfaction of the conditions set forth in Article XIV, the Distribution shall be effective as of the Distribution Time. 4.2 MECHANICS OF THE DISTRIBUTION. Effective at the Distribution Time, Ralcorp shall distribute all outstanding shares of Common Stock to holders of record of Ralcorp Stock on the Record Date on the basis of one share of Common Stock for each share of Ralcorp Stock outstanding on the Record Date, subject to the treatment of fractional shares as set forth in Section 4.3. All shares of Common Stock issued in the Distribution shall be duly authorized, validly issued, fully paid and nonassessable. To the extent feasible, the Rights Payment shall be included in the mailing of Common Stock to such record holders. The parties acknowledge that Ralcorp is responsible for the issuance of checks and the payment of the Rights Payment and New Ralcorp is responsible for the costs of the distribution of such payment. 4.3 PAYMENT IN LIEU OF FRACTIONAL SHARES. No fractional shares of Common Stock shall be issued in the Distribution. In lieu thereof, New Ralcorp shall remit to each holder of Ralcorp Stock who would otherwise be entitled to receive such fractional shares, an amount of cash equal to the average of the high and low sales prices of the Common Stock during the first three days of trading following the Distribution Date multiplied by such holders fractional interest in such shares (after making appropriate deductions of the amount required for Federal tax withholding purposes). ARTICLE V REPRESENTATIONS AND WARRANTIES 5.1 REPRESENTATIONS AND WARRANTIES OF NEW RALCORP AND FOODS. Each of New Ralcorp and Foods hereby represents and warrants, as to itself, to Ralcorp and the Branded Subsidiary as follows: 13 (a) Organization, Standing and Power. Each of New Ralcorp and Foods is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation. Each of New Ralcorp and Foods has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. (b) Authority. Each of New Ralcorp and Foods has all requisite power and authority to execute this Agreement and the Ancillary Agreements to which it is or will be party (collectively, the "New Ralcorp Documents") and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the other New Ralcorp Documents and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of New Ralcorp and Foods and, to the extent required, by the stockholder of New Ralcorp and Foods. This Agreement has been duly executed and delivered by each of New Ralcorp and Foods and constitutes, and each of the other New Ralcorp Documents will be duly executed and delivered by New Ralcorp on or prior to the Closing Date, and when so executed and delivered will constitute, a legal, valid and binding obligation of New Ralcorp and/or Foods, as the case may be, enforceable against it in accordance with its terms. (c) No Conflict. (i) The execution, delivery and performance by each of New Ralcorp and Foods of this Agreement and by New Ralcorp of the other New Ralcorp Documents will not contravene, violate, result in a breach of or constitute a default under (x) any provision of applicable law or of the articles of incorporation or by-laws of New Ralcorp or Foods or any other member of the New Ralcorp Group or (y) any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to New Ralcorp or Foods or any other member of the New Ralcorp Group or any of their properties or assets. (d) Approvals. No consent, approval, order, authorization of, or registration, declaration or filing with, any governmental entity is required in connection with the making or performance by New Ralcorp or Foods of this Agreement or the other New Ralcorp Documents. ARTICLE VI CERTAIN ADDITIONAL COVENANTS 6.1 NEW RALCORP BOARD. Prior to the Distribution Date, Ralcorp shall take such actions as are necessary such that New Ralcorp's Board of Directors is comprised of those individuals named as directors in the Form 10. 6.2 CONTRACTUAL ARRANGEMENTS. 14 (a) At the Closing, effective as of the Distribution Time, Ralcorp and New Ralcorp shall enter into the Tax Sharing Agreement, substantially in the form attached to this Agreement as Exhibit 6.2(a) ("Tax Sharing Agreement"); (b) At the Closing, effective as of the Distribution Time, Ralcorp, New Ralcorp and the Branded Subsidiary shall enter into the Trademark Agreement, substantially in the form attached to this Agreement as Exhibit 6.2(b) ("Trademark Agreement"); (c) At the Closing, effective as of the Distribution Time, Ralcorp, New Ralcorp and the Branded Subsidiary shall enter into the Technology Agreement, substantially in the form attached to this Agreement as Exhibit 6.2(c) ("Technology Agreement"); (d) At the Closing, effective as of the Distribution Time, Ralcorp and New Ralcorp shall enter into the Transition Services -- Supply Agreement, substantially in the form attached to this Agreement as Exhibit 6.2(d) ("Supply Agreement"); (e) At the Closing, effective immediately prior to the Effective Time, New Ralcorp and the Branded Subsidiary shall enter into the Assignment and Assumption Agreement, in a form mutually reasonably agreed to between New Ralcorp and Acquiror ("Assignment and Assumption Agreement"); (f) At the Closing, effective immediately prior to the Effective Time, New Ralcorp shall execute and deliver to the Branded Subsidiary a Bill of Sale, in a form mutually reasonably agreed to between New Ralcorp and Acquiror (the "New Ralcorp Bill of Sale"); and (g) At the Closing, effective as of the Effective Time, Ralcorp shall execute and deliver to New Ralcorp a Bill of Sale, in a form mutually reasonably agreed to between New Ralcorp and Acquiror (the "Ralcorp Bill of Sale"). (h) Notwithstanding the foregoing, the parties have agreed that the Trademark Agreement, the Technology Agreement and the Supply Agreement are each to be conditionally amended as set forth in Exhibits 6.2(b)(i), 6.2(c)(i) and 6.2(d)(i), respectively. These amendments shall become final upon final acceptance by the Federal Trade Commission of the Consent Agreement between Acquiror and the Federal Trade Commission dated December 24, 1996; provided, however, if this should not occur, then all of these amendments shall be revoked, canceled and of no force or effect ten (10) business days after the Federal Trade Commission withdraws its provisional acceptance of this Consent Agreement regardless of whether the Trademark Agreement, the Technology Agreement and the Supply Agreement have been executed by the parties and the Closing has occurred. In such event, the Trademark Agreement, the Technology Agreement and the Supply Agreement shall each be executed or re-executed, as the case may be, by the parties in their original form, without giving effect to the amendments reflected in Exhibits 6.2(b)(i), 6.2(c)(i) and 6.2(d)(i). 15 6.3 INTERCOMPANY ACCOUNTS. All intercompany services provided by the New Ralcorp Group to the Ralcorp Group or by the Ralcorp Group to the New Ralcorp Group shall terminate as of the Distribution Time unless otherwise provided in any Ancillary Agreement. Effective as of the close of business on the Distribution Date, all intercompany receivables or payables and loans then existing between any member of one Group and any member of the other Group shall be written off by means of cancellation, capital contribution or dividend, as the case may be. ARTICLE VII ACCESS TO INFORMATION 7.1 PROVISION OF CORPORATE RECORDS. (a) Prior to or as promptly as practicable after the Distribution Date, Ralcorp shall deliver to New Ralcorp all corporate books and records of the New Ralcorp Group as well as copies or, to the extent not detrimental in the reasonable opinion of Ralcorp to the interests of Ralcorp, originals, of all books, records and data relating exclusively to the New Ralcorp Assets, the New Ralcorp Business, or the New Ralcorp Liabilities, including, but not limited to, all books, records and data relating to the purchase of materials, supplies and services, financial results, sale of products, records of the New Ralcorp Employees, commercial data, research done by or for New Ralcorp or Foods, catalogues, brochures, training and other manuals, sales literature, advertising and other sales and promotional materials, maintenance records and drawings, all active agreements, active litigation files and government filings. All such documents located at locations other than the Branded Plant shall be deemed delivered to New Ralcorp as of the Distribution Date. To the extent that originals of such books, records and data are provided to New Ralcorp, New Ralcorp shall provide Ralcorp copies thereof as reasonably requested in writing by Ralcorp. Notwithstanding the above, Ralcorp shall provide copies of customer information, invoices and credit information only to the extent reasonably requested in writing by New Ralcorp, and Ralcorp shall provide such copies of all books, records and data only to the extent that such action is not prohibited by the terms of any agreements pertaining to such information or is not prohibited by law. From and after the Distribution Date, all books, records and copies so delivered shall be the property of New Ralcorp. Notwithstanding the above, Ralcorp shall not be required to make copies, other than pursuant to Section 7.2 of this Agreement, of any portion of any books, records or data to the extent such portion relates exclusively to the Branded Assets, the Branded Business or to Liabilities assumed or retained by the Branded Subsidiary or Ralcorp. (b) Prior to or as promptly as practicable after the Distribution Date, New Ralcorp shall deliver to Ralcorp all corporate books and records of the Ralcorp Group as well as copies or, to the extent not detrimental in the reasonable opinion of New Ralcorp to the interests of New Ralcorp, originals, of all books, records and data relating 16 exclusively to the Branded Assets, the Branded Business, or the Branded Liabilities, including, but not limited to, all books, records and data relating to the purchase of materials, supplies and services, financial results, sale of products, records of the Branded Employees, commercial data, research done by or for Ralcorp, catalogues, brochures, training and other manuals, sales literature, advertising and other sales and promotional materials, maintenance records and drawings, all active agreements, active litigation files and government filings. All such documents located at the Branded Plant shall be deemed delivered to Ralcorp as of the Distribution Date. To the extent that originals of such books, records and data are provided to Ralcorp, Ralcorp shall provide New Ralcorp copies thereof as reasonably requested in writing by New Ralcorp. Notwithstanding the above, New Ralcorp shall provide copies of customer information, invoices and credit information only to the extent reasonably requested in writing by Ralcorp, and New Ralcorp shall provide such copies of all books, records and data only to the extent that such action is not prohibited by the terms of any agreements pertaining to such information or is not prohibited by law. From and after the Distribution Date, all books, records and copies so delivered shall be the property of Ralcorp. Notwithstanding the above, New Ralcorp shall not be required to make copies, other than pursuant to Section 7.2 of this Agreement, of any portion of any books, records or data to the extent such portion relates exclusively to the New Ralcorp Assets, the New Ralcorp Business or to Liabilities assumed or retained by New Ralcorp. 7.2 ACCESS TO INFORMATION. From and after the Distribution Date, each of Ralcorp and New Ralcorp shall afford to the other and to the other's agents, employees, accountants, counsel and other designated representatives, reasonable access and duplicating rights during normal business hours to all records, books, contracts, instruments, computer data and other data and information ("Information") within such party's possession relating to such other party's businesses, assets or liabilities, insofar as such access is reasonably required by such other party. Without limiting the foregoing, such Information may be requested under this Section for audit, accounting, claims, litigation and tax purposes, as well as for purposes of fulfilling disclosure and reporting obligations. 7.3 RETENTION OF RECORDS. Except as otherwise required by law or agreed in writing, or as otherwise provided in the Tax Sharing Agreement, each of Ralcorp and New Ralcorp shall retain, for a period of at least seven years following the Distribution Date, all significant Information in such party's possession or under its control relating to the business, assets or liabilities of the other party and, after the expiration of such seven-year period, prior to destroying or disposing of any of such Information, (a) the party proposing to dispose of or destroy any such Information shall provide no less than 30 days prior written notice to the other party, specifying the Information proposed to be destroyed or disposed of, and (b) if, prior to the scheduled date for such destruction or disposal, the other party requests in writing that any of the Information proposed to be destroyed or disposed of be delivered to such other party, the party proposing to dispose of or destroy such Information promptly shall arrange for the delivery of the requested Information to a location specified by, and at the expense of, the requesting party. 17 7.4 CONFIDENTIALITY. From and after the Distribution Date, each Group shall hold, in strict confidence, all Information obtained from the other Group prior to the Distribution Date or furnished to it pursuant to this Agreement or any other agreement referred to herein which relates to or concerns the business conducted by such other Group, and such Information shall not be used by it to the detriment of the other Group, or disclosed by it or its agents, officers, employees or directors without the prior written consent of such other Group unless and to the extent that (a) disclosure is compelled by judicial or administrative process or, in the opinion of such Group's counsel, by other requirements of law, or (b) such Group can show that such Information was (i) available to such Group on a nonconfidential basis prior to its disclosure by the other Group, (ii) in the public domain through no fault of such Group, (iii) lawfully acquired by such Group from other sources after the time that it was furnished to such Group pursuant to this Agreement or any other agreement referred to herein, or (iv) independently developed by such Group. Notwithstanding the foregoing, each Group shall be deemed to have satisfied its obligations of confidentiality under this Section with respect to any Information concerning or supplied by the other Group if it exercises substantially the same care with regard to such Information as it takes to preserve confidentiality for its own similar Information. 7.5 REIMBURSEMENT. Each member of any Group providing Information pursuant to Sections 7.2 or 7.3 to any member of the other Group shall be entitled to receive from the recipient, upon presentation of an invoice therefor, payment of all out-of-pocket costs and expenses as may reasonably be incurred in providing such Information. 18 ARTICLE VIII EMPLOYEE BENEFITS; LABOR MATTERS 8.1 RALCORP RETIREMENT PLAN. (a) Ralcorp shall take, or cause to be taken, all action necessary and appropriate to amend the Ralcorp Holdings, Inc. Retirement Plan for Sales, Administrative, Clerical, and Production Employees (the "Ralcorp Retirement Plan") to remove Ralcorp as sponsor and a named fiduciary and shall name New Ralcorp as successor sponsor and named fiduciary of the plan prior to the Distribution Date. Acquiror shall take, or cause to be taken, all action necessary and appropriate to establish, effective as of the day after the Distribution Date, and administer, a defined benefit pension plan which is a qualified plan ("New Retirement Plan") and to provide benefits thereunder for all Branded Employees who, on the Distribution Date, were participants in the Ralcorp Retirement Plan for service through the Distribution Date and to provide benefits thereunder for all Branded Employees who were covered by a collective bargaining agreement and who, on the Distribution Date, were participating thereunder for service after the Distribution Date. The New Retirement Plan shall be the same as the Ralcorp Retirement Plan in all material respects and shall preserve all protected benefits within the meaning of Code Section 411(d)(6). Acquiror shall take, or cause to be taken, all action necessary and appropriate to amend, effective as of the day after the Distribution Date, the Retirement Income Plan of General Mills, Inc. (the "RIP") to provide benefits thereunder for all Branded Employees who, on the Distribution Date, were not covered by a collective bargaining agreement and were participants in the Ralcorp Retirement Plan, for service after the Distribution Date. New Ralcorp agrees to provide Acquiror, as soon as practicable after the Distribution Date, with a list of the Branded Employees who were, to the best knowledge of New Ralcorp, participants in or otherwise entitled to benefits under the Ralcorp Retirement Plan as of the Distribution Date, together with a listing of each such Branded Employee's term of service for eligibility, accrual and vesting purposes under the Ralcorp Retirement Plan on such Distribution Date and a listing of each such Branded Employee's accrued benefit thereunder through such Distribution Date, along with all other records necessary to effectively administer such benefits. Ralcorp shall, as soon as practicable after the Distribution Date, provide New Ralcorp with such additional information (to the extent in the possession of Ralcorp and not already in the possession of the New Ralcorp Group) as may be reasonably requested by New Ralcorp and necessary for New Ralcorp to effectively administer the Ralcorp Retirement Plan. (b) New Ralcorp agrees, as soon as practicable following the Distribution Date, to direct the trustees of the Ralcorp Retirement Trust to transfer to the trustee of the New Retirement Plan, in cash, securities and other property, or a combination thereof, as reasonably determined by New Ralcorp and as agreed to by Acquiror, an amount 19 determined according to the following formula, with respect to all Branded Employees on the Distribution Date: (X) less (Y), as adjusted by (Z) where (X) equals the projected benefit obligations (within the meaning of Statement No. 87 of the Financial Accounting Standards Board) determined as described in (c) below of such Branded Employees, as of the Distribution Date pursuant to the benefit provisions of the Ralcorp Retirement Plan in effect as of Distribution Date, where (Y) equals aggregate payments made from the Ralcorp Retirement Trust relating to the Ralcorp Retirement Plan in respect of the accrued benefits of such Branded Employees, from the Distribution Date through the date of complete transfer; and where (Z) equals the amount of the net earnings or losses, as the case may be, from the Distribution Date through the date of transfer, on the average of the daily balances of (X) and (Y) and based upon the Frank Russell Trust Co. short term interest rate in effect with respect to the Ralcorp Retirement Plan during such period. (c) New Ralcorp shall cause the calculation of the projected benefit obligation and the amounts to be transferred pursuant to this Section to be completed by Kwasha Lipton, based on the actuarial assumptions used for the Ralcorp Retirement Plan for financial disclosure purposes for the fiscal year in which the Distribution Date occurs; provided however, that (i) the discount rate shall be equal to (A) the average of the 30-year U.S. Treasury rate as of thirty days prior to the Distribution Date, on the Distribution Date and thirty days after the Distribution Date, plus (B) 75 basis points and (ii) the salary scale shall be 5.25%. Acquiror shall cause the calculation of such amounts to be reviewed by William M. Mercer. New Ralcorp and Acquiror shall use their best efforts to resolve any dispute arising in connection with the calculation of the amounts to be transferred and to effect the actual transfer of such funds. Notwithstanding the foregoing provisions of this Section, such transfers shall be adjusted, if and to the extent necessary, to comply with applicable law and regulations, including Section 414(l) of the Code and the regulations promulgated thereunder and Pension Benefit Guaranty Corporation Regulations Section 2619.41 through 2619.65 (including Appendices A through D). (d) In connection with the transfers described in this Section, Ralcorp and New Ralcorp shall cooperate in making any and all appropriate filings required under the Code or ERISA, and the regulations thereunder, and any applicable securities laws and take all such action as may be necessary and appropriate to cause such transfers to take place as soon as practicable after the Distribution Date; provided, however, that no transfer shall take place until as soon as practicable after the later of (i) the expiration of a 30-day period following the date of filing any required Forms 5310-A (or any successor form thereto) with the IRS and (ii) with respect to the New Retirement Plan transfer, the receipt of a favorable IRS determination letter with respect to the qualification of the New Retirement Plan as amended through the date of transfer, under Code Sections 401(a) and 501(a) or the receipt by New Ralcorp of an opinion of counsel retained by Ralcorp and reasonably satisfactory in form and substance to New Ralcorp to the effect that such counsel believes the transferee plan as amended through the date of transfer, to be qualified under Code Section 401(a) and that the trust 20 established thereunder is exempt from federal tax under Code Section 501(a). Ralcorp and New Ralcorp agree to provide to such counsel such information in the possession of the Ralcorp Group and the New Ralcorp Group, respectively, as may be reasonably requested by such counsel in connection with the issuance of such opinion. New Ralcorp agrees, during the period ending with the date of complete transfer of assets and liabilities to the New Retirement Plan, to administer the Ralcorp Retirement Plan in the ordinary course, in accordance with its plan provisions, the Code and ERISA, except as otherwise set forth in this Agreement. In connection with this transaction, Ralcorp and New Ralcorp shall cooperate in making any and all appropriate filings required by the Pension Benefit Guaranty Corporation and the regulations so governing. (e) Except as specifically set forth in this Section, from and after the Distribution Date, Ralcorp shall cease to have any liability whatsoever with respect to the Ralcorp Retirement Plan other than liability for the accrued benefits related to the asset transfer made on behalf of Branded Employees from the Ralcorp Retirement Plan ("Transfer Obligations"), and New Ralcorp shall assume and shall be solely responsible for all other liabilities whatsoever under the Ralcorp Retirement Plan, including liabilities with respect to Branded Employees other than Transfer Obligations. 8.2 401(K) PLAN. Ralcorp shall take, or cause to be taken, all action necessary and appropriate to amend the Ralcorp Holdings, Inc. Savings Investment Plan (the "SIP") to remove Ralcorp as sponsor and named fiduciary and shall name New Ralcorp as sponsor and named fiduciary of the plan prior to the Distribution Date. Ralcorp shall also take such action as necessary to fully vest as of the Distribution Date each participant who is a Branded Employee in his or her account balance under the SIP. Acquiror shall take, or cause to be taken, such action as necessary to amend the General Mills Savings Plan (the "Savings Plan") to permit participation by the Branded Employees of Ralcorp immediately following the Distribution Date. The Savings Plan will accept direct rollovers of the eligible taxable distributions which could otherwise be made to the Ralcorp Group employees. The acceptance of direct rollovers will be subject to the procedures of the Savings Plan. New Ralcorp agrees to provide such information (to the extent in the possession of the New Ralcorp Group or of any party providing services to the SIP) as may be reasonably required by Ralcorp in order for the Acquiror to effectively administer the Savings Plan, including, without limitation, information necessary to determine the appropriate Code Section 415 limits of each Branded Employee and to determine the qualified status of the SIP. 8.3 WELFARE PLANS. (a) Ralcorp shall take, or cause to be taken, all action necessary and appropriate to amend each and every welfare plan covering its employees (Ralcorp Welfare Plans) to remove Ralcorp as sponsor and named fiduciary and shall name New Ralcorp as sponsor and named fiduciary of each such plan prior to the Distribution Date. Acquiror shall take, or cause to be taken, all action necessary and appropriate to cause either (i) 21 its existing welfare plans to be amended, or (ii) new welfare plans to be adopted which will cover Branded Employees (and their dependents as appropriate) immediately following the Distribution Date (the "New Welfare Plans"). Acquiror shall cause the New Welfare Plans to provide benefits of substantially the same, or greater, type and value as the benefits which the Branded Employees (other than administrative employees who are not covered by a collective bargaining agreement) enjoyed under the Ralcorp Welfare Plans, on the date immediately preceding the Distribution Date. Acquiror shall also cause the New Welfare Plans, to the extent applicable, to credit such Branded Employees with the term of service credited to such employees as of the Distribution Date under the terms of the applicable Ralcorp Welfare Plan. Acquiror will cause Branded Employees to receive credit for payments made under the Ralcorp Comprehensive and Well-Med Plan during the plan year in which the Distribution Date occurs for purposes of satisfying the applicable deductibles and maximum out-of-pocket limits of the applicable New Welfare Plans during the plan year in which the Distribution Date occurs. (b) Except as otherwise noted in this Section, Ralcorp shall cause one or more members of the New Ralcorp Group to assume and be solely responsible for, or cause its insurance carriers or agents to be responsible for, all liabilities for welfare benefit claims incurred under the welfare plans on or before the Distribution Date. For purposes of this Section, disability claims are incurred on the date on which the disability was incurred or, in the case of a disability which is not incurred on a single, identifiable date, the date on which the disability was diagnosed; medical and dental services are incurred when an individual is provided with medical or dental care; death benefit claims are incurred at the time of death of the insured notwithstanding any other provision of any welfare benefit plan to the contrary. At the Distribution Date, Branded Employees will cease participation in Ralcorp Welfare Plans, except to the extent (i) that a Branded Employee or a covered dependent of a Branded Employee is hospitalized on the Distribution Date, in which case such individual shall continue to be covered under the appropriate Ralcorp Welfare Plan until the individual is discharged from the hospital or (ii) they elect continued coverage under such plans pursuant to COBRA or other provisions of the plans. New Ralcorp shall be responsible for all qualifying events under COBRA and COBRA claims incurred under the Ralcorp Welfare Plans on or before the Distribution Date. (c) New Ralcorp and the New Ralcorp Group shall be responsible for any retiree medical and life insurance benefits payable under any welfare plan with respect to any former employee of Ralcorp or one of its Affiliates who retired from the New Ralcorp Group or the Ralcorp Group on or before the Distribution Date and who met the eligibility requirements for such benefits at that time. Branded Employees who retire from Ralcorp or Acquiror after the Distribution Date shall not be entitled to retiree medical and life insurance benefits from the Ralcorp Welfare Plans, but shall be eligible for coverage as provided by the New Welfare Plans. 8.4 STOCK OPTIONS AND RESTRICTED STOCK. 22 (a) On or prior to the Distribution Date, Ralcorp shall take such action as may be necessary in order to obtain any required consents to insure that at the Distribution Date, all rights to acquire Ralcorp Common Stock pursuant to the ISP (the "Ralcorp Options") which are outstanding at the Distribution Date, whether or not then exercisable, shall be waived by such employees. (b) Prior to the Distribution, Ralcorp shall accelerate or pay in cash the value of restricted shares of Ralcorp Stock awarded pursuant to the Ralcorp ISP and held by New Ralcorp Employees, immediately prior to the Distribution. 8.5 CHANGE OF PLAN SPONSOR. Prior to the Distribution Date, Ralcorp shall take such action as necessary to remove Ralcorp as sponsor and named fiduciary of the plans listed in Schedule 8.5, and name New Ralcorp as the sponsor and named fiduciary of such plans. 8.6 LIFE INSURANCE PROGRAMS. On the Distribution Date, Ralcorp shall relinquish all rights under any Split Dollar Second-To-Die Life Insurance policies currently insuring the lives of any New Ralcorp Employee and his or her spouse, including but not limited to rights to any portion of the cash value or death benefits under such policies, created in accordance with the terms of the Split Dollar Agreement and Collateral Assignment between Ralcorp and such employee regarding such policies, and will take all reasonable steps necessary to assign such rights to New Ralcorp. Prior to the Distribution Date, Ralcorp shall perform any and all obligations required of it under the terms of such Split Dollar Agreement and Collateral Assignment with respect to such policies. 8.7 VACATION PAY. Ralcorp shall assume all liability for unpaid vacation pay accrued by Branded Employees, to the extent it has been properly accrued for on the books of the Branded Business. New Ralcorp will assume all liability for unpaid vacation pay accrued by New Ralcorp Employees, prior to the Distribution Date. Except as set forth in the first sentence hereof, after the Distribution Date, Ralcorp will have no liability for vacation pay. 8.8 SEVERANCE PAY. (a) Ralcorp and New Ralcorp agree that, with respect to individuals who, in connection with the Distribution, cease to be employees of the Ralcorp Group and become employees of the New Ralcorp Group, such cessation shall not be deemed a severance of employment from either Group for purposes of any Plan that provides for the payment of severance, salary continuation or similar benefits and shall, in connection with the Distribution, if and to the extent appropriate obtain waivers from individuals against any such assertion. (b) The Ralcorp Group shall assume and be solely responsible for all liabilities and obligations whatsoever in connection with claims made by or on behalf of Branded 23 Employees. New Ralcorp shall assume and be responsible for any severance pay with respect to any individuals other than the Branded Employees, including, without limitation, any individuals who, in connection with the Distribution, cease to be employees of the Ralcorp Group, whether or not such individuals accept employment with the New Ralcorp Group. 8.9 COLLECTIVE BARGAINING AGREEMENTS. As of the Distribution Date, Ralcorp and the Ralcorp Group shall cease to have any liability or obligation whatsoever with respect to any employee or former employees under any of the collective bargaining agreements listed on Schedule 8.9. 8.10 OTHER BALANCE SHEET ADJUSTMENTS. To the extent not otherwise provided in this Agreement, Ralcorp, New Ralcorp and Foods shall take such action as is necessary to effect an adjustment to the books of Ralcorp, New Ralcorp and Foods so that, as of the Distribution Date, the prepaid expense balances and accrued employee liabilities with respect to any employee liability or obligation assumed or retained as of the Distribution Date by the Ralcorp Group or the New Ralcorp Group are appropriately reflected on the consolidated balance sheets as of the Distribution Date of Ralcorp and New Ralcorp, respectively, and are taken into account in calculating the Closing Date Net Asset Value (as defined in the Merger Agreement). 8.11 PRESERVATION OF RIGHTS TO AMEND OR TERMINATE PLANS. Subject to the provisions of this Article, no provision of this Agreement, including the agreement of Ralcorp or New Ralcorp that it, or any member of the Ralcorp Group or the New Ralcorp Group, will make a contribution or payment to or under any Plan herein referred to for any period, shall be construed as a limitation on the right of Ralcorp or New Ralcorp or any member of the Ralcorp Group or the New Ralcorp Group to amend such Plan or terminate its participation therein which Ralcorp or New Ralcorp or any member of the Ralcorp Group or the New Ralcorp Group would otherwise have under the terms of such Plan or otherwise, and no provision of this Agreement shall be construed to create a right in any employee or former employee or beneficiary of such employee or former employee under a Plan which such employee or former employee or beneficiary would not otherwise have under the terms of the Plan itself. Notwithstanding the above, however, New Ralcorp agrees that it shall not make or cause to be made any amendments to any Plan, nor shall it terminate any Plan, in a manner which would violate the covenants set forth in this Agreement, except as may be required to comply with applicable law, but subject to the provisions of this Article. 8.12 REIMBURSEMENT; INDEMNIFICATION. Each of the parties hereto acknowledges that the Ralcorp Group, on the one hand, and the New Ralcorp Group, on the other hand, may incur costs and expenses (including contributions to Plans and the payment of insurance premiums) arising from or related to any of the Plans which are, as set forth in this Agreement, the responsibility of the other party hereto. Notwithstanding anything in this Section to the contrary, (1) New Ralcorp shall reimburse Ralcorp and, as applicable, the trustees of the Ralcorp Retirement Plan, for costs and expenses or other liabilities they 24 may incur after the Distribution Date which arise out of action taken by the Pension Benefit Guaranty Corporation (PBGC) or an agreement reached between Ralcorp or the trustees of the Ralcorp Retirement Plan and the PBGC relating to the funded status of, or payment of benefits by, the New Ralcorp Retirement Plan or any successor plan or plans; and (2) costs and expenses or other recovery arising from any challenge by the IRS pursuant to Section 414(l) of the Code, in connection with the calculation of assets and liabilities to be transferred as set forth in Section 8.1, shall not be subject to reimbursement or indemnification under this Agreement. Ralcorp and New Ralcorp agree to reimburse each other, as soon as practicable but in any event within 30 days of receipt from the other party of appropriate verification, for all such costs and expenses. Except as specifically assumed or retained by Ralcorp pursuant to this Article, New Ralcorp will indemnify and hold Ralcorp, the Branded Subsidiary and their respective Affiliates harmless from and against any and all Liabilities or other Indemnifiable Losses (including, without limitation, taxes, penalties, interest, claims for benefits, legal fees and other costs and expenses) arising out of or related to (w) the Ralcorp Plans (as defined below), (x) the employment of any Branded Employee on or before the Distribution Date, (y) the employment of any New Ralcorp Employee whether before, on or after the Distribution Date, or (z) the breach of any covenant of New Ralcorp in this Article. Ralcorp Plans means any Plan sponsored or maintained by Ralcorp or an Affiliate, or to which Ralcorp or an Affiliate contributed or was obligated to contribute. 8.13 FURTHER TRANSFERS. For a period of six months following the Distribution Date, no member of either Group shall, directly or indirectly, without the prior written consent of a corporate officer of the other Group, solicit or attempt to solicit any exempt employee or officer of such other Group for the purpose of obtaining his or her services for hire, or otherwise causing such exempt employee to leave employment with such other Group, and no member of either Group, without the prior written consent of a corporate officer of the other Group, will, for such period of six months, hire such exempt employee or officer; provided, however, if the employment of any officer or exempt employee of one Group is terminated by that Group at any time following the Distribution, a member of the other Group may employ such person without the consent of the other Group. Subject to the above sentence, Ralcorp and New Ralcorp recognize that there may be New Ralcorp Employees who will, after the Distribution, become employed by Ralcorp and there may be Branded Employees who become employed, after the Distribution Date, by New Ralcorp. 8.14 OTHER LIABILITIES. As of the Distribution Date, New Ralcorp shall assume and be solely responsible for all Liabilities whatsoever of the Ralcorp Group with respect to claims made by individuals other than Branded Individuals relating to any Liability not otherwise expressly provided for in this Agreement, including earned salaries, wages, severance payments or other compensation, regardless of whether such Liability was incurred before or after the Distribution Date. 8.15 COMPLIANCE. Notwithstanding anything to the contrary in this Article, to the extent any actions of the parties contemplated in this Article are determined prior to the 25 Distribution to violate law or result in unintended tax liability for Branded Individuals or New Ralcorp Individuals, such action may be modified to avoid such violation of law or unintended tax liability. ARTICLE IX INDEMNIFICATION 9.1 INDEMNIFICATION. (a) From and after the Effective Time, Acquiror, Ralcorp and the Branded Subsidiary jointly and severally agree to indemnify and hold harmless New Ralcorp against any and all Indemnifiable Losses for or on account of or arising from or in connection with or otherwise with respect to: (i) any and all Branded Liabilities (except for the Scheduled Branded Litigation and the Unknown Branded Liabilities, to the extent that New Ralcorp is obligated to indemnify Ralcorp and the Branded Subsidiary therefor under Section 9.1(b)(ii)) assumed by the Branded Subsidiary pursuant to Section 3.2 of this Agreement; (ii) any breach or violation of any covenant made in the Merger Agreement, this Agreement or any other Ancillary Agreement by Acquiror, or, with respect to covenants to be performed after the Effective Time, by Ralcorp or the Branded Subsidiary (including Ralcorp's obligations under Section 9.1(c)); (iii) subject to the limitations set forth in Section 9.2, any breach or violation of any representation or warranty (without regard to materiality qualifications contained therein) made by Acquiror and/or Merger Sub in the Merger Agreement; or (iv) as provided in Section 9.1(c). Any indemnification provided for under this Section shall be deemed to also extend to other members of the New Ralcorp Group, Affiliates of New Ralcorp and to New Ralcorp Employees, directors, Plan fiduciaries, shareholders, agents, consultants, representatives, successors, transferees and assigns of New Ralcorp or members of the New Ralcorp Group. (b) From and after the Distribution Date, New Ralcorp agrees to indemnify and hold harmless Ralcorp and the Branded Subsidiary against any and all Indemnifiable Losses for or on account of or arising from or in connection with or otherwise with respect to: (i) any and all New Ralcorp Liabilities assumed by New Ralcorp pursuant to Section 3.4 of this Agreement; 26 (ii) subject to the limitations set forth in Section 9.2, any and all Unknown Branded Liabilities and the Scheduled Branded Litigation; (iii) any breach or violation of any covenant made in the Merger Agreement, this Agreement or any other Ancillary Agreement by New Ralcorp or Foods or, with respect to covenants to be performed before the Effective Time, by Ralcorp or the Branded Subsidiary (including New Ralcorp's obligations under Section 9.1(c)); (iv) the ownership, use or possession of the New Ralcorp Assets or the operation of the New Ralcorp Business, whether relating to or arising out of occurrences prior to or after the Effective Time, except to the extent liability therefor is assumed by the Branded Subsidiary pursuant to Section 3.2 of this Agreement; (v) subject to the limitations set forth in Section 9.2, any breach or violation of any representation or warranty (without regard to materiality qualifications contained therein) made by Ralcorp in the Merger Agreement or made by New Ralcorp or Foods in this Agreement; (vi) any Third Party Claim to the extent relating to the actions of the Ralcorp Board in authorizing the Distribution or the Merger; (vii) any Third Party claim arising out of the disclosures contained in the Form 10 or the S-1, if required, other than disclosures based on information provided by or on behalf of Acquiror for inclusion therein; or (viii) as provided in Section 9.1(c). Any indemnification provided for under this Section shall also be deemed to extend to other members of the Ralcorp Group, Affiliates of New Ralcorp, Branded Employees, directors, Plan fiduciaries, shareholders, agents, consultants, representatives, successors, transferees and assigns of Ralcorp or members of the Ralcorp Group. (c) In the event an appraisal award is paid to any holder of shares of Ralcorp Stock as a result of such holder's exercise of dissenters' rights with respect to the Merger and/or the Distribution, the liability for such appraisal award shall be allocated as follows: (i) if such appraisal award is based on the value of the Ralcorp Stock before giving effect to the Distribution and such award does not allocate the portions thereof attributable to the value of the Branded Business and the value of the New Ralcorp Business, respectively, Ralcorp shall be responsible for and shall indemnify New Ralcorp and its Affiliates against such award in the amount per share equal to the value of the Merger Consideration (as defined in the Merger Agreement), as calculated based on the Average Value of Acquiror Common Stock (as defined in the Merger Agreement), and New Ralcorp shall be responsible for and shall indemnify Ralcorp 27 and its Affiliates against such award to the extent such award exceeds the value of the per share Merger Consideration as described above. (ii) if such appraisal award is based on the value of the Ralcorp Stock before giving effect to the Distribution and such award allocates the portions thereof attributable to the value of the Branded Business and the value of the New Ralcorp Business, respectively, Ralcorp and New Ralcorp shall each be responsible for and shall indemnify the other (and the other's Affiliates) against the portion of the award allocated to the value of the Branded Business and the value of the New Ralcorp Business, respectively. (iii) if such appraisal award is based on the value of the Ralcorp Stock after giving effect to the Distribution, Ralcorp shall be responsible for and shall indemnify New Ralcorp and its Affiliates against all of such award. (iv) each of Ralcorp and New Ralcorp shall bear their own respective costs and expenses incurred in connection with any appraisal proceeding relating to the Merger and/or the Distribution. (v) Ralcorp and New Ralcorp each agree to cooperate with each other reasonably in the event of any appraisal proceeding involving the value of the Ralcorp Stock before giving effect to the Distribution in order to minimize the appraisal award granted as a whole and, to the extent reasonably feasible without prejudicing its own interests in such appraisal proceeding, minimize the portion of the appraisal award that would be payable by the other party. 9.2 LIMITATIONS ON INDEMNIFICATION. (a) Notwithstanding the expiration of the representations and warranties in the Merger Agreement or anything else to the contrary in the Merger Agreement, the indemnification obligations set forth in Sections 9.1(a)(iii) and (b)(v) above shall survive the Distribution Date for eighteen months, at which time such indemnification obligations shall expire automatically, except with respect to written claims for indemnification made in good faith prior to such expiration (which claims will survive such expiration). (b) The indemnification obligations set forth in Section 9.1(b)(ii) above shall survive the Distribution Date for five years, at which time such indemnification obligation shall expire automatically, except with respect to written claims for indemnification made in good faith prior to such expiration (which claims will survive such expiration). (c) The indemnification obligation set forth in Section 9.1(a)(iii) above shall apply only to the extent Indemnifiable Losses under such Section exceed $6 million in the aggregate. 28 (d) The indemnification obligations set forth in Sections 9.1(b)(ii) and (v) above shall apply only to the extent Indemnifiable Losses under such Sections combined exceed $6 million in the aggregate. 9.3 INSURANCE AND THIRD PARTY OBLIGATIONS. Any indemnification otherwise payable pursuant to Section 9.1 shall be reduced by the amount of any insurance or other amounts (net of deductibles and allocated paid loss retropremiums) received from a third party by the Indemnitee or paid by a third party on the Indemnitee's behalf. It is expressly agreed that no insurer or any other third party shall be (i) entitled to a benefit it would not be entitled to receive in the absence of the foregoing indemnification provisions, (ii) relieved of the responsibility to pay any claims for which it is obligated, or (iii) entitled to any subrogation rights with respect to any obligation hereunder. 9.4 ACTIONS AND CLAIMS OTHER THAN THIRD PARTY CLAIMS; NOTICE AND PAYMENT. Promptly upon obtaining knowledge of any Action, Liabilities or claim, other than Third Party Claims, which any Person entitled to indemnification (the "Indemnitee") believes may give rise to any Indemnifiable Loss, the Indemnitee shall promptly notify the party liable for such indemnification (the "Indemnitor") in writing of such Action or claim (such written notice being hereinafter referred to as a "Notice of Claim"); provided, however, that failure of an Indemnitee timely to give a Notice of Claim to the Indemnitor shall not release the Indemnitor from its indemnity obligations set forth in this Article except to the extent that such failure materially increases the amount of indemnification which the Indemnitor is obligated to pay hereunder, in which event the amount of indemnification which the Indemnitee shall be entitled to receive shall be reduced to an amount which the Indemnitee would have been entitled to receive had such Notice of Claim been timely given. A Notice of Claim shall specify in reasonable detail the nature and estimated amount of any such Action, Liabilities or claim giving rise to a right of indemnification. The Indemnitor shall have thirty Business Days after receipt of a Notice of Claim to notify the Indemnitee whether or not it disputes its liability to the Indemnitee with respect to such Action, Liabilities or claim or the amount thereof, and setting forth the basis for such objection. If the Indemnitor fails to respond to the Indemnitee within such thirty Business Day period, the Indemnitor shall be deemed to have acknowledged its responsibility for such Indemnifiable Loss. The Indemnitor shall pay and discharge any such Indemnifiable Loss which is not contested within forty-five Business Days after the later of its receipt of a Notice of Claim or the determination of the amount of such Indemnifiable Loss. 9.5 THIRD PARTY CLAIMS; NOTICE, DEFENSE AND PAYMENT. Promptly following the earlier of (i) receipt of notice of the commencement of a Third Party Claim or (ii) receipt of information from a third party alleging the existence of a Third Party Claim, any Indemnitee who believes that it is or may be entitled to indemnification by any Indemnitor under Section 9.1 with respect to such Third Party Claim shall deliver a Notice of Claim to the Indemnitor. Failure of an Indemnitee timely to give a Notice of Claim to the Indemnitor shall not release the Indemnitor from its indemnity obligations 29 set forth in this Article except to the extent that such failure adversely affects the ability of the Indemnitor to defend such Action, Liabilities or claim or materially increases the amount of indemnification which the Indemnitor is obligated to pay hereunder, in which event the amount of indemnification which the Indemnitee shall be entitled to receive shall be reduced to an amount which the Indemnitee would have been entitled to receive had such Notice of Claim been timely given. Indemnitee shall not settle or compromise any Third Party Claim in an amount in excess of $25,000 prior to giving a Notice of Claim to Indemnitor. In addition, if an Indemnitee settles or compromises any Third Party Claims for an amount equal to or less than $25,000 prior to giving a Notice of Claim to an Indemnitor, the Indemnitor shall be released from its indemnity obligations to the extent that such settlement or compromise was not made in good faith and was not commercially reasonable. Within thirty Business Days after receipt of Notice of Claim, the Indemnitor may (i) by giving written notice thereof to the Indemnitee, acknowledge liability for, and at its option elect to assume, the defense of such Third Party Claim at its sole cost and expense or (ii) object to the claim of indemnification set forth in the Notice of Claim delivered by the Indemnitee; provided that if the Indemnitor does not within the same thirty Business Day period give the Indemnitee written notice either objecting to such claim and setting forth the grounds therefor or electing to assume the defense, the Indemnitor shall be deemed to have acknowledged its responsibility to accept the defense and its ultimate liability, if any, for such Third Party Claim. Any contest of a Third Party Claim as to which the Indemnitor has elected to assume the defense shall be conducted by attorneys employed by the Indemnitor and reasonably satisfactory to the Indemnitee; provided that the Indemnitee shall have the right to participate in such proceedings and to be represented by attorneys of its own choosing at the Indemnitee's sole cost and expense. If the Indemnitor assumes the defense of a Third Party Claim, the Indemnitor may settle or compromise the Third Party Claim without the prior written consent of Indemnitee; provided that the Indemnitor may not agree to any such settlement pursuant to which any such remedy or relief, other than monetary damages for which the Indemnitor shall be responsible hereunder, shall be applied to or against the Indemnitee, without the prior written consent of the Indemnitee, which consent shall not be unreasonably withheld. If the Indemnitor does not assume the defense of a Third Party Claim for which it has acknowledged liability for indemnification under Section 9.1, the Indemnitee may require the Indemnitor to reimburse it on a current basis for its reasonable expenses of investigation, reasonable attorney's fees and reasonable out-of- pocket expenses incurred in defending against such Third Party Claim and the Indemnitor shall be bound by the result obtained with respect thereto by the Indemnitee, provided that the Indemnitor shall not be liable for any settlement effected without its consent, which consent shall not be unreasonably withheld. The Indemnitor shall pay to the Indemnitee in cash the amount for which the Indemnitee is entitled to be indemnified (if any) within ten Business Days after the final resolution of such Third Party Claim (whether by settlement, a final nonappealable judgment of a court of competent jurisdiction or otherwise) or, in the case of any Third Party Claim as to which the Indemnitor has not acknowledged liability, within fifteen days after such Indemnitor's objection has been resolved pursuant to the provisions of Article XII of this Agreement. Pending acknowledgment or determination of the liability of Indemnitor with respect to any Third Party Claim, Indemnitee may 30 defend such Third Party Claim and any Liability arising out of such Third Party Claim (including all costs and expenses of such defense) shall be allocated in accordance with such acknowledgment or determination. 9.6 REMEDIES CUMULATIVE; SURVIVAL OF INDEMNITIES. The remedies provided in this Article shall be cumulative and shall not preclude assertion by any Indemnitee of any other rights or the seeking of any and all other remedies against any Indemnitor. The obligations of each of Ralcorp and the Branded Subsidiary, on the one hand, and New Ralcorp, on the other hand, under this Article shall survive the sale or other transfer by it of any assets or businesses or the assignment by it of any Liabilities, with respect to any claim of the other for any Indemnifiable Losses related to such assets, businesses or Liabilities. ARTICLE X OTHER POST-DISTRIBUTION OBLIGATIONS 10.1 NEW RALCORP'S POST-DISTRIBUTION OBLIGATIONS. New Ralcorp shall, and shall cause each member of the New Ralcorp Group to, comply with each representation and statement made, or to be made, to the IRS (or, if applicable, tax counsel) in connection with any ruling (or tax opinion) obtained, or to be obtained, by Ralcorp, from the IRS (or tax counsel) with respect to any transaction contemplated by this Agreement or the Merger Agreement. Neither New Ralcorp nor any member of the New Ralcorp Group shall for a period of two years following the Distribution Date engage in any of the following transactions, unless either (a) an opinion in form and substance reasonably satisfactory to Ralcorp is obtained from counsel to New Ralcorp, or (b) a supplemental ruling is obtained from the IRS, in either case to the effect that such transaction(s) would not adversely affect the tax consequences of the transactions described in this Agreement or the Merger Agreement to (1) Ralcorp or any member of the Ralcorp Group, (2) New Ralcorp or any member of the New Ralcorp Group, or (3) the Ralcorp shareholders as of the Record Date. The transactions subject to this provision are: (i) making a material disposition (including transfers from one member of the New Ralcorp Group to another member of the New Ralcorp Group), by means of a sale or exchange of assets or capital stock, a distribution to shareholders, or otherwise, of any of its assets (other than the transactions contemplated by this Agreement) except in the ordinary course of business; (ii) repurchasing any New Ralcorp capital stock, unless such repurchase satisfies the requirements of Section 4.05(1)(b) of Revenue Procedure 96-30; (iii) issuing any New Ralcorp capital stock that in the aggregate exceeds ten percent (10%) of the issued and outstanding stock of New Ralcorp immediately following the Distribution; (iv) liquidating or merging with any other corporation (including a member of the New Ralcorp Group); or (v) causing New Ralcorp to cease conducting directly the New Ralcorp Business in the ordinary course. New Ralcorp hereby represents that neither New Ralcorp nor any member of the New Ralcorp Group has any present intention to undertake any of the transactions set forth in (i), (ii), (iii), (iv) or (v) above. 31 10.2 RALCORP'S AND ACQUIROR'S POST-DISTRIBUTION OBLIGATIONS. Acquiror and Ralcorp shall, and shall cause each member of the Ralcorp Group to, comply with each representation and statement made, or to be made, to the IRS (or, if applicable, tax counsel) in connection with any ruling (or tax opinion) obtained by Ralcorp from the IRS (or tax counsel) with respect to any transaction contemplated by this Agreement or the Merger Agreement. Acquiror shall not, during the two-year period following the Merger, (i) reduce its stock ownership interest in Ralcorp to a level that does not constitute "control" of Ralcorp within the meaning of Section 368(c) of the Code; (ii) cause Ralcorp to be liquidated (including via a statutory merger); (iii) cause Ralcorp to reduce its stock ownership interest in the Branded Subsidiary to a level that does not constitute "control" of the Branded Subsidiary within the meaning of Section 368(c) of the Code; (iv) engage in or cause to occur any transaction(s) which will result in the Branded Subsidiary ceasing to conduct directly the Branded Business in the ordinary course or cause Ralcorp's stock ownership interest in the Branded Subsidiary to represent less than 90% of the fair market value of Ralcorp's gross assets; or (v) cause the Branded Subsidiary to dispose of a material portion of its assets other than in the ordinary course of business, unless (a) an opinion in form and substance reasonably satisfactory to New Ralcorp is obtained from counsel to Acquiror; or (b) a supplemental ruling is obtained from the IRS, in either case to the effect that such transaction(s) would not adversely affect the tax consequences of the Internal Merger, the Internal Spinoff or the Distribution. Acquiror represents that it presently has no plan or intention, and will have no plan or intention at the time of the Merger, to engage in or cause to occur any of the transactions or events described in items (i) through (v) of this Section. 10.3 PERFORMANCE BY NEW RALCORP OF CERTAIN MERGER AGREEMENT COVENANTS. New Ralcorp, as successor to Foods subsequent to the Internal Merger, hereby covenants and agrees that it will (a) perform in all respects the covenants applicable to Foods in Section 2.3 of the Merger Agreement and (b) pay the fees and expenses of Lehman Brothers, Inc. referred to in Section 3.2(i) of the Merger Agreement. 10.4 DISTRIBUTORSHIP AGREEMENT. From and after the Effective Time, New Ralcorp, as successor to Foods subsequent to the Internal Merger, will exercise its rights under the Exclusive Distribution Agreement for Cereals, dated as of April 1, 1994 (the "Distributorship Agreement"), between Foods and Ralston Purina Company ("RPCo.") so as (a) to prevent RPCo. from continuing to use any trademarks used in the Branded Business in connection with RPCo.'s sale of Products (as defined in the Distributorship Agreement), and (b) to terminate the Distributorship Agreement, as to Products that are included in the Branded Business, at the earliest time permitted under such agreement. 10.5 NET WORTH. (a) For a period of two years following the Distribution Date, New Ralcorp and its subsidiaries, on a consolidated basis, will maintain at all times a net worth (determined in accordance with generally accepted accounting principles, consistently applied) of not less than $100 million. 32 (b) Except as provided in paragraph (c) below, for a period of two years commencing on the second anniversary of the Distribution Date, New Ralcorp and its subsidiaries, on a consolidated basis, will maintain at all times a net worth (determined in accordance with generally accepted accounting principles, consistently applied) of not less than the lesser of (i) the sum of $25 million plus the aggregate of all claims for indemnification made in good faith under Section 9.1(b) hereof (subject to the limitations provided in Section 9.2) unresolved and pending on the second anniversary of the Distribution Date, and (ii) $100 million. (c) Notwithstanding the foregoing paragraph (b), in the event an agreement between Ralcorp and RPCo. as contemplated by Section 4.3(d)(ii) of the Merger Agreement is not entered into prior to the second anniversary of the Distribution Date, for a period of three years commencing on the second anniversary of the Distribution Date, New Ralcorp and its subsidiaries, on a consolidated basis, will maintain at all times a net worth (determined in accordance with generally accepted accounting principles, consistently applied) of not less than the amounts specified below: (i) during the first year of such three-year period, the lesser of (A) the sum of $75 million plus the aggregate of all claims for indemnification made in good faith under Section 9.1(b) hereof (subject to the limitations provided in Section 9.2) unresolved and pending on the second anniversary of the Distribution Date, and (B) $100 million; (ii) during the second year of such three-year period, the lesser of (A) the sum of $50 million plus the aggregate of all claims for indemnification made in good faith under Section 9.1(b) hereof (subject to the limitations provided in Section 9.2) unresolved and pending on the third anniversary of the Distribution Date, and (B) the amount specified in clause (i) of this paragraph (c); and (iii) during the third year of such three-year period, the lesser of (A) the sum of $25 million plus the aggregate of all claims for indemnification made in good faith under Section 9.1(b) hereof (subject to the limitations provided in Section 9.2) unresolved and pending on the fourth anniversary of the Distribution Date, and (B) the amount specified in clause (ii) of this paragraph (c). In the event an agreement between Ralcorp and RPCo. as contemplated by Section 4.3(d)(ii) of the Merger Agreement is entered into after the second anniversary of the Distribution Date, upon execution of such agreement this paragraph (c) will be of no further force or effect and the provisions of paragraph (b) will apply instead. (d) During the foregoing periods, New Ralcorp will provide to Ralcorp, within 45 days following the end of each of New Ralcorp's fiscal quarters, a certificate of the 33 Chief Financial Officer of New Ralcorp certifying New Ralcorp's continuing compliance with the foregoing covenants. ARTICLE XI GUARANTEES AND SURETY BONDS OF THE RALCORP GROUP New Ralcorp agrees that as soon as practicable following the Distribution Date it will substitute surety bonds obtained by it for each of the surety bonds of any member of the Ralcorp Group, if any, relating to any New Ralcorp Asset, the New Ralcorp Business or any New Ralcorp Liability. New Ralcorp agrees that it shall enter indemnification agreements in its name with each provider of a surety bond obtained with respect to the New Ralcorp Assets, the New Ralcorp Business or any New Ralcorp Liability. New Ralcorp shall use its reasonable best efforts to obtain the complete release and discharge of any member of the Ralcorp Group from all obligations (including any obligations upon any renewal or extension) related to the New Ralcorp Assets, the New Ralcorp Business or any New Ralcorp Liability on which any member of the Ralcorp Group is directly or contingently obligated as a guarantor or assignor or otherwise contingently liable (including, without limitation, any letter of credit, guaranties with respect to workers' compensation liabilities, and guarantees issued in connection with Resorts' Conference Center (the "New Ralcorp Obligations")). In the event that New Ralcorp is unable to obtain any such release, New Ralcorp agrees that (i) it shall not extend the term or otherwise modify any such New Ralcorp Obligation in a manner which would expand Ralcorp's financial exposure under such New Ralcorp Obligation, (ii) it shall use its reasonable best efforts to substitute itself or another member of the New Ralcorp Group as primary guarantor of such New Ralcorp Obligations, and (iii) New Ralcorp or any member of the New Ralcorp Group shall not (other than, in connection with the Resorts Conference Center, through a sale of all or substantially all of Ralston Resorts, Inc., a wholly owned subsidiary of Foods) assign any such New Ralcorp Obligation or transfer, sell or assign any assets securing such New Ralcorp Obligation or comprising all or any substantial portion of a project, the financing of which gave rise to such New Ralcorp Obligation, unless Ralcorp or the appropriate member of the Ralcorp Group, as the case may be, is released and discharged of all liabilities with respect to such New Ralcorp Obligation. Without limiting any other obligation of indemnification under this Agreement or any agreement described herein, New Ralcorp shall defend, indemnify and hold harmless each member of the Ralcorp Group and their respective Affiliates, Subsidiaries, directors, officers and employees against any and all Liabilities whatsoever incurred or suffered by any of them as a result of any New Ralcorp Obligation. The term "reasonable best efforts" as used in this paragraph shall not be deemed to require New Ralcorp to (i) prepay any such New Ralcorp Obligation, (ii) agree to any increase in amount of principal payments or interest with respect thereto or (iii) extend or accelerate the term of any such New Ralcorp Obligation. ARTICLE XII 34 MEDIATION 12.1 RESOLUTION BY NEGOTIATION; MEDIATION. If any question shall arise in regard to the interpretation of any provision of this Agreement or any Ancillary Agreement or as to the rights or obligations of either Group hereunder or thereunder, each Group shall designate a senior executive within its organization or other individual with decision-making authority regarding the dispute who shall, within thirty days after such question arises, meet with each other to negotiate and attempt to resolve such question in good faith. Such individuals may, if they so desire, consult outside advisors for assistance in arriving at such a resolution. In the event that a resolution is not achieved within such thirty day period, then the parties will submit the dispute to mediation in accordance with the Model Procedure for Mediation of Business Disputes of the Center for Public Resources or such other procedures as the parties may agree and will bear equally the costs of the mediation. The parties will jointly appoint a mutually acceptable mediator, seeking assistance in such regard from JAMS/Endispute or the Center for Public Resources if they have been unable to agree upon such appointment and the procedures within 20 days from the conclusion of the negotiation period. The parties agree to participate in good faith in the mediation and negotiations related thereto for a period of 30 days. If the parties are not successful in resolving the dispute through the mediation, then the parties may agree to submit the matter to binding arbitration or a private adjudicator, or either party may seek an adjudicated resolution through the appropriate court. The foregoing shall not be construed to prevent any party from seeking such preliminary injunctive relief, without compliance with the foregoing provisions, as may be necessary to preserve the status quo pending resolution of any such dispute. 12.2 JURISDICTION; WAIVER OF JURY TRIAL. Subject to Section 12.1, each of the parties hereto (a) consents to submit itself to the personal jurisdiction of any Federal court located in the State of Missouri or the State of Minnesota in the event any dispute arises out of this Agreement or any other Ancillary Agreement or any of the transactions contemplated hereby or thereby, (b) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, and (c) agrees that it will not bring any action relating to this Agreement or any other Ancillary Agreement or any of the transactions contemplated hereby or thereby in any court other than a Federal court (or if such court does not have subject matter jurisdiction, in a state court) sitting in the State of Missouri or the State of Minnesota. THE PARTIES HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS AGREEMENT OR ANY OTHER ANCILLARY AGREEMENT. ARTICLE XIII MISCELLANEOUS 13.1 FURTHER ASSURANCES. Each party hereto shall cooperate reasonably with the other parties, and execute and deliver, or use its reasonable best efforts to cause to be executed 35 and delivered, all instruments, including instruments of conveyance, assignment and transfer, and to make all filings with, and to obtain all consents, approvals or authorizations of, any governmental or regulatory authority or any other Person under any permit, license, agreement, indenture or other instrument, and take all such other actions as such party may reasonably be requested to take by any other party hereto from time to time, consistent with the terms of this Agreement, in order to effectuate the provisions and purposes of this Agreement and the transfers of Assets and Liabilities and the other transactions contemplated hereby or in any of the Ancillary Agreements. 13.2 SURVIVAL OF AGREEMENTS. All covenants and agreements of the parties hereto contained in this Agreement shall survive the Distribution Date. 13.3 ENTIRE AGREEMENT. This Agreement, the Exhibits and Schedules hereto, the Merger Agreement and the Ancillary Agreements shall constitute the entire agreement between the parties hereto with respect to the subject matter hereof, superseding all previous negotiations, commitments and writings with respect to such subject matter. 13.4 EXPENSES. Except as provided in Section 7.2(b) of the Merger Agreement and Section 10.3 of this Agreement, all fees and expenses incurred in connection with the Merger, the Distribution, this Agreement, the Merger Agreement and the transactions contemplated by this Agreement, the Merger Agreement and the Ancillary Agreements shall be paid by the party incurring such fees or expenses, whether or not the Distribution is consummated, except that expenses incurred in connection with printing and mailing the Proxy Statement, the Form S-4, the Form S-1 (if required) and the Form 10, shall be shared equally by Acquiror and Ralcorp, subject to the provisions of Section 5.6 of the Merger Agreement. 13.5 GOVERNING LAW. This Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of Missouri, without regard to its conflicts of law principles, as to all matters, including matters of validity, construction, effect, performance and remedies. 13.6 NOTICES. All notices, requests, claims, demands and other communications hereunder (collectively, "Notices") shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by cable, telegram, telex, facsimile or other standard form of telecommunications, or by registered or certified mail, postage prepaid, return receipt requested, addressed as follows: If to a member of the Ralcorp Group or Acquiror: General Mills, Inc. Number One General Mills Boulevard Minneapolis, Minnesota 55426 Attention: Siri S. Marshall 36 If to a member of the New Ralcorp Group: R.W. Lockwood General Counsel 800 Market Street, Suite 2900 St. Louis, Missouri 63101 Facsimile: (314) 877-7748 or to such other address as either Group may have furnished to the other Group by a notice in writing in accordance with this Section. 13.7 AMENDMENT AND MODIFICATION. This Agreement may be amended, modified or supplemented, and rights hereunder may be waived, only by a written agreement signed by Ralcorp, New Ralcorp, Foods and Acquiror. No waiver of any term, provision or condition of or failure to exercise or delay in exercising any rights or remedies under this Agreement, in one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of such term, provision, condition, right or remedy or as a waiver of any other term, provision or condition of, or right or remedy under, this Agreement. 13.8 SUCCESSORS AND ASSIGNS; NO THIRD-PARTY BENEFICIARIES. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of each party hereto and each of their respective successors and permitted assigns, but neither this Agreement nor any of the rights, interests and obligations hereunder shall be assigned by (i) the New Ralcorp Group without the prior written consent of Acquiror or the Ralcorp Group (which consent shall not be unreasonably withheld) and (ii) the Ralcorp Group or Acquiror, as the case may be, without the prior written consent of the New Ralcorp Group (which consent shall not be unreasonably withheld). This Agreement is solely for the benefit of each Group and is not intended to confer upon any other Person any rights or remedies hereunder. 13.9 COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 13.10 INTERPRETATION. (a) The Article and Section headings contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the parties hereto and shall not in any way affect the meaning or interpretation of this Agreement. (b) The parties hereto intend that, for federal income tax purposes, the contributions, transfers, assumptions, Distribution and Merger contemplated hereby shall each qualify for non-recognition treatment under the applicable provisions of subchapter C of the Code. 37 13.11 LEGAL ENFORCEABILITY. Any provision of this Agreement or any of the Ancillary Agreements which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof. Any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Each party acknowledges that money damages would be an inadequate remedy for any breach of the provisions of this Agreement or any of the Ancillary Agreements and agrees that the obligations of the parties hereunder and thereunder shall be specifically enforceable. 13.12 REFERENCES; CONSTRUCTION. References to any "Article," "Exhibit," "Schedule" or "Section," without more, are to Articles, Exhibits, Schedules and Sections to or of this Agreement. Unless otherwise expressly stated, clauses beginning with the term "including" set forth examples only and in no way limit the generality of the matters thus exemplified. 13.13 TERMINATION. In the event the Merger Agreement is terminated, notwithstanding any provision hereof, this Agreement may be terminated and the Distribution abandoned at any time prior to the Distribution Date by and in the sole discretion of the Ralcorp Board without the approval of any other party hereto or of Ralcorp's shareholders. In the event of such termination, no party hereto shall have any Liability to any Person by reason of this Agreement. 38 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. RALCORP HOLDINGS, INC. By: /s/ J. R. Micheletto ----------------------------------- Name: J. R. Micheletto Title: Chief Executive Officer and President NEW RALCORP HOLDINGS, INC. By: /s/ J. R. Micheletto ----------------------------------- Name: J. R. Micheletto Title: Chief Executive Officer and President RALSTON FOODS, INC. By: /s/ J. R. Micheletto ----------------------------------- Name: J. R. Micheletto Title: Chief Executive Officer CHEX INC. By: /s/ Robert W. Lockwood ----------------------------------- Name: Robert W. Lockwood Title: President GENERAL MILLS, INC. By: /s/ T. J. Brown ----------------------------------- Name: T. J. Brown Title: Vice President EX-10.3 5 TRADEMARK AGREEMENT 1 EXHIBIT 10.3 TRADEMARK AGREEMENT THIS TRADEMARK AGREEMENT dated as of the 31st day of January, 1997, is by and among Ralcorp Holdings, Inc., a Missouri corporation ("Ralcorp"), New Ralcorp Holdings, Inc., a Missouri corporation wholly owned by Ralcorp ("New Ralcorp"), and Chex Inc., a Delaware corporation ("Branded Subsidiary"). W I T N E S S E T H: WHEREAS, Ralcorp, and General Mills, Inc., a Delaware corporation ("Acquiror"), and General Mills Missouri, Inc., a Missouri corporation and a wholly owned subsidiary of Acquiror ("Merger Sub"), have entered into an Agreement and Plan of Merger dated August 13, 1996 (as amended from time to time, the "Merger Agreement") pursuant to which Merger Sub is being merged with and into Ralcorp immediately after the consummation of the transactions contemplated hereby (the "Merger"); and WHEREAS, in connection with the Merger, the parties hereto desire to transfer or license certain intellectual property assets to each other on the terms and conditions set forth in (i) that certain Technology Agreement by and between Ralcorp, New Ralcorp and Branded Subsidiary dated as of the date hereof (the "Technology Agreement") and (ii) this Agreement; NOW, THEREFORE, in consideration of the mutual covenants herein contained and for other good and valuable consideration, the parties agree as follows: 1. Definitions a. The term "Trademarks" shall mean and include trademark(s), service mark(s), trade dress, and copyright(s) and all registrations and applications for registrations relating thereto; however, the term "trademark" shall mean only a word, symbol or device registrable as a trademark under the trademark laws. b. The term "Designated Products" shall mean cereals, cereal based snacks and snack mixes, and products which are identical to or substantially similar in form or in overall appearance to those products, which have been offered for sale in connection with any form of the CHEX trademark or the COOKIE CRISP trademark prior to the date hereof, whether or not any of such products are (i) similar in flavor to those products which have been offered for sale in connection with such trademarks or (ii) used in association with ingredients (e.g., raisins) different from the ingredients used in the products which have been offered for sale in connection with such trademarks; provided, however, that this term shall not include the hexagonally 2 shaped products currently sold under the CRISPY HEXAGON designation or those wheat cereals denominated or described as SHREDDED WHEAT and similar in nature to other shredded wheat products currently offered by other cereal manufacturers. c. The term "Private Label Trademark(s)" shall mean those trademarks and trade names owned by a grocery retailer, a wholesaler, or broker, which is not a cereal producer or primarily in the cereal business, which are used by such persons or entities to identify grocery products sold by such parties or entities and in which New Ralcorp (as successor by merger to Ralston Foods, Inc. ("Foods")) and its Affiliates have no rights, except for the right to produce products utilizing such Trademarks and trade names for such parties or entities or their licensees, but which shall not, in any event, include any Trademark or trade name described in Section 2(d)(i) or Section 2(d)(ii) hereinbelow. d. The term "Reorganization Agreement" shall mean the Agreement by this name dated as of the date hereof by and among Ralcorp, New Ralcorp, Foods, Branded Subsidiary, and Acquiror. e. The term "Control Brand" shall mean those Trademarks and trade names which (i) are utilized by New Ralcorp and/or its subsidiaries on a line of products, the vast majority of which are sold utilizing Private Label Trademarks, which are typically offered by New Ralcorp to re-sellers of grocery products who normally do not utilize their own Private Label Trademarks on such grocery products, in lieu of a Private Label Trademark on such products and (ii) New Ralcorp and/or its subsidiaries do not themselves advertise to consumers. f. All other capitalized terms used but not otherwise defined herein shall have the meanings ascribed thereto in the Reorganization Agreement. 2. Trademark Assignments and Licenses a. New Ralcorp on behalf of itself and its subsidiaries, other than Branded Subsidiary, hereby assigns and agrees to cause any applicable subsidiaries to assign, effective as of the Distribution Date, to the Branded Subsidiary all of New Ralcorp's and its subsidiaries' rights, title and interest, together with all of the goodwill associated therewith, in (i) the Trademarks and recipe names listed on Schedule 2(a) attached hereto and registrations and applications for registrations related to the trademarks listed in Schedule 2(a), and (ii) any other Trademarks, other than the RALSTON, RALSTON FOODS, and red, stylized R trademarks (collectively, the "Ralston Trademarks") and the SUN FLAKES and SPIDERMAN Trademarks, previously used or currently owned by New Ralcorp or licensed to New Ralcorp (as successor by merger to Foods) or its subsidiaries which are or have been almost always associated with the Branded Business or intended almost always for use therein (collectively, the Trademarks described in this Section 2(a) constitute the "Branded 2 3 Trademarks"). New Ralcorp hereby grants (without assuming any liability, as to Puerto Rico, that may arise as a result of or in connection with such grant, including, without limitation, with respect to the Distributorship Agreement), effective as of the Distribution Date, to Branded Subsidiary a non-exclusive royalty free right to use the Ralston Trademarks in the United States, its territories and possessions and the Commonwealth of Puerto Rico and military installations on any product packaging, promotional or advertising materials for a period of one (1) year following the Distribution Date; provided however, that such term may be extended (for a period of no more than one (1) additional year) for the purpose of permitting the Branded Subsidiary to use, sell or otherwise dispose of product packaging and advertising or promotional materials that remain on hand on the one year anniversary of the Distribution Date. The Branded Subsidiary, on behalf of itself and its Affiliates and subsidiaries, hereby agrees that it will (i) make reasonable efforts to conclude the use of such product packaging and promotional and advertising materials by the one year anniversary of the Distribution Date and (ii) not place any orders for such product packaging and advertising or promotional materials at any time after the one year anniversary of the Distribution Date. Nothing herein shall prevent the Branded Subsidiary from ordering such product packaging and promotional and advertising materials within the initial one (1) year period following the Distribution Date. b. Ralcorp hereby assigns to New Ralcorp all of Ralcorp's rights, title and interest, together with all the goodwill associated therewith, in and to (i) the trademarks listed on Schedule 2(b) attached hereto and registrations and applications for registrations related thereto and (ii) any other Trademarks owned by Ralcorp, other than the Branded Trademarks (collectively, the Trademarks described in this Section 2(b) constitute the "Other Trademarks"). c. Each of Ralcorp and the Branded Subsidiary hereby acknowledge and agree that New Ralcorp, or its Affiliates and subsidiaries, will retain, and that neither Ralcorp, nor the Branded Subsidiary will have any rights in the Other Trademarks, except, as otherwise provided in Section 2(a), with respect to use of the Ralston Trademarks. d. New Ralcorp, on behalf of itself and its Affiliates hereby acknowledges and agrees that neither it nor any of them will retain nor will they have any rights to the Branded Trademarks. For the respective periods set out below, New Ralcorp, on behalf of itself and its present and future Affiliates, further agrees, and shall cause such Affiliates to agree, that New Ralcorp and such Affiliates shall not directly or indirectly use (including, without limitation, any use in connection with any Private Label Trademark or Control Brand products, any contract packing arrangement or otherwise in connection with producing product for third parties), register, seek to register, license or otherwise grant rights in any of the following Trademarks or statements, as the case may be, in any state, country or territory anywhere in the world: 3 4 (i) the Branded Trademarks and any Trademarks or trade names confusingly similar to any of such Branded Trademarks, including, with respect to cereals and snack mixes, without any limitation of the generality of the foregoing, any one syllable Trademark or trade name concluding with an "EX" type sound; provided, however, that nothing in this Agreement shall prevent New Ralcorp or its Affiliates from using (A) the Branded Trademarks in connection with any legally permissible comparative advertising or (B) the word "mix" in or in connection with any Trademark or trade name otherwise permitted to be used hereunder for any cereal, snack mix or snack mix recipe; (ii) with respect to the Designated Products, (A) PURINA, CHECKERBOARD, any checkerboard or checkered logo or symbol, and any Trademarks or trade names confusingly similar to any of the foregoing trademarks or (B) any statement which indicates (x) that any CHEX-type ready to eat cereal Designated Products were produced at any time prior to the Distribution Date or (y) that any other Designated Products were produced at any time prior to the date which is 18 months after the Distribution Date, in either case (x) or (y), by Ralston Purina Company ("RP Co.") or Foods or New Ralcorp or their Affiliates; and (iii) with respect to the Designated Products, any trademarks or trade names, other than Private Label Trademarks. The obligations set forth in Section 2(d)(i) shall continue and remain in effect as long as the Branded Subsidiary and its Affiliates, successors in interest, assigns and licensees shall not have abandoned all use of the applicable Branded Trademark and all Trademarks confusingly similar thereto and all registrations for such applicable Branded Trademark and all Trademarks confusingly similar thereto shall not have expired. The obligations set forth in Section 2(d)(ii) shall continue and remain in effect as long as the Branded Subsidiary and its Affiliates, successors in interest, assigns and licensees shall not have permanently discontinued (which shall be deemed to have occurred if any such Designated Product shall not have been offered for sale for a period of two (2) consecutive years or more unless such discontinuance is a result of a force majeure event) offering all products which are identical to or substantially similar to the applicable Designated Product. The obligations set forth in Section 2(d)(iii) shall continue and remain in effect for a period of three (3) years from the Distribution Date; provided, however, that (A) commencing two (2) years after the Distribution Date, New Ralcorp shall have the right to use the Ralston Trademarks as a Control Brand (provided that all requirements of Section 2(d)(i) and Section 2(d)(ii) are met), and any other Control Brands which otherwise comply with the requirements of this Section 2(d), in connection with any Designated Product, and (B) commencing three (3) years after the Distribution Date, New Ralcorp shall have the right to use the Ralston Trademarks in connection with the Designated Products (without limiting its rights 4 5 to use the Ralston Trademarks on any other products) only as a house brand in the same manner as it does for its other cereal products and only on the conditions that the Ralston Trademarks are less prominently displayed than the primary trademark or product name in all uses on the principal display panels of the products and in advertising thereof, and the other requirements of Section 2(d)(i) and Section 2(d)(ii) are otherwise satisfied and the Ralston Trademarks shall not be used as part of the product name. Notwithstanding the foregoing, the restrictions contained in Section 2(d)(iii) hereinabove shall not in and of themselves restrict in any manner whatsoever, the use of any pre-existing Trademarks or Trademarks confusingly similar thereto, in the business of any third party which may acquire New Ralcorp or its Affiliates through a merger, consolidation or other acquisition transaction. All of the foregoing provisions of this paragraph (d) are subject to the terms of the Technology Agreement which shall control in the event of any conflict, difference or ambiguity existing between this Agreement and the Technology Agreement. e. All assignments made pursuant to this Trademark Agreement by Ralcorp are on a quitclaim basis. All grants and assignments made by New Ralcorp are made on the same basis as set forth in the Merger Agreement and the Reorganization Agreement with respect to Intellectual Property. The Branded Subsidiary hereby acknowledges that it has assumed limitations, undertakings and liabilities related to the Branded Trademarks pursuant to, and in accordance with, the terms of the Reorganization Agreement, including, without limitation, such limitations, undertakings and liabilities arising out of that certain Trademark Agreement dated as of March 31, 1994 (which has not been amended since such date other than the amendment dated March 28, 1995) by and between Ralcorp and Ralston Purina Company (the "Prior Trademark Agreement") which agreement is attached hereto as Exhibit A. New Ralcorp hereby acknowledges that it has assumed limitations, undertakings and liabilities related to the Other Trademarks pursuant to, and in accordance with, the terms of the Reorganization Agreement, including, without limitation, the limitations, undertakings and liabilities arising out of the Prior Trademark Agreement. f. U.S. and Canadian assignments in recordable form, as applicable, relating to the Branded Trademarks shall be delivered effective as of the Distribution Date to the Branded Subsidiary at Closing. To the extent registrations and/or applications relating to the Branded Trademarks exist in more than one country, a single multi-country assignment shall be delivered effective as of the Distribution Date to the Branded Subsidiary at Closing. At the Branded Subsidiary's request and expense, separate country-specific assignments will be delivered to the Branded Subsidiary or its designee at a reasonable time following each such request. All taxes, transfer fees and other costs required to record title to the Branded Trademarks shall be borne by the Branded Subsidiary. g. U.S. and Canadian assignments in recordable form, as applicable, relating to the Other Trademarks shall be delivered effective as of the Distribution Date to New 5 6 Ralcorp at Closing. To the extent registrations and/or applications relating to the Other Trademarks exist in more than one country, a single multi-country assignment shall be delivered effective as of the Distribution Date to New Ralcorp at Closing. At New Ralcorp's request and expense, separate country-specific assignments will be delivered to New Ralcorp at a reasonable time following each such request. All taxes, transfer fees and other costs required to record title to the Other Trademarks shall be borne by New Ralcorp. h. If for any reason a Trademark required to be assigned to the Branded Subsidiary hereunder cannot be assigned without also assigning rights used in or associated with businesses not related to the Branded Business, the parties will work together in good faith to accomplish the goal that such Trademark will reside in the Branded Subsidiary, or its designee, for Branded Business purposes and, if for any reason, a Trademark required to be assigned to New Ralcorp hereunder cannot be assigned without also assigning rights used in or associated with the Branded Business, the parties will work together in good faith to accomplish the goal that such Trademark will reside in the Branded Subsidiary for purposes of the Branded Business and in New Ralcorp or its designee for other purposes. 3. License Agreements and Contracts. a. To the extent assignable without third-party consent, and, if not, to the extent such consents have been obtained heretofore, the license agreements and contracts listed on Schedule 3(a) attached hereto (which Schedule 3(a) shall include all license agreements and contracts related to the Branded Trademarks, including those that may have been entered into from and after August 13, 1996, in accordance with the terms of the Merger Agreement) and related to the rights in the Branded Trademarks between New Ralcorp and unaffiliated third parties are hereby assigned, effective as of the Distribution Date, to the Branded Subsidiary. Branded Subsidiary hereby acknowledges that, effective as of the Distribution Date, it has assumed the obligations under the license agreements and other contracts listed on Schedule 3(a) pursuant to and in accordance with the terms of the Reorganization Agreement. To the extent they are non-assignable, New Ralcorp shall use reasonable efforts to place the Branded Subsidiary in the same position as the Branded Subsidiary would have been had the rights under such agreements been assigned. b. To the extent assignable without third-party consent, and, if not, to the extent such consents have been obtained heretofore, the license agreements and contracts related to the rights in the Other Trademarks between Ralcorp and unaffiliated third parties are hereby assigned, effective as of the Distribution Date, to New Ralcorp. New Ralcorp hereby acknowledges that, effective as of the Distribution Date, it has assumed the obligations under such license agreements and other contracts pursuant to and in accordance with the terms of the Reorganization Agreement. To the extent they are non-assignable, Ralcorp shall use reasonable efforts to place New Ralcorp 6 7 in the same position as New Ralcorp would have been had the rights under such agreements been assigned. 4. Scope and Modification. Except as set forth in the Technology Agreement, the Merger Agreement and the Reorganization Agreement, each of which shall control in the event of any conflict, this Trademark Agreement sets forth the entire agreement between the parties and supersedes all prior agreements and understandings between the parties relating to the subject matter hereof. None of the terms of this Trademark Agreement may be waived or modified except as expressly agreed to, in writing, by each of the parties or their Affiliates. 5. Successors and Assigns. This Trademark Agreement and all the provisions hereof shall be binding upon and inure to the benefit of the parties and each of their respective successors and assigns. 6. Interpretation. The section headings contained in this Trademark Agreement are solely for the purpose of reference, are not part of the agreement of the parties hereto, and shall not in any way affect the meaning or interpretation of this Trademark Agreement. 7. Counterparts. This Trademark Agreement may be executed in two or more counterparts, each of which may be deemed an original, but all of which together shall constitute one and the same instrument. 8. Governing Law. This Trademark Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of Missouri. 9. Additional Documents. The parties agree to execute or cause to be executed such additional documents as may be reasonably required to give effect to their undertakings in this Trademark Agreement. 10. Dispute Resolution. The dispute resolution provisions of Article XII of the Reorganization Agreement will control in the event of any dispute in relation to this Agreement. 7 8 IN WITNESS WHEREOF, the parties hereto have executed this Trademark Agreement as of the date first above written. RALCORP HOLDINGS, INC. By: /s/ J. R. Micheletto ----------------------------------- Name: J. R. Micheletto Title: Chief Executive Officer and President NEW RALCORP HOLDINGS, INC. By: /s/ J. R. Micheletto ----------------------------------- Name: J. R. Micheletto Title: Chief Executive Officer and President CHEX INC. By: /s/ R. W. Lockwood ----------------------------------- Name: R. W. Lockwood Title: President 8 EX-10.4 6 TECHNOLOGY AGREEMENT 1 EXHIBIT 10.4 TECHNOLOGY AGREEMENT This Technology Agreement (hereinafter "Agreement") dated as of January 31, 1997 by and among Ralcorp Holdings, Inc., a Missouri corporation ("Ralcorp"), New Ralcorp Holdings, Inc., a Missouri corporation and a wholly owned subsidiary of Ralcorp ("New Ralcorp"), and Chex Inc., a Delaware corporation and a wholly owned subsidiary of New Ralcorp ("Branded Subsidiary"). WITNESSETH THAT: WHEREAS, Ralcorp, General Mills, Inc., a Delaware corporation ("Acquiror"), and General Mills Missouri, Inc., a Missouri corporation and wholly owned subsidiary of Acquiror ("Merger Sub"), have heretofore entered into an Agreement and Plan of Merger dated as of August 13, 1996 (as amended from time to time, the "Merger Agreement") pursuant to which Merger Sub is being merged with and into Ralcorp immediately after the consummation of the transactions contemplated hereby (the "Merger"). WHEREAS, this Agreement is entered into in conjunction with the Merger Agreement in order to facilitate the license or transfer of certain technical information and know how to certain of the parties hereto. WHEREAS, (i) Ralcorp wishes to assign its rights to certain of this technical information and know how to New Ralcorp and each of Ralcorp and Branded Subsidiary wish to license other of this technical information and know how to New Ralcorp, and New Ralcorp wishes to accept such assignments and licenses and (ii) New Ralcorp wishes to assign its rights to certain of this technical information and know how to Branded Subsidiary, and Branded Subsidiary wishes to accept such assignment, with all such assignments and licenses being on the terms and conditions as hereinafter set forth. NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I - DEFINITIONS 1. The term "Branded Business" shall mean the business of manufacturing, distributing and selling branded ready-to-eat cereal (excluding Non-Branded Cereals) and branded cereal-based snacks and snack mixes, as ever conducted by Ralcorp, New Ralcorp, Ralston Foods, Inc., the predecessor in interest to New Ralcorp ("Foods"), or their predecessor in interest, Ralston Purina Company ("RP Co."), prior to the Distribution Date. 2 2. The term "Foods Business" shall mean any business (including any of the same businesses as previously conducted by RP Co.) as ever conducted by Ralcorp, New Ralcorp, Foods, or any of their Affiliates prior to the Distribution Date, other than the Branded Business. 3. The term "Technical Information and Know How" shall mean any and all information owned or licensed from third parties by Ralcorp and its subsidiaries, and which, as of the date of this Agreement, has been used or reduced to practice for use by the Branded Business or the Foods Business or by RP Co. in connection with either of such businesses, including trade secrets, product formulas, processing and equipment design and information, specifications, know how, manufacturing, research, software, inventions, patent applications, patents and industrial property rights and other technical information. 4. The term "Assigned Technical Information and Know How" shall mean any and all Technical Information and Know How that is or has in the past been used exclusively in, or reduced to practice for use exclusively by, the Foods Business and that same business as it was previously conducted by RP Co. The term "Assigned Technical Information and Know How" shall specifically include, without limitation, the Technical Information and Know How listed on Schedule A attached hereto (such information designated on Schedule A referred to as the "Special Assigned Technical Information and Know How") and shall specifically exclude both the Branded Technical Information and Know How and the Shared Technical Information and Know How. 5. The term "Shared Technical Information and Know How" shall mean any and all Technical Information and Know How that is or has in the past been used or reduced to practice for use by (a) the Branded Business and that same business as it was previously conducted by RP Co. for any products which are not Designated Products and (b) both the Branded Business and the Foods Business and those same businesses as they were previously conducted by RP Co. The term Shared Technical Information and Know How" shall specifically exclude the Assigned Technical Information and Know How and the Branded Technical Information and Know How. 6. The term "Branded Technical Information and Know How" shall mean any and all Technical Information and Know How that is or has in the past been used exclusively, or reduced to practice for use exclusively, by Ralcorp, its subsidiaries or RP Co. to produce Designated Products, including all cereal-based snacks and snack mixes that are Designated Products, and shall include the technical information, know how and equipment listed on Schedule B attached hereto, which shall not be considered or form part of the Shared Technical Information and Know How. The term "Branded Technical Information and Know How" shall specifically exclude the Assigned Technical Information and Know How. 7. The term "Designated Products" shall have the meaning set forth in the Trademark Agreement. 2 3 8. The term "Reorganization Agreement" shall mean the agreement by this name dated as of the date hereof by and among Ralcorp, New Ralcorp, Foods, Acquiror, and Branded Subsidiary. 9. The term "Trademark Agreement" shall mean the agreement by this name dated as of the date hereof by and among Ralcorp, New Ralcorp and Branded Subsidiary. 10. All other capitalized terms used but not otherwise defined herein shall have the meanings ascribed thereto in the Reorganization Agreement. ARTICLE II - ASSIGNMENTS 1. Ralcorp hereby assigns and transfers to New Ralcorp, its successors and assigns, all of its right, title, and interest, effective as of the Distribution Date, in the United States of America and all foreign countries, in and to the Assigned Technical Information and Know How and all income, royalties, fees, damages, and payments now or hereafter due or payable in respect thereto, and in and to any and all causes of action (either in law or in equity), and the right to enforce any rights and file any causes of action, including the right to recover damages, for any past, present, or future infringement or misappropriation of any of said rights. 2. New Ralcorp hereby assigns and transfers to Branded Subsidiary, its successors and assigns, all of its right, title and interest, effective as of the Distribution Date, in the United States of America and all foreign countries, in and to the Shared Technical Information and Know How and the Branded Technical Information and Know How in which New Ralcorp or any of its subsidiaries owns or possesses or otherwise has rights, together with all income, royalties, fees, damages and payments now or hereafter due or payable in respect thereto, and in and to any and all causes of action (either in law or in equity), and the right to enforce any rights and file any causes of action, including the right to recover damages, for any past, present, or future infringement or misappropriation of any of said rights. 3. All assignments made hereunder by Ralcorp and New Ralcorp are on a quitclaim basis without contravening the representations or warranties concerning such Technical Information and Know How contained in the Merger Agreement or Reorganization Agreement. 3 4 ARTICLE III - LICENSE GRANTS 1. Each of Ralcorp and Branded Subsidiary hereby grants to New Ralcorp, effective as of the Distribution Date and subject to the terms, covenants, conditions, and limitations set forth in this Agreement (including, without limitation, those restrictions set forth in Article IV hereof), that certain Technology Agreement dated as of March 31, 1994 by and among RP Co., Ralston Purina International, Inc., VCS Holding Company Inc. and Ralcorp, which agreement is attached hereto as Exhibit A (the "Prior Technology Agreement"), the Merger Agreement, and the Trademark Agreement: (a) an irrevocable, non-exclusive, royalty-free, license to use, employ, exercise, apply, or otherwise utilize, the Shared Technical Information and Know How from and after the date hereof until March 31, 1999 in the Western Hemisphere, but, with no rights (except as expressly provided herein) during the applicable time periods specified in Section 4(a) of Article IV hereof to produce, have produced, or license to produce the Designated Products or snack mixes which are not Designated Products; (b) an irrevocable, non-exclusive, royalty-free, license to use, employ, exercise, apply, or otherwise utilize, the Shared Technical Information and Know How from and after March 31, 1999, worldwide, in perpetuity, but, with no rights (except as expressly provided herein) during the applicable time periods specified in Section 4(a) of Article IV hereof to produce, have produced, or license to produce the Designated Products or snack mixes which are not Designated Products; (c) an irrevocable, non-exclusive, royalty free, license to use, employ, exercise, apply or otherwise utilize the Branded Technical Information and Know How to produce, but, except as expressly provided herein, not to disclose or sublicense the same to third parties (including, without limitation, to contract manufacturers, other than as is necessary for Foods Copacking (as defined below)), (i) any products (including, without limitation, all Designated Products and all cereal-based snacks and snack mixes) exclusively for Branded Subsidiary alone or for RP Co. as provided in and in accordance with Article V, Section 1 hereinbelow, in each case, commencing as of the Distribution Date; (ii) (A) any products, other than snack mix products and Designated Products which are COOKIE CRISP type ready to eat cereals, commencing on the Distribution Date and (B) any Designated Products which are COOKIE CRISP type ready to eat cereals, commencing eighteen (18) months after the Distribution Date, in each case (A) and (B), in the United States, its territories, possessions, military installations and the Commonwealth of Puerto Rico for any third parties; (iii) any products, other than snack mix products, commencing five (5) years after the Distribution Date, in all other countries for any third parties; (iv) any snack mix products other than those referred to in Section 4(a)(iii) of Article IV, commencing two (2) years after the Distribution Date, worldwide for any third parties; and (v) any snack mix products referred to in Section 4(a)(iii) of Article IV 4 5 hereof, commencing five (5) years after the Distribution Date, worldwide, for any third parties. (d) an irrevocable, non-exclusive, royalty-free, license to use the invention claimed in U.S. Patent No. 5,188,860 entitled "Process for the Production for a Fiber Containing Cereal Product", worldwide, in perpetuity. For purposes of the foregoing paragraph (c), the term "Foods Copacking" shall mean the right of New Ralcorp (subject to all of the restrictions and obligations set forth herein and provided that all use of Branded Technical Information and Know How and the Shared Technical Information and Know How by any such contract manufacturer is on the same basis and subject to the same restrictions as set forth in Section 1 of Article III and Section 4 of Article IV as they apply to New Ralcorp) to have contract manufacturers pack, or mix with other ingredients and pack, only for New Ralcorp itself, ready to eat cereals that are Designated Products and cereal based snacks and snack mix products as described in Section 4(a) of Article IV, but shall not include any right of any contract manufacturer to produce or make any of such products for itself or other third parties. 2. New Ralcorp hereby agrees and acknowledges that the Shared Technical Information and Know How and the Branded Technical Information and Know How is subject to all limitations, undertakings and liabilities contained in the Prior Technology Agreement, including, without limitation, each of the following: (a) New Ralcorp shall not disclose any of the Shared Technical Information and Know How and Branded Technical Information and Know How to any third party during the term of the license without the written consent of RP Co.; and (b) New Ralcorp shall obtain a written agreement from each of its employees, agents, officers and/or directors that the Shared Technical Information and Know How and the Branded Technical Information and Know How will be kept confidential at all times by such parties and that such information will not be disclosed to any third parties. ARTICLE IV - OBLIGATIONS OF THE PARTIES 1. New Ralcorp hereby agrees to assume from Ralcorp and fulfill all of the technical assistance obligations owed to RP Co. by Ralcorp as described in Article III of the Prior Technology Agreement, and Ralcorp hereby consents to such assumption by New Ralcorp. 2. Ralcorp, Branded Subsidiary and New Ralcorp each agree to treat as confidential all Technical Information and Know How, including the Branded Technical Information and Know How, the Assigned Technical Information and Know How, the Special Assigned Technical Information and Know How and the Shared Technical Information and Know How; and shall not at any time disclose or permit to be disclosed any portion thereof to any other person, firm, or entity; provided, however, (i) that New Ralcorp shall have the right to 5 6 license or disclose, in confidence, but only in accordance with the terms of the Prior Technology Agreement and this Agreement, the Shared Technical Information and Know How and, as to the Branded Technical Information and Know How, in accordance with Section 2 of Article V of this Agreement, and that this provision shall not otherwise limit or preclude New Ralcorp from doing so and (ii) that each of Ralcorp and Branded Subsidiary shall have the right to license or disclose, in confidence, but only in accordance with the terms of the Prior Technology Agreement, the Shared Technical Information and Know How and the Branded Technical Information and Know How, and that this provision shall not otherwise limit or preclude Ralcorp or Branded Subsidiary from doing so. Notwithstanding the foregoing, New Ralcorp shall not be under any obligation pursuant to this Agreement to treat as confidential any of the Assigned Technical Information and Know How or Special Assigned Technical Information and Know How. 3. The obligation of nondisclosure, contained in Paragraph 2 above, shall not apply in the event that any of such confidential information: (a) was known to the public or generally available to the public prior to the date it was received from the disclosing party; (b) became known to the public or generally available to the public subsequent to the date it was received from the disclosing party without any fault of the receiving party; or (c) is, subsequent to the date of this Agreement, disclosed to the receiving party from a third party who is under no obligation of confidentiality regarding the same. 4. New Ralcorp, on behalf of itself and its successors in interest and present and future subsidiaries and Affiliates other than Branded Subsidiary, agrees and shall cause such subsidiaries and Affiliates to agree, that (except as otherwise provided in the Supply Agreement) New Ralcorp, its successors and such subsidiaries and Affiliates shall not directly or indirectly: (a) make, have made, produce, market, contract pack, sell or license, or contract with, any third party to produce (except as provided in and in accordance with Article V, Section 1, hereinbelow for RP Co. and Article V, Section 3 for Branded Subsidiary): (i) (A) any ready-to-eat cereals that are COOKIE CRISP-type Designated Products in the United States, its territories, possessions, military installations or the Commonwealth of Puerto Rico for the eighteen (18) month period commencing upon the Distribution Date and (B) any ready to eat cereals that are Designated Products outside of the United States, its territories, possessions, military installations or the Commonwealth of Puerto Rico for the five (5) year period commencing upon the Distribution Date (which shall preclude, without limitation, any sales made to third 6 7 parties of such Designated Products which New Ralcorp knows are likely, based on reasonable information and knowledge, to be sold or resold outside the United States, its territories, possessions or military installations, or the Commonwealth of Puerto Rico); (ii) any snack mix, cereal-based or otherwise, anywhere in the world for the two (2) year period commencing upon the Distribution Date; and (iii) any snack mix containing those products, or a product substantially similar to, or identical to, products which have been, prior to the date hereof, offered for sale in connection with any form of the CHEX trademark, which shall include products sold under the Crispy Hexagon designation but which shall not include those wheat cereals denominated or described as SHREDDED WHEAT and similar in nature to other shredded wheat products currently offered by other cereal manufacturers, for the five (5) year period commencing upon the Distribution Date; provided, however, that this Section 4(a)(iii) and Section 4(a)(ii) hereinabove shall not apply to snack mix products of an enterprise acquired by New Ralcorp in which the snack mix business generates less than 20% of the annual gross revenues of such enterprise and less than seven (7) million dollars in annual sales; or (b) use, print, disseminate, display or publish on packaging for cereals, or in any related advertising, sales or promotional materials, any snack recipes which are essentially identical to the snack mix recipes that have been used by Foods or New Ralcorp in connection with CHEX products in the three (3) years prior to the Distribution Date. 5. Ralcorp and Branded Subsidiary, and their Affiliates and subsidiaries, hereby agree that Sections 4(a) and (b) of this Article IV shall not apply to, and shall not restrict in any manner whatsoever, the existing business of any third party (including the Affiliates and subsidiaries of such third party prior to such acquisition) which may acquire New Ralcorp or any of its Affiliates or subsidiaries, as such existing business is conducted at the time of such acquisition. Notwithstanding the foregoing, New Ralcorp, on behalf of itself and its successors in interest and present and future subsidiaries and Affiliates, agrees and shall cause such subsidiaries and Affiliates to agree, that Sections 4(a) and (b) shall prevent any such acquiring third party from using the Shared Technical Information and Know How related to snack mixes or the Designated Products and the Branded Technical Information and Know How in violation of the terms of Sections 4(a) and (b) of this Article IV. ARTICLE V - CERTAIN AGREEMENTS 1. Each of Ralcorp and Branded Subsidiary hereby agrees that, except as set forth in this Section 1, nothing contained in this Agreement shall interfere with the ability of New Ralcorp to meet the obligations of New Ralcorp, if any, to RP Co., as set forth in the Distributorship Agreement. Each of Ralcorp and Branded Subsidiary hereby agrees that 7 8 New Ralcorp shall have the right to produce ready to eat cereals for RP Co. in accordance with the terms of the Distributorship Agreement, up to, but not beyond, September 1, 1999, by which time New Ralcorp agrees that it shall have terminated the Distributorship Agreement insofar as it may require the production or sale of any Designated Products. New Ralcorp also agrees that New Ralcorp shall not use any of the Branded Trademarks in connection with such production for RP Co., unless such usage is specifically authorized in writing by Ralcorp. 2. Each of Ralcorp and Branded Subsidiary hereby agrees that New Ralcorp shall have the right to license in accordance with the terms of the Prior Technology Agreement, or, at its option, request that Ralcorp and Branded Subsidiary each license in accordance with the terms of the Prior Technology Agreement, if applicable, the Shared Technical Information and Know How and the Branded Technical Information and Know How, or any parts thereof, from and after the Distribution Date to any subsidiaries or Affiliates of New Ralcorp (regardless of when any such relationship with New Ralcorp may arise), for so long as such entity continues to be a subsidiary or Affiliate of New Ralcorp, and to any "Successor Third Party," on the same terms as set forth herein and specifically subject to the requirement that each such entity shall assume and be subject to and be bound by all restrictions set forth in this Agreement and the Trademark Agreement, provided that, upon the granting of a license of the Shared Technical Information and Know How and the Branded Technical Information and Know How, or any parts thereof, by Ralcorp or Branded Subsidiary to a Successor Third Party, the then existing licenses to New Ralcorp (and its subsidiaries and Affiliates) relating exclusively to the business transferred or to be transferred to such Successor Third Party shall be terminated and New Ralcorp shall only retain, if any, licenses of the Shared Technical Information and Know How and Branded Technical Information and Know How relating to that part of the ready to eat cereal, cereal based snack and cereal based snack mix business of which it retains ownership immediately after such transfer. It is hereby understood that any such license will (i) provide the licensee with rights no greater than the rights of New Ralcorp as set forth in this Agreement and (ii) be subject in all respects to the terms of this Agreement and the Prior Technology Agreement. Each of Ralcorp and Branded Subsidiary hereby agrees that it shall, or, if necessary to fulfill its obligations hereunder, it shall cause its Affiliates and subsidiaries to, promptly comply with (in no case, more than fourteen (14) days after its receipt of) any such request by New Ralcorp by providing any such subsidiary or Affiliate of New Ralcorp with all documentation necessary to provide such Affiliate or subsidiary with the same rights as transferred to New Ralcorp by this Agreement. For purposes of this Agreement, "Successor Third Party" shall mean any entity to whom New Ralcorp transfers (by way of asset transfer, stock transfer, merger or otherwise) following the date hereof all or substantially all of (x) its ready to eat cereal, cereal based snack and cereal based snack mix business as a whole, (y) substantially all of its assets, title, properties, interests, rights and privileges, tangible and intangible, to manufacture and sell cereals that are identical to or substantially similar in form or overall appearance to cereal products bearing the CHEX trademark, or (z) after a transfer of the business as described in (y), the ready to eat cereal, cereal based snack and cereal based snack mix business then remaining, including any entity that is a subsidiary or Affiliate of New Ralcorp, and any entity which is a subsequent 8 9 transferee of any of the businesses described in (x), (y) or (z) of this Section V.2; it being understood that any license of the Shared Technical Information and Know How and the Branded Technical Information and Know How to a subsequent transferee shall be on the same terms and conditions as set forth in this Section V.2. 3. Each of Ralcorp and Branded Subsidiary hereby agrees that nothing contained in this Agreement shall interfere with the ability of New Ralcorp to meet its obligations to Branded Subsidiary under the Supply Agreement. 4. After the Distribution Date, none of New Ralcorp, Ralcorp nor Branded Subsidiary shall have an ongoing obligation to assign, license, share or provide to the other any Technical Information and Know How created or developed after the Distribution Date. 5. Ralcorp, Branded Subsidiary and New Ralcorp each hereby acknowledges that pursuant to the Reorganization Agreement it has agreed to abide by certain limitations, undertakings and liabilities related to the Assigned Technical Information and Know How, the Shared Technical Information and Know How and the Branded Technical Information and Know How, including those arising out of the Prior Technology Agreement. ARTICLE VI - ASSIGNABILITY New Ralcorp's rights herein as to the Shared Technical Information and Know How and the Branded Technical Information and Know How shall not be assignable except to its successor by operation of law and except as otherwise expressly provided herein; otherwise, this Agreement and the rights granted herein shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. ARTICLE VII - MISCELLANEOUS PROVISIONS 1. Should any provision of this Agreement be declared unenforceable for any reason or found contrary to any law or statute, said provision shall be adjusted in accordance with such decision or if it cannot be so adjusted will automatically cease to be a part of this Agreement without affecting any other provisions or obligation thereof. 2. This Agreement shall be construed and enforced in accordance with the laws of the State of Missouri. 3. The headings used in this Agreement are for reference only and shall not be relied upon or used in the interpretation of this Agreement. 4. The dispute resolution provisions contained in Article XII of the Reorganization Agreement will control in the event of any dispute in relation to this Agreement. 9 10 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized representative effective on the day and year set forth in this Agreement. RALCORP HOLDINGS INC. By: /s/ J. R. Micheletto ----------------------------------- Name: J. R. Micheletto Title: Chief Executive Officer and President CHEX INC. By: /s/ R. W. Lockwood ----------------------------------- Name: R. W. Lockwood Title: President NEW RALCORP HOLDINGS, INC. By: /s/ J. R. Micheletto ----------------------------------- Name: J. R. Micheletto Title: Chief Executive Officer and President 10 11 SCHEDULE A TO THE TECHNOLOGY AGREEMENT SPECIAL ASSIGNED TECHNICAL INFORMATION AND KNOW HOW 1. Twin screw extrusion technology and equipment currently and historically associated exclusively with cereals not offered by and not reduced to practice for use by cereal or snack mixes of the Branded Business. 2. Cooking, shredding, baking and sugar frosting technology and equipment at Bremner facility in Princeton, Kentucky currently and historically associated exclusively with cereals (including cereals not yet in commercial production) not offered by and not reduced to practice for use by cereal or snack mixes of the Branded Business. 3. Crispy hexagon forming rolls and related technology currently and historically associated exclusively with cereals not offered by the Branded Business. 11 12 SCHEDULE B TO THE TECHNOLOGY AGREEMENT 1. Formulas and processing steps, times and conditions for the Designated Products 2. To the extent they are exclusively associated with the Designated Products, the following, as well: Material specifications Machine and equipment settings Equipment and manufacturing specifications and instructions Plant operating procedures Testing procedures Sampling procedures Safety protocols Ingredient testing 12 EX-10.5 7 TAX SHARING AGREEMENT 1 EXHIBIT 10.5 TAX SHARING AGREEMENT BETWEEN RALCORP HOLDINGS, INC. AND NEW RALCORP HOLDINGS, INC. THIS AGREEMENT (the "Agreement") dated as of January 31, 1997, is made by and between Ralcorp Holdings, Inc. ("Ralcorp"), a Missouri corporation, and New Ralcorp Holdings, Inc., a Missouri Corporation ("New Ralcorp"), and each of the parties listed on the signature page. WHEREAS, Ralcorp is the common parent of an affiliated group of domestic corporations, including New Ralcorp (the successor to Ralston Foods, Inc.), for which a consolidated Federal Income Tax Return is filed; WHEREAS, Ralcorp proposes to distribute to its shareholders all of its stock in New Ralcorp (the "Distribution") under the Reorganization Agreement among Ralcorp, New Ralcorp, Branded Subsidiary and Acquiror dated January 31, 1997, subject to receipt of a favorable ruling from the Internal Revenue Service or an opinion of counsel that the Distribution qualifies for tax-free treatment under section 355 of the Code; WHEREAS, following the Distribution, New Ralcorp will become the common parent of an affiliated group of domestic corporations for which a consolidated Federal Income Tax Return will be filed; WHEREAS, New Ralcorp and its Affiliates will exist independent of Ralcorp and its Affiliates after the Distribution Date; and WHEREAS, the parties desire to set forth their agreement relating to their respective obligations, responsibilities, rights and entitlements with respect to their Federal, state and local Tax liabilities, as well as certain other Tax matters, attributable to periods before and after the Distribution; NOW, THEREFORE, in consideration of the premises and of the agreements herein set forth, Ralcorp (on its own behalf and on behalf of its Affiliates) and New Ralcorp (on its own behalf and on behalf of its Affiliates) hereby agree as follows: 2 ARTICLE I. GENERAL PROVISIONS SEC. 1 DEFINITIONS (a) As used in this Agreement: "Affiliate" shall have the meaning assigned to it in the Reorganization Agreement. "Code" means the Internal Revenue Code of 1986, as amended. "Consolidated State Tax" means, with respect to each state, any Income Tax payable to any such state in which New Ralcorp or any of its Affiliates is or may be liable for such Tax on a consolidated, combined or unitary basis with Ralcorp or any of its Affiliates. "Distribution Date" means the date that the shares of New Ralcorp are distributed to the Ralcorp shareholders. "Federal Tax" means any United States net income, environmental, excise, alternative or add-on minimum Tax. "Income Taxes" means any Federal Tax, state or local income or franchise tax or other tax measured by income and all other taxes reported on returns which include federal, state or local income or franchise taxes or other taxes measured by income, together with any interest, penalties or additions to tax imposed with respect thereto, but excluding therefrom any taxes imposed by any foreign government or subdivision thereof. "Income Tax Return" means any federal, state or local consolidated or separate Tax Return which reports Income Taxes of Ralcorp, New Ralcorp or any Affiliate thereof. "Other Taxes" means Taxes other than Income Taxes. "Post-Distribution Tax Period" means a taxable year or other taxable period beginning after the Distribution Date, including the portion of any Straddle Period occurring subsequent to the Distribution Date. "Pre-Distribution Tax Period" means any taxable year or other taxable period beginning before, and ending on or before, the Distribution Date, including the portion of any Straddle Period occurring prior to the Distribution Date. "Ralcorp Consolidated Group" means, with respect to any taxable period, the corporations which are members of the affiliated group of corporations of which Ralcorp is the common parent (within the meaning of section 1504 of the Code). "Straddle Period" means any taxable period that includes (but does not end on) the Distribution Date. 2 3 "Tax" means (A) any net income, alternative or add-on minimum, gross income, gross receipts, sales, use, ad valorem, franchise, profits, license, withholding, payroll, employment, excise, transfer, recording, severance, stamp, occupation, premium, property, environmental, custom duty, or other tax, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest and any penalty, addition to tax or additional amount imposed by any governmental authority responsible for the imposition of any such domestic or foreign tax (a "Taxing Authority"); and (B) any liability of Ralcorp, New Ralcorp or any Affiliate (or, in each case, any successor in interest thereto by merger or otherwise), as the case may be, for (x) the payment of any amounts of the type described in clause (A) for any taxable period resulting from the application of Treasury Regulation section 1.1502-6 or, in the case of any Consolidated State Tax, any similar provision applicable under State law or (y) for any amount of the type described in (A) under any Tax sharing, Tax indemnity or other such agreement. "Tax Return" means all reports, estimates, extensions, information statements and returns relating to or required by law to be filed by either Ralcorp and its Affiliates or New Ralcorp and its Affiliates in connection with any Taxes and in the case of consolidated or combined tax returns, by Ralcorp on behalf of New Ralcorp and its Affiliates, and all information returns (e.g., Form W-2, Form 1099) and reports relating to Taxes and employee benefit plans of either Ralcorp and its Affiliates or New Ralcorp and its Affiliates. (b) Any term used in this Agreement which is not defined in this Agreement shall, to the extent the context requires, have the meaning assigned to it in the Reorganization Agreement, Code or applicable Treasury Regulations thereunder, as the case may be. SEC. 2. RESPONSIBILITIES Except as otherwise provided herein, New Ralcorp is and will be liable for all Taxes of (1) New Ralcorp or any New Ralcorp Affiliate for any Pre- or Post-Distribution Tax Period and (2) Ralcorp or any Ralcorp Affiliate for any Pre-Distribution Tax Period, including any such liabilities resulting from an audit or other adjustment to previously filed Tax Returns. Ralcorp will be liable for all Taxes of Ralcorp or any Ralcorp Affiliate attributable to any Post-Distribution Tax Period. In the case of any Straddle Period, Taxes shall be allocated to the Pre-Distribution Tax Period and the Post-Distribution Tax Period in accordance with the following principles: (a) periodic Taxes that are not based on income or receipts (e.g., property Taxes) for the relevant portion of any Straddle Period shall be computed based upon the ratio of the number of days in the Pre-Distribution Date Tax Period or Post-Distribution Date Tax Period, as the case may be, and the number of days in the entire Tax period; and (b) Taxes for the Pre-Distribution Date Tax Period or Post-Distribution Date Tax Period, as the case may be (other than Taxes described in clause (a)) shall be 3 4 computed as if such taxable period ended as of the close of business on the Distribution Date, and, in the case of any Taxes attributable to the ownership of any equity interest in any partnership or other "flowthrough" entity (other than its Subsidiaries), as if a taxable period of such partnership or the "flowthrough" entity ended as of the close of business on the Distribution Date. SEC. 3. TAX ADJUSTMENTS New Ralcorp and Ralcorp recognize that since the Distribution Date will occur on some date during the fiscal year ending September 30, 1997, and certain Tax Returns will cover a period which includes the Distribution Date, there will be certain income and expense items of New Ralcorp and its Affiliates and Ralcorp and its Affiliates which may require adjustments to be made for Tax accounting and Tax Return preparation between the portion of the fiscal year beginning October 1, 1996, and ending with the Distribution Date and the portion of the fiscal year beginning the day after the Distribution Date and ending September 30, 1997. These required Tax adjustments may impact the amount of Taxes due on certain returns and the applicable payment dates to various government authorities for any type of Tax covered by this Agreement. Recognizing the extended return preparation periods, and the time needed to determine such final tax adjustments between New Ralcorp and Ralcorp, the parties agree that such tax adjustments shall be made and given effect separate and apart from other adjustments under the Reorganization Agreement as provided therein. Notice and documentation of such adjustments shall be provided the other party within 30 days of determination. Any required payment resulting from such tax adjustments from one party to the other shall be made within thirty (30) days of the receipt of written request therefor. SEC. 4. MUTUAL COOPERATION New Ralcorp and Ralcorp will, and will cause each of their respective Affiliates to, cooperate with each other in filing any tax return or consent contemplated by this Agreement and to take such action as the other party may reasonably request, including but not limited to the following: (a) provide data for the preparation of Tax Returns, including schedules, and make elections that may be required by the other party; (b) provide required documents and data and cooperate in audits or investigations of Tax Returns and execute appropriate powers of attorney in favor of the other party and/or its agents; (c) file protests or otherwise contest proposed or asserted tax deficiencies, including filing petitions for redetermination or prosecuting actions for refund in court and pursuing the appeal of such actions; (d) take any of the actions of the type described in Treasury Regulation section 1.1502-77(a) (describing the scope of the agency of the common parent of a group of affiliated corporations); and 4 5 (e) file requests for the extension of time within which to file Tax Returns. ARTICLE II. FEDERAL INCOME TAXES SEC. 1. FEDERAL RETURNS (a) New Ralcorp will join, and will cause each eligible New Ralcorp Affiliate to join, in the consolidated Federal Tax Income Tax Return to be filed by Ralcorp for all Pre-Distribution Tax Periods. Ralcorp will not elect to file separate Federal Tax Income Tax Returns for any such periods; (b) New Ralcorp hereby designates, and New Ralcorp agrees to cause each of the New Ralcorp Affiliates to designate, Ralcorp irrevocably as its agent for the purpose of taking any and all action necessary or incidental to the filing of consolidated Federal Tax Income Tax Returns, including the filing of Internal Revenue Service Form 1122 (consent to be included in the consolidated Federal Tax Return), and New Ralcorp agrees to deliver, and to cause each of the New Ralcorp Affiliates to deliver, to Ralcorp executed copies of said Form 1122, if required. New Ralcorp further agrees to furnish, and to cause each of the New Ralcorp Affiliates to furnish, Ralcorp with any and all information requested by Ralcorp in order to carry out the provisions of this Agreement without any charge to Ralcorp. Ralcorp agrees to furnish to New Ralcorp any and all information requested by New Ralcorp in order to carry out the provisions of this Agreement without any charge to New Ralcorp. (c) New Ralcorp shall prepare, at its expense, and Ralcorp shall review, all Federal Tax Income Tax Returns of the Ralcorp Consolidated Group in respect of any Pre-Distribution Period. (d) Ralcorp, as the common parent of the Ralcorp Consolidated Group, shall be responsible for filing all Federal Tax Income Tax Returns required to be filed by or on behalf of Ralcorp or a Ralcorp Affiliate in respect of any Post-Distribution Tax Period. SEC. 2. FEDERAL TAX LIABILITIES (a) Except as otherwise provided in this Agreement, New Ralcorp and each New Ralcorp Affiliate shall be liable for, and shall indemnify and hold Ralcorp and each Ralcorp Affiliate harmless against, any and all Indemnifiable Losses with respect to Federal Taxes attributable to the Ralcorp Consolidated Group or any other consolidated group of which New Ralcorp, Ralcorp or any of their respective Affiliates are or were members in respect of any Pre-Distribution Tax Period and New Ralcorp shall be entitled to all refunds of any such Federal Taxes in respect of such Pre-Distribution Tax Period. (b) Except as otherwise provided in this Agreement, Ralcorp and each Ralcorp Affiliate shall be liable for, and shall indemnify and hold New Ralcorp and each New Ralcorp Affiliate harmless against, any and all Indemnifiable Losses with respect to Federal Taxes, in respect of any Post-Distribution Tax Period, attributable to the Ralcorp Consolidated 5 6 Group or any other consolidated group of which Ralcorp or any of its Affiliates are or will be members. (c) If, as a result of operations in a Post-Distribution Tax Period, New Ralcorp or any of its Affiliates shall have, for Federal Tax purposes, any losses or credits which may be carried back to a Pre-Distribution Tax Period, New Ralcorp shall be entitled to any Tax refunds, as a result of such carrybacks and any Tax refunds (plus interest) received by Ralcorp or its Affiliates as a result of such carrybacks shall be remitted to New Ralcorp. Ralcorp agrees to cooperate with New Ralcorp to obtain such Tax refunds and New Ralcorp agrees to reimburse Ralcorp for its reasonable expenses related thereto. In the event any such refund is disallowed to any extent, such refund (including interest and penalties) shall be remitted to Ralcorp. (d) If there are timing differences reflected in the Federal Tax Income Tax Return of the Ralcorp Consolidated Group as filed for either the taxable year ended September 30, 1996 or the taxable period ending on the Distribution Date but that are not included in the deferred income tax balance on the Closing Date Balance Sheet, and such timing differences reverse in a Ralcorp or Affiliate Income Tax Returns in a Post-Distribution Tax Period, then notice and documentation of such adjustments shall be provided the other party within thirty (30) days of determination, and (i) If such timing difference reversal results in an actual increase of Federal Tax liability of Ralcorp for such subsequent periods, New Ralcorp shall pay Ralcorp the amount of such liability when due or within thirty (30) days of the receipt of written request therefore, whichever is later; or (ii) If such timing difference reversal results in an actual diminution of Federal Tax liability of Ralcorp for such subsequent periods, Ralcorp shall pay New Ralcorp the amount of such actual savings within thirty (30) days of written notice as provided herein. (e) Anything in this Agreement to the contrary notwithstanding New Ralcorp and each New Ralcorp Affiliate shall be liable for and shall indemnify and hold Ralcorp and each Ralcorp Affiliate harmless against any and all Indemnifiable Losses (as defined in the Reorganization Agreement) with respect to Taxes directly arising out of or directly resulting from any transactions set forth in the Reorganization Agreement, the other Ancillary Agreements or the Merger Agreement unless such Tax liability arises as a result of a breach of Ralcorp of its obligations under Section 10.2 of the Reorganization Agreement. SEC. 3. FEDERAL TAX ADJUSTMENTS (a) New Ralcorp's liability under Section 2 hereto for all Taxes for any Pre-Distribution Tax Period shall be adjusted consistent with any adjustments made by the Internal Revenue Service to the taxable income, loss or tax credits of Ralcorp and its subsidiary. For 6 7 purposes of this Agreement, the term "tax credits" shall include, but shall not be limited to, any business tax credit available under the Code. (b) If the Internal Revenue Service shall make an adjustment to the Consolidated Return of the Ralcorp Consolidated Group for any Pre- Distribution Tax Period, and such adjustment, consistently applied would require Ralcorp or a Ralcorp Affiliate to make a corresponding adjustment to their Federal Tax Income Tax Returns for any Post-Distribution Period, then (i) if such corresponding adjustment in the Federal Tax Income Tax Returns of Ralcorp or any of its Affiliates results in an increase of Federal Tax liability for such Post-Distribution Tax Period, New Ralcorp shall pay Ralcorp the amount of such liability, when due, including any applicable interest, penalties or additions to tax. Any payment by New Ralcorp to Ralcorp of a refund or additional tax credit shall be made within ninety (90) days after such adjustment; or (ii) if such corresponding adjustment in the Federal Tax Income Tax Returns of Ralcorp or any of its Affiliates would result in an actual diminution of Federal Tax liability for such Post-Distribution Period, whether or not an actual amended return is filed, Ralcorp shall pay New Ralcorp the amount of such actual savings plus interest either (a) when such refund and related interest are received and required to be remitted within the period provided in this Agreement, or (b) within ninety (90) days of written notice by New Ralcorp to Ralcorp that corresponding adjustments should be made, if an amended return is not filed. (c) Any interest payment shall be calculated from the same date and at the rate used by the Internal Revenue Service in computing the interest payable by it or to it. Unless otherwise provided, all payments required to be made under this Agreement from one party to another shall be made promptly after the event which gives rise to the requirement for payment occurs. 7 8 SEC. 4. CONTEST OF FEDERAL ADJUSTMENTS Any Federal Tax deficiencies or refund claims which arise with respect to the consolidated Federal Tax liability of the New Ralcorp Consolidated Group and which are attributable to any Pre-Distribution Period shall, be defended or prosecuted by New Ralcorp at its own cost and expense and with counsel and accountants of its own selection; provided, however, Ralcorp may participate in any such proceeding at its own cost and expense (in either event such cost or expense not to include the amount of any payment of any tax claim, interest or penalties, or of any compromise settlement or other disposition thereof). New Ralcorp shall have control of any such proceedings, but New Ralcorp shall not compromise or settle any deficiency of Federal Tax which may reasonably be expected to affect Ralcorp or any Ralcorp Affiliate without the prior written consent of Ralcorp, which consent shall not be unreasonably withheld. New Ralcorp and Ralcorp and their respective Affiliates also agree to execute and file such Treasury Department waivers, consents, or other forms, Tax Court or other petitions, refund claims, complaints, powers of attorney and other documents needed from time to time in order to defend, prosecute or resolve the Federal Tax deficiencies or refund claims which are the subject of this Article II, Section 4. Ralcorp shall have a reasonable opportunity to review and comment upon any documents to be submitted to a court or governmental agency. ARTICLE III. STATE AND LOCAL INCOME TAXES SEC. 1. STATE AND LOCAL RETURNS (a) Ralcorp and the Ralcorp Affiliates have filed separately, or have been included in combined or consolidated Income Tax Returns, with New Ralcorp and various New Ralcorp Affiliates in the various states of the United States and in certain other local jurisdictions in which they carry on their trade or businesses. (b) Ralcorp will file, and New Ralcorp and the New Ralcorp Affiliates consent to the filing of, all combined or consolidated state and local Income Tax Returns which include the businesses of New Ralcorp and the New Ralcorp Affiliates for any Pre-Distribution Tax Period. Such combined or consolidated state and local Income Tax Returns shall be prepared by New Ralcorp, unless such Income Tax Returns are for a Straddle Period, in which case Ralcorp shall prepare the Income Tax Returns subject to the review and approval of New Ralcorp. (c) Ralcorp will be responsible for filing combined or consolidated state or local Income Tax Returns for Ralcorp and the Ralcorp Affiliates in any state or local jurisdiction in which such a return is required for any Post-Distribution Tax Period. (d) New Ralcorp and its Affiliates will be responsible for filing the separate state or local Income Tax Returns for New Ralcorp and each New Ralcorp Affiliate in each state or local jurisdiction in which such a return is required for any Pre- or Post-Distribution Tax Period. SEC. 2. STATE AND LOCAL TAX LIABILITY 8 9 (a) Except as otherwise provided herein, New Ralcorp shall be responsible for paying any amount of state and local Income Tax attributable to Ralcorp or its Affiliates for any Pre-Distribution Tax Period and to New Ralcorp or its Affiliates for any Pre-Distribution Tax Period or Post-Distribution Tax Period. Ralcorp or the Ralcorp Affiliates shall be responsible for paying any state or local Income Tax attributable to Ralcorp or a Ralcorp Affiliate in respect of any Post-Distribution Tax Period. (b) If there are timing differences reflected in the state and local Income Tax Returns of the Ralcorp Consolidated Group as filed for a Pre-Distribution Tax Period but which are not included in the deferred income tax balance on the Closing Date Balance Sheet, and such timing differences should reverse in Ralcorp Consolidated Group state and local Income Tax Returns in a Post-Distribution Tax Period, then notice and documentation of such adjustments shall be provided the other party within thirty (30) days of determination, and (i) If such timing difference reversal results in an actual increase of state and local Income Tax liability of Ralcorp for such subsequent periods, New Ralcorp shall pay Ralcorp the amount of such liability when due or within thirty (30) days of the receipt of written request therefore, whichever is later; or (ii) If such timing difference reversal results in an actual diminution of state and local Income Tax liability of Ralcorp for such subsequent periods, Ralcorp shall pay New Ralcorp the amount of such actual savings within thirty (30) days of written notice as provided herein. SEC. 3. STATE TAX ADJUSTMENTS If a state or local Taxing Authority makes an adjustment for an item reported on a state or local Income Tax Return of Ralcorp or a Ralcorp Affiliate attributable to a Pre-Distribution Tax Period (including adjustments to tax basis determination or tax accounting methods with respect to its property and accounts included in and carried forward from the Distribution Date), any resulting increase or decrease in the Tax liability of Ralcorp and/or a Ralcorp Affiliate shall be accounted for between New Ralcorp and Ralcorp in accordance with the principles and provisions of Article II, Section 3(b) of this Agreement. SEC. 4. STATE TAX REFUNDS (a) If a state or local Income Tax adjustment for an item reported on a state or local Income Tax Return results in a refund in a Pre- Distribution Tax Period, that refund will be for the account of New Ralcorp in accordance with the principles and provisions of this Agreement on payments under Article III, Sections 2 and 3. (b) If, as a result of operations during periods commencing after the Distribution Date, New Ralcorp or a New Ralcorp Affiliate shall have, for state or local Income Tax purposes, any losses or credits which may be carried back to a Pre-Distribution Tax Period, New 9 10 Ralcorp shall be entitled to any Tax refunds resulting from such carrybacks and any Tax refunds (plus interest) received by Ralcorp or a Ralcorp Affiliate resulting from such carrybacks shall be remitted to New Ralcorp. Ralcorp agrees to cooperate with New Ralcorp to obtain such refunds and New Ralcorp agrees to reimburse Ralcorp for expenses related thereto. In the event any such refund is disallowed, to any extent, such refund (including interest and penalties) shall be remitted to Ralcorp. ARTICLE IV. OTHER TAXES SEC. 1. OTHER TAXES New Ralcorp shall be liable for all Other Taxes and Tax Returns (other than those relating to federal, state and local Income Taxes, the treatment of which has been set forth above) and for all foreign taxes attributable to Ralcorp or a Ralcorp Affiliate or New Ralcorp or a New Ralcorp Affiliate in respect of any Pre-Distribution Tax Period. Ralcorp shall be liable for all such Other Taxes attributable to Ralcorp or a Ralcorp Affiliate in respect of any Post-Distribution Tax Period. SEC. 2. TRANSFER TAXES New Ralcorp shall pay any and all sales, use, real property, real property gains, transfer, mortgage recording or stock transfer or stamp taxes or similar charges directly resulting from the Distribution, the Internal Spinoff, or the transactions set forth in the Reorganization Agreement or any other Ancillary Agreement imposed by any federal, state or local authorities. ARTICLE V. STATE AND LOCAL CONTESTS OF ADJUSTMENTS SEC. 1. CONTESTS OF ADJUSTMENTS Any state or local Income Tax or Other Tax liabilities which would result in a payment under Articles III or IV shall be defended (or prosecuted as a refund action) by Ralcorp or New Ralcorp, depending on which party is responsible for such Tax liability under this Agreement, at its own cost and expense and with counsel and accountants of its own selection. Ralcorp and New Ralcorp agree to cooperate fully in such defense (or prosecution) and provide promptly such executed documents as the other party may require from time to time in order to defend (or prosecute) the tax deficiencies or refund claims which are the subject of Articles III or IV. Neither party shall compromise or settle any deficiency of tax which would result in a payment under Article III or IV without the prior written consent of the other, which consent shall not be unreasonably withheld. SEC. 2. PAYMENTS New Ralcorp agrees to pay to Ralcorp and Ralcorp agrees to pay to New Ralcorp as the case may be, any amounts determined to be for the account of Ralcorp or New Ralcorp as finally determined under Articles III or IV. Such payment shall be made within thirty (30) days after the final adjustment giving rise to such payment. Any interest payment shall be calculated from the 10 11 same date and at the same rate used by the applicable state, local or foreign tax authority in computing the interest payable by it or to it. ARTICLE VI. DISPUTE RESOLUTION For the purposes of this Agreement, all computations or recomputations of federal, state, local or foreign income and franchise tax liability, and all computations or recomputations of any amount or any payment (including, but not limited to, computations of the amount of the tax liability, any loss or credit or deduction, statutory tax rate for a year, interest payments, and adjustments) and all determinations of payments or repayments, or determination of any other nature required to be made pursuant to this Agreement, shall be based on the assumptions and conclusions of the party making the computations. If either New Ralcorp or Ralcorp objects thereto in writing, addressed to the other party, the provisions of Article XII in the Reorganization Agreement between the parties shall be applicable to resolve any issues under this Tax Sharing Agreement. ARTICLE VII. MISCELLANEOUS PROVISIONS SEC. 1. GOVERNING LAW. This Agreement shall be governed and construed in accordance with the laws of the State of Missouri and shall be binding on the successors and assigns of the parties hereto. SEC. 2. ENTIRE AGREEMENT. Unless specified otherwise, this Agreement contains the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior written agreements, memoranda, negotiations and oral understandings, if any. SEC. 3. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but which together shall constitute one and the same instrument. SECTION 4. NOTICES. All notices, demands, claims, or other communications under this Agreement shall be in writing and shall be deemed to have been given upon the delivery or mailing thereof, as the case may be, if delivered personally or sent by certified mail, return receipt requested, postage prepaid, to the parties at the following addresses (or at such other address as a party may specify by notice to the other): 11 12 If to Ralcorp, to: General Mills P.O. Box 1113 Number One General Mills Blvd. Minneapolis, MN 55440 Attention: Ernest M. Harper, Jr. cc: General Mills P.O. Box 1113 Number One General Mills Blvd. Minneapolis, MN 55440 Attention: Ivy S. Bernhardson If to New Ralcorp, to: New Ralcorp Holdings, Inc._ 800 Market Street, Suite 2900_ St. Louis, Missouri 63101_ Attention: Robert W. Lockwood_ SEC. 5. COSTS AND EXPENSES. Except as expressly set forth in this Agreement, each party shall bear its own costs and expenses incurred pursuant to this Agreement. SEC. 6. TERMINATION AND SURVIVAL. Notwithstanding anything in this Agreement to the contrary, this Agreement shall remain in effect and its provisions shall survive for the full period of all applicable statutes of limitation (giving effect to any extension, waiver or mitigation thereof). SEC. 7. SECTION HEADINGS. The section headings contained in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. SEC. 8. AMENDMENTS; NO WAIVERS. (a) Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by Ralcorp and New Ralcorp or, in the case of a waiver, by the party against whom the waiver is to be effective. (b) No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. 12 13 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written. NEW RALCORP HOLDINGS, INC. BREMNER, INC. BY /s/ J. R. MICHELETTO BY /s/ J. R. MICHELETTO ------------------------------------ ------------------------------------ [NAME] J. R. MICHELETTO [NAME] J. R. MICHELETTO [TITLE] CHIEF EXECUTIVE OFFICER [TITLE] CHIEF EXECUTIVE OFFICER AND PRESIDENT RALCORP HOLDINGS, INC. BEECH-NUT NUTRITION CORPORATION BY /s/ J. R. MICHELETTO BY /s/ J. R. MICHELETTO ------------------------------------ ------------------------------------ [NAME] J. R. MICHELETTO [NAME] J. R. MICHELETTO [TITLE] CHIEF EXECUTIVE OFFICER [TITLE] CHIEF EXECUTIVE OFFICER AND PRESIDENT BREMNER FINANCE, INC. NATIONAL OATS COMPANY BY /s/ J. R. MICHELETTO BY /s/ J. R. MICHELETTO ------------------------------------ ------------------------------------ [NAME] J. R. MICHELETTO [NAME] J. R. MICHELETTO [TITLE] AUTHORIZED SIGNATORY [TITLE] CHIEF EXECUTIVE OFFICER 13 EX-10.6 8 TRANSITION SERVICES - SUPPLY AGREEMENT 1 EXHIBIT 10.6 TRANSITION SERVICES - SUPPLY AGREEMENT BETWEEN CHEX INC. AND NEW RALCORP HOLDINGS, INC. FOR "CHEX" AND "COOKIE CRISP" CEREALS 2 TABLE OF CONTENTS TRANSITION SERVICES - SUPPLY AGREEMENT PART I SUPPLY AGREEMENT SECTION 1 DEFINITIONS 1 SECTION 2 TERM 3 SECTION 3 PERFORMANCE 3 SECTION 4 PRODUCTION SYSTEM 4 SECTION 5 MATERIALS 4 SECTION 6 SAMPLING AND TESTING 4 SECTION 7 STORAGE 5 SECTION 8 REJECTION 5 SECTION 9 INSPECTION 6 SECTION 10 SUPPLY; QUANTITIES 7 SECTION 11 PAYMENT 8 SECTION 12 WARRANTIES AND COVENANTS 10 SECTION 13 INSURANCE 11 SECTION 14 INDEMNIFICATION 12 SECTION 15 CONFIDENTIAL INFORMATION 14 SECTION 16 INTELLECTUAL PROPERTY 15 SECTION 17 BREACH 15 SECTION 18 TERMINATION 16 SECTION 19 BRANDED SUBSIDIARY PRICING 16 SECTION 20 RIGHTS RESERVED TO BRANDED SUBSIDIARY 17 SECTION 21 ASSIGNMENT 17 SECTION 22 INTERPRETATIONS 17 SECTION 23 DISCRIMINATION 17 -i- 3 TABLE OF CONTENTS (CONT.) TRANSITION SERVICES - SUPPLY AGREEMENT SECTION 24 ENTIRE AGREEMENT 17 SECTION 25 FORCE MAJEURE 18 SECTION 26 GOVERNING LAW 18 SECTION 27 INDEPENDENT CONTRACTOR 18 SECTION 28 NOTICE 18 SECTION 29 REGULATORY NOTICE 19 SECTION 30 SUCCESSORS AND ASSIGNS 19 SECTION 31 WAIVER 19 SECTION 32 AUTHORIZATION; VALIDITY 20 PART II TRANSITION SERVICES 18 SCHEDULE(S) SCHEDULE - 1 22 SCHEDULE - 2 26 -ii- 4 TRANSITION SERVICES - SUPPLY AGREEMENT This Transition Services - Supply Agreement ("Agreement"), dated as of January 31, 1997, is between CHEX INC., a Delaware corporation ("Branded Subsidiary"), and NEW RALCORP HOLDINGS, INC., a Missouri corporation ("Supplier") on behalf of itself, its subsidiaries and Affiliates. WHEREAS, Branded Subsidiary and Supplier possess certain Technical Information for the manufacture of ready-to-eat (RTE) cereals; and, WHEREAS, Branded Subsidiary wishes Supplier to produce certain of such products on behalf of Branded Subsidiary and to provide certain other transition services to Branded Subsidiary; and WHEREAS, Supplier is willing to produce those products and provide those other transition services specified herein. In consideration of the mutual agreements, promises and covenants herein contained, the parties hereby agree as follows: PART I. SUPPLY AGREEMENT SECTION 1 DEFINITIONS A. "FDCA" shall mean the Federal Food, Drug and Cosmetic Act, including its amendments and regulations. B. "Laws" shall mean the FDCA and all applicable state and municipal statutes, rules and regulations substantially similar to the FDCA. C. "Nonconforming Products" shall mean Products which do not comply with the FDCA, other Laws or the Specifications referred to below. -1- 5 D. "Plant" shall mean, for the production of rice-based cereal packaged using the "CHEX" trademark (i.e. Rice Chex), Supplier's Battle Creek, Michigan cereal plant, up to its capacity as defined in Schedule 1; and for cereal packaged using the "COOKIE CRISP" trademark, Supplier's Lancaster, Ohio cereal plant, up to its capacity as defined in Schedule 1; and Supplier's Sparks, Nevada cereal plant, to the extent Supplier deems reasonably necessary to utilize such plant for production of Cookie Crisp cereal in lieu of the Lancaster, Ohio plant. E. "Product(s)" shall mean Products Of The Type which have been offered for sale in connection with any form of any CHEX or COOKIE CRISP trademarks. F. "Technical Information" shall mean all formulae, information concerning manufacturing processes and know-how, quality control data, test data and all other scientific and/or technical data and information ("data") relating to the development, manufacture, distribution, sale, or use of the Products and all proprietary rights embodied therein and related thereto which is licensed by Branded Subsidiary or its Affiliates to Supplier or its Affiliates, or provided to Supplier by Branded Subsidiary or which may hereafter be developed by Branded Subsidiary and provided to Supplier by Branded Subsidiary, whether provided in oral, written or other form including, but not limited to, any patent or patent application, formulation, software, product and packaging specifications, trade secrets and know-how. G. "Specifications" shall mean the formulas and specifications for the Products and their production, processing and packaging, which shall reflect the actual operating conditions and practices of Supplier as of the date of this Agreement and as such may be amended from time to time upon reasonable advance written notice by Branded Subsidiary, and other information relating to quality control, processing, packaging and administrative procedures as the parties shall mutually agree upon prior to Closing (the "Other Information"). The parties shall set forth the terms of the Other Information as an Exhibit hereto (the "Other Information Exhibit"). The Other Information Exhibit shall be made a part hereof, and may be amended from time to time by written agreement of the parties. -2- 6 H. The term "Products Of The Type" shall mean the identical products and all products substantially similar in form or in overall appearance to such products, whether or not they are similar in flavor or are used in association with other ingredients (e.g. raisins). I. All other capitalized terms used but not otherwise defined herein shall have the meanings ascribed thereto in the Reorganization Agreement (the "Reorganization Agreement") dated as of the date hereof, by and among Supplier, Branded Subsidiary, Ralston Foods, Inc. ("Foods"), General Mills, Inc. ("General Mills"), General Mills Missouri, Inc. ("General Mills Missouri") and Ralcorp Holdings, Inc. ("Ralcorp"). SECTION 2 TERM This Agreement shall commence immediately after the Closing Date (the "Closing Date") of the Agreement and Plan of Merger by and among Ralcorp, General Mills and General Mills Missouri, dated as of August 13, 1996 (as amended, the "Merger Agreement"). This agreement shall expire, with respect to COOKIE CRISP, eighteen months after the Closing Date; provided that Branded Subsidiary may extend this Agreement, with respect to COOKIE CRISP, for a second term not to exceed six (6) months, by notice given not less than sixty (60) days prior to the expiration of such initial term. This Agreement shall expire, with respect to RICE CHEX, eighteen months after the Closing Date. SECTION 3 PERFORMANCE A. General Understanding. Supplier agrees to use reasonable efforts to produce the Products in accordance with the provisions of this Agreement. B. Performance. Supplier's performance hereunder, including its production, packaging and labeling of Products, and handling and storing ingredients and packaging materials, including stretch wrap, if any, to be used in connection with Products produced on Branded Subsidiary's behalf ("Materials"), shall be in accordance with the terms of this Agreement, including, without limitation, the Specifications. Branded Subsidiary -3- 7 reserves the right at any time to modify, delete or add to the Specifications provided that Branded Subsidiary allows Supplier reasonable time in each instance to implement any changes necessitated by such revisions in the Specifications so that Product(s) will remain in compliance with such Specifications. If any such modification(s) as approved by Supplier result(s) in additional costs to Supplier, Supplier shall be entitled to a cost increase equal to the reasonable additional costs resulting therefrom in accordance with Section 11 hereof. Such costs may include the costs of disposing of Nonconforming Product if Supplier determines, in its reasonable discretion, that it will be unable, exercising reasonable efforts, to consistently meet such revised Specifications, and notifies Branded Subsidiary accordingly. All Exhibits and Schedules attached hereto or referred to herein are incorporated by reference herein and form part of this Agreement. SECTION 4 PRODUCTION SYSTEM Supplier's Equipment. Supplier shall provide all equipment and personnel necessary to produce, package and ship Products in accordance with the terms hereof without any additional costs to Branded Subsidiary beyond those incorporated into the respective Product prices and/or rates as described in Section 11A. SECTION 5 MATERIALS Securing Materials and loss of yield shall be in accordance with Schedule 1 attached hereto. SECTION 6 SAMPLING AND TESTING A. Materials. Supplier shall inspect, sample, analyze and test all Materials received by Supplier to be used to produce or package Products in accordance with the Specifications. Any Materials which do not comply with the requirements of the Specifications shall not be used by Supplier for any reason in connection with the Products, and Supplier shall immediately notify Branded Subsidiary of all such nonconforming Material(s) when such Material(s) were supplied by Branded Subsidiary or purchased on Supplier's behalf by Branded Subsidiary. The parties shall provide Materials in accordance with the terms set forth in Schedule 1. -4- 8 B. Products. Supplier shall sample and test the Products in accordance with the Specifications. Supplier shall also segregate for testing by Branded Subsidiary such quantities of packaged Products and Materials as Branded Subsidiary may from time to time reasonably request and Supplier shall, at Branded Subsidiary's expense, ship such packages and Materials to such destinations as specified by Branded Subsidiary. C. Protection. Supplier shall exercise reasonable care in handling, storing and protecting the Products and Materials intended for use in the Products. SECTION 7 STORAGE Supplier shall provide suitable Branded Subsidiary approved storage and warehousing space ("space") in accordance with Schedule 1. SECTION 8 REJECTION A. Supplier shall not knowingly ship any Nonconforming Products to Branded Subsidiary. B. Nothing contained in this Agreement shall be deemed to obligate Branded Subsidiary to inspect any products purchased hereunder. C. Without limiting any other rights available to Branded Subsidiary with respect to Nonconforming Products which are in violation of any Laws, unless otherwise agreed by the parties, in the event that Supplier produces any Nonconforming Products, Supplier shall promptly replace such Products at no cost to Branded Subsidiary (including any additional freight costs incurred), except to the extent such nonconformance was as the result of Branded Subsidiary's actions, including but not limited to if such nonconformance was attributable to Materials supplied by Branded Subsidiary or purchased on Supplier's behalf by Branded Subsidiary. Replacement of Nonconforming Products by Supplier at no cost to Branded Subsidiary shall be Branded Subsidiary's sole remedy with respect to Nonconforming Products which are not in violation of any Laws. D. Nonconforming Products still within Supplier's possession shall be destroyed or disposed of pursuant to instructions provided by Branded Subsidiary. Such disposal shall be at the -5- 9 expense of Supplier, except to the extent such nonconformance was as the result of Branded Subsidiary's actions, including but not limited to if such nonconformance was attributable to Materials supplied by Branded Subsidiary or purchased on Supplier's behalf by Branded Subsidiary. In no event shall Supplier sell, distribute or ship any Nonconforming Products in violation of Branded Subsidiary's instructions. Notwithstanding the above, Supplier may, subject to Branded Subsidiary's consent, donate such Products provided they are removed from the normal retail packaging prior to ultimate distribution. E. Supplier shall code the Products in accordance with the Specifications. SECTION 9 INSPECTION A. Records. Supplier shall maintain, at the Plant, true, accurate and complete records in respect of Products production, packaging, storage, sampling, testing and shipment hereunder ("Records") in accordance with Supplier's Record Retention Policy, a copy of which will be provided to Branded Subsidiary. Upon written notice to Supplier from Branded Subsidiary, Supplier shall permit Branded Subsidiary to (i) inspect the Records at the Plant and at mutually convenient times and locations, and (ii) take inventory of Materials and finished Products produced by Supplier for Branded Subsidiary. B. Inventories. Supplier shall provide Branded Subsidiary access to Supplier's reports related to Supplier's inventory of Products and Materials in accordance with the Specifications. C. Plant. During the period(s) Supplier is performing any of its services hereunder and upon reasonable advance notice, Branded Subsidiary may inspect, at Branded Subsidiary's cost, areas of the Plant where Materials or Products are handled, processed, sampled, tested, packaged or stored hereunder for the purposes of inspecting the Plant and its facilities, and the Products, Materials and procedures followed by Supplier; provided, however, that Supplier shall have the right to accompany Branded Subsidiary on any such inspections; and provided, further that such inspection(s) shall not relieve Supplier of any of its obligations hereunder. Supplier shall, in good faith, explore the possibility and feasibility of changing its procedure(s) whenever such changes are determined by -6- 10 Branded Subsidiary as necessary or desirable in order to correct and/or improve the Products, the conditions of processing and packaging and the procedures followed hereunder. Supplier has the right to restrict access to any location, material or equipment that is proprietary to Supplier's continued production of other products; provided, however, that such restrictions shall not prevent Branded Subsidiary's representatives from having access to the areas of the Plant where Materials or Products are handled, processed, packaged or stored hereunder, for the purposes of inspecting the Plant and its facilities, and the Products, Materials and procedures followed by Supplier. D. Immediate Notice. Supplier shall immediately notify Branded Subsidiary of any sanitation audits, the results of which indicate the presence of any food pathogens in the Plant or possible adulteration of the Products. SECTION 10 SUPPLY; QUANTITIES A. To ensure that Branded Subsidiary shall have sufficient Products during the first 18 months of the transition following the above referred to Merger (and an additional 6 months with respect to COOKIE CRISP in the event that Branded Subsidiary renews this Agreement in accordance with Section 2), Branded Subsidiary shall have the sole and exclusive right to Supplier's and its subsidiaries' and Affiliates' available capacity and rights to make Products, at all of their plants and facilities, during the term hereof (i) up to 8,400 cwt. a month of RICE CHEX and 10,000 cwt. a month for COOKIE CRISP, and (ii) beyond these levels, other than as reasonably necessary to meet Supplier's requirements for CHEX-type ready to eat cereal Products to be sold by Supplier under Private Label Trademarks and Supplier's obligations under its Exclusive Distribution Agreement with Ralston Purina Company, dated April 1, 1994 (the "RP Agreement"), with any demands exceeding Supplier's ability to supply allocated proportionally between Branded Subsidiary and Ralston Purina Company, based upon total quantities ordered after Supplier first meets Branded Subsidiary's monthly requirements for RICE CHEX up to 8,400 cwt. a month and for COOKIE CRISP up to 10,000 cwt. a month and Supplier's requirements for CHEX-type ready to eat cereal Products (after Supplier has first met Branded Subsidiary's monthly requirements, up to 8,400 cwt. a month); provided, however, that any production of Products for Supplier or Ralston Purina Company pursuant to such agreement shall not include the use of any of the CHEX or -7- 11 COOKIE CRISP trademarks or any other trademarks or trade dress owned by Branded Subsidiary or its Affiliates except as otherwise agreed in writing by Branded Subsidiary. Further, it is understood and acknowledged that the calculation of available capacity for RICE CHEX production has taken into account Supplier's anticipated capacity requirements for its store brand hexagon shaped biscuit product sold under several names, including Crispy Hexagons, among others, and, in any event, Supplier's obligation to supply Branded Subsidiary hereunder shall not exceed Supplier's capacity as set forth in Schedule 1. Branded Subsidiary may order and Supplier shall produce for Branded Subsidiary Products ordered in accordance with firm orders as set out in Schedule 1. Branded Subsidiary agrees that it will order a minimum of 90,000 cwt. of Cookie Crisp cereal during the term, and a minimum of 2,000 cwt. in any given month during the COOKIE CRISP Commitment Period (as defined in Schedule 1C). Branded Subsidiary agrees that in any month during the term in which Branded Subsidiary orders Rice Chex cereal, Branded Subsidiary will order a minimum of 6,000 cwt. of Rice Chex cereal in such month. B. Except for such production of Products (which shall not include the use of the CHEX or COOKIE CRISP trademarks or other trademarks and trade dress of Branded Subsidiary or its Affiliates), if any as may be necessary, as set forth above, for Supplier for CHEX-type ready-to-eat cereal Products sold under Private Label Trademarks and for Ralston Purina Company under the RP Agreement, during the term Supplier shall produce Products solely and exclusively for Branded Subsidiary. SECTION 11 PAYMENT A. Product Price. Subject to the provisions of Sections 3B and 11B, Branded Subsidiary shall pay Supplier an amount equal to $37.09 per cwt. of COOKIE CRISP for the period beginning at the commencement of the term of this Agreement and ending on September 30, 1997, $38.28 per cwt. of COOKIE CRISP for the period beginning on October 1, 1997 and ending on September 30, 1998, and $39.50 per cwt. of COOKIE CRISP thereafter, for Supplier's manufacturing variable costs, warehouse variable costs, fixed manufacturing and fixed warehouse costs for COOKIE CRISP produced and packaged in accordance with this Agreement. Branded Subsidiary shall pay Supplier an amount equal to actual costs for all Materials provided by Supplier in connection with COOKIE CRISP -8- 12 produced and packaged in accordance with this Agreement, subject to yield losses set forth in Schedule 1E. Subject to the provisions of Sections 3B and 11B, Branded Subsidiary shall pay Supplier an amount equal to $38.64 per cwt. of RICE CHEX for the period beginning at the commencement of the term of this Agreement and ending on September 30, 1997 and $39.94 per cwt. of RICE CHEX for the remainder of the term of this Agreement, for Supplier's manufacturing variable costs, warehouse variable costs, fixed manufacturing and fixed warehouse costs (excluding depreciation costs with respect to Building 3 of Supplier's Plant location at Battle Creek, Michigan and the equipment utilized therein) for RICE CHEX produced and packaged in accordance with this Agreement. Branded Subsidiary shall pay Supplier an amount equal to actual costs for all Materials provided by Supplier in connection with RICE CHEX produced and packaged in accordance with this Agreement, subject to yield losses set forth in Schedule 1E. In addition, Branded Subsidiary shall pay Supplier an amount (the "Commitment Amount") equal to $85,500 for each month in the RICE CHEX Commitment Period, as such term is defined in Schedule 1C. The Commitment Amount for any month in the RICE CHEX Commitment Period shall be reduced by an amount which bears the same ratio to $85,500 as the Supplier Weight (as defined below) for such month bears to the Aggregate Weight (as defined below) for such month. The term "Supplier Weight" means, for any month in the RICE CHEX Commitment Period, the total weight of all products produced by Supplier in Building 3 of Supplier's Plant location at Battle Creek, Michigan, other than such Products produced by Supplier for Branded Subsidiary, alone in accordance with the terms of this Agreement. The term "Aggregate Weight" means, for any month in the RICE CHEX Commitment Period, the total weight of all products produced by Supplier in Building 3 of Supplier's Plant location at Battle Creek, Michigan. For each month in the Subsequent Period (as defined below) that Supplier utilizes Building 3 of Supplier's Plant location at Battle Creek, Michigan, Supplier shall pay to -9- 13 Branded Subsidiary an amount equal to 50 percent of the quotient of (x) the sum of the Commitment Amounts for each Non-use Month (as defined below), divided by (y) the aggregate number of Non-use Months. The term "Subsequent Period" means the period of consecutive months equal in number to the aggregate number of Non-use Months, commencing upon the termination of the RICE CHEX Commitment Period. The term "Non-use Month" means any month in the RICE CHEX Commitment Period during which Building 3 of Supplier's Plant location at Battle Creek, Michigan is not utilized for the production of RICE CHEX for Branded Subsidiary in accordance with this Agreement. Product will be shipped F.O.B. Plant. Supplier will invoice Branded Subsidiary monthly for all production. Payment terms will be net 11 days. Yield losses will be addressed as identified in Schedule 1E. B. Cost Savings. The parties agree to cooperate throughout the term of this Agreement to identify methods of reducing the cost of the Products and shall meet periodically to discuss cost savings plans. SECTION 12 WARRANTIES AND COVENANTS A. Supplier represents, warrants and covenants that: 1. Except to the extent arising out of the actions of Branded Subsidiary or from Materials provided by Branded Subsidiary or purchased on Supplier's behalf by Branded Subsidiary, Supplier's performance hereunder shall be in accordance with all the terms of this Agreement, including the Specifications, and be free of defects in workmanship and materials, except for defects arising from conformity with the applicable Specifications to the extent such Specifications were modified per Branded Subsidiary's request; -10- 14 2. Supplier shall not cause any of the Products processed, packaged, stored, labeled and shipped hereunder to be adulterated or misbranded, within the meaning of Laws, or to be products which may not, under any of the provisions thereof, be introduced into interstate commerce, and the Products shall comply with all Laws; 3. Supplier's performance hereunder, including, without limitation, the maintenance of the Plant, shall at all times be in compliance with all Laws. B. Branded Subsidiary's sampling Products and/or approving it for shipment shall neither relieve Supplier of its warranties hereunder nor be construed as a waiver of any of Supplier's obligations hereunder. C. Branded Subsidiary represents and warrants that compliance with the Specifications of this Agreement, to the extent modified per Branded Subsidiary's request, shall not cause any of the Products processed, packed and labeled hereunder to be adulterated or misbranded, within the meaning of the FDCA, or to be products which may not, under any of the provisions thereof, be introduced into interstate commerce. SECTION 13 INSURANCE On or before execution of this Agreement, Supplier shall obtain: A. Product liability insurance on an occurrence basis with issuers acceptable to Branded Subsidiary. The product liability insurance to be maintained shall provide coverage of Two Million Dollars ($2,000,000) per occurrence, with a Five Million Dollars ($5,000,000) annual aggregate; B. Public liability insurance, including contractual liability with limits of not less than Two Million Dollars ($2,000,000); C. Worker's compensation insurance in accordance with the Laws where the Plant is located on all employees engaged in any way in the work pursuant to this Agreement; and D. Broad form vendor's liability coverage. -11- 15 Each such policy shall provide that it may not expire or be canceled except upon thirty (30) days' prior written notice to Branded Subsidiary. Upon the execution of this Agreement, and upon every insurance renewal during the term of this Agreement, Supplier shall deliver to Branded Subsidiary (i) a certificate of insurance evidencing such insurance, (ii) if requested by Branded Subsidiary, a true and complete copy of the policy as then in effect, and (iii) proof of payment of premiums. Notwithstanding the foregoing Branded Subsidiary shall not be under a duty to examine such policy. Branded Subsidiary does not in any way represent that the insurance coverage specified herein is sufficient or adequate to protect Supplier's interests or potential liabilities. SECTION 14 INDEMNIFICATION A. Supplier hereby indemnifies Branded Subsidiary and forever holds Branded Subsidiary (including its parent, subsidiary and Affiliated corporations, and their respective directors, officers, employees and agents) and its customers harmless from and against all claims, suits, actions, proceedings, damages, losses or liabilities, costs or expenses (including reasonable attorneys' fees, expenses and amounts paid in settlement) (but excluding consequential damages (which shall include but not be limited to lost profits))("Claims") incurred by Branded Subsidiary arising out of, based upon, or in connection with any (i) material breach of any of Supplier's warranties, representations or agreements under this Agreement, (ii) injuries or damages to third parties arising from or in any way related to the use or consumption of any Products produced by Supplier for Branded Subsidiary pursuant to this Agreement, to the extent arising out of the condition of such Product(s) as of the date of shipment to Branded Subsidiary (except to the extent attributable to Materials supplied by Branded Subsidiary or purchased on Supplier's behalf by Branded Subsidiary), (iii) actual or alleged injury to person or property or death occurring to any of Supplier's employees, agents or any individual on Supplier's premises, (iv) fines and penalties for statutory violations of Laws attributable to Supplier in connection with Supplier's manufacture of Products pursuant to this Agreement, (v) claim or action by any person alleging that use of any know-how, machinery, equipment or process employed by Supplier in connection with the manufacture of the Products produced by Supplier for Branded Subsidiary pursuant to this Agreement -12- 16 infringes upon any rights of any third party or violates other rights, and (vi) all reasonable costs of any recall of Products produced pursuant to the terms hereof as to which Supplier has consented, such consent not to be unreasonably withheld. In the event of any Claims made against Branded Subsidiary, Branded Subsidiary shall notify Supplier of such claim promptly upon a representative of Branded Subsidiary obtaining knowledge of such Claim, provided that failure to give such notice shall not relieve Supplier from its indemnity hereunder, except to the extent Supplier is prejudiced thereby. Thereafter, Supplier, at its sole cost and expense, may assume the defense of any claim for which it is required to indemnify Branded Subsidiary pursuant to this Section 14A, using counsel of its own choice. Notwithstanding anything in this Section 14 to the contrary, Supplier shall not, without Branded Subsidiary's prior written consent, which consent shall not be unreasonably withheld, settle or compromise any Claim or consent to entry of any judgment with respect to any Claim for anything other than money damages paid by Supplier which would have a material adverse effect on Branded Subsidiary. Supplier may, without Branded Subsidiary's prior written consent, settle or compromise any Claim or consent to entry of any judgment with respect to any Claim which requires solely money damages paid by Supplier and which includes as an unconditional term thereof the release of Branded Subsidiary and its Affiliates by the plaintiff from all liability in respect of such Claim. Branded Subsidiary shall make available to Supplier all records and other materials reasonably required for use in contesting any Claim and shall cooperate fully with Supplier in the conduct and defense of any Claim. B. Branded Subsidiary hereby indemnifies Supplier and forever holds Supplier (including its parent, subsidiary and Affiliated corporations, and their respective directors, officers, employees and agents) and its customers harmless from and against all Claims incurred by Supplier arising out of, based upon, or in connection with any (i) material breach of any of Branded Subsidiary's warranties, representations or agreements under this Agreement, (ii) injuries or damages to third parties arising from or in any way related to the use of or consumption of any Products produced by Supplier for Branded Subsidiary to the extent such injuries or damages are attributable to Materials or premiums supplied by Branded Subsidiary or purchased on Supplier's behalf by Branded Subsidiary, or from conditions which arise after Products were made available for shipment to Branded Subsidiary; (iii) fines, penalties or any other actions or claims arising out of alleged violations of any laws or regulations, including Laws, as a result of any Product claims -13- 17 made by Branded Subsidiary (e.g. health claims) or other copy, graphics, coupons and promotional offers used in connection with such Products on packaging or in advertising (except when such violation arises from Supplier's breach of this Agreement); (iv) claim or action by any person alleging that use of any know-how, machinery, equipment or process employed by Supplier at Branded Subsidiary's behest after the Closing in connection with the manufacture of Products for Branded Subsidiary infringes upon any rights of any third party. C. The provisions of this Section 14 shall survive the termination of this Agreement. SECTION 15 CONFIDENTIAL INFORMATION A. Except as expressly provided in the Technology Agreement, Supplier shall not use the Specifications, Technical Information owned by or licensed to Branded Subsidiary and all other confidential information of Branded Subsidiary for any reason other than the production of Products in accordance with the terms of this Agreement and shall not disclose this information to any third party and shall keep confidential all such information. The terms of this provision shall survive the expiration or termination of this Agreement. B. Except as expressly provided in the Technology Agreement, Branded Subsidiary shall not use any confidential information of Supplier that Branded Subsidiary is not otherwise specifically entitled to use pursuant to the terms of the Technology Agreement, including but not limited to information pertaining to the operation of Plants, and production of other products at such facilities, and Branded Subsidiary shall not disclose this information to any third party and shall keep confidential all such information. The terms of this provision shall survive the expiration or termination of this Agreement. C. The obligations of nondisclosure, contained in Paragraphs 15A and B above, shall not apply in the event that any of such information: (a) was known to the public or generally available to the public prior to the date it was received from the disclosing party: -14- 18 (b) became known to the public or generally available to the public subsequent to the date it was received from the disclosing party without any fault of the receiving party; or (c) is, subsequent to the date of this Agreement, disclosed to the receiving party from a third party who is under no obligation of confidentiality regarding the same. SECTION 16 INTELLECTUAL PROPERTY Nothing in this Agreement shall be construed to grant to Supplier any right to or interest in (i) any trademark, trade name, trade dress, copyright and patent right or (ii) except as may be provided in the Technology Agreement, any other rights, including any rights to any Technical Information and Know How which is owned by or licensed to Branded Subsidiary or its Affiliates ("Intellectual Property"). SECTION 17 BREACH The following actions shall each constitute a breach of this Agreement. A. The institution by Supplier or Branded Subsidiary of a voluntary case under any chapter of the Bankruptcy Code (Title 11, United States Code), or any equivalent or similar action under any other federal or state law in effect at such time relating to bankruptcy or insolvency, or if a petition is filed against Supplier or Branded Subsidiary under the Bankruptcy Code, or if a petition is filed seeking any such equivalent or similar relief against Supplier or Branded Subsidiary under any other federal or state law in effect at the time relating to bankruptcy; B. If Supplier or Branded Subsidiary makes a general assignment for the benefit of creditors; C. If Supplier or Branded Subsidiary admits in writing an inability to pay its debts generally as they become due; D. If Supplier or Branded Subsidiary has appointed (voluntarily or involuntarily) a trustee, receiver, custodian or agent under applicable law or under contract, whose appointment -15- 19 or authority to take charge of property of Supplier or Branded Subsidiary for the purpose of general administration of such property for the benefit of Supplier's or Branded Subsidiary's creditors, respectively; or E. If Supplier or Branded Subsidiary commits a material breach of any of the material terms or provisions of this Agreement and such breach is not cured within thirty (30) days after written notice to the breaching party advising of such breach. SECTION 18 TERMINATION A. In the event this Agreement expires or is terminated, Supplier shall promptly provide Branded Subsidiary with all Products and other Materials owned or provided by Branded Subsidiary which are in Supplier's possession. B. In the event of the occurrence of any material breach not cured within thirty (30) days of written notice of such breach, the non-breaching party may terminate this Agreement effective immediately upon written notice to the breaching party. C. Upon termination of this Agreement for any reason Supplier shall immediately stop the production of any Products then in process which were to be supplied to Branded Subsidiary and promptly deliver to Branded Subsidiary all Products manufactured hereunder along with all Specifications, Technical Information belonging to Branded Subsidiary, artwork, premiums, and packaging materials purchased by Branded Subsidiary and all other Materials and supplies provided by Branded Subsidiary. Branded Subsidiary shall purchase from Supplier reasonable quantities of any packaging materials and any other Materials purchased by Supplier specifically for use with Products to be produced for Branded Subsidiary. D. Upon any change of control of Supplier, Branded Subsidiary may terminate this Agreement effective immediately upon written notice to Supplier. SECTION 19 BRANDED SUBSIDIARY PRICING Branded Subsidiary shall independently determine its prices of the Products to its customers. -16- 20 SECTION 20 RIGHTS RESERVED TO BRANDED SUBSIDIARY Except to the extent otherwise provided herein, Branded Subsidiary reserves to itself the right to alter the flavors, formulas, ingredients, processing conditions, labeling or packaging for the Products, provided that Supplier may reasonably refuse to accept any alteration which adversely affects Supplier's production of other products in the affected Plant(s). SECTION 21 ASSIGNMENT Other than to a wholly owned subsidiary or to a wholly owned subsidiary of its parent company, which shall agree to be bound by all the terms and conditions hereof, neither party shall assign or otherwise transfer in any manner its rights under this Agreement without the other's prior written consent. No assignment of this Agreement will act to relieve the Assignor from any of its duties or obligations hereunder. SECTION 22 INTERPRETATIONS The captions contained in this Agreement are for convenience and reference only and do not define, limit, extend or describe the scope of this Agreement or the intent of any provision thereof. This Agreement shall be deemed to have been drafted by each party hereto. SECTION 23 DISCRIMINATION Supplier shall not discriminate, in violation of the applicable laws, in its employment practices and shall comply with all applicable federal, state and local laws, statutes, ordinances, rules, regulations and orders regarding employee relations. SECTION 24 ENTIRE AGREEMENT This Agreement, including its attached exhibits and schedules specified herein, together with the Trademark Agreement, the Technology Agreement, the Reorganization Agreement and the Merger Agreement supersedes all prior or contemporaneous written or oral agreements and understandings relating to the subject matter hereof. This Agreement shall not be amended, altered, or changed unless in writing signed by the parties hereto. -17- 21 SECTION 25 FORCE MAJEURE In the event that a party hereto shall be delayed, hindered in or prevented from the performance of any act required hereunder by reason of strikes, lock-outs, labor troubles, inability to procure Materials, failure of power, riots, insurrection, war or other reasons of a like nature not the fault of, or under the reasonable control of, the party delayed in performing work or doing acts required hereunder (a "Casualty"), then performance of such act(s) shall be excused for the period of the delay and the period for the performance of any such act shall be extended for a period equal to the period of such delay, provided such delayed party promptly gives written notice to the other party of the occurrence giving rise to the delay and upon cessation of the event causing the delay, promptly resumes performance of its obligations hereunder. SECTION 26 GOVERNING LAW This Agreement shall be governed and construed in accordance with the laws of the State of Missouri, including all matters of construction, validity, enforcement and performance. SECTION 27 INDEPENDENT CONTRACTOR Supplier agrees that its services are provided as an independent contractor and that individuals employed by Supplier shall not be deemed employees of Branded Subsidiary for any reason. Neither party shall have the authority to bind the other party or to assume or create any obligation or responsibility, express or implied, on behalf of the other party or in the other party's name. SECTION 28 NOTICE All notices, requests and other communications to any party hereunder shall be in writing (including facsimile or similar writing) and shall be given: If to Branded Subsidiary, to: Chex Inc. Number One General Mills Boulevard Minneapolis, MN 55426 Attention: Bruce A. Barquist Facsimile: (612) 540-4995 -18- 22 Telephone: (612) 540-2374 If to Supplier, to: New Ralcorp Holdings, Inc. 800 Market Street, Suite 2900 St. Louis, Missouri 63102 Attention: Ronald D. Wilkinson Facsimile: (314) 877-7694 Telephone: (314) 877-7652 With additional copies as noted in the Schedule(s). or such other address or telex or facsimile number as such party may hereafter specify by written notice to the other party. SECTION 29 REGULATORY NOTICE Each party agrees to notify the other immediately by telephone of any action or inspection by any regulatory agency with respect to the Products covered by this Agreement, or any of the raw materials or ingredients used to manufacture Products covered by his Agreement, and shall confirm such notice promptly in writing. Supplier shall promptly deliver to Branded Subsidiary copies of all reports pertaining to the Plants (to the extent relevant to Products produced by Supplier for Branded Subsidiary pursuant to this Agreement) or Products resulting from an inspection of the Plant made by government organizations. SECTION 30 SUCCESSORS AND ASSIGNS Except as limited by the Assignment provisions hereof, this Agreement, its terms and provisions shall be binding upon and inure to the benefit of the parties hereto and their respective partners, legal representatives, successors and assigns. SECTION 31 WAIVER Either party's failure to enforce any provision of this Agreement or to require performance by the other party shall not be construed as a waiver of such provision nor affect the validity of the Agreement or any part thereof, or either party's right to enforce any provision thereafter. -19- 23 SECTION 32 AUTHORIZATION; VALIDITY The persons executing this Agreement on behalf of the Supplier and Branded Subsidiary each acknowledge that they are duly authorized to execute this Agreement on behalf of and bind Supplier or Branded Subsidiary, as the case may be, to the terms hereof. PART II. OTHER TRANSITION SERVICES 1. Services. Subject to the terms of this part of the Agreement, from and after the Effective Date of this Agreement, Supplier shall make such Services available to Branded Subsidiary in accordance with Supplier's normal practice in providing such services as of the Effective Date or as specifically set forth in Schedule 2 hereto (the "Services"). In consideration for the Services, Branded Subsidiary shall pay to Supplier an amount equal to the reasonable costs of Supplier (including, but not limited to labor costs) in providing such Services and each Service provided will be separately invoiced to Branded Subsidiary. Branded Subsidiary shall give Supplier written notice of its intent to terminate any one or more of the Services at least thirty (30) days prior to the termination of the Service. This Agreement shall continue in full force and effect with respect to any Services not terminated by any such notices. 2. Knowledge Transfer: Data Separation & Transfer. Supplier and Branded Subsidiary shall, through their respective information systems departments, work together to the extent reasonably necessary to facilitate the transfer of knowledge and data to Branded Subsidiary in accordance with the terms of the Reorganization Agreement and the Technology Agreement in order to eliminate the need for or to otherwise discontinue as expeditiously as reasonably possible those Services performed in accordance with this Agreement. To the extent such Services can reasonably be eliminated upon the separation and transfer of data, the parties will work toward executing such transfer immediately following the Closing. Branded Subsidiary shall pay to Supplier an amount equal to such reasonable costs for all hours expended by Supplier personnel and actual charges incurred in separating and converting and/or transferring data and in transferring knowledge associated therewith. 3. Liability: Indemnification. Supplier shall have no liability to Branded Subsidiary with respect to its furnishing any of the Services hereunder except for its willful misconduct or gross negligence. By agreeing to provide the Services as an accommodation to Branded Subsidiary, Supplier is making no representations or warranties as to the quality, suitability or adequacy of the Services for any purpose or use, except that Supplier will use such care in providing services to Branded Subsidiary as it would use in providing such services for its own -20- 24 use. In providing the Services, Supplier shall not be obligated to (i) hire any additional employees; (ii) maintain the employment of any specific employee; (iii) purchase, lease or license any additional equipment or software; or (iv) pay any costs related to the transfer or conversion of Branded Subsidiary's data to Branded Subsidiary or any alternate supplier of administrative services. Except for Supplier's gross negligence or willful misconduct, the sole remedy of Branded Subsidiary in the event data owned by it is lost or damaged in any way during processing by Supplier is the refund to it of any charges paid for the processing of the damaged data. Supplier agrees to exercise reasonable diligence to correct errors or deficiencies in the Services. Except for Supplier's gross negligence or willful misconduct, (i) Supplier shall not be liable to any third party in any way for any obligation or commitment or for any act or omission in connection with the provision of Services by Supplier and (ii) Branded Subsidiary shall be solely liable and responsible for any and all claims, liabilities, obligations, losses, costs, expenses, litigation, proceedings, taxes, levies, imposts, duties, deficiencies, assessments, charges, allegations, demands, damages or judgments of any kind or nature whatsoever ("Liabilities") related to, arising from, asserted against or associated with Supplier furnishing or failing to furnish to Branded Subsidiary any of the Services described herein. Upon the termination of any of the Services, Branded Subsidiary shall be obligated to return to Supplier, as soon as reasonably practicable, any equipment or other property of Supplier relating to the Services which is owned or leased by it and is or was in Branded Subsidiary's possession or control and which was or is not part of the assets to be transferred pursuant to the Merger Agreement or the Reorganization Agreement. Effective as of the date of this Agreement, Branded Subsidiary shall indemnify and hold Supplier and its affiliates and their respective directors, shareholders, officers, employees, agents, consultants, representatives, successors, transferees and assigns harmless from and against any and all Liabilities (including, without limitation, reasonable fees and expenses of counsel) of whatever kind and nature related to, arising from, asserted against or associated with Supplier's furnishing or failing to furnish the Services provided for in this Agreement, other than Liabilities arising out of the willful misconduct or gross negligence of Supplier or its affiliates or their respective directors, shareholders, officers, employees, agents, consultants, representatives, successors, transferees or assigns. Nothing herein, however, shall be deemed to affect the right of Branded Subsidiary to seek damages or other rights of redress against Supplier for breach of the provisions of this part of the Agreement. 4. Claims. Branded Subsidiary's receipt of any Service performed hereunder shall be an unqualified acceptance of, and a waiver by it of any and all claims with respect to such Service unless Branded Subsidiary gives Supplier notice of claim within thirty (30) days after such receipt; no claim by Branded Subsidiary against Supplier of any kind, whether as to service performed or for delayed performance or non- performance, unless such claim is based on gross negligence or willful misconduct, shall be greater in amount than the fee for the Service in respect of which such claim is made; and in no event will Supplier be liable to Branded Subsidiary for any incidental or consequential damages, whether or not caused by or resulting from gross negligence or willful misconduct or breach of obligations hereunder. -21- 25 5. Additional Services. If Branded Subsidiary wants Supplier to provide any service other than the Services provided for in the Schedule 2, Branded Subsidiary shall notify Supplier, and within five (5) days following the giving of such notice, Supplier shall provide such service if such service is reasonably necessary for the conduct of the Branded Business (as defined in the Reorganization Agreement) in the ordinary course. Branded Subsidiary shall be invoiced for such services in accordance with billing practices reasonably determined by Supplier. The provision by Supplier of any such additional Services shall be subject to all other provisions of this Agreement, as if those Services had originally been part of the Schedule 2 to this Agreement. 6. Confidentiality. Any and all information which is not generally known to the public which is exchanged between the parties in connection with this Agreement, whether of a technical or business nature, shall be considered to be confidential. The parties agree that confidential information shall not be disclosed to any third party or parties without the written consent of the other party, except to the extent otherwise addressed by the Technology Agreement, which shall be treated in accordance with the terms of the Technology Agreement. Each party shall take reasonable measures to protect against nondisclosure of confidential information by its officers and employees. Confidential information shall not include any information (i) which is or becomes part of the public domain, (ii) which is obtained from third parties who are not bound by confidentiality obligations, except to the extent otherwise addressed by the Technology Agreement or (iii) which is required to be disclosed by law, regulation, legal process or the rules of any state or federal regulatory agency or the New York Stock Exchange. The provisions of this section shall survive the termination of this Agreement. 7. Billing and Payment. Supplier shall bill Branded Subsidiary on a monthly basis for the amounts due to Supplier for services provided pursuant to the terms of this Agreement. All such bills shall contain reasonable detail and shall be due thirty (30) days after receipt. The failure of Branded Subsidiary to pay any bill within thirty (30) days of receipt shall result in Branded Subsidiary owing Supplier an additional handling charge equal to 1% per month of the amount due from the date due to the payment date. 8. Term. It is intended that the Services be provided by Supplier as a temporary accommodation to Branded Subsidiary. Supplier shall provide the Services for a period beginning at the commencement of the term of this Agreement. In no event, however, shall Supplier be obligated to provide any Services identified pursuant to Part II of this Agreement beyond ninety (90) days from the Closing Date. 9. Other Provisions. Section 1 and Sections 21 through 32 of Part I of this Agreement shall be incorporated by reference to this Part II. The remaining terms of Part I shall in no way govern nor otherwise be applicable to the services provided pursuant to this Part II. -22- 26 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. CHEX INC. NEW RALCORP HOLDINGS, INC. By /s/ Robert W. Lockwood By /s/ J. R. Micheletto ------------------------------ ------------------------------ Title President Title Chief Executive Officer and President -23- EX-10.7 9 SECOND AMENDMENT TO AGREEMENT AND PLAN OF MERGER 1 EXHIBIT 10.7 SECOND AMENDMENT TO AGREEMENT AND PLAN OF MERGER BY AND AMONG RALCORP HOLDINGS, INC., GENERAL MILLS, INC. AND GENERAL MILLS MISSOURI, INC. This Second Amendment to Agreement and Plan of Merger is dated as of January 29, 1997 by and among Ralcorp Holdings, Inc., a Missouri corporation (the "Company"), General Mills, Inc., a Delaware corporation (the "Acquiror"), and General Mills Missouri, Inc., a Missouri corporation and a wholly-owned subsidiary of Acquiror ("Merger Sub"). WHEREAS, the parties hereto are parties to an Agreement and Plan of Merger dated as of August 13, 1996, as amended by that certain Amendment to Agreement and Plan of Merger dated as of October 25, 1996 (the "Merger Agreement"); WHEREAS, pursuant and subject to the terms and conditions of the Merger Agreement, the Company has agreed to take all necessary action to redeem the common stock purchase rights ("Rights") associated with the Company Common Stock (as defined in the Merger Agreement) prior to the Effective Time (as defined in the Merger Agreement); WHEREAS, in order to avoid certain unnecessary administrative burdens in connection with the redemption of the Rights, the parties desire to amend the Merger Agreement to reflect that New Ralcorp Holdings, Inc., a Missouri corporation and a wholly owned subsidiary of the Company ("New Ralcorp") shall, prior to the Distribution (as defined in the Merger Agreement), assume the obligation of the Company to pay the amount required to be paid by the Company to the holders of the Rights to redeem the Rights, to the extent such amount remains unpaid at the Effective Time (the "Rights Payment"); WHEREAS, the parties also desire to clarify the sequential order in which the transactions contemplated by the Merger Agreement and the Reorganization Agreement (as defined in the Merger Agreement) shall occur on the Closing Date (as defined in the Merger Agreement); and WHEREAS, the parties also desire to amend Schedule 2.3 to the Merger Agreement in the manner set forth hereinbelow. NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained in the Merger Agreement and this Second Amendment, the parties hereto agree as follows: 1. Prior to the Distribution, New Ralcorp shall assume the obligation of the Company to make the Rights Payment to the holders of the Rights entitled to receive payment therefor. 2 2. The parties acknowledge and agree that, upon such assumption by New Ralcorp and notwithstanding the provisions of Section 2.1(b) of the Merger Agreement to the contrary, the Rights Payment shall not be deducted from the amount of $570,000,000 in arriving at the Conversion Number (as defined in the Merger Agreement). 3. The parties also acknowledge and agree that the Rights Payment shall in no way affect the calculation of the Closing Date Net Asset Value (as defined in the Merger Agreement); it being hereby understood that the Closing Date Balance Sheet (as defined in the Merger Agreement) shall not include any accrual related to the Rights Payment. 4. The parties further acknowledge and agree that the transactions contemplated by the Merger Agreement and the Reorganization Agreement shall occur in the following sequential order on the Closing Date: (i). Internal Merger (as defined in the Merger Agreement); then (ii). Branded Contribution (as defined in the Merger Agreement); then (iii). Internal Spinoff (as defined in the Merger Agreement); then (iv). Distribution; then (v). Redemption of Rights; and then (vi). Merger (as defined in the Merger Agreement). 5. Schedule 2.3 to the Merger Agreement is hereby amended in its entirety to read as set forth on Exhibit A attached hereto. 6. Except as expressly amended hereby, the Merger Agreement shall remain in full force and effect. 2 3 IN WITNESS WHEREOF, Acquiror, Merger Sub and the Company have caused this Agreement to be signed by their respective officers thereunto duly authorized, all as of the date first written above. GENERAL MILLS, INC. By: /s/ T. J. Brown -------------------------------------- Name: T. J. Brown Title: Vice President GENERAL MILLS MISSOURI, INC. By: /s/ T. J. Brown -------------------------------------- Name: T. J. Brown Title: Vice President RALCORP HOLDINGS, INC. By: /s/ J. R. Micheletto -------------------------------------- Name: J. R. Micheletto Title: Chief Executive Officer and President 3 EX-10.8 10 THIRD AMENDMENT TO AGREEMENT AND PLAN OF MERGER 1 EXHIBIT 10.8 THIRD AMENDMENT TO AGREEMENT AND PLAN OF MERGER BY AND AMONG RALCORP HOLDINGS, INC., GENERAL MILLS, INC. AND GENERAL MILLS MISSOURI, INC. This Third Amendment to Agreement and Plan of Merger is dated as of January 31, 1997 by and among Ralcorp Holdings, Inc., a Missouri corporation (the "Company"), General Mills, Inc., a Delaware corporation (the "Acquiror"), and General Mills Missouri, Inc., a Missouri corporation and a wholly-owned subsidiary of Acquiror ("Merger Sub"). WHEREAS, the parties hereto are parties to an Agreement and Plan of Merger dated as of August 13, 1996, as amended by that certain Amendment to Agreement and Plan of Merger dated as of October 25, 1996 and as amended by that certain Second Amendment to Agreement and Plan of Merger dated as of January 29, 1997 (the "Merger Agreement"); WHEREAS, the parties desire to amend the Merger Agreement as hereinafter set forth. NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained in the Merger Agreement and this Second Amendment, the parties hereto agree as follows: 1. Section 1.5(a) of the Merger Agreement is hereby amended by deleting the words "Merger Sub" and substituting therefor the word "Company." 2. The parties hereto agree that at the Effective Time the 1,000 shares of common stock of Merger Sub owned by Acquiror (being all of the issued and outstanding shares of Merger Sub) shall be cancelled and the Surviving Corporation shall issue to Acquiror 1,000 shares of common stock in replacement thereof. 3. Acquiror hereby agrees to make all appropriate filings to evidence the reduction in the stated capital of the Surviving Corporation as a result of the Merger. 2 IN WITNESS WHEREOF, Acquiror, Merger Sub and the Company have caused this Agreement to be signed by their respective officers thereunto duly authorized, all as of the date first written above. GENERAL MILLS, INC. By: /s/ T. J. Brown -------------------------------------- Name: T. J. Brown Title: Vice President GENERAL MILLS MISSOURI, INC. By: /s/ T. J. Brown -------------------------------------- Name: T. J. Brown Title: Vice President RALCORP HOLDINGS, INC. By: /s/ Robert W. Lockwood -------------------------------------- Name: Robert W. Lockwood Title: Vice President, General Counsel and Secretary 2 EX-10.9 11 SHAREHOLDER AGREEMENT 1 EXHIBIT 10.9 SHAREHOLDER AGREEMENT Among VAIL RESORTS, INC. RALSTON FOODS, INC. AND APOLLO SKI PARTNERS, L.P. January 3, 1997 2 TABLE OF CONTENTS Page ARTICLE I - DEFINITIONS 1 ARTICLE II - STANDSTILL AND VOTING PROVISIONS ...................... 6 Section 2.1. Standstill Covenants ...................... 6 Section 2.2. Acquisition of Vail Securities ............ 8 Section 2.3. Voting of Vail Equity ..................... 9 Section 2.4. Restrictions on Certain Transactions Prior to IPO ............................. 10 ARTICLE III - TRANSFER OF VAIL EQUITY ........................ 10 Section 3.1. Restrictions on Transfer .................. 10 Section 3.2. Exceptions to Restrictions ................ 10 Section 3.3. Improper Transfer ......................... 11 Section 3.4. Restrictive Legend ........................ 12 ARTICLE IV - RIGHT OF FIRST OFFER ............................ 13 Section 4.1. Sales by Foods ............................ 13 ARTICLE V - REGISTRATION ..................................... 14 Section 5.1. Demand Registration ....................... 14 Section 5.2. Delay of Demand Registration .............. 16 Section 5.3. Piggyback Registration .................... 17 Section 5.4. Delay of Piggyback Registration ........... 18 Section 5.5. Holdback Agreements ....................... 18 Section 5.6. Right to Purchase in Lieu of Registration ............................. 19 ARTICLE VI - REGISTRATION EXPENSES ........................... 19 Section 6.1. Registration Expenses ..................... 19 ARTICLE VII - REGISTRATION PROCEDURE ......................... 20 Section 7.1. Shareholder Information ................... 20 Section 7.2. Compliance ................................ 21 Section 7.3. Provision of Prospectuses ................. 21 Section 7.4. Blue Sky Compliance ....................... 22 Section 7.5. Listing of Vail Equity .................... 22 Section 7.6. Stop Orders ............................... 22 -i- 3 Page ARTICLE VIII - INDEMNIFICATION AND CONTRIBUTION .............. 23 Section 8.1. Indemnification .................... 23 Section 8.2. Contribution ....................... 27 ARTICLE IX - TAKE-ALONG RIGHTS ............................... 28 Section 9.1. Take-Along Rights .................. 28 ARTICLE X - INITIAL PUBLIC OFFERING .......................... 29 Section 10.1. IPO Commitment ..................... 29 Section 10.2. Co-Manager ......................... 29 Section 10.3. Foods Initiated IPO ................ 30 ARTICLE XI - ADDITIONAL COVENANTS ............................ 30 Section 11.1. Maintain Listing or Quotation ...... 30 Section 11.2. Board of Directors ................. 31 Section 11.3. No Inconsistent Agreements ......... 31 Section 11.4. Rules 144 and 144A ................. 31 Section 11.5. Limitations on Holdings of Foods Associates ........................ 31 ARTICLE XII - MISCELLANEOUS .................................. 31 Section 12.1. Entire Agreement ................... 31 Section 12.2. Headings and Captions .............. 31 Section 12.3. Choice of Law ...................... 32 Section 12.4. Venue .............................. 32 Section 12.5. Notices ............................ 32 Section 12.6. Amendments ......................... 33 Section 12.7. Extended Meanings .................. 33 Section 12.8. Successors and Assigns ............. 33 Section 12.9. Severability ....................... 34 Section 12.10. Counterparts ....................... 34 Section 12.11. Remedies Cumulative ................ 34 Section 12.12. Binding Agreement .................. 34 Section 12.13. Recapitalizations, Exchanges, Etc., Affecting Vail Securities ......... 34 Section 12.14. Other Agreements ................... 35 Section 12.15. Termination ........................ 35 Section 12.16. Enforcement ........................ 35 Section 12.17. Confidentiality .................... 36 -ii- 4 Page Section 12.18. Fiduciary Accounts ................. 36 -iii- 5 SHAREHOLDER AGREEMENT THIS SHAREHOLDER AGREEMENT, dated January 3, 1997 (the "Agreement"), is among Vail Resorts, Inc., a Delaware corporation ("Vail"), Ralston Foods, Inc., a Nevada corporation ("Foods"), and Apollo Ski Partners, L.P., a Delaware limited partnership ("Apollo") (Foods and Apollo and their respective legal representatives, successors and assigns are referred to herein individually as a "Shareholder" and collectively as the "Shareholders"). WHEREAS, pursuant to the Stock Purchase Agreement dated as of July 22, 1996, as amended (the "Purchase Agreement") by and among Vail, Foods and Ralston Resorts, Inc., a Colorado corporation ("Ralston"), Vail acquired all of the outstanding shares of capital stock of Ralston in exchange for 3,777,203 shares of Common Stock, par value $.01 per share, of Vail ("Vail Stock"); and WHEREAS, Apollo owns 1,325,669 shares of Vail Stock and 5,958,874 shares of Class A Common Stock, par value $.01 per share, of Vail ("Vail Class A Stock"); and WHEREAS, the parties hereto desire to enter into this Agreement to provide for certain rights and restrictions with respect to the shares of Vail Equity (as hereinafter defined). NOW, THEREFORE, in consideration of the mutual covenants and obligations set forth herein, each of Vail and Foods agree as follows: I DEFINITIONS As used in this Agreement, and unless the context requires a different meaning, the following terms (whether used 6 -2- in the singular or plural) have the meanings indicated herein. Any term used and not defined herein has the meaning set forth in the Purchase Agreement. "Affiliate" of a Person means any other Person that directly or indirectly through one or more intermediaries Controls, is Controlled by or is under common Control with such Person. "Apollo" has the meaning set forth above in the recitals to this Agreement. "Apollo Option Period" has the meaning set forth in Section 4.1(c) of this Agreement. "Associate" of a Person means any of such Person's directors, officers, shareholders, representatives, trustees, employees, attorneys, advisors or agents. "Business Day" means any day other than a Saturday, Sunday or legal holiday for commercial banks in New York City. "Change of Control" means any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than Apollo or one or more Affiliates of Appollo, becomes the beneficial owner of (i) more than 50% of the total outstanding Vail Securities or (ii) such number of Vail Securities which would allow such person or group to elect a majority of the Board of Directors of Vail. "Closing" means the closing of the transactions contemplated by the Purchase Agreement. "Control" (including the terms "Controlling," "Controlled by" and "under common Control with") means the possession of the power, directly or indirectly, (a) to elect a majority of the board of directors (or equivalent governing body) of the entity in question; or (b) to direct or cause the direction of the management and policies of or with respect to 7 -3- the entity or assets in question, whether through ownership of securities, by contract or otherwise. "Demand Notice" has the meaning set forth in Section 5.1(a) of this Agreement. "Demand Registration" has the meaning set forth in Section 5.1(a) of this Agreement. "Discussion Period" has the meaning set forth in Section 10.3(b) of this Agreement. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder. "First Option" has the meaning set forth in Section 4.1(b) of this Agreement. "Foods" has the meaning set forth above in the recitals to this Agreement. "Foods Initiated IPO" has the meaning set forth in Section 10.3(b) of this Agreement. "Foods Notice" has the meaning set forth in Section 10.3(b) of this Agreement. "GAAP" means accounting principles which are (a) consistent with the principles promulgated or adopted by the Financial Accounting Standards Board and its predecessors in effect from time to time and (b) applied on a basis consistent with prior periods. "Group" means any group of Persons within the meaning of Section 13(d)(3) of the Exchange Act. "IPO" means the consummation of an initial public offering of Vail Stock pursuant to a registration statement filed with the Securities and Exchange Commission. 8 -4- "Loss" has the meaning set forth in Section 8.1(a)(i) of this Agreement. "Marketable Number" has the meaning set forth in Section 5.1(e) of this Agreement. "Non-Qualified Transferee" has the meaning set forth in Section 9.1 of this Agreement. "Non-Requesting Shareholder" has the meaning set forth in Section 5.1(e) of this Agreement. "Person" means an individual, corporation, partnership, trust, incorporated or unincorporated association, joint venture, joint stock company, limited liability company, government (or an agency or political subdivision thereof) or other entity of any kind. "Piggyback Notice" has the meaning set forth in Section 5.3(a) of this Agreement. "Piggyback Registration" has the meaning set forth in Section 5.3(a) of this Agreement. "Piggyback Shareholder" has the meaning set forth in Section 5.3(a) of this Agreement. "Private Sale" has the meaning set forth in Section 2.2 of this Agreement. "Purchase Agreement" has the meaning set forth above in the recitals to this Agreement. "Ralston" has the meaning set forth above in the recitals to this Agreement. "Registration Statement" means any registration statement or comparable document under Section 5 of the 9 -5- Securities Act through which a public sale or disposition of Vail Securities may be registered other than a registration statement (a) relating to an Employee Benefit Plan or similar plan or a business combination or (b) on any form that is not available for a secondary offering. "Requesting Shareholder" has the meaning set forth in Section 5.1(d) of this Agreement. "SEC" means the Securities and Exchange Commission or other federal agency at the time administering the Securities Act, the Exchange Act or any successor acts thereto. "Second Option" has the meaning set forth in Section 4.1(c) of this Agreement. "Section 4.1 Shares" has the meaning set forth in Section 4.1(a) of this Agreement. "Section 5.6 Shares" has the meaning set forth in Section 5.6 of this Agreement. "Section 9.1 Shares" has the meaning set forth in Section 9.1 of this Agreement. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations thereunder. "Shareholder" means Apollo or Foods and its permitted successors and assigns. "Shareholder Indemnified Party" has the meaning set forth in Section 8.1(c) of this Agreement. "Transfer" with respect to all or any part of the Vail Equity means to directly or indirectly (whether or not through an underwriter) sell, convey, distribute, transfer (by merger or otherwise), assign, devise, exchange, encumber, gift, pledge, hypothecate or otherwise dispose of such Vail Equity (including 10 -6- without limitation the sale or disposition of an entity the primary asset of which is Vail Equity). "Transfer Notice" has the meaning set forth in Section 4.1(a) of this Agreement. "Trigger Date" has the meaning set forth in Section 10.3(a) of this Agreement. "Vail" has the meaning set forth above in the recitals to this Agreement. "Vail Class A Stock" means the Class A Common Stock of Vail, par value $.01 per share. "Vail Equity" means (i) shares of Vail Stock acquired by Foods at the Closing and any other Vail Securities owned, beneficially or of record, by Foods or any of its Affiliates at any time during the term of this Agreement and (ii) shares of Vail Stock, Vail Class A Stock and any other Vail Securities owned, beneficially or of record, by Apollo or any of its Affiliates at any time during the term of this Agreement. "Vail Indemnified Party" has the meaning set forth in Section 8.1(a) of this Agreement. "Vail Market Price" means the average of the closing sale prices of the Vail Stock being valued on the New York Stock Exchange or, if the Vail Stock is not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system of the principal national securities exchange on which the Vail Stock is listed or admitted to trading, for the twenty (20) trading days which end on the day immediately prior to the date of the Demand Notice. If the Vail Stock is not listed or admitted to trading on any national securities exchange, "Vail Market Price" means the last quoted sale price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, 11 -7- Inc. Automated Quotation System or such other system then in use, for the twenty (20) trading days which end on the day immediately prior to such date or, if on any such trading day the Vail Stock is not quoted by any such organization, the average of the closing bid and asked prices as furnished by two professional market makers making a market in the Vail Stock, one selected in good faith by the board of directors of Vail and the other selected in good faith by Foods. If the Vail Stock is not publicly held or so listed or publicly traded, "Vail Market Price" means the cash price at which a willing seller would sell and a willing buyer would buy such securities in an arm's-length negotiated transaction without undue time restraints, as determined in good faith by an investment banking firm selected by agreement between Vail and Foods. "Vail Option Period" has the meaning set forth in Section 4.1(b) of this Agreement. "Vail Securities" means the Vail Stock, Vail Class A Stock and any other voting securities of Vail or its Affiliates, including any securities convertible into or exercisable or exchangeable for any voting securities of Vail. "Vail Stock" has the meaning set forth above in the recitals to this Agreement. II STANDSTILL AND VOTING PROVISIONS II.1 Standstill Covenants. Unless otherwise permitted in this Agreement, Foods agrees that during the term of this Agreement, it will not, directly or indirectly: (a) acquire, offer to acquire, or agree to acquire by purchase or otherwise, any Vail Securities except as a result of a stock split, stock dividend or similar recapitalization by Vail; 12 -8- (b) except in the ordinary course of business, acquire, offer to acquire, or agree to acquire by purchase or otherwise, any assets of Vail; (c) initiate, solicit, propose, seek to effect or negotiate, alone or with any other Person, (i) any form of business combination transaction involving Vail or any Affiliate thereof, or (ii) any restructuring, recapitalization or similar transaction with respect to Vail or any Affiliate thereof; (d) initiate, solicit, propose, seek to effect, negotiate, or announce an intent to make, alone or with any other Person, any tender offer, exchange offer, merger, consolidation or share exchange for any Vail Securities, or disclose an intent, purpose, plan or proposal with respect to Vail, any of its Affiliates or any Vail Securities inconsistent with the provisions of this Agreement; (e) make, or in any way participate in, any "solicitation" of "proxies" (as such terms are defined or used in Regulation 14A under the Exchange Act) with respect to Vail or any of its Affiliates or become a "participant" in any "election contest" (as such terms are defined or used in Rule 14a-11 under the Exchange Act) involving Vail or any of its Affiliates; (f) initiate, solicit or propose the approval of one or more shareholder proposals with respect to Vail or any of its Affiliates or induce or attempt to induce any other Person to initiate any such shareholder proposal; (g) form, join or in any way participate in a Group with respect to the Vail Securities; (h) except as expressly provided herein, seek election to or seek to place a representative on the board of directors of Vail or any of its Affiliates or seek the 13 -9- removal of any member of the board of directors of Vail or any of its Affiliates; (i) except for participation on the board of directors of Vail, act in concert with any other Person to seek to affect the management or board of directors of Vail or any of its Affiliates or the business, operations or affairs of Vail or any of its Affiliates; (j) call or seek to have called any meeting of the shareholders of Vail or any of its Affiliates; (k) disclose to any third party or in any filing with any governmental authority any intention, plan or arrangement inconsistent with any of the foregoing or with the restrictions on transfer set forth in this Agreement; or (l) enter into any discussions, negotiations, arrangements or understandings with any third party with respect to any of the foregoing, or advise, assist, encourage or influence any other Person to take any action with respect to any of the foregoing. II.2 Acquisition of Vail Securities. Notwithstanding Section 2.1 hereof, Foods may purchase in one or more open market transactions or otherwise (including the IPO) that number of shares of Vail Securities necessary for Foods to continue to account for its investment in Vail under the equity accounting method under GAAP; provided, that in no event shall any such purchase result in the ownership by Foods and its Affiliates of Vail Securities exceeding 23.5% of the total outstanding Vail Securities. In the event that Vail proposes to register or otherwise offer any Vail Securities for sale for its own account (including the IPO) under the Securities Act (other than a registration of securities in connection with a merger, an acquisition, an exchange offer or an employee benefit plan maintained by Vail or its Affiliates or on Form S-4 or S-8 or any successor or similar form or by means of a shelf registration pursuant to Rule 415 under the Securities Act) or in a 14 -10- transaction exempt from registration under the Securities Act (a "Private Sale"), Vail will give written notice to Foods of its intention to do so and of Foods' rights under this Section 2.2, at least twenty (20) calendar days prior to the anticipated filing date of a Registration Statement relating to such registration (or if such transaction is a Private Sale a comparable period of time). Foods will have the right, but not the obligation, to elect to purchase shares in such offering (including the IPO), at the same price Vail is to receive for the shares to be sold for its account provided that if such offering is not the IPO Foods shall only have such purchase right if Apollo is purchasing Vail Securities in such offering, in which case the number of Vail Securities that Foods may purchase in such offering shall be equal to the number of shares proposed to be purchased by Apollo multiplied by a fraction, the numerator of which is the total number or shares of Vail Equity owned by Foods at such time and the denominator of which is the sum of the total number of shares of Vail Equity owned by Apollo and Foods at such time. In the event that the size of such offering is increased after Foods has received notice of such offering, Foods will have the right, but not the obligation, to proportionately increase its purchase of shares in such offering. Foods may exercise its purchase rights under this Section 2.2 by notifying Vail of its election to purchase shares (which election shall be irrevocable) in such offering within ten days of receiving notice from Vail (failure by Foods to give such notice within such ten-business-day period shall be deemed an election by Foods not to purchase Vail Securities in such offering). Any purchase by Foods of Vail Securities pursuant to this Section 2.2 may not result in Foods and its Affiliates' ownership exceeding 23.5% of the total outstanding Vail Securities. Foods shall not be entitled to a Piggyback Registration with respect to any offering if it has elected to purchase Vail Securities in such offering. II.3 Voting of Vail Equity. Foods agrees that during the term of this Agreement, with respect to the election of directors of Vail, each class of Vail Equity owned by Foods and its Affiliates shall be voted (i) "for" the nominees recommended by the Board of Directors of Vail, provided Vail and Apollo are 15 -11- in compliance with the terms of Section 11.2 of this Agreement, (ii) in accordance with the recommendation of the Board of Directors of Vail on each proposal of a security holder pursuant to Rule 14a-8 under the Exchange Act, so long as the subject matter of such proposal does not fall within the proviso hereto, and (iii) with respect to all other matters requiring a vote of the Vail Equity, "for" any proposal in the same proportion as the votes cast "for" such proposal by the holders of the Vail Securities of the same class (excluding the Vail Equity owned by Foods), and "against" any proposal in the same proportion as the votes cast "against" such proposal by the holders of each such class of Vail Securities (excluding the Vail Equity owned by Foods) and that with respect to broker non-votes and abstentions, each class of Vail Equity owned by Foods will be voted in the same proportion as votes deemed "for," "against" or "abstain," giving effect to broker non-votes and abstentions as required under the laws and rules then applicable; provided, however, that Foods shall retain the right to vote its Vail Equity in any manner it sees fit with respect to any proposals for (1) the merger, consolidation or other business combination of Vail or any subsidiary of Vail with or into any other corporation, (2) the sale, lease, exchange, transfer or other disposition of all or substantially all of the assets of Vail and all of its subsidiaries taken together as a single business, (3) the creation of any other class of stock with voting rights and (4) changes to the Certificate of Incorporation or Bylaws of Vail that adversely affect Foods' rights under this Agreement. The provisions of this Section 2.3 shall apply to both the casting of votes at meetings of shareholders and execution of actions by written consent. II.4 Restrictions on Certain Transactions Prior to IPO. Prior to the IPO, Vail shall not, without the prior written approval of Foods, (1) enter into transactions with Apollo or its Affiliates that are not on an arm's-length basis (other than the continuation or extension of contracts or arrangements between Vail and Apollo and its Affiliates that are in existence as of the date of this Agreement and have heretofore been disclosed to Foods), (2) permit (a) the merger of Vail with or into any other 16 -12- corporation (other than a subsidiary of Vail), (b) the sale, lease, exchange, transfer or other disposition of all or substantially all of the assets of Vail and all of its subsidiaries taken together as a single business, (c) the creation of any other class of stock with voting rights that materially adversely affects Foods' rights under this Agreement or (d) changes to the Certificate of Incorporation or Bylaws of Vail that adversely affect Foods' rights under this Agreement, or (3) enter into any material business not currently conducted by Vail that is not related to the operation of ski resorts, real estate or the vacation, leisure and entertainment industries. III TRANSFER OF VAIL EQUITY III.1 Restrictions on Transfer. During the term of this Agreement, Foods agrees that it will not, and it will cause each of its Affiliates who acquire Vail Equity not to, Transfer any Vail Equity, except as permitted by or in accordance with this Agreement. III.2 Exceptions to Restrictions. Subject to all applicable laws, the restrictions on Transfer set forth in Section 3.1 hereof shall not apply to any of the following: (a) a Transfer of some or all of the Vail Equity pro rata to all of the holders of common stock of Foods as a dividend or distribution, in redemption of the Foods Stock or pursuant to a similar transaction; (b) a Transfer of some or all of the Vail Equity to an Affiliate of Foods, provided that such Affiliate (i) shall agree to be bound by and subject to the provisions of this Agreement, (ii) Foods shall remain liable for the performance by such Affiliate of its obligations under this Agreement and (iii) such Affiliate shall have executed and delivered to Vail the guaranty required by Section 5.14 of the Purchase Agreement; 17 -13- (c) a Transfer of some or all of the Vail Equity in accordance with Section 5.1 or 5.3 of this Agreement; (d) a Transfer of some or all of the Vail Equity in any tender offer, self-tender, exchange offer, going private transaction or other transaction involving a Transfer which is recommended to shareholders of Vail by at least a majority of the Board of Directors of Vail; (e) subject to Section 4.1, a Transfer of some or all of the Vail Equity with the prior written consent of a majority of the Board of Directors of Vail; (f) subject to Section 4.1, a Transfer of some or all of the Vail Equity pursuant to Rule 144 of the Securities Act if an IPO has not been consummated by December 31, 1998; (g) subject to Section 4.1, a Transfer of some or all of the Vail Equity if an IPO has not been consummated by December 31, 1998 and such transferee agrees to be bound by the terms of this Agreement; and (h) subject to Section 4.1, a Transfer of some or all of the Vail Equity on or after the date which is 18 months after the date of this Agreement, provided that (i) the transferee agrees to be bound by and subject to the provisions of this Agreement, (ii) after giving effect to such Transfer, the transferee will not own, directly or indirectly, more than 10% of the then outstanding Vail Securities and (iii) such transferee agrees with Vail and Apollo not to thereafter purchase or otherwise acquire, directly or indirectly, any additional Vail Securities if it would result in such transferee owning, directly or indirectly, more than 10% of the then outstanding Vail Securities. III.3 Improper Transfer. Any attempt to Transfer any shares of Vail Equity not in accordance with this Agreement will be null and void and Vail will not give nor permit the transfer 18 -14- agent of Vail to give any effect to such attempted Transfer in its stock records. III.4 Restrictive Legend. (a) A copy of this Agreement will be filed with the Secretary of Vail and kept with the records of Vail. All certificates representing shares of Vail Equity hereafter issued to or acquired by Foods or its successors or permitted assigns, will bear the following legend (until such time as such shares are sold pursuant to an effective registration statement or pursuant to Rule 144 under the Securities Act) noted conspicuously on such certificates: THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT ONLY, AND MAY NOT BE OFFERED, SOLD, TRANSFERRED (BY MERGER OR OTHERWISE), ASSIGNED, DEVISED, EXCHANGED, GIFTED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS AND UNTIL REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND ANY APPLICABLE STATE SECURITIES LAWS OR UNLESS SUCH TRANSFER IS EXEMPT FROM REGISTRATION, AND AN ACCEPTABLE OPINION OF COUNSEL IS DELIVERED TO VAIL RESORTS, INC. WITH REGARD TO SUCH EXEMPTION, OR IS OTHERWISE IN COMPLIANCE WITH THE ACT AND SUCH STATE SECURITIES LAWS. THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO THE RESTRICTIONS ON TRANSFER SET FORTH IN THE SHAREHOLDER AGREEMENT, DATED , 1996. NO TRANSFER OF THESE SHARES WILL BE EFFECTIVE UNLESS AND UNTIL THE TERMS AND CONDITIONS OF SUCH SHAREHOLDER AGREEMENT HAVE BEEN COMPLIED WITH IN FULL AND NO PERSON MAY REQUEST VAIL RESORTS, INC. TO RECORD THE TRANSFER OF ANY SHARES IF SUCH TRANSFER IS IN VIOLATION OF SUCH SHAREHOLDER AGREEMENT. A COPY OF THE SHAREHOLDER AGREEMENT IS ON FILE AT THE EXECUTIVE OFFICES OF VAIL RESORTS, INC. AND WILL BE FURNISHED WITHOUT CHARGE TO THE HOLDER OF SUCH SHARES UPON WRITTEN REQUEST. THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON VOTING PROVIDED FOR IN THE SHAREHOLDER AGREEMENT AND NO VOTE 19 -15- OF SUCH SHARES THAT CONTRAVENES THE SHAREHOLDER AGREEMENT SHALL BE EFFECTIVE. (b) Until such time as the Vail Equity has been registered pursuant to a registration statement under the Securities Act or sold pursuant to Rule 144 of the Securities Act, the certificates representing Vail Equity (including, without limitation, all certificates issued upon Transfer or in exchange or substitution therefor) will also bear any legend required under any other applicable laws, including state securities or blue sky laws. (c) Vail may make a notation on its records or give stop-transfer instructions to any transfer agents or registrars for the Vail Equity in order to implement the restrictions set forth in this Article III. (d) In the event Foods acquires any other or additional Vail Securities, Foods will submit all certificates representing such Vail Securities to Vail so that any appropriate legend or legends required by this Section 3.4 may be placed thereon. IV RIGHT OF FIRST OFFER IV.1 Sales by Foods. (a) Prior to any Transfer pursuant to Section 3.2(e), (f), (g) and (h), Foods must first give written notice of its intent to make such Transfer (a "Transfer Notice") to Vail and Apollo setting forth the number of shares of Vail Equity (the "Section 4.1 Shares") that Foods desires to Transfer and the cash price that Foods proposes to be paid for such Section 4.1 Shares and the other terms and conditions of such proposed Transfer. (b) Vail shall have the right, but not the obligation, to purchase the Section 4.1 Shares (the "First Option") on the 20 -16- same terms and conditions as set forth in such notice, which option shall be exercised by delivering to Foods irrevocable written notice of its commitment to purchase the Section 4.1 Shares within ten business days after receipt of the Transfer Notice (the "Vail Option Period"). Failure by Vail to give such notice within such ten-business-day period shall be deemed an election by Vail not to purchase the Section 4.1 Shares. (c) In the event that Vail decides not to purchase the Section 4.1 Shares pursuant to Section 4.1(b), then Apollo will have the right, but not the obligation, to purchase the Section 4.1 Shares (the "Second Option") on the same terms and conditions as set forth in the Transfer Notice, which option shall be exercised by delivering to Foods irrevocable written notice of its commitment to purchase the Section 4.1 Shares within five business days after the termination of the Vail Option Period (the "Apollo Option Period"). Failure by Apollo to give such notice within such five-business-day period shall be deemed an election by Apollo not to purchase the Section 4.1 Shares. (d) Delivery of written notice by Vail or Apollo accepting the First Option or the Second Option, as the case may be, shall constitute a contract between Vail or Apollo, on the one hand, and Foods, on the other hand, for the purchase and sale of the Section 4.1 Shares on the terms and conditions set forth in the Transfer Notice. The purchase of any shares pursuant to the exercise of the First Option or the Second Option, as the case may be, shall be completed not later than 30 days following delivery of the Transfer Notice with respect to the Section 4.1 Shares, subject to receipt of any required material third-party or governmental approvals, compliance with applicable laws and the absence of any injunction or similar legal order preventing such transaction. In the event that neither the First Option nor the Second Option is exercised, Foods shall have the right for a period of 45 days after the termination of the Apollo Option Period to Transfer the Section 4.1 Shares at a price not less than 90% of the price contained in, and on terms and conditions no less favorable to Foods than those set forth in, the Transfer Notice; provided that the Transferee agrees to be bound by the 21 -17- terms and conditions of this Agreement (unless the Transfer is pursuant to Rule 144 under the Securities Act). V REGISTRATION V.1 Demand Registration. (a) After the consummation of an IPO or at such time prior to the consummation of an IPO as is permitted by Section 10.3 with respect to a given Shareholder, upon a Shareholder's written request specifying the intended manner of disposition (including the number of shares of Vail Equity to be sold) (a "Demand Notice"), Vail will use its best efforts to prepare and file with the SEC, as expeditiously as possible, a Registration Statement on an available form for which Vail then qualifies (but not including by means of a shelf registration pursuant to Rule 415 under the Securities Act), which legal counsel for Vail deems appropriate and which is available for the sale of Vail Equity to permit an underwritten public offering of some or all of the shares of Vail Equity then held by such Shareholder and use its best efforts to cause such registration statement to become effective (a "Demand Registration"). (b) A Demand Registration will not be deemed to have occurred until it has become effective under the Securities Act (unless a Shareholder delivers a Demand Notice and subsequently withdraws the Demand Notice, in which case such Demand Registration will be deemed to have occurred unless such Shareholder agrees to pay all reasonable out-of-pocket expenses associated with such registration actually incurred by Vail); provided, however, that if, after a Demand Registration has become effective, the offering of Vail Equity pursuant to such Demand Registration is prohibited by any stop order, injunction or other order or requirement of the SEC or other governmental agency or a court, such Demand Registration will be deemed not to have occurred (unless such prohibition on the sale of the Vail Equity is based on actions or omissions of such Shareholder, in 22 -18- which case such Demand Registration will be deemed to have occurred unless such Shareholder agrees to pay all reasonable out-of-pocket expenses associated with such registration actually incurred by Vail). (c) Vail shall only be obligated to effect one Demand Registration per Shareholder in any twelve month period under this Section 5.1; provided, however, that Vail will not be required to register the Vail Equity pursuant to a Demand Notice under this Section 5.1 if at such time (i) the shares of Vail Equity which a Shareholder is requesting to be registered pursuant to this Section 5.1 constitute less than 6.0% (or, if less, all of the shares of Vail Equity owned by such Shareholder) of the outstanding Vail Securities so requested to be registered or (ii) such Demand Notice is given within six (6) months after the effective date of any other registration of any Vail Securities under the Securities Act. (d) The managing underwriter will be selected by the Shareholder requesting registration pursuant to this Section 5.1 (the "Requesting Shareholder"); provided, however, that such underwriter shall be subject to the approval of Vail, which approval shall not be unreasonably withheld. In the event there is one or more co-managers, the first such co-manager shall be selected by Vail, provided that such co-manager shall be subject to the approval of the Requesting Shareholder, which approval shall not be unreasonably withheld or delayed, and all other co-managers will be selected by the Requesting Shareholder. (e) In connection with a Demand Registration, both the Shareholder not requesting the Demand Registration (the "Non-Requesting Shareholder") and Vail may elect to include additional shares of Vail Securities in such offering on the same terms and conditions as the Vail Equity to be sold by the Requesting Shareholder; provided, however, that if the managing underwriter(s) advises the Requesting Shareholder, the Non-Requesting Shareholder and Vail that, in its judgment, the number of shares proposed to be included in such offering exceeds the largest number of Vail Securities which can be sold without 23 -19- having an adverse effect on such offering, including the price at which such securities can be sold (the "Marketable Number"), then the total number of shares to be included in such offering shall be limited as follows: (i) first, all the shares of Vail Equity that the Requesting Shareholder and the Non-Requesting Shareholder propose to sell up to the Marketable Number, allocated pro rata between the Requesting Shareholder and the Non-Requesting Shareholder on the basis of the relative number of Vail Securities that the Requesting Shareholder and the Non-Requesting Shareholder have proposed to be included in such registration, and (ii) second, all the shares of Vail Securities that Vail proposes to sell, which does not exceed the difference, if any, between the Marketable Number and that number of shares which the Requesting Shareholder and the Non-Requesting Shareholder have included pursuant to clauses (i) and (ii) above. V.2 Delay of Demand Registration. Notwithstanding anything to the contrary in Article V hereof, in the event that Vail determines in its reasonable judgment that it may be advisable to delay filing a Registration Statement described in Section 5.1 hereof or to withdraw such Registration Statement if such Registration Statement has already been filed, Vail may delay filing such, or withdraw such previously filed, Registration Statement for a period of not more than ninety (90) days from the date of receipt of the request for the Demand Registration if Vail furnishes to the Requesting Shareholder a certificate signed by an executive officer of Vail stating that Vail has reasonably determined that (i) such a filing would adversely affect any proposed financing or acquisition by Vail or (ii) such a filing would otherwise represent an undue hardship for Vail; provided, however, that Vail will, at the request of the Requesting Shareholder, file or refile, as the case may be, such Registration Statement promptly after Vail, in its reasonable judgment, determines that it is no longer advisable to delay filing or to continue the withdrawal of such Registration Statement but in no event shall the filing or re-filing of such Registration Statement be delayed more than the aforementioned ninety (90) days. 24 -20- V.3 Piggyback Registration. (a) Right To Include Vail Equity. (i) If Vail or any other Person (other than a Shareholder) at any time proposes to register any Vail Securities under the Securities Act (other than a registration of securities in connection with a merger, an acquisition, an exchange offer or an employee benefit plan maintained by Vail or its Affiliates or on Form S-4 or S-8 or any successor or similar form or by means of a shelf registration pursuant to Rule 415 under the Securities Act to permit sales of Vail Securities by employees, officers and directors of Vail), whether or not for sale for its own account, in a manner which would permit registration of the Vail Equity for sale to the public under the Securities Act, it will give written notice to each Shareholder of its intention to do so and of such Shareholder's rights under this Section 5.3(a)(i), at least twenty (20) calendar days prior to the anticipated filing date of a Registration Statement relating to such registration (a "Piggyback Notice"). Such Piggyback Notice will offer each Shareholder the opportunity to include in such Registration Statement that number of shares of Vail Equity as such Shareholder may request. Upon the written request (the "Piggyback Registration") (which request will specify the number of shares of Vail Equity intended to be disposed of by each Shareholder pursuant to such Registration Statement) of each Shareholder (the "Piggyback Shareholder") made within ten (10) calendar days after the receipt of the Piggyback Notice, Vail will use its best efforts to effect the registration under the Securities Act of all shares of Vail Equity which Vail has been so requested to register; provided, however, that each Shareholder must sell its Vail Equity requested to be included in such registration to the underwriter(s) selected by Vail on the same terms and conditions as apply to other Persons, including Vail, and if, at any time after receiving a reply from each Shareholder to a Piggyback Notice and prior to the effective date of the Registration Statement filed in connection with such registration, Vail decides for any reason not to register any shares of Vail Securities, Vail will notify each Shareholder and 25 -21- thereupon be relieved of its obligation to register any Vail Equity in connection with such registration. (ii) No registration, whether or not effected under this Section 5.3(a), will relieve Vail of its obligations to effect Demand Registrations under Section 5.1 hereof. (b) Priority in Piggyback Registrations. If the managing underwriter advises Vail in writing that, in its opinion, the Marketable Number is less than that intended to be included in a Registration Statement, Vail will include in such Registration Statement (i) first, all of the Vail Securities Vail proposes to sell for its own account, and (ii) second, the Vail Securities requested to be included by the Shareholders and other Persons pursuant to Section 5.3(a) hereof shall be allocated pro rata among the Shareholders on the basis of the relative number of Vail Securities each Shareholder and such other Persons has requested to be included in such registration. V.4 Delay of Piggyback Registration. Notwithstanding anything to the contrary in this Article V, in the event that Vail determines in its reasonable judgment that it may be advisable to delay filing a Registration Statement described in Section 5.3 hereof or to withdraw such Registration Statement if such Registration Statement has already been filed, Vail may delay filing such, or withdraw such previously filed, Registration Statement in accordance with the provisions of Section 5.2 hereof. V.5 Holdback Agreements. (a) Whenever Vail effects an underwritten public offering of Vail Equity pursuant to a registration statement (including the IPO), each Shareholder agrees not to effect any public sale or distribution, including any sale pursuant to Rule 144 under the Securities Act, of any Vail Securities (other than as part of such registration) during the 15 days prior to, and during the 180-day period (or such shorter period as may be 26 -22- requested by the lead underwriter for such offering) beginning on, the effective date of such registration statement. (b) In connection with underwritten public offering of Vail Equity pursuant to a registration statement under this Agreement, Vail agrees not to effect any public sale or distribution of any Vail Securities (other than as part of such registration or in connection with any employee stock option or other benefit plan or any private issuance of Vail Equity where the recipient also agrees to be bound by the hold back arrangements applicable to Vail under this Section 5.5) during the 15 days prior to, and during the 90-day period (or such shorter period as may be requested by the lead underwriter for such offering) beginning on the effective date of, such registration statement. V.6 Right to Purchase in Lieu of Registration. (a) Any time Vail receives a request for a Demand Registration or a Piggyback Registration from Foods, Vail shall have the option to purchase all but not less than all of the Vail Equity proposed to be disposed of in such request (the "Section 5.6 Shares") at the Vail Market Price by delivering to Foods, a notice of Vail's election to purchase the Section 5.6 Shares within seven (7) days of receipt by Vail of the request for the Demand Registration or Piggyback Registration, as the case may be, pursuant to Section 5.1 or Section 5.3(a), as the case may be. (b) In the event that Vail decides not to purchase the Section 5.6 Shares pursuant to Section 5.6(a), then Apollo will have the right, but not the obligation, to purchase the Section 5.6 Shares at the Vail Market Price by delivering to Foods a notice of Apollo's election to purchase the Section 5.6 Shares within seven (7) days of Vail deciding not to purchase the Section 5.6 Shares. VI 27 -23- REGISTRATION EXPENSES VI.1 Registration Expenses. (a) Subject to Section 5.1(b) of this Agreement, all expenses incident to Vail's performance of or compliance with Articles V and VII of this Agreement to effect Demand Registrations and Piggyback Registrations will be borne by Vail, including, without limitation: (i) all federal registration and filing fees; (ii) subject to Section 7.4, fees and expenses of compliance with securities or blue sky laws; provided, however, that Vail will in no event be obligated to pay the fees and disbursements of counsel for the underwriters or the Shareholders in connection with blue sky qualifications of the Vail Equity under the laws of such jurisdictions as the managing underwriter(s) may designate; (iii) printing, messenger, telephone and delivery expenses; (iv) fees and disbursements of legal counsel for Vail; (v) fees and disbursements of all independent certified public accountants of Vail; (vi) NASD fees and disbursements of the underwriters; provided, however, that in all cases a Shareholder will pay all costs of discounts, commissions, spreads or fees of underwriters, selling brokers, dealer managers or similar securities industry professionals relating to the distribution of the Vail Equity being sold by such Shareholder; (vii) fees and expenses of other Persons retained by Vail; and 28 -24- (viii) listing or quotation fees and expenses required to be made pursuant to Section 7.5 hereof in connection with the Registration Statement. (b) Each of Vail and the Shareholders will pay its own respective internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the fees and expenses of any Person, including special experts, retained by Vail or the Shareholders, respectively. VII REGISTRATION PROCEDURE VII.1 Shareholder Information. Each Shareholder will provide Vail with such information about such Shareholder and the intended manner of distribution of Vail Equity and otherwise cooperate with Vail and the underwriter(s) as may be necessary in the reasonable opinion of Vail to satisfy any obligation of Vail under this Agreement to register the Vail Equity under federal or state securities laws and otherwise take actions related thereto. In the event of the failure of a Shareholder to comply with the requirements of the preceding sentence Vail may delay filing such, and withdraw such previously filed, Registration Statement. Vail will file or refile, as the case may be, such Registration Statement promptly following compliance with such requirements by a Shareholder; provided, however, that a Shareholder will be responsible for any reasonable out-of-pocket costs which arise out of such non-compliance. A Shareholder will immediately notify Vail upon discovery that any information provided by such Shareholder which is included in the prospectus that is included in a Registration Statement, as then in effect, is untrue in any material respect, or omits to state any material fact required to be stated therein or to make the information stated therein not misleading in the light of the circumstances under which it is presented. 29 -25- VII.2 Compliance. Each Shareholder and Vail will comply with all rules and regulations of the SEC and applicable state securities or blue sky laws governing the manner of sale of securities in connection with the Transfer of any of the Vail Equity pursuant to any Registration Statement. VII.3 Provision of Prospectuses. (a) Vail will furnish to each Shareholder such number of copies of a summary prospectus or other prospectus, including a prospectus subject to completion in conformity with the requirements of the Securities Act, and such other documents as such Shareholder may reasonably request in writing, in order to facilitate the public sale or other disposition of the Vail Equity of each Shareholder included in a Registration Statement. (b) At any time when a sale or other disposition of Vail Equity pursuant to a Registration Statement is subject to a prospectus delivery requirement, Vail will notify each Shareholder of the occurrence of any event that causes the prospectus included in such Registration Statement, as then in effect, to include an untrue statement of a material fact or to omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing and Vail will use its best efforts, as expeditiously as possible, to either amend the prospectus or otherwise take any actions so that use of the previous prospectus may be legally resumed. Upon receipt of such a notice, each Shareholder will immediately discontinue all sales or other dispositions of Vail Equity pursuant to the Registration Statement. Each Shareholder may resume such sales or dispositions only upon receipt of an amended prospectus or after such Shareholder is advised by Vail that the use of the previous prospectus may be legally resumed. VII.4 Blue Sky Compliance. Vail will use its best efforts to (a) register or qualify the Vail Equity included in a Registration Statement under the securities or blue sky laws of such jurisdictions as each Shareholder reasonably requests and 30 -26- (b) do any and all other acts that may be reasonably necessary or advisable to enable each Shareholder to consummate the public sale or disposition of such securities in such jurisdictions; provided, however, that Vail is not required to consent to, or take any action that would subject it to, general service of process or taxation in any jurisdiction where it is not then so subject, nor qualify to do business in any jurisdiction where it is not then so qualified. VII.5 Listing of Vail Equity. Vail will use its best efforts to cause the Vail Equity when issued to be listed on all securities exchanges on which any securities issued by Vail are then listed, or quoted on all automated quotation systems on which any such securities of Vail are then quoted, including, without limitation, entering into appropriate customary agreements (including a listing application and indemnification agreement in customary form). VII.6 Stop Orders. Vail will promptly notify each Shareholder of (a) the receipt by Vail of any notification with respect to the issuance by the SEC of any stop order or order suspending the effectiveness of any Registration Statement covering any Vail Equity or the initiation of any proceedings for that purpose or (b) the receipt by Vail of any notification with respect to the limitation, restriction or suspension of the offer or sale of Vail Equity in any jurisdiction in which the Vail Equity was qualified to be sold, or the initiation of any proceedings for such purpose. In the event that Vail notifies each Shareholder of any such event, each Shareholder will immediately discontinue all sales or other dispositions of Vail Equity pursuant to the Registration Statement until such time that Vail notifies each Shareholder of the lifting of such stop order or similar order; provided, however, that such a stop order or similar order issued by a state securities or blue sky administrator will apply only to offers and sales in such state, unless each Shareholder is advised otherwise by Vail. Vail, with the cooperation of each Shareholder, will use its best efforts to contest any such proceedings and to obtain the withdrawal of any such order at the earliest possible date. 31 -27- VIII INDEMNIFICATION AND CONTRIBUTION VIII.1 Indemnification. (a) Indemnification by Foods. (i) Foods agrees to indemnify and hold harmless Vail and its Affiliates and Associates (each such Person being hereinafter referred to as a "Vail Indemnified Party") from and against all losses, claims, damages, liabilities and expenses (including reasonable costs of investigation and legal expenses) (each a "Loss") arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or preliminary, final or summary prospectus covering the Vail Equity, or in any amendment or supplement thereto, or in any document incorporated by reference into any of the foregoing or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, but only if, and only to the extent, such statement or alleged statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to Vail or its representatives by or on behalf of Foods for use in the preparation of such Registration Statement, preliminary, final or summary prospectus or such amendment or supplement thereto, or such document incorporated by reference. This indemnity will be in addition to any liability which Foods may otherwise have. Foods will also indemnify the underwriter(s), selling broker(s), dealer manager(s) and similar securities industry professionals participating in the distribution, their officers and directors and each Person who Controls such Persons to the same extent as provided above with respect to the indemnification of a Vail Indemnified Party. (ii) Foods also agrees to indemnify and hold harmless any Vail Indemnified Party to the same extent as 32 -28- provided in clause (i) above from and against all Losses arising out of any action or proceeding brought against any Vail Indemnified Party in connection with the distribution or proposed distribution of Vail Equity to the holders of Foods Stock; provided, however, that this Section 8.1(a)(ii) shall not apply to any Losses for which Vail is responsible as provided in Section 8.1(c) of this Agreement. (iii) If any action or proceeding (including any governmental investigation or inquiry) is brought or asserted against a Vail Indemnified Party in respect of which indemnity may be sought from Foods, such Vail Indemnified Party will promptly notify Foods in writing of the commencement of such action and Foods shall assume the defense thereof and have primary control over any related suit or proceeding, including the employment of legal counsel and the payment of all expenses in connection therewith; provided, however, that the failure of any Vail Indemnified Party to give notice as provided herein shall not relieve Foods of its obligations under this Section 8.1(a) except to the extent that Foods is actually materially prejudiced by such failure to give notice. A Vail Indemnified Party shall have the right to participate in and jointly with Foods, to the extent that it may wish, and employ separate counsel reasonably satisfactory to such Vail Indemnified Party, provided, however, that Foods will not be liable to such Vail Indemnified Party for any legal or other expenses incurred by such Vail Indemnified Party in connection therewith, unless such Vail Indemnified Party shall have been advised by counsel that a conflict of interest between such Vail Indemnified Party and Foods is likely to exist in respect of such claim. (b) Indemnification by Apollo. (i) Apollo agrees to indemnify and hold harmless each Vail Indemnified Party from and against all Losses arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or preliminary, final or summary prospectus covering the Vail Equity, or in any amendment or supplement thereto, or in 33 -29- any document incorporated by reference into any of the foregoing or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, but only if, and only to the extent, such statement or alleged statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to Vail or its representatives by or on behalf of Apollo for use in the preparation of such Registration Statement, preliminary, final or summary prospectus or such amendment or supplement thereto, or such document incorporated by reference. This indemnity will be in addition to any liability which Apollo may otherwise have. Apollo will also indemnify the underwriter(s), selling broker(s), dealer manager(s) and similar securities industry professionals participating in the distribution, their officers and directors and each Person who Controls such Persons to the same extent as provided above with respect to the indemnification of a Vail Indemnified Party. (ii) Apollo also agrees to indemnify and hold harmless any Vail Indemnified Party to the same extent as provided in clause (i) above from and against all Losses arising out of any action or proceeding brought against any Vail Indemnified Party in connection with the distribution or proposed distribution of Vail Equity to the holders of Apollo Stock; provided, however, that this Section 8.1(b)(ii) shall not apply to any Losses for which Vail is responsible as provided in Section 8.1(c) of this Agreement. (iii) If any action or proceeding (including any governmental investigation or inquiry) is brought or asserted against a Vail Indemnified Party in respect of which indemnity may be sought from Apollo, such Vail Indemnified Party will promptly notify Apollo in writing of the commencement of such action and Apollo shall assume the defense thereof and have primary control over any related suit or proceeding, including the employment of legal counsel and the payment of all expenses in connection therewith; provided, however, that the failure of any Vail Indemnified Party to give notice as provided herein 34 -30- shall not relieve Apollo of its obligations under this Section 8.1(b) except to the extent that Apollo is actually materially prejudiced by such failure to give notice. A Vail Indemnified Party shall have the right to participate in and jointly with Apollo, to the extent that it may wish, and employ separate counsel reasonably satisfactory to such Vail Indemnified Party, provided, however, that Apollo will not be liable to such Vail Indemnified Party for any legal or other expenses incurred by such Vail Indemnified Party in connection therewith, unless such Vail Indemnified Party shall have been advised by counsel that a conflict of interest between such Vail Indemnified Party and Apollo is likely to exist in respect of such claim. (c) Indemnification by Vail. (i) Vail agrees to indemnify and hold harmless each Shareholder and its Affiliates and Associates (each such person being hereinafter referred to as a "Shareholder Indemnified Party") from and against all Losses arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement, preliminary, final or summary prospectus covering the Vail Equity, or in any amendment or supplement thereto, or in any document incorporated by reference into any of the foregoing or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statement therein not misleading, except insofar as such Losses arise out of or are based solely upon any such untrue statement or omission or allegation thereof based upon written information provided by or on behalf of a Shareholder for inclusion in such Registration Statement, preliminary, final or summary prospectus, or such amendment or supplement thereto, or such document incorporated by reference; provided, however, that Vail will not be liable in any such case to the extent that any such Loss arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any preliminary prospectus if (A) such Shareholder failed to send or deliver a copy of the final prospectus with or prior to the delivery of written confirmation 35 -31- of the sale of the Vail Equity covered by the Registration Statement to the Person asserting such Loss, and (B) the final prospectus corrected such untrue statement or omission; and provided, further, that Vail will not be liable in any such case to the extent that any such Loss arises out of or is based upon an untrue statement or omission in the final prospectus, if such untrue statement or omission is corrected in an amendment or supplement to the final prospectus and if, having previously been furnished by or on behalf of Vail with copies of the final prospectus as so amended or supplemented, such Shareholder thereafter fails to deliver such prospectus as so amended or supplemented, prior to or concurrently with the sale of the Vail Equity to the Person asserting such Loss who purchased such Vail Equity which is the subject thereof. This indemnity will be in addition to any liability which Vail may otherwise have. Vail will also indemnify the underwriter(s), selling broker(s), dealer manager(s) and similar securities industry professionals participating in the distribution, their officers and directors and each Person who Controls such Persons to the same extent as provided above with respect to the indemnification of a Shareholder Indemnified Party. (ii) If any action or proceeding is brought against a Shareholder Indemnified Party in respect of which indemnity may be sought against such Shareholder Indemnified Party, such Shareholder Indemnified Party will promptly notify Vail in writing of the commencement of such action and Vail will assume the defense thereof and have primary control over any related suit or proceeding, including the employment of legal counsel and the payment of all expenses in connection therewith; provided, however, that the failure of any Shareholder Indemnified Party to give notice as provided herein shall not relieve Vail of its obligations under this Section 8.1(c) except to the extent that Vail is actually materially prejudiced by such failure to give notice. A Shareholder Indemnified Party shall have the right to participate in and jointly with Vail, to the extent that it may wish, and employ separate counsel reasonably satisfactory to such Shareholder Indemnified Party, provided, however, that Vail will not be liable to such Shareholder 36 -32- Indemnified Party for any legal or other expenses incurred by such Shareholder Indemnified Party in connection therewith, unless such Shareholder Indemnified Party shall have been advised by counsel that a conflict of interest between such Shareholder Indemnified Party and Vail is likely to exist in respect of such claim. VIII.2 Contribution. (a) If the Indemnification provided for in Section 8.1 hereof is unavailable to a Vail Indemnified Party or Shareholder Indemnified Party under Section 8.1(a), 8.1(b) or Section 8.1(c) hereof (other than by reason of the exceptions provided in Sections 8.1(a), 8.1(b) and 8.1(c)) in respect of any Losses referred to therein, then such indemnifying party, in lieu of indemnifying such indemnified party, will contribute to the amount paid or payable by such indemnified party as a result of such Losses in such proportion as is appropriate to reflect the relative fault of the indemnifying party, on the one hand, and the indemnified party, on the other hand, in connection with the statements or omissions which resulted in such Losses, as well as any other relevant equitable considerations. The relative fault of the indemnifying party, on the one hand, and the indemnified party, on the other hand, shall be determined by reference to, among other things, whether the untrue statement or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such indemnified party and each parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by each party as a result of the Losses referred to above will be deemed to include, subject to the limitations set forth in Sections 8.1(a), 8.1(b) and 8.1(c) hereof, any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. (b) Notwithstanding the provisions of Section 8.2(a) hereof, no Person found to be guilty of fraudulent misrepresentation shall be entitled to contribution from any 37 -33- Person who is not found to be guilty of such fraudulent misrepresentation. 38 -34- IX TAKE-ALONG RIGHTS 39 -35- IX.1 Take-Along Rights. Apollo may not effect a Transfer (or a series of related Transfers) of Vail Equity to one person or a related group of persons if such Transfer would result in a Change of Control of Vail (other than Transfers effected by sales of Vail Equity through underwriters in a public offering or in the securities markets generally) (the "Section 9.1 Shares") without first complying with this Section 9.1. If Apollo desires to Transfer the Section 9.1 Shares, Apollo shall give written notice (the "Take-Along Notice") to Foods stating (i) the name and address of the transferee (the "Non-Qualified Transferee") and (ii) the price and terms upon which the Non-Qualified Transferee proposes to purchase the Section 9.1 Shares. Foods shall have the irrevocable option, but not the obligation (the "Take-Along Option"), to sell to the Non-Qualified Transferee, up to a number of shares of Vail Equity (the "Included Shares") determined in accordance with Section 9.1(a), at the price and on the terms set forth in the Take-Along Notice. The Take-Along Option shall be exercised by Foods by giving written notice to Apollo, within ten business days of receipt of the Take-Along Notice, indicating its election to exercise the Take-Along Option. Failure by Foods to give such notice within the ten business day period shall be deemed an election by Foods not to sell its shares of Vail Equity pursuant to that Take-Along Notice. The closing with respect to any sale to a Non-Qualified Transferee pursuant to this Section 9.1 shall be held at the time and place specified in the Take-Along Notice but in any event within 30 days of the date the Take-Along Notice is given; provided that if through the exercise of reasonable efforts Apollo is unable to cause such transaction to close within 30 days, such period may be extended for such reasonable period of time as may be necessary to close such transaction. Consummation of the sale of the Section 9.1 Shares by Apollo to a Non-Qualified Transferee shall be conditioned upon consummation of the sale by Foods to such Non-Qualified Transferee of the Included Shares, if any. (a) The number of Included Shares purchased from Foods shall be determined by multiplying the number of Shares proposed to be purchased from Apollo by a Non-Qualified Transferee by a 40 -36- fraction, the numerator of which is the total number of shares of Vail Equity owned by Foods and the denominator of which is the sum of the total number of shares of Vail Equity owned by Apollo and Foods. (b) Apollo shall arrange for payment directly by the Non-Qualified Transferee to Foods, upon delivery of the certificate or certificates representing the Included Shares duly endorsed for transfer, together with such other documents as the Non-Qualified Transferee may reasonably request. The reasonable costs and expenses incurred by Apollo and Foods in connection with a sale of shares of Vail Equity subject to this Section 9.1 shall be allocated pro rata based upon the number of shares of Vail Equity sold by each Shareholder to a Non-Qualified Transferee. (c) If, at end of 30 days following the date on which a Take-Along Notice was given, the sale of shares of Vail Equity by Apollo and the sale of the Included Shares, if any, have not been completed in accordance with the terms of the Non-Qualified Transferee's offer, all certificates representing the Included Shares shall be returned to Foods, and all the restrictions on Transfer contained in this Agreement with respect to shares of Vail Equity owned by Apollo shall again be in effect. ARTICLE X INITIAL PUBLIC OFFERING X.1 IPO Commitment. Vail and Apollo hereby agree to use reasonable efforts to consummate the IPO as soon as possible following the Closing. X.2 Co-Manager. In connection with the IPO (unless the IPO is effected by means of a Demand Registration by Foods), Foods shall select one of the co-managers (other than the lead manager); provided, however, that such co-manager shall be subject to the approval of Vail, which approval shall not be unreasonably withheld. 41 -37- X.3 Foods Initiated IPO. (a) If the IPO has not been consummated on the later of (i) September 30, 1997 or (ii) nine months after the Closing (the "Trigger Date"), Apollo, Vail and Foods agree to abide by the procedures of this Section 10.3. (b) Following the Trigger Date, Apollo and Foods agree to discuss in good faith for a period of 30 days (the "Discussion Period") the timing of the IPO. At the conclusion of the Discussion Period, Foods may deliver a notice to Vail within 30 days (the "Foods Notice") stating that it will request a Demand Registration unless Vail consummates the IPO within three months from the date of the Foods Notice. If at the conclusion of such three-month period the IPO has not been consummated, during the next six months Foods shall have the right to request a Demand Registration and consummate the IPO by means of such Demand Registration. If at the conclusion of such six-month period the IPO has not been consummated, Foods' right to request a Demand Registration to effect the IPO shall be suspended for a twelve-month period. If at the conclusion of such twelve-month period the IPO has not otherwise been consummated, during the next six months Foods shall again have the right to request a Demand Registration and consummate the IPO by means of such Demand Registration. If the IPO is consummated by means of a Demand Registration by Foods (the "Foods Initiated IPO"), then Foods shall select the lead manager for the Foods Initiated IPO; provided, however, that such lead manager shall be subject to the approval of Vail, which approval shall not be unreasonably withheld or delayed. Vail may select one co-manager in connection with a Foods Initiated IPO, subject to the approval of the lead manager for the Foods Initiated IPO, which approval shall not be unreasonably withheld or delayed. XI ADDITIONAL COVENANTS 42 -38- XI.1 Maintain Listing or Quotation. Vail hereby covenants and agrees that it shall use its best efforts to maintain its listing of Vail Securities on any securities exchanges on which Vail Securities are listed in the future pursuant to Section 7.5 hereof and to maintain its quotation of Vail Securities on any automated quotation systems on which Vail Securities are quoted in the future pursuant to Section 7.5 hereto. XI.2 Board of Directors. Vail and the Shareholders agree to take all actions necessary to cause the Board of Directors to consist of no more than twenty directors. As lone as Foods owns at least 10% of the outstanding Vail Securities, Vail and the Shareholders agree to take all actions necessary to cause the Board of Directors to consist of no more than twenty directors. As long as Foods owns at least 10% of the outstanding Vail Securities, Vail and the Shareholders agree to take all actions necessary for Foods to be able to nominate and appoint two directors to the Board of Directors of Vail, including without limitation Apollo nominating and electing such directors as Class 1 directors elected by the holders of the Vail Class A Stock. XI.3 No Inconsistent Agreements. Vail hereby covenants and agrees that it shall not enter into any agreements governing the transfer or registration of shares of Vail Securities which would materially adversely affect Foods' rights under this Agreement without Foods' prior written consent. XI.4 Rules 144 and 144A. Vail hereby covenants and agrees that it will use its reasonable best efforts to file any reports required to be filed by it under the Securities Act and the Exchange Act and it will take such further action as Foods may reasonably request, all to the extent required from time to time to enable Foods to sell its Vail Equity (subject to the terms hereof) without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 or 144A under the Securities Act, as such Rules may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the SEC. Section XI.33 Limitations on Holdings of Foods Associates. Foods shall use its best efforts to cause its 43 -39- Associates and Associates of its Affiliates not to own, in the aggregate, 2% or more of the outstanding Vail Securities. XII MISCELLANEOUS XII.1 Entire Agreement. This Agreement constitutes the entire agreement among the parties hereto relative to the subject matter hereof, and supersedes all prior written or oral understandings, agreements, conditions or representations. XII.2 Headings and Captions. All headings and captions used in this Agreement are for convenience only, and will not be construed to either limit or broaden the language of this Agreement or any particular section. XII.3 Choice of Law. This Agreement will be governed by and construed under and in accordance with the laws of the State of New York, without giving effect to the conflict of laws provisions thereof, except that all matters relating to the internal affairs of Vail shall be governed by and construed under and in accordance with the General Corporation Law of the State of Delaware. XII.4 Venue. Any action or legal proceedings to enforce this Agreement or any of its terms, or for indemnification and the recovery of losses as provided for in this Agreement by a party, may be brought and prosecuted in such court or courts located in the State of New York as provided by law, and the parties to this Agreement consent to the jurisdiction of said court or courts and to service of process by registered mail, return receipt requested, or by any other manner provided by New York law. XII.5 Notices. Any notice or other communication required or permitted hereunder is deemed delivered when delivered in person, when transmitted by telecopier (which will also be sent concurrently by certified or registered mail), on 44 -40- the next Business Day when sent by Federal Express or a similar overnight delivery service, or on the third Business Day when sent by registered or certified U.S. mail service as follows: If to Foods: Ralston Foods, Inc. 800 Market Street Suite 2900 St. Louis, Missouri 63101 Attn.: Robert W. Lockwood, Esq. Facsimile No.: (314) 877-7748 If to Vail: Vail Resorts, Inc. (Delivery other than mail) 137 Benchmark Road Avon, Colorado 81620 Vail Resorts, Inc. (Mail Delivery) Post Office Box 7 Vail, Colorado 81658 Attn.: James S. Mandel, Esq. Facsimile No.: (970) 845-2912 If to Apollo: 1301 Avenue of the Americas New York, New York 10019 Attn.: Marc Rowan Facsimile No.: (212) 261-4071 With a copy to: 45 -41- James J. Clark, Esq. Cahill Gordon & Reindel 80 Pine Street New York, NY 10005 Facsimile No.: (212) 269-5420 The parties to this Agreement will promptly notify each other in the manner provided in this Section 12.5 of any change in their respective addresses. A notice of change of address will not be deemed to have been given until received by the addressee. Section XII.6 Amendments. No changes, modifications, amendments or additions will be valid unless such be made in writing and signed by or on behalf of each party. XII.7 Extended Meanings. Words importing the singular number include the plural and vice versa, and words importing the masculine gender include the feminine and neuter genders. XII.8 Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns; provided each of Foods and Vail shall have the right to assign its rights and obligations under this Agreement as a whole (i) in a transaction pursuant to Section 3.2(b), (g) or (h) or (ii) to the surviving entity in a merger, consolidation, combination or other corporate transaction involving it if the surviving entity agrees in writing to be bound by the terms hereof, and Apollo shall have the right to assign its rights and obligations under this Agreement to any of its Affiliates or in a bona fide distribution of its assets following dissolution or liquidation, provided each of the distributees agrees in writing to be bound by the terms hereof. XII.9 Severability. The invalidity or unenforceability of any provision hereof in any jurisdiction will not affect the validity or enforceability of this Agreement, 46 -42- including that provision, in any other jurisdiction. To the extent permitted by applicable law, each party waives any provision of law that renders any provision hereof prohibited or unenforceable in any respect. If any term, provision, covenant or restriction in this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the parties hereto will use their best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction and the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect, in order to achieve the intent of the parties to the extent possible. XII.10 Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which is deemed an original, but all of which together constitute a single agreement, and it is not necessary in making proof of this Agreement to produce or account for more than one such counterpart. Section XII.11 Remedies Cumulative. Except as otherwise expressly limited herein, the remedies given to any party by this Agreement are in addition to all remedies under any statute or rule of law. Any forbearance or failure or delay in exercising any remedy hereunder is not deemed to be a waiver of any other remedy a party may have under this Agreement. XII.12 Binding Agreement. This Agreement will be deemed effective and legally binding upon the parties when it has been executed and delivered by all parties hereto. This Agreement will inure to the benefit of the parties hereto and their successors and permitted assignees. XII.13 Recapitalizations, Exchanges, Etc., Affecting Vail Securities. The provisions of this Agreement apply to the full extent set forth herein with respect to the Vail Equity, to any and all shares of capital stock of Vail or any successor or assign of Vail (whether by merger, consolidation, sale of assets 47 -43- or otherwise) which may be issued in respect of or in exchange or substitution for Vail Equity and will be appropriately adjusted for any stock dividends, splits, reverse splits, combinations, recapitalizations and the like occurring after the date hereof. XII.14 Other Agreements. Nothing contained in this Agreement will be deemed to be a waiver of, or release from, any obligations any party hereto may have under any other agreement, including, without limitation, the Purchase Agreement. XII.15 Termination. This Agreement, and all rights and obligations of each party hereto, shall terminate (i) upon agreement of each of the Shareholders, (ii) upon the voluntary or involuntary dissolution of Vail, (iii) upon the sale of all or substantially all of the assets of Vail or upon a Change of Control of Vail, (iv) when Apollo and its Affiliates own less than 10% of the shares of Vail Equity owned by Apollo on the date of this Agreement (adjusted accordingly for any stock splits, stock dividends or similar recapitalizations by Vail after the date hereof) or (v) when Foods and its Affiliates own less than 10% of the outstanding Vail Securities. The provisions of Article VIII hereof shall survive the termination of this Agreement. XII.16 Enforcement. Each of Vail, Apollo and Foods agree that any breach of the provisions contained in this Agreement by Vail, Apollo and/or Foods would cause irreparable harm to the other and its Affiliates and therefore, notwithstanding any right of Vail, Apollo and/or Foods to recover monetary damages with respect to any such breach (a) as set forth in this Agreement or (b) at law, Vail, Apollo and Foods will each be entitled to equitable relief to enjoin any threatened or continuing breach of the other hereof and, in the event of any action for specific performance, each party shall waive the defense that a remedy at law would be adequate. If the scope of any restriction contained in this Agreement is too broad to permit enforcement to its fullest extent, then such restriction will be enforced to the maximum extent permitted by law in the manner provided in Section 12.9 hereof. Nothing herein stated 48 -44- will be construed as prohibiting any party from pursuing any other remedies available to that party for a breach hereunder, including recovery of damages. XII.17 Confidentiality. Each of Foods, Apollo and Vail acknowledges that the other would be irreparably damaged if confidential knowledge of its business and affairs were disclosed or utilized on behalf of any Person. Each of Vail, Apollo and Foods covenants and agrees not to disclose or use any such confidential information of the other unless such information has been made available to the public generally (other than in violation of this Section 12.17) or Vail, Apollo and/or Foods is required to disclose such information by a governmental body or regulatory agency or by law in connection with a transaction that is not otherwise prohibited hereby. XII.18 Fiduciary Accounts. Vail, Apollo and Foods each acknowledge and agree that this Agreement shall apply only to the Vail Securities owned by Foods and Apollo for its own respective account and does not apply to any Vail Securities which may be deemed to be beneficially owned or controlled by Foods or their respective Affiliates and which shares are held in fiduciary accounts in connection with any pension plans, profit sharing plans or other employee benefit plans or held in any other fiduciary accounts. 49 -45- IN WITNESS WHEREOF, the parties have executed this Agreement by an officer thereunto duly authorized, all as of the day and year first above written. VAIL RESORTS, INC. By: ---------------------------------- Name: Title: RALSTON FOODS, INC. By: ---------------------------------- Name: Title: APOLLO SKI PARTNERS, L.P. By: ---------------------------------- Name: Authorized Signatory EX-27 12 FINANCIAL DATA SCHEDULE
5 EXCLUDED FROM THE BELOW COST/EXPENSE INFORMATION ARE RESTRUCTURING CHARGES OF $5. 1,000,000 3-MOS SEP-30-1997 OCT-01-1996 DEC-31-1996 0 0 75 1 92 181 530 223 617 119 335 0 0 0 121 617 293 293 141 141 119 0 7 21 8 13 0 0 0 13 .40 .40
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