-----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, MoUTWHgfnyqMLiHJ1UZ2IrFg38vhZFv5aTFsCj8rOID+OvBIWnjjs35t7jfWTw/C jyRoU9S6evl0H9GW3kwD7g== 0000897101-02-000567.txt : 20020814 0000897101-02-000567.hdr.sgml : 20020814 20020814104812 ACCESSION NUMBER: 0000897101-02-000567 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20020526 FILED AS OF DATE: 20020814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENERAL MILLS INC CENTRAL INDEX KEY: 0000040704 STANDARD INDUSTRIAL CLASSIFICATION: GRAIN MILL PRODUCTS [2040] IRS NUMBER: 410274440 STATE OF INCORPORATION: DE FISCAL YEAR END: 0525 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-01185 FILM NUMBER: 02732275 BUSINESS ADDRESS: STREET 1: NUMBER ONE GENERAL MILLS BLVD CITY: MINNEAPOLIS STATE: MN ZIP: 55426 BUSINESS PHONE: 7637642311 MAIL ADDRESS: STREET 1: P O BOX 1113 CITY: MINNEAPOLIS STATE: MN ZIP: 55440 10-K 1 genmills023880_10k.txt GENERAL MILLS, INC. FORM 10-K ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- FORM 10-K --------------- ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED MAY 26, 2002 COMMISSION FILE NUMBER 1-1185 --------------- GENERAL MILLS, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 41-0274440 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) NUMBER ONE GENERAL MILLS BOULEVARD MINNEAPOLIS, MN 55426 (MAIL: P.O. BOX 1113) (MAIL: 55440) (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (763) 764-7600 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) --------------- SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED ------------------- ------------------- Common Stock, $.10 par value New York Stock Exchange --------------- SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE --------------- 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 __X__ No _____ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by Reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Aggregate market value of Common Stock held by non-affiliates of the Registrant, based on the closing price of $39.70 per share as reported on the New York Stock Exchange on July 25, 2002: $11,411.7 million. Number of shares of Common Stock outstanding as of July 25, 2002: 367,756,985 (including 11,428 shares set aside for the exchange of shares of Ralcorp Holdings, Inc. and excluding 134,549,679 shares held in the treasury). DOCUMENTS INCORPORATED BY REFERENCE Portions of Registrant's Proxy Statement for its 2002 Annual Meeting of Stockholders are incorporated by reference into Part III, and portions of Registrant's 2002 Annual Report to Stockholders are incorporated by reference into Parts I, II and IV. ================================================================================ PART I ITEM 1. BUSINESS. COMPANY OVERVIEW General Mills, Inc. was incorporated in Delaware in 1928. The terms "General Mills," "Company" and "Registrant" mean General Mills, Inc. and its subsidiaries unless the context indicates otherwise. The Company is a leading producer of packaged consumer foods and operates exclusively in the consumer foods industry. The Company's multiple operating segments are organized generally by product categories. Following the acquisition of The Pillsbury Company (described below), the Company restructured its management organization and aggregated its businesses into three reportable segments: 1) U.S. Retail; 2) Bakeries and Foodservice; and 3) International. U.S. Retail consists of cereals, meals, refrigerated and frozen dough products, baking products, snacks, yogurt and health venture activities. The Bakeries and Foodservice segment consists of products marketed to retail and wholesale bakeries and offered to the commercial and non-commercial foodservice sectors throughout the United States and Canada, such as restaurants and school cafeterias. The International segment is made up of retail business outside the United States and foodservice business outside of the United States and Canada. A more detailed description of the product categories for each reportable segment is set forth below. On October 31, 2001, General Mills completed the acquisition of the worldwide businesses of The Pillsbury Company from Diageo plc ("Diageo") in a stock and cash transaction that included 134 million shares of General Mills common stock, together with cash paid to Diageo and assumed debt of Pillsbury totaling $3,830 million. On November 1, 2001, under the terms of a stockholders agreement, Diageo exercised a put option to sell to General Mills 55 million shares of General Mills common stock at a price of $42.14 per share. The 79 million shares of General Mills common stock retained by Diageo were valued at $3,576 million. Therefore, the total stock consideration was $5,894 million, and the total acquisition consideration was approximately $9,724 million. In addition to the payments described above, General Mills may be required to pay Diageo, on April 30, 2003, up to $395 million, depending on General Mills' stock price and the number of General Mills shares that Diageo continues to hold on that date. If the average of the daily high and low price per share of the Company's stock for the 20 full trading days preceding April 30, 2003 is less than $49 per share, Diageo will receive an amount per share equal to the difference between $49 and the actual General Mills stock price, up to a maximum of $5 per share. If the Company's stock price is $49 per share or more, Diageo will not receive any additional payment. For a more detailed description of the Pillsbury acquisition, please see Note Two to Consolidated Financial Statements appearing on page 25 through 27 of the Company's 2002 Annual Report to Stockholders which is incorporated herein by reference. Since the completion of the acquisition, activities related to the integration of Pillsbury and the Company have included combining selling organizations, merging benefit plans and payroll systems, combining all U. S. businesses under a single invoicing system and reconfiguring certain manufacturing facilities. The integration of the Pillsbury businesses and operations will continue throughout fiscal 2003. The Company's combination with Pillsbury is expected to produce cost synergies of $350 million in fiscal 2003 and $475 million by the end of the second full year of integration. In order to obtain regulatory clearance for the acquisition of Pillsbury, the Company arranged to divest certain businesses. On November 13, 2001, International Multifoods Corporation (IMC) purchased the Pillsbury dessert and specialty products businesses as well as certain General Mills' brands and the General Mills' Toledo production facilities for $316 million. After-tax cash proceeds from this transaction were used to reduce the debt incurred in the Pillsbury acquisition. Pursuant to the agreement with IMC, General Mills also agreed to purchase and install certain equipment and to convert the Toledo, Ohio production facility to produce the dessert and specialty products for the divested businesses at an estimated cost to General Mills of $70 million, of which $47 million has been expended through May 26, 2002. In addition, Pillsbury had a 50 percent equity interest in Ice Cream Partners USA LLC (ICP), a joint venture Pillsbury formed with Nestle USA during fiscal 2000 for the manufacture, marketing and distribution of Haagen-Dazs and Nestle ice cream products in the United States. On December 26, 2001, Nestle USA exercised its right, triggered by the change of ownership of Pillsbury, to buy 1 the 50 percent stake of ICP that it did not already own. Nestle USA paid General Mills approximately $641 million for its 50 percent of the joint venture and a long-term, paid-in-full license for the HAAGEN-DAZS brand in the United States. BUSINESS SEGMENTS U.S. RETAIL In the United States, General Mills markets its retail products primarily through its own sales organization, supported by advertising and other promotional activities. These products primarily are distributed directly to retail food chains, cooperatives, membership stores and wholesalers. Certain food products, such as yogurt and some refrigerated products, are sold through distributors and brokers. The Company's principal product categories in the U.S. Retail segment are as follows: BIG G CEREALS. General Mills produces and sells a number of ready-to-eat cereals, including such brands as: CHEERIOS, HONEY NUT CHEERIOS, FROSTED CHEERIOS, APPLE CINNAMON CHEERIOS, MULTI-GRAIN CHEERIOS, TEAM CHEERIOS, WHEATIES, WHEATIES RAISIN BRAN, FROSTED WHEATIES, WHEATIES ENERGY CRUNCH, LUCKY CHARMS, TOTAL CORN FLAKES, WHOLE GRAIN TOTAL, TOTAL RAISIN BRAN, BROWN SUGAR AND OAT TOTAL, TRIX, GOLDEN GRAHAMS, WHEAT CHEX, CORN CHEX, RICE CHEX, MULTI-BRAN CHEX, HONEY NUT CHEX, KIX, BERRY BERRY KIX, FIBER ONE, REESE'S PUFFS, COCOA PUFFS, NESQUIK, COOKIE CRISP, CINNAMON TOAST CRUNCH, FRENCH TOAST CRUNCH, CLUSTERS, RAISIN NUT BRAN, OATMEAL CRISP, BASIC 4, and HARMONY. The Company also offers Big G MILK 'N CEREAL BARS in four FLAVORS. In 2002, the Company introduced FROSTED MINI CHEX and CHEX MORNING MIX, a portable cereal in a single-serve pouch. MEALS. General Mills manufactures and sells several lines of convenient dinner products, including BETTY CROCKER dry packaged dinner mixes under the HAMBURGER HELPER, TUNA HELPER and CHICKEN HELPER trademarks, and a line of refrigerated barbeque products under the LLOYD'S BARBEQUE name. Also under the BETTY CROCKER trademark, the Company sells dry packaged specialty potatoes, POTATO BUDS instant mashed potatoes, SUDDENLY SALAD and BAC*O'S salad topping. The Company also manufactures and markets shelf stable microwavable meals under the BOWL APPETIT! trademark. With the acquisition of Pillsbury, the Company has added OLD EL PASO Mexican foods and dinner kits, PROGRESSO soups and ingredients and GREEN GIANT canned and frozen vegetables and meal starters to its convenient meal products. PILLSBURY USA. General Mills manufactures and sells refrigerated and frozen dough products, frozen breakfast products and frozen pizza and snack products through the Pillsbury USA division. Refrigerated dough products marketed under the PILLSBURY brand include GRANDS! biscuits and sweet rolls, BIG COUNTRY and GOLDEN LAYERS' biscuits, PILLSBURY READY TO BAKE and BIG DELUXE CLASSICS cookies, and PILLSBURY rolls, biscuits, cookies, breads and pie crust. Frozen dough product offerings include HOME BAKED CLASSICS biscuits, rolls and other bakery goods. Breakfast products sold under the PILLSBURY trademark include TOASTER STRUDEL, TOASTER SCRAMBLES and PILLSBURY frozen pancakes and waffles. All the breakfast and refrigerated and frozen dough products incorporate the well-known DOUGHBOY logo. Frozen pizza and snack products are marketed under the TOTINO'S and JENO'S trademarks. BAKING PRODUCTS. General Mills makes and sells a line of dessert mixes under the BETTY CROCKER trademark, including SUPERMOIST cake mixes, RICH & CREAMY and SOFT WHIPPED ready-to-spread frostings, SUPREME brownie and dessert bar mixes, muffin mixes and other mixes used to prepare dessert and baking items. The company markets a variety of baking mixes under the BISQUICK trademark, sells pouch mixes under the BETTY CROCKER name, and produces family flour under the GOLD MEDAL brand introduced in 1880. SNACKS. General Mills markets POP*SECRET microwave popcorn; a line of grain snacks including NATURE VALLEY granola bars; a line of fruit snacks including FRUIT ROLL-UPS, FRUIT BY THE FOOT and GUSHERS; a line of snack mix products including CHEX MIX and GARDETTO'S Snack mix; and savory snacks marketed under the name BUGLES. YOPLAIT-COLOMBO/HEALTH VENTURES. General Mills manufactures and sells yogurt products, including YOPLAIT ORIGINAL, YOPLAIT LIGHT, CUSTARD STYLE, TRIX, YUMSTERS, GO-GURT, yogurt in a tube for children, and EXPRESSE, an adult-oriented yogurt packaged in a portable tube. In fiscal 2002, the Company also introduced YOPLAIT WHIPS!, a mousse-like yogurt and YOPLAIT NOURICHE, a 2 meal replacement yogurt drink. The Company also manufactures and sells a variety of refrigerated cup yogurt products under the COLOMBO brand name. As part of its health ventures activities, General Mills markets organic frozen fruits and vegetables, meals and entrees, a wide variety of canned tomato products including tomatoes and spaghetti sauce, frozen juice concentrates, fruit spreads, and frozen desserts under its CASCADIAN FARM and MUIR GLEN trademarks. BAKERIES AND FOODSERVICE General Mills markets mixes and unbaked, par-baked and fully baked dough products to retail, supermarket and wholesale bakeries under the PILLSBURY and GOLD MEDAL trademarks. In addition, General Mills sells flour to bakery, foodservice and manufacturing customers. The Company also markets dough products, branded baking mixes, cereals, snacks, dinner and side dish products, refrigerated and soft-serve frozen yogurt, and custom products to outlets like restaurants, including quick serve restaurants, school cafeterias, convenience stores and vending companies. INTERNATIONAL The Company's international businesses consist of operations and sales in Canada, Latin America, Europe and Asia/Pacific. Outside the U.S., the Company's products are manufactured in 16 countries and distributed in over 100 countries. In Canada, the Company markets products in many categories, including cereals, meals, refrigerated dough products, baking products and snacks. Outside of North America, the Company offers numerous local brands in addition to such internationally recognized brands as HAAGEN-DAZS ice cream, OLD EL PASO Mexican foods, GREEN GIANT vegetables, PILLSBURY dough products and mixes, BETTY CROCKER mixes and BUGLES snacks. The Company also sells mixes and dough products to bakery and foodservice customers outside of the United States and Canada. These international businesses are managed through wholly owned subsidiaries and joint ventures with sales and marketing organizations in 32 countries. Additional geographic information is incorporated herein by reference from Note 18 to Consolidated Financial Statements appearing on pages 38 and 39 of the Company's 2002 Annual Report to Stockholders. FINANCIAL INFORMATION ABOUT REPORTABLE SEGMENTS The following tables set forth the percentage of net sales and operating profit before unusual items from each reportable segment:
% of Net Sales For Fiscal Years Ended May ----------------------------------------------------- 2002 2001 2000 ---- ---- ---- U.S. Retail 77% 88% 88% Bakeries and Foodservice 13 7 7 International 10 5 5 ----------------------------------------------------- Total Segment Net Sales 100% 100% 100% % of Operating Profit Before Unusual Items For Fiscal Years Ended May ----------------------------------------------------- 2002 2001 2000 ---- ---- ---- U.S. Retail 85% 91% 91% Bakeries and Foodservice 12 8 7 International 3 1 2 ----------------------------------------------------- Total Segment Operating Profit 100% 100% 100%
3 Financial information for the Company's reportable business segments is incorporated herein by reference from Note 18 to Consolidated Financial Statements appearing on pages 38 and 39 of the Company's 2002 Annual Report to Stockholders. JOINT VENTURES In addition to its consolidated operations, the Company manufactures and sells products through several joint ventures. DOMESTIC JOINT VENTURES. The Company has a 50 percent equity interest in 8th Continent, LLC, a joint venture formed with DuPont to develop and market soy foods and beverages. This venture began marketing a line of 8TH CONTINENT soymilk in July 2001. INTERNATIONAL JOINT VENTURES. The Company has a 50 percent equity interest in Cereal Partners Worldwide (CPW), a joint venture with Nestle, S.A., that competes in more than 80 countries and republics. The following cereal products were marketed by CPW under the umbrella NESTLE trademark in fiscal 2002: CHOCO CLUSTERS, LION, NESFIT, SPORTIES, TRIO, CLUSTERS, NESQUIK, MULTI-CHEERIOS, HONEY NUT CHEERIOS, GOLDEN GRAHAMS, CINI MINIS, CHOCAPIC, TRIX, ESTRELITAS, GOLD, KIX, MILO, FIBRE 1, KANGUS, FITNESS, SHREDDED WHEAT, SHREDDIES, COUNTRY CORN FLAKES, HONEY STARS, KOKO KRUNCH, SNOW FLAKES, ZUCOSOS, FRUTINA, APPLE MINIS, CRUNCH, FITNESS & FRUIT, LA LECHERA, and MOCA. CPW also manufactures private label cereals for customers in the United Kingdom and cereal bars in several European countries. Snack Ventures Europe (SVE), the Company's joint venture with PepsiCo, Inc., manufactures and sells snack foods in Holland, France, Belgium, Spain, Portugal, Greece, the Baltics, Hungary, and Russia. The Company has a 40.5 percent equity interest in SVE. As a result of the Pillsbury acquisition, the Company has a 50 percent interest in each of five joint ventures for the manufacture, distribution and marketing of HAAGEN-DAZS frozen ice cream products and novelties in the following countries: Japan, Korea, Taiwan, Thailand and the Philippines. The Company also has a 50 percent interest in Seretram, a joint venture with Co-op de Pau for the production of Green Giant canned corn in France. See Note Four to Consolidated Financial Statements appearing on pages 27 and 28 of the Company's 2002 Annual Report to Stockholders, incorporated into this description by reference. COMPETITION The consumer foods market is highly competitive, with numerous competitors of varying sizes in the United States and throughout the world. The Company's principal strategies for competing in the marketplace include superior product quality, innovative advertising, product promotion, product innovations and price. In most product categories, the Company competes not only with other widely advertised branded products of major companies, but also with generic products and private label products, which are generally sold at lower prices. Internationally, the Company primarily competes with local manufacturers, and each country includes a unique group of competitors. CUSTOMERS During fiscal 2002, one customer, Wal-Mart Stores, Inc., accounted for approximately 12 percent of the Company's net sales. SEASONALITY In general, demand for the Company's products is evenly balanced throughout the year. However, demand for the Company's refrigerated dough, frozen baked goods and baking products is stronger in the fourth calendar quarter. Demand for PROGRESSO soup is higher during the fall and winter months. Internationally, demand for HAAGEN-DAZS ice cream is higher during the summer months and demand for the baking mix and dough products increases during winter months. Due to the offsetting impact of these demand trends, as well as the different seasons in the northern and southern hemispheres, the Company's international net sales are generally evenly balanced throughout the year. 4 GENERAL INFORMATION TRADEMARKS AND PATENTS. The Company's products are marketed under trademarks and service marks owned by or licensed to the Company. Trademarks and service marks are vital to the Company's business. The most significant trademarks and service marks of the Company are set forth in italics in the business discussions above. As part of the sale to IMC of certain Pillsbury dessert and specialty product businesses, IMC received an exclusive royalty-free license to use the DOUGHBOY trademark and PILLSBURY brand in the desserts and baking mix categories. The licenses are renewable without cost in 20-year increments at IMC's discretion. The Company considers the collective rights under its various patents, which expire from time to time, a valuable asset, but the Company does not believe that its businesses are materially dependent upon any single patent or group of related patents. With the exception of its joint venture activities, the Company's activities under licenses or other franchises or concessions are not material. RAW MATERIALS AND SUPPLIES. The principal raw materials used by General Mills are cereal grains, sugar, dairy products, vegetables, fruits, meats, other agricultural products, vegetable oils, plastic and paper packaging materials, operating supplies and energy. General Mills has some long-term fixed price contracts, but the majority of such raw materials are purchased on the open market. General Mills believes that it will be able to obtain an adequate supply of needed ingredients and packaging materials. Occasionally and where possible, General Mills makes advance purchases of items significant to its business in order to ensure continuity of operations. The Company's objective is to procure materials meeting both the company's quality standards and its production needs at the lowest total cost to the Company. The Company's strategy is to buy these materials at price levels that allow a targeted profit margin. Since commodities generally represent the largest variable cost in manufacturing the Company's products, to the extent possible, the Company hedges the risk associated with adverse price movements using exchange-traded futures and options, forward cash contracts and over-the-counter hedging mechanisms. These tools enable the Company to manage the related commodity price risk over periods of time that exceed the period of time in which the physical commodity is available. Accordingly, the Company uses these hedging tools to mitigate the risks associated with adverse price movements and not to speculate in the marketplace. See also Note Seven to Consolidated Financial Statements appearing on pages 29 through 31 of the Company's 2002 Annual Report to Stockholders, incorporated into this section by reference and the "Market Risk Management" section of the Report's "Management's Discussion and Analysis" appearing on page 17 of the Company's 2002 Annual Report to Stockholders, incorporated herein by reference. CAPITAL EXPENDITURES. During the three fiscal years ended May 26, 2002, General Mills' aggregate capital expenditures amounted to $1,081 million, not including the cost of acquired companies. The Company expects to spend approximately $750 million for such purposes in fiscal 2003, including construction costs to expand the Company's headquarters and costs of integrating Pillsbury into the Company's information systems. RESEARCH AND DEVELOPMENT. Major research and development facilities are located at the Pillsbury Technical Center in Minneapolis, Minnesota and the James Ford Bell Technical Center in Golden Valley (suburban Minneapolis), Minnesota. With a staff of approximately 1,100, these research facilities are responsible for most of the food research for the Company. Research and development expenditures amounted to $131 million in fiscal 2002, $83 million in fiscal 2001 and $77 million in fiscal 2000. General Mills' research and development resources are focused on new product development, product improvement, process design and improvement, packaging, and exploratory research in new business areas. 5 EMPLOYEES. At May 26, 2002, General Mills had 29,859 employees. ENVIRONMENTAL MATTERS. As of June, 2002, the Company was involved with the following active cleanup sites associated with the alleged release or threatened release of hazardous substances or wastes:
SITE CHEMICAL OF CONCERN ---- ------------------- Central Steel Drum, Newark, NJ no single hazardous material specified East Hennepin, Minneapolis, MN trichloroethylene GBF/Pittsburgh, Antioch, CA no single hazardous material specified Gloucester, MA petroleum fuel products King's Road Landfill, Toledo, OH no single hazardous material specified Kipp, KS carbon tetrachloride Lorentz Barrel, San Jose, CA no single hazardous material specified NL Industries, Granite City, IL lead Northside Sanitary Landfill, Zionsville, IN no single hazardous material specified Operating Industries, Los Angeles, CA no single hazardous material specified PCB Treatment, Kansas City, MO PCBs Pennsauken Landfill, Pennsauken, NJ no single hazardous material specified PET, St. Louis, MO tetrachloroethylene Sauget Landfill, Sauget, IL no single hazardous material specified Shafer Metal Recycling, Minneapolis, MN lead Safer Textiles, Moonachie, NJ tetrachloroethylene Stuckey's, Doolittle, MO petroleum fuel products Try-Chem, Milwaukee, WI no single hazardous material specified
These matters involve several different procedural contexts, including litigation initiated by governmental authorities and/or private parties, administrative proceedings commenced by regulatory agencies, and demand letters issued by regulatory agencies and/or private parties. The Company recognizes that its potential exposure with respect to any of these sites may be joint and several, but has concluded that its probable aggregate exposure is not material. This conclusion is based upon, among other things, the Company's payments and/or accruals with respect to each site; the number, ranking, and financial strength of other potentially responsible parties identified at each of the sites; the status of the proceedings, including various settlement agreements, consent decrees or court orders; allocations of volumetric waste contributions and allocations of relative responsibility among potentially responsible parties developed by regulatory agencies and by private parties; remediation cost estimates prepared by governmental authorities or private technical consultants; and the Company's historical experience in negotiating and settling disputes with respect to similar sites. Based on current facts and circumstances, General Mills believes that neither the results of these proceedings nor its compliance in general with environmental laws or regulations will have a material adverse effect upon the capital expenditures, earnings or competitive position of the Company. EXECUTIVE OFFICERS OF THE REGISTRANT The executive officers of the Company, together with their ages and business experience, are summarized below: Randy G. Darcy, age 51, is Senior Vice President, Supply Chain. Mr. Darcy joined the Company in 1987, was named Vice President, Director of Manufacturing, Technology and Operations in 1989 and was named to his present position in 1994. Mr. Darcy was employed by Procter & Gamble from 1973 to 1987, serving in a variety of management positions. Rory A. M. Delaney, age 57, is Senior Vice President, Strategic Technology Development. Mr. Delaney joined the Company in this position in 2001 from The Pillsbury Company where he spent a total of 8 years, last serving as Senior Vice President of Technology, responsible for the development and application of food technologies for Pillsbury's global operations. Prior to joining the Pillsbury Company, Mr. Delaney spent 18 years in the Frito-Lay/PepsiCo business, last serving as Senior Vice President of Technology for Frito-Lay, North America. 6 Stephen R. Demeritt, age 58, is Vice Chairman of the Company, with responsibility for General Mills' cereal, snacks and yogurt businesses, General Mills Canada, consumer insights and advertising, Small Planet Foods, and the 8th Continent, Cereal Partners Worldwide and Snack Ventures Europe joint ventures. He has served as Vice Chairman since October 1999. Mr. Demeritt joined General Mills in 1969 and served in a variety of consumer food marketing positions. He was president of International Foods from 1991 to 1993 and from 1993 to 1999 was Chief Executive Officer of Cereal Partners Worldwide, our global cereal joint venture with Nestle. James A. Lawrence, age 49, is Executive Vice President, Chief Financial Officer, with additional responsibility for international operations. Mr. Lawrence joined the Company in this position in 1998 from Northwest Airlines where he was Executive Vice President, Chief Financial Officer. Prior to joining Northwest Airlines in 1996, he was at Pepsi-Cola International, serving initially as Executive Vice President and subsequently as President and Chief Executive Officer for its operations in Asia, the Middle East and Africa. Siri S. Marshall, age 54, is Senior Vice President, Corporate Affairs, General Counsel and Secretary. Ms. Marshall joined the Company in 1994 as Senior Vice President, General Counsel and Secretary. Ms. Marshall joined the Company in 1994 from Avon Products, Inc. where she spent 15 years, last serving as Senior Vice President, General Counsel and Secretary. Michael A. Peel, age 52, is Senior Vice President, Human Resources and Corporate Services. Mr. Peel joined the Company in this position in 1991 from PepsiCo where he spent 14 years, last serving as Senior Vice President, Human Resources, responsible for PepsiCo Worldwide Foods. Jeffrey J. Rotsch, age 52, is Senior Vice President, with overall responsibility for Consumer Food Sales and Channel Development. Mr. Rotsch joined the Company in 1974 and served as the president of several divisions, including Betty Crocker and Big G cereals. He was elected Senior Vice President in 1993 and named to his present position in November 1997. Stephen W. Sanger, age 56, has been Chairman and Chief Executive Officer of General Mills since 1995. Mr. Sanger joined the Company in 1974 and served as the head of several business units, including Yoplait USA and Big G cereals. He was elected a Senior Vice President in 1989, an Executive Vice President in 1991, Vice Chairman in 1992 and President in 1993. He is a director of Target Corporation and Donaldson Company, Inc. and Chairman of the Board of Directors of Grocery Manufacturers of America. Danny L. Strickland, age 53, is Senior Vice President, Innovation, Technology and Quality. Mr. Strickland joined the Company in this position in 1997 from Johnson & Johnson where he held the position of Executive Vice President, Worldwide Absorbent Products and Material Research from 1993 to 1997. Prior to joining Johnson & Johnson, he spent five years at Kraft General Foods as Vice President of Technology. Kenneth L. Thome, age 54, is Senior Vice President, Financial Operations. Mr. Thome joined the Company in 1969 and was named Vice President, Controller for Convenience and International Foods Group in 1985, Vice President, Controller for International Foods in 1989, Vice President, Director of Information Systems in 1991 and was elected to his present position in 1993. Raymond G. Viault, age 58, is Vice Chairman of the Company with responsibility for General Mills' meals, baking products, and Pillsbury USA and bakeries and foodservice businesses. Mr. Viault joined the Company as Vice Chairman in 1996 from Philip Morris, where he had been based in Zurich, Switzerland, serving since 1990 as President of Kraft Jacobs Suchard. Mr. Viault was with Kraft General Foods a total of 20 years, serving in a variety of major marketing and general management positions. Mr. Viault is a director of VF Corporation and Newell Rubbermaid Inc. AVAILABLE INFORMATION General Mills is a reporting company under the Securities Exchange Act of 1934, as amended (the "1934 Act"), and files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). The 7 public may read and copy any Company filings at the Commission's Public Reference Room at 450 Fifth Street N.W., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. Because the Company makes filings to the Commission electronically, you may access this information at the Commission's Internet site (http://www.sec.gov). This site contains reports, proxies and information statements and other information regarding issuers that file electronically with the Commission. You can also learn more about General Mills at the Company's web site located at http://www.generalmills.com. CAUTIONARY STATEMENT RELEVANT TO FORWARD-LOOKING INFORMATION FOR THE PURPOSE OF "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 This Report contains or incorporates by reference forward looking statements with respect to annual or long-term goals of the Company. The Company and its representatives also may from time to time make written or oral forward-looking statements, including statements contained in the Company's filings with the Securities and Exchange Commission and in its reports to stockholders. The words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project" or similar expressions identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, the Company is identifying important factors that could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements. In particular, the Company's predictions about the future volume and earnings could be affected by difficulties resulting from the Pillsbury acquisition, such as integration problems, failure to achieve synergies, difficulty consolidating manufacturing capacity, unanticipated liabilities, inexperience in new business lines, and changes in the competitive environment. The Company's future results also could be affected by a variety of additional factors such as: competitive dynamics in the U.S. ready-to-eat cereal market, including pricing and promotional spending levels by competitors; the impact of competitive products and pricing; product development; actions of competitors other than as described above; acquisitions or dispositions of businesses or assets; changes in capital structure; changes in laws and regulations, including changes in accounting standards; customer demand; effectiveness of advertising and marketing spending or programs; consumer perception of health-related issues; economic conditions, including changes in inflation rates or interest rates; fluctuations in the cost and availability of supply-chain resources; and foreign economic conditions, including currency rate fluctuations. The Company undertakes no obligation to publicly revise any forward-looking statements to reflect future events or circumstances. The Company's debt securities are rated by rating organizations. Investors should note that a security rating is not a recommendation to buy, sell or hold securities, that it is subject to revision or withdrawal at any time by the assigning rating agency, and that each rating should be evaluated independently of any other rating. ITEM 2. PROPERTIES. The Company's principal executive offices and main research facilities are Company-owned, and are located in the Minneapolis, Minnesota metropolitan area. General Mills owns and operates numerous manufacturing facilities, and maintains many sales and administrative offices and warehouses, mainly in the United States. Other facilities are operated in Canada, and elsewhere around the world. In addition to owned facilities, the Company acquired 583,885 square feet of leased office space in Minneapolis with the acquisition of the Pillsbury business. A portion of this space has been sublet and the Company intends to sublet the remaining space upon completion of the headquarters office addition. Please see Note 17 to Consolidated Financial Statements appearing on pages 37 and 38 of the Company's 2002 Annual Report to Stockholders which is incorporated herein by reference. 8 As of May 2002, General Mills operated 91 food production facilities for a wide variety of food products. Of these plants, 54 are located in the United States, 11 in Europe, 11 in Asia, eight in Canada and Mexico, six in Latin America and one in Africa. The Company owns wheat flour mills at seven locations: Avon, Iowa; Buffalo, New York; Great Falls, Montana; Johnson City, Tennessee; Kansas City, Missouri; Vallejo, California; and Vernon, California. The Company operates 11 terminal grain elevators and has country grain elevators in 34 locations, primarily in Idaho and Montana. General Mills also owns or leases warehouse space aggregating approximately 16,500,000 square feet, of which approximately 11,400,000 square feet are leased. A number of sales and administrative offices are maintained in the United States, Canada, and elsewhere around the world, totaling 2,900,000 square feet. ITEM 3. LEGAL PROCEEDINGS. In management's opinion, there were no claims or litigation pending at May 26, 2002, the outcome of which could have a material adverse effect on the consolidated financial position or results of operations of the Company. See the information contained under the section entitled "Environmental Matters," on page 6 of this report, for a discussion of environmental matters in which the Company is involved. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No matters require disclosure here. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The information relating to the market prices and dividends of the Company's common stock contained in Note 19 to Consolidated Financial Statements and in the Six-Year Financial Summary appearing on pages 39 and 18 of Registrant's 2002 Annual Report to Stockholders is incorporated into this report by reference. As of July 25, 2002, the number of record holders of common stock was 38,047. The Company's common stock ($.10 par value) is listed on the New York Stock Exchange. ITEM 6. SELECTED FINANCIAL DATA. The information for fiscal years 1998 through 2002 contained in the Six-Year Financial Summary on page 18 of Registrant's 2002 Annual Report to Stockholders is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION. The information in the section entitled "Management's Discussion and Analysis" on pages 12 through 17 of Registrant's 2002 Annual Report to Stockholders is incorporated herein by reference. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The information in the "Market Risk Management" subsection of the section entitled "Management's Discussion and Analysis" on page 17 of Registrant's 2002 Annual Report to Stockholders is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The information on pages 20 through 39 of Registrant's 2002 Annual Report to Stockholders is incorporated herein by reference. 9 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. No matters require disclosure here. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The information contained in the sections entitled "Information About Nominees For the Board of Directors" and "Section 16(a): Beneficial Ownership Reporting Compliance" contained in Registrant's definitive Proxy Statement for its 2002 Annual Meeting of Stockholders is incorporated herein by reference. Certain information regarding the Registrant's executive officers is set forth under the caption "Executive Officers of the Registrant" in Part I of this Report. ITEM 11. EXECUTIVE COMPENSATION. The information contained on pages 25 through 31 of Registrant's definitive Proxy Statement for its 2002 Annual Meeting of Stockholders is incorporated herein by reference. The information appearing under the heading "Report of Compensation Committee on Executive Compensation" is not incorporated herein. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERS MATTERS. (a) The information contained in the section entitled "Stock Ownership of General Mills Directors and Officers" contained in Registrant's definitive Proxy Statement for its 2002 Annual Meeting of Stockholders is incorporated herein by reference. (b) The following table provides information about General Mills common stock that may be issued upon the exercise of stock options and stock units under all of the Registrant's equity compensation plans in effect as of May 26, 2002. EQUITY COMPENSATION PLAN INFORMATION
----------------------------------------------------------------------------------------------------------------- PLAN CATEGORY NUMBER OF SECURITIES TO BE WEIGHTED-AVERAGE EXERCISE NUMBER OF SECURITIES ISSUED UPON EXERCISE OF PRICE OF OUTSTANDING REMAINING AVAILABLE FOR OUTSTANDING OPTIONS, OPTIONS, WARRANTS AND FUTURE ISSUANCE UNDER WARRANTS AND RIGHTS RIGHTS EQUITY COMPENSATION PLANS (EXCLUDING SECURITIES REFLECTED IN THE FIRST COLUMN) (a) (b) (c) ----------------------------------------------------------------------------------------------------------------- EQUITY COMPENSATION PLANS 47,259,001 $32.77 7,077,803 APPROVED BY SECURITY HOLDERS (1) ----------------------------------------------------------------------------------------------------------------- EQUITY COMPENSATION PLANS NOT 24,130,414 $41.96 2,271,038 APPROVED BY SECURITY HOLDERS (2) ----------------------------------------------------------------------------------------------------------------- TOTAL 71,389,415 $35.88 9,348,841 -----------------------------------------------------------------------------------------------------------------
(1) Includes stock options and stock units granted under the following shareholder-approved plans: Executive Incentive Plan, 1998 Senior Management Stock Plan, 1995 Salary Replacement Stock Option Plan, and 2001 Compensation Plan for Non-Employee Directors, and the following shareholder-approved plans, which have been discontinued: Stock Option and Long-Term Incentive Plan of 1988, 1990 Stock Plan for Non-Employee Directors, 1990 Salary Replacement Stock Option Plan, Stock Option and Long-Term Incentive Plan of 1993, and 1996 Compensation Plan for Non-Employee Directors. No awards may be granted under any of the discontinued plans. Column (a) includes 179,935 stock units granted to key employees and non-employee directors under the following plans: Executive Incentive Plan, 2001 Compensation Plan for Non-Employee Directors, Long-Term Incentive Plan of 1993, 1996 Compensation Plan for Non-Employee Directors and 37,302 stock units granted to key employees but deferred under the following plans: Executive Incentive Plan and Stock Option Long-Term Incentive Plan of 1993. 10 Column (c) excludes restricted stock units to be awarded under the Executive Incentive Plan that are tied to the amount of an executive's incentive award, which is based on Company and individual performance. The Plan imposes a limit on the amount of an executive's annual incentive award. (2) Column (a) includes 88,219 stock units and 8,000 deferred stock units granted to employees under the 1998 Employee Stock Plan. Also, the column includes 499 stock units, representing dividend equivalents credited based on dividends paid on the Company's common stock that are reinvested and deferred in additional stock units, and 842 stock units, representing the Company's matching contributions in common stock allocable to incentive compensation and restricted stock granted under various stock plans and deferred under the Deferred Compensation Plan. 1998 Employee Stock Plan ------------------------ In June 1998, the Board of Directors adopted the 1998 Employee Stock Plan, which became effective September 28, 1998. All employees of the Company are eligible to receive grants of stock options, restricted stock or restricted stock units under the Plan. Non-qualified stock options are available for grant under the Plan at an option price that is 100% of the fair market value on the date the option is granted. Stock options expire within 10 years and one month following the grant date and generally become exercisable in four years. Awards of restricted stock and restricted stock units under the Plan are limited to 15% of the authorized shares. The Plan contains provisions covering the treatment of stock options, restricted stock and stock units upon an employee's resignation, retirement or death. In the event of a change of control of the Company, stock options, restricted stock and stock units granted under the Plan will immediately vest, stock options will become exercisable, and restricted stock and common stock and dividend equivalents to be issued in respect of stock units will be immediately distributed to an employee. 28,000,000 shares are authorized for issuance under the Plan. Deferred Compensation Plan -------------------------- The Company's Deferred Compensation Plan was approved by the Compensation Committee of the Board of Directors and became effective on May 1, 1984. The Plan is a non-qualified compensation plan that provides for the deferral of cash incentives, common stock issued under the Company's stock option plans, restricted stock and restricted stock units issued under the Company's various stock plans. An employee can elect to defer up to 100% of annual incentive compensation, receipt of shares of common stock resulting from a stock-for-stock exercise of stock options under the Company's stock option plans, shares of common stock attributable to nonvested restricted stock or restricted stock units under the Company's restricted stock plans. Certain key and highly compensated management employees of the Company are eligible to participate and defer compensation under the Plan. DEFERRED CASH OR STOCK UNIT ACCOUNT. A deferred cash incentive compensation account is established for each participant electing to defer such compensation. Each participant's deferred cash account is credited monthly with a rate of return based on the investment performance of participant-selected 401(k) Savings Plan funds for the prior month. A deferred stock unit account is established for an employee electing to defer receipt of common stock under a stock option grant or shares of restricted stock or restricted stock units under the Company's stock plans. Dividend equivalent amounts can be paid out to the employee or credited to an employee's account to reflect dividends paid on the Company's common stock, based on the number of stock units deferred and credited to an employee's deferred account. COMPANY CONTRIBUTIONS IN CASH AND STOCK. The Company credits the deferred cash account of each participant in the Plan with an additional amount that will equal the value of the employer matching contributions that the Company would have otherwise made to the participant's 401(k) Savings Plan account if the employee had not deferred compensation under the Plan. The Company credits the deferred stock unit account of each participant in the Plan with additional stock units in an amount equal to the value of the employer matching contributions that the Company would have otherwise made to the employee's 401(k) Savings Plan account if the employee had not deferred compensation under the Plan. PROVISIONS COVERING RESIGNATION, RETIREMENT, DEATH AND CHANGE OF CONTROL. The Plan contains provisions covering the payout of deferred cash and stock unit accounts upon an employee's resignation, 11 retirement or death. In the event of a change in control of the Company, shares of common stock and cash attributable to stock units and dividend equivalents credited to an employee's deferred stock unit account under the Plan will be immediately distributed. In addition, a trust has been established to hold Company assets as a reserve for the discharge of certain Company obligations under the Plan in the event of a change of control. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information contained on pages 10 through 12 of Registrant's definitive Proxy Statement for its 2002 Annual Meeting of Stockholders is incorporated herein by reference. - ------------------------ The Company's Annual Report on Form 10-K for the fiscal year ended May 26, 2002, at the time of its filing with the Securities and Exchange Commission, shall modify and supersede all prior documents filed pursuant to Sections 13, 14 and 15(d) of the 1934 Act for purposes of any offers or sales of any securities after the date of such filing pursuant to any Registration Statement or Prospectus filed pursuant to the Securities Act of 1933 which incorporates by reference such Annual Report on Form 10-K. 12 INDEPENDENT AUDITORS' REPORT The Stockholders and the Board of Directors General Mills, Inc.: Under date of June 24, 2002, we reported on the consolidated balance sheets of General Mills, Inc. and subsidiaries as of May 26, 2002 and May 27, 2001 and the related consolidated statements of earnings, stockholders' equity and cash flows for each of the fiscal years in the three-year period ended May 26, 2002, as contained in the 2002 annual report to stockholders. These consolidated financial statements and our report thereon are incorporated by reference in the annual report on Form 10-K for the fiscal year ended May 26, 2002. In connection with our audits of the aforementioned consolidated financial statements, we have also audited the related financial statement schedule as listed in the accompanying index. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. /s/ KPMG LLP Minneapolis, Minnesota June 24, 2002 CONSENT OF KPMG LLP The Board of Directors General Mills, Inc.: We consent to incorporation by reference in the Registration Statements (No. 2-49637 and 333-75808) on Form S-3 and Registration Statements (Nos. 2-13460, 2-53523, 2-95574, 33-24504, 33-27628, 33-32059, 33-36892, 33-36893, 33-50337, 33-62729, 333-13089, 333-32509, 333-65311, 333-65313, 333-90010, and 333-90012) on Form S-8 of General Mills, Inc. of our report dated June 24, 2002, relating to the consolidated balance sheets of General Mills, Inc. and subsidiaries as of May 26, 2002 and May 27, 2001 and the related consolidated statements of earnings, stockholders' equity, cash flows and our report dated June 24, 2002 on the related financial statement schedule for each of the fiscal years in the three-year period ended May 26, 2002, which reports are included or incorporated by reference in the May 26, 2002 annual report on Form 10-K of General Mills, Inc. /s/ KPMG LLP Minneapolis, Minnesota August 13, 2002 13 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) 1. FINANCIAL STATEMENTS: Consolidated Statements of Earnings for the Fiscal Years Ended May 26, 2002, May 27, 2001 and May 28, 2000 (incorporated herein by reference to page 20 of the Registrant's 2002 Annual Report to Stockholders). Consolidated Balance Sheets at May 26, 2002 and May 27, 2001 (incorporated herein by reference to page 21 of the Registrant's 2002 Annual Report to Stockholders). Consolidated Statements of Cash Flows for the Fiscal Years Ended May 26, 2002, May 27, 2001 and May 28, 2000 (incorporated herein by reference to page 22 of the Registrant's 2002 Annual Report to Stockholders). Consolidated Statements of Stockholders' Equity for the Fiscal Years Ended May 26, 2002, May 27, 2001 and May 28, 2000 (incorporated herein by reference to page 23 of the Registrant's 2002 Annual Report to Stockholders). Notes to Consolidated Financial Statements (incorporated herein by reference to pages 24 through 39 of the Registrant's 2002 Annual Report to Stockholders). 2. FINANCIAL STATEMENT SCHEDULES: For the Fiscal Years Ended May 26, 2002, May 27, 2001 and May 28, 2000: II - Valuation and Qualifying Accounts 3. EXHIBITS: Exhibit No. Description ----------- ----------- 2.1 Agreement and Plan of Merger, dated as of July 16, 2000 by and among the Registrant, General Mills North American Businesses, Inc., Diageo plc and The Pillsbury Company (incorporated herein by reference to Exhibit 10.1 to Registrant's Report on Form 8-K filed July 20, 2000). 2.2 First Amendment dated as of April 12, 2001 to Agreement and Plan of Merger dated as of July 16, 2000 by and among the Registrant, General Mills North American Businesses, Inc., Diageo plc and The Pillsbury Company (incorporated herein by reference to Exhibit 10.1 to Registrant's Report on Form 8-K filed April 13, 2001). 2.3 Second Amendment, dated as of October 31, 2001, to Agreement and Plan of Merger, dated as of July 16, 2000, by and among the Registrant, General Mills North American Businesses, Inc., Diageo plc and The Pillsbury Company (incorporated herein by reference to Exhibit 10.1 to Registrant's Report on Form 8-K filed November 2, 2001). 3.1 Registrant's Restated Certificate of Incorporation, as amended to date. 3.2 Registrant's By-Laws, as amended to date (incorporated herein by reference to Exhibit 3.2 to Registrant's Annual Report on Form 10-K for the fiscal year ended May 30, 1999). 4.1 Indenture between Registrant and U.S. Bank Trust National Association (f.k.a. Continental Illinois National Bank and Trust Company of Chicago), as amended to date by Supplemental Indentures Nos. 1 through 8. 4.2 Rights Agreement dated as of December 11, 1995 between Registrant and Wells Fargo Bank Minnesota, N.A. (f.k.a. Norwest Bank Minnesota, N.A.) (incorporated herein by reference to Exhibit 1 to Registrant's Registration Statement on Form 8-A filed January 2, 1996). 4.3 Indenture between Registrant and U.S. Bank Trust National Association (f.k.a. First Trust of Illinois, National Association) dated February 1, 1996 (incorporated herein by reference to Exhibit 4.1 to Registrant's Registration Statement on Form S-3 effective February 23, 1996). 14 4.4 Indenture between Ralcorp Holdings, Inc. and The First National Bank of Chicago, as supplemented to date by the First Supplemental Indenture among Ralcorp Holdings, Inc., Registrant and The First National Bank of Chicago. 4.5 Amendment No. 1 dated as of July 16, 2000, to the Rights Agreement dated as of December 11, 1995 between Registrant and Wells Fargo Bank Minnesota, N.A. (f.k.a. Norwest Bank Minnesota, N.A.) (incorporated by reference to Exhibit 1 to Registrant's Report on Form 8-A/A dated July 25, 2000). *10.1 Stock Option and Long-Term Incentive Plan of 1988, as amended to date (incorporated herein by reference to Exhibit 10.1 to Registrant's Annual Report on Form 10-K for the fiscal year ended May 30, 1999). 10.2 Addendum No. 3 effective as of March 15, 1993 to Protocol of Cereal Partners Worldwide (incorporated herein by reference to Exhibit 10.2 to Registrant's Annual Report on Form 10-K for the fiscal year ended May 28, 2000). *10.3 1998 Employee Stock Plan, as amended to date. *10.4 Amended and Restated Executive Incentive Plan, as amended to date (incorporated herein by reference to Exhibit 10.4 to Registrant's Annual Report on Form 10-K for the fiscal year ended May 27, 2001). *10.5 Management Continuity Agreement, as amended to date (incorporated herein by reference to Exhibit 10.5 to Registrant's Annual Report on Form 10-K for the fiscal year ended May 27, 2001). *10.6 Supplemental Retirement Plan, as amended to date (incorporated herein by reference to Exhibit 10.6 to Registrant's Annual Report on Form 10-K for the fiscal year ended May 28, 2000). *10.7 Executive Survivor Income Plan, as amended to date (incorporated herein by reference to Exhibit 10.7 to Registrant's Annual Report on Form 10-K for the fiscal year ended May 30, 1999). *10.8 Executive Health Plan, as amended to date (incorporated herein by reference to Exhibit 10.1 to Registrant's Report on Form 10-Q for the period ended February 24, 2002). *10.9 Supplemental Savings Plan, as amended to date (incorporated herein by reference to Exhibit 10.9 to Registrant's Annual Report on Form 10-K for the fiscal year ended May 28, 2000). *10.10 1996 Compensation Plan for Non-Employee Directors, as amended to date (incorporated herein by reference to Exhibit 10.10 to Registrant's Annual Report on Form 10-K for the fiscal year ended May 30, 1999). *10.11 General Mills, Inc. 1995 Salary Replacement Stock Option Plan, as amended to date (incorporated herein by reference to Exhibit 10.11 to Registrant's Annual Report on Form 10-K for the fiscal year ended May 28, 2000). *10.12 General Mills, Inc. Deferred Compensation Plan, as amended to date (incorporated herein by reference to Exhibit 10.12 to Registrant's Annual Report on Form 10-K for the fiscal year ended May 27, 2001). *10.13 Supplemental Benefits Trust Agreement dated February 9, 1987, as amended and restated as of September 26, 1988 (incorporated herein by reference to Exhibit 10.13 to Registrant's Annual Report on Form 10-K for the fiscal year ended May 30, 1999). *10.14 Supplemental Benefits Trust Agreement dated September 26, 1988 (incorporated herein by reference to Exhibit 10.14 to Registrant's Annual Report on Form 10-K for the fiscal year ended May 30, 1999). 10.15 Agreements dated November 29, 1989 by and between General Mills, Inc. and Nestle, S.A. (incorporated herein by reference to Exhibit 10.15 to Registrant's Annual Report on Form 10-K for the fiscal year ended May 28, 2000). 10.16 Protocol and Addendum No. 1 to Protocol of Cereal Partners Worldwide dated November 21, 1989 (incorporated herein by reference to Exhibit 10.16 to Registrant's Annual Report on Form 10-K for the fiscal year ended May 27, 2001). *10.17 1990 Salary Replacement Stock Option Plan, as amended to date (incorporated herein by reference to Exhibit 10.17 to Registrant's Annual Report on Form 10-K for the fiscal year ended May 30, 1999). 10.18 Addendum No. 2 dated March 16, 1993 to Protocol of Cereal Partners Worldwide (incorporated herein by reference to Exhibit 10.18 to Registrant's Annual Report on Form 10-K for the fiscal year ended May 31, 1998). 10.19 Agreement dated July 31, 1992 by and between General Mills, Inc. and PepsiCo, Inc. (incorporated herein by reference to Exhibit 10.19 to Registrant's Annual Report on Form 10-K for the fiscal year ended May 31, 1998). 15 *Items that are management contracts or compensatory plans or arrangements required to be filed as exhibits pursuant to Item 14(c) of Form 10-K. Exhibit No. Description ----------- ----------- *10.20 Stock Option and Long-Term Incentive Plan of 1993, as amended to date (incorporated herein by reference to Exhibit 10.20 to Registrant's Annual Report on Form 10-K for the fiscal year ended May 28, 2000). 10.21 Standstill Agreement with CPC International, Inc. dated October 17, 1994 (incorporated herein by reference to Exhibit 10.21 to Registrant's Annual Report on Form 10-K for the fiscal year ended May 28, 2000). *10.22 1998 Senior Management Stock Plan, as amended to date (incorporated herein by reference to Exhibit 10.22 to Registrant's Annual Report on Form 10-K for the fiscal year ended May 28, 2000). *10.23 2001 Compensation Plan for Non-employee Directors (incorporated herein by reference to Exhibit 10.2 to Registrant's Report on Form 10-Q for the period ended February 24, 2002). 12 Statement of Ratio of Earnings to Fixed Charges (contained on page 21 of this Report). 13 2002 Annual Report to Stockholders (only those portions expressly incorporated by reference herein shall be deemed filed with the Commission). 21 List of Subsidiaries of General Mills, Inc. 23 Consent of KPMG LLP (contained on page 13 of this Report). 99.1 364-Day Credit Agreement, dated as of January 24, 2001, among the Registrant, The Chase Manhattan Bank, as Administrative Agent, and the other financial institutions party thereto (incorporated by reference to Exhibit 99.1 to Registrant's Quarterly Report on Form 10-Q for the period ended February 25, 2001). 99.2 Five Year Credit Agreement, dated as of January 24, 2001, among the Registrant, The Chase Manhattan Bank, as Administrative Agent, and the other financial institutions party hereto (incorporated by reference to Exhibit 99.2 to Registrant's Quarterly Report on Form 10-Q for the period ended February 25, 2001). 99.3 Amendment No. 1, dated as of October 31, 2001, to 364-Day Credit Agreement, dated as of January 24, 2001, among the Registrant, The Chase Manhattan Bank, as Administrative Agent, and the other financial institutions party thereto. (incorporated herein by reference to Exhibit 99.1 to Registrant's Report on Form 8-K filed February 2, 2002). 99.4 Amendment No. 2, dated as of January 23, 2002, to 364-Day Credit Agreement, dated as of January 24, 2001, among the Registrant, JPMorgan Chase Bank, as Administrative Agent, and the other financial institutions party thereto. (incorporated herein by reference to Exhibit 99.2 to Registrant's Report on Form 8-K filed February 2, 2002). 99.5 Amendment No. 1, dated as of October 31, 2001, to Five-Year Credit Agreement, dated as of January 24, 2001, among the Registrant, The Chase Manhattan Bank, as Administrative Agent, and the other financial institutions party thereto. (incorporated herein by reference to Exhibit 99.3 to Registrant's Report on Form 8-K filed February 2, 2002). 99.6 364-Day Credit Agreement, dated as of October 30, 2001, among Registrant, Morgan Guaranty Trust Company of New York, as Administrative Agent, and the other financial institutions party thereto. (incorporated herein by reference to Exhibit 99.1 to Registrant's Report on Form 8-K filed November 15, 2001). 99.7 Amendment No. 1, dated as of November 9, 2001, to Credit Agreement, dated as of October 30, 2001, among Registrant, Morgan Guaranty Trust Company of New York, as Administrative Agent, and the other financial institutions party thereto. (incorporated herein by reference to Exhibit 99.2 to Registrant's Report on Form 8-K filed November 15, 2001). 16 (b) REPORTS ON FORM 8-K. None. *Items that are management contracts or compensatory plans or arrangements required to be filed as exhibits pursuant to Item 14(c) of Form 10-K. 17 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. GENERAL MILLS, INC. Dated: August 13, 2002 By: /s/ S. S. MARSHALL ---------------------------------------- S. S. Marshall SENIOR VICE PRESIDENT, CORPORATE AFFAIRS, GENERAL COUNSEL AND SECRETARY PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED. SIGNATURE TITLE DATE --------- ----- ---- /s/ STEPHEN R. DEMERITT Director July 26, 2002 - ------------------------------ Vice Chairman (Stephen R. Demeritt) /s/ L. DE SIMONE Director August 13, 2002 - ------------------------------ (Livio D. DeSimone) /s/ W.T. ESREY Director August 13, 2002 - ------------------------------ (William T. Esrey) /s/ R.V. GILMARTIN Director August 13, 2002 - ------------------------------ (Raymond V. Gilmartin) /s/ JUDITH RICHARDS HOPE Director July 29, 2002 - ------------------------------ (Judith R. Hope) /s/ ROBERT L. JOHNSON Director August 5, 2002 - ------------------------------ (Robert L. Johnson) /s/ JOHN M. KEENAN Director August 7, 2002 - ------------------------------ (John M. Keenan) /s/ HEIDI G. MILLER Director August 8, 2002 - ------------------------------ (Heidi G. Miller) /s/ S.W. SANGER Chairman of the Board and July 26, 2002 - ------------------------------ Chief Executive Officer (Stephen W. Sanger) /s/ A. MICHAEL SPENCE Director August 2, 2002 - ------------------------------ (A. Michael Spence) 18 SIGNATURE TITLE DATE --------- ----- ---- /s/ DOROTHY A. TERRELL Director August 13, 2002 - ------------------------------ (Dorothy A. Terrell) /s/ R.G. VIAULT Director July 26, 2002 - ------------------------------ Vice Chairman (Raymond G. Viault) /s/ PAUL S. WALSH Director August 13, 2002 - ------------------------------ (Paul S. Walsh) /s/ KENNETH L. THOME Senior Vice President, August 13, 2002 - ------------------------------ Financial Operations (Kenneth L. Thome) (Principal Accounting Officer) 19 GENERAL MILLS, INC. AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (IN MILLIONS)
Year ended ------------------------------------------ May 26, May 27, May 28, 2002 2001 2000 ------ ------ ------ ALLOWANCE FOR POSSIBLE LOSSES ON ACCOUNTS RECEIVABLE: Balance at beginning of year $ 6 $ 6 $ 5 Additions charged to expense 3 1 3 Additions from acquisitions 15 -- -- Bad debt write-offs (2) (2) (3) Other adjustments and reclassifications (1) 1 1 ------ ------ ------ Balance at end of year $ 21 $ 6 $ 6 ====== ====== ====== VALUATION ALLOWANCE FOR DEFERRED TAX ASSETS: Balance at beginning of year $ 3 $ 5 $ 5 Additions charged to expense 7 -- -- Reductions credited to expense -- (2) -- ------ ------ ------ Balance at end of year $ 10 $ 3 $ 5 ====== ====== ====== RESTRUCTURING CHARGES: Balance at beginning of year $ 9 $ 10 $ 44 Additions charged to expense 190 12 -- Net amounts utilized for restructuring activities (83) (13) (34) ------ ------ ------ Balance at end of year $ 116 $ 9 $ 10 ====== ====== ======
20 EXHIBIT INDEX 3.1 Registrant's Restated Certificate of Incorporation, as amended to date. 4.1 Indenture between Registrant and U.S. Bank Trust National Association (f.k.a. Continental Illinois National Bank and Trust Company of Chicago), as amended to date by Supplemental Indentures Nos. 1 through 8. 4.4 Indenture between Ralcorp Holdings, Inc. and The First National Bank of Chicago, as supplemented to date by the First Supplemental Indenture among Ralcorp Holdings, Inc., Registrant and The First National Bank of Chicago. 10.3 1998 Employee Stock Plan, as amended to date. 12 General Mills, Inc. Ratio of Earnings to Fixed Charges (contained on page 21 of this Report). 13 2002 Annual Report to Stockholders (only those portions expressly incorporated by reference herein shall be deemed filed with the Commission). 21 List of Subsidiaries of General Mills, Inc. 23 Consent of KPMG LLP (contained on page 13 of this Report). EX-3.1 5 genmills023880_ex3-1.txt AMENDED CERTIFICATE OF INCORPORATION EXHIBIT 3.1 RESTATED CERTIFICATE OF INCORPORATION of GENERAL MILLS, INC., AS AMENDED ARTICLE I The name of this Corporation is General Mills, Inc. ARTICLE II The address of its registered office in the State of Delaware is 1209 Orange Street in the City of Wilmington, County of New Castle, and the name of its registered agent at such address is The Corporation Trust Company. ARTICLE III The purpose of this Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. ARTICLE IV The total number of shares of capital stock which may be issued by the Corporation is one billion five million (1,005,000,000), of which one billion (1,000,000,000) shares ($.10 par value) shall be Common Stock and five million (5,000,000) shares, without par value, shall be Cumulative Preference Stock. (1) PROVISIONS RELATING TO COMMON STOCK (a) Each share of Common Stock shall, subject to paragraph (f) of Section (2), have one vote and, except as provided by resolution or resolutions adopted by the Board of Directors providing for the issue of any series of Cumulative Preference Stock, the exclusive voting power for all purposes shall be vested in the holders of the Common Stock. (b) No holder of Common Stock as such shall have any preemptive right to subscribe to stock, obligations, warrants, rights to subscribe to stock or other securities of the Corporation of any class, whether now or hereafter authorized. (c) Subject to the provisions of law and preference of the Cumulative Preference Stock, dividends may be paid on the Common Stock of the Corporation at such time and in such amounts as the Board of Directors may deem advisable. (d) In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of Common Stock shall be entitled, after payment or provision for payment of the debts and other liabilities of the Corporation and the amounts to which holders of Cumulative Preference Stock shall be entitled, to the remaining net assets of the Corporation. -1- (2) PROVISIONS RELATING TO CUMULATIVE PREFERENCE STOCK (a) The Cumulative Preference Stock may be issued from time to time in one or more series, each of such series to have such designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, as are stated and expressed herein and in the resolution or resolutions providing for the issue of such series adopted by the Board of Directors as hereinafter provided. (b) Authority is hereby expressly granted to the Board of Directors, subject to the provisions of this Article IV, to authorize the issue of one or more series of Cumulative Preference Stock and with respect to each series to fix by resolution or resolutions providing for the issue of such series: (i) The number of shares to constitute such series and the distinctive designation thereof; (ii) The dividend rate or rates to which such shares shall be entitled and the restrictions, limitations and conditions upon the payment of such dividends, the date or dates from which dividends shall accumulate and the quarterly dates on which dividends, if declared, shall be payable; (iii) Whether or not the shares of such series shall be redeemable, the limitations and restrictions with respect to such redemptions, the manner of selecting shares of such series for redemption if less than all shares are to be redeemed, and the amount, if any, in addition to any accrued dividends thereon which the holder of shares of such series shall be entitled to receive upon the redemption thereof, which amount may vary at different redemption dates and may be different with respect to shares redeemed through the operation of any retirement or sinking fund and with respect to shares otherwise redeemed; (iv) The amount in addition to any accrued dividends thereon which the holders of shares of such series shall be entitled to receive upon the voluntary or involuntary liquidation, dissolution or winding up of the Corporation, which amount may vary depending on whether such liquidation, dissolution or winding up is voluntary or involuntary and, if voluntary, may vary at different dates (the amount so payable upon such involuntary liquidation, dissolution or winding up, exclusive of accrued dividends, being hereinafter sometimes called the "involuntary liquidation value"); (v) Whether or not the shares of such series shall be subject to the operation of a purchase, retirement or sinking fund, and, if so, whether such retirement or sinking fund shall be cumulative or non-cumulative, the extent to and the manner in which such fund shall be applied to the purchase or redemption of the shares of such series for retirement or to other corporate purposes and the terms and provisions relative to the operation thereof; (vi) Whether or not the shares of such series shall be convertible into, or exchangeable for, shares of stock of any other class or classes, or of any other series of the same class, and if so convertible or exchangeable, the price or prices or the rate or rates of conversion or exchange and the method, if any, of adjusting the same; (vii) The voting powers, if any, of such series in addition to the voting powers provided in paragraph (f) of this Section (2); and (viii) Any other preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof as shall not be inconsistent with this Section (2). (c) All shares of any one series of Cumulative Preference Stock shall be identical with each other in all respects, except that shares of any one series issued at different times may differ as to the dates from which dividends thereon shall be cumulative; and all series shall rank equally and be identical in all respects, except as permitted by the foregoing provisions of paragraph (b) of this Section (2). -2- (d) Before any dividends on any class or classes of stock of the Corporation ranking junior to the Cumulative Preference Stock (other than dividends payable in shares of any class or classes of stock of the Corporation ranking junior to the Cumulative Preference Stock) shall be declared or paid or set apart for payment, the holders of shares of Cumulative Preference Stock of each series shall be entitled to such cash dividends, but only when and as declared by the Board of Directors out of funds legally available therefor, as they may be entitled to in accordance with the resolution or resolutions adopted by the Board of Directors providing for the issue of such series, payable quarterly on such dates as may be fixed in such resolution or resolutions in each year. Such dividends shall be cumulative from the date or dates fixed in the resolution or resolutions adopted by the Board of Directors providing for the issue of such series. Dividends in full shall not be declared or paid or set apart for payment on the Cumulative Preference Stock of any one series for any dividend period unless dividends in full have been declared or paid or set apart for payment on the Cumulative Preference Stock of all series for all dividend periods terminating on the same or any earlier date. When the dividends are not paid in full on all series of the Cumulative Preference Stock, the shares of all series shall share ratably in the payment of dividends, including accumulations, if any, in accordance with the sums which would be payable on said shares if all dividends were declared and paid in full. A "dividend period" is the period between any two consecutive dividend payment dates (or, when shares are originally issued, the period from the date from which dividends are cumulative to the first dividend payment date) as fixed for a particular series. Accruals of dividends shall not bear interest. (e) In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, before any payment or distribution of the assets of the Corporation shall be made to or set apart for the holders of shares of any class or classes of stock of the Corporation ranking junior to the Cumulative Preference Stock, the holders of the shares of each series of the Cumulative Preference Stock shall be entitled to receive payment of the amount per share fixed in the resolution or resolutions adopted by the Board of Directors providing for the issuance of the shares of such series, plus an amount equal to all dividends accrued thereon to the date of final distribution to such holders; but they shall be entitled to no further payment. If, upon any liquidation, dissolution or winding up of the Corporation, the assets of the Corporation, or proceeds thereof, distributable among the holders of the shares of the Cumulative Preference Stock shall be insufficient to pay in full the preferential amount aforesaid, then such assets, or the proceeds thereof, shall be distributed among such holders ratably in accordance with the respective amounts which would be payable on such shares if all amounts payable thereon were paid in full. For the purposes of this paragraph (e), the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property or assets of the Corporation or a consolidation or merger of the Corporation with one or more corporations shall not be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary. (f) So long as any of the Cumulative Preference Stock is outstanding the Corporation (i) will not declare or pay, or set apart for payment, any dividends (other than dividends payable in shares of any class or classes of stock of the Corporation ranking junior to the Cumulative Preference Stock), or make any distribution, on any class or classes of stock of the Corporation ranking junior to the Cumulative Preference Stock, and will not redeem, purchase or otherwise acquire, directly or indirectly, whether voluntarily, for a sinking fund, or otherwise, any shares of any class or classes of stock of the Corporation ranking junior to the Cumulative Preference Stock, if at the time of making such declaration, payment, setting apart, distribution, redemption, purchase or acquisition the Corporation shall be in default with respect to any dividend payable on or any obligation to retire shares of Cumulative Preference Stock, provided that notwithstanding the foregoing the Corporation may at any time redeem, purchase or otherwise acquire shares of stock of any such junior class in exchange for, or out of the net cash proceeds from the concurrent sale of, other shares of stock of any such junior class; (ii) will not, without the affirmative vote or consent of the holders of at least 66-2/3% of all the Cumulative Preference Stock at the time outstanding, given in person or by proxy, either in writing or by resolution adopted at a meeting (which may be an annual meeting) called for the purpose, at which the holders of the Cumulative Preference Stock, regardless of series, shall vote separately as a class, amend, alter or repeal (by any means, including, without limitation, merger or consolidation) any of the provisions of this Section (2) so as adversely to affect the preferences, rights or powers of the Cumulative Preference Stock; and -3- (iii) will not, without the affirmative vote or consent of the holders of at least 66-2/3% of any adversely affected series of the Cumulative Preference Stock at the time outstanding, given in person or by proxy, either in writing or by resolution adopted at a meeting (which may be an annual meeting) called for the purpose (the holders of such series of the Cumulative Preference Stock consenting or voting, as the case may be, separately as a class), amend, alter or repeal (by any means, including, without limitation, merger or consolidation) any of the provisions herein or in the resolution or resolutions adopted by the Board of Directors providing for the issue of such series so as adversely to affect the preferences, rights or powers of the Cumulative Preference Stock of such series; provided, however, that any vote or consent required by subparagraph (ii) above may be given or made effective by the filing of an appropriate amendment of the Corporation's Restated Certificate of Incorporation without obtaining the vote or consent of the holders of the Common Stock of the Corporation, the right to give such vote or consent being expressly waived by all holders of such Common Stock unless the action to be taken would adversely affect the preferences, rights or powers of the Common Stock; and provided further that any vote or consent required by subparagraph (iii) above may be given and made effective by the filing of an appropriate amendment of the Corporation's Restated Certificate of Incorporation without obtaining the vote or consent of the holders of any other series of the Cumulative Preference Stock or of the holders of the Common Stock of the Corporation, the right to give such vote or consent being expressly waived by all holders of such other series of Cumulative Preference Stock and Common Stock unless the action to be taken would adversely affect the preferences, rights or powers of such other series of Cumulative Preference Stock or Common Stock, as the case may be. (g) If in any case the amounts payable with respect to any obligations to retire shares of the Cumulative Preference Stock are not paid in full in the case of all series with respect to which such obligations exist, the number of shares of each of such series to be retired pursuant to any such obligations shall be in proportion to the respective amounts which would be payable on account of such obligations if all amounts payable in respect of all such obligations if all amounts payable in respect of all such series were discharged in full. (h) The term "class or classes of stock of the Corporation ranking junior to the Cumulative Preference Stock" shall mean the Common Stock referred to in Section (1) of this Article IV and any other class or classes of stock of the Corporation hereinafter authorized which shall rank junior to the Cumulative Preference Stock as to dividends or upon liquidation. (i) Aggregate involuntary liquidation value of all shares of Cumulative Preference Stock outstanding at any time shall never exceed $300,000,000. (j) No holder of Cumulative Preference Stock as such shall have any preemptive right to subscribe to stock, obligations, warrants, rights to subscribe to stock or other securities of the Corporation of any class, whether now or hereafter authorized. (k) For the purposes of Section (2) of this Article IV or of any resolution of the Board of Directors providing for the issue of any series of Cumulative Preference Stock or of any certificate filed with the Secretary of State of the State of Delaware pursuant to any such resolution (unless otherwise provided in any such resolution or certificate); (i) The term "outstanding" when used in reference to shares of stock shall mean issued shares, excluding shares held by the Corporation and shares called for redemption, funds for the redemption of which shall have been set aside or deposited in trust: (ii) The amount of dividends "accrued" on any share of Cumulative Preference Stock as at any quarterly dividend date shall be deemed to be the amount of any unpaid dividends accumulated thereon to and including such quarterly dividend date, whether or not earned or declared, and the amount of dividends "accrued" on any share of Cumulative Preference Stock as at any date other than a quarterly dividend date shall be calculated as the amount of any unpaid dividends accumulated thereon to and including the last preceding quarterly dividend date, whether or not earned or declared, plus an amount calculated on the basis of the annual -4- dividend rate fixed for the shares of such series for the period after such last preceding quarterly dividend date to and including the date as of which the calculation is made, based on a 360 day year of twelve 30 day months. (3) PROVISIONS RELATING TO ALL CLASSES OF STOCK The shares of Cumulative Preference Stock and Common Stock may be issued by the Corporation from time to time for such consideration (not less than the par value thereof in the case of Common Stock) as may be fixed from time to time by the Board of Directors. Any and all shares without nominal or par value for which the consideration so fixed shall have been paid or delivered shall be deemed fully paid stock and shall not be liable for any further call or assessment thereon; and the holders of such shares shall not be liable for any further payments in respect of such shares. ARTICLE V [ARTICLE V is hereby reserved] ARTICLE VI The following provisions are inserted for the regulation and conduct of the affairs of the Corporation, but it is expressly provided that the same are intended to be and shall be construed to be in furtherance and not in limitation or exclusion of the powers conferred by law: (1) Subject always to such by-laws as may be adopted from time to time by the stockholders, the Board of Directors is expressly authorized to adopt, alter, amend and repeal the by-laws of this Corporation, but any by-law adopted by the Board of Directors may be altered, amended or repealed by the stockholders. (2) The business of this Corporation shall be managed by its Board of Directors. Directors need not be stockholders. The by-laws may prescribe the number of directors, not less than three; may provide for the increase or reduction thereof but not less than three; and may prescribe the number necessary to constitute a quorum, which number may be less than a majority of the whole Board of Directors, but not less than the number required by law. No director shall be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty by such director as a director. Notwithstanding the foregoing, a director shall be liable to the extent provided by applicable law (i) for breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the Delaware General Corporation Law or (iv) for any transaction from which the director derived an improper personal benefit. No amendment to or repeal of these provisions shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment. ARTICLE VII (a) Any action by stockholders of the Corporation shall be taken at a meeting of stockholders and no action may be taken by written consent of stockholders entitled to vote upon such action except as provided in Article IV, Section (2)(f)(ii) and (iii) hereof. (b) No amendment to the Certificate of Incorporation shall amend, alter, change or repeal any of the provisions of this Article VIl unless such amendment shall receive the affirmative vote of not less than 51% of the Voting Stock. -5- EX-4.1 6 genmills023880_ex4-1.txt SUPPLEMENTAL INDENTURES EXHIBIT 4.1 GENERAL MILLS, INC. and CONTINENTAL ILLINOIS NATIONAL BANK AND TRUST COMPANY OF CHICAGO, Trustee INDENTURE Dated as of July 1, 1982 RECONCILIATION AND TIE SHEET* between provisions of the Trust Indenture Act of 1939 and the Indenture dated as of July 1, 1982 between GENERAL MILLS, INC. and CONTINENTAL ILLINOIS NATIONAL BANK AND TRUST COMPANY OF CHICAGO, Trustee: Section of Act Section of Indenture - -------------- -------------------- 310(a)(1) and (2) 7.09 310(a)(3) and (4) Not applicable 310(b) 7.08 and 7.10(a), (b) and (d) 310(c) Not applicable 311(a) 7.13(a) and (c)(1) and (2) 311(b) 7.13(b) 311(c) Not applicable 312(a) 5.01 and 5.02(a) 312(b) and (c) 5.02(b) and (c) 313(a) 5.04(a) 313(b)(1) Not applicable 313(b)(2) 5.04(b) 313(c) 5.04(c) 313(d) 5.04(d) 314(a) 5.03 314(b) Not applicable 314(c)(1) and (2) 14.06 314(c)(3) Not applicable 314(d) Not applicable 314(e) 14.06 314(f) Not applicable 315(a)(c) and (d) 7.01 315(b) 6.07 315(e) 6.08 316(a)(1) 6.06 316(a)(2) Omitted 316(a) last sentence 8.04 316(b) 6.04 317(a) 6.02 317(b) 4.11 318(a) 14.08 * This reconciliation and tie sheet is not, nor shall it for any purpose be deemed to be, a part of the Indenture. TABLE OF CONTENTS* Page ---- PARTIES 1 RECITALS: Purpose of Indenture 1 Compliance with legal requirements 1 Purpose of and consideration for Indenture 1 ARTICLE ONE. DEFINITIONS. SECTION 1.01. Certain terms defined; other terms defined in the Trust Indenture Act of 1939, as amended, or by reference therein defined in the Securities Act of 1933, as amended, to have meanings therein assigned 1 Authenticating Agent 2 Authorized Newspaper 2 Board of Directors 2 Business Day 2 Company 2 Coupon Debt Security 3 Debt Securities 3 Debt Security Register 3 Event of Default 3 Fully Registered Debt Security 3 Holder 3 Indenture 3 Interest 3 Officers' Certificate 4 Opinion of Counsel 4 Original Issue Discount Security 4 Outstanding 4 Person 5 Place of Payment 5 Principal Corporate Trust Office of the Trustee 5 Principal Property 5 Record Date 5 Redemption Price 6 Registered Coupon Debt Security 6 Registered Debt Security 6 Registered Holder 6 *This Table of Contents, comprising pages i to xi, inclusive, is not, nor shall it for any purpose be deemed to be part of the Indenture. ii Page ---- Responsible Officer 6 Restricted Subsidiary 6 Shareholders' Ownership 6 Subsidiary 7 Trustee 7 Trust Indenture Act of 1939 7 United States of America 7 Unregistered Debt Security 7 Unrestricted Subsidiary 7 Value 8 Yield to Maturity 8 ARTICLE TWO. FORM, ISSUE, DESCRIPTION, EXECUTION, REGISTRATION, TRANSFER AND EXCHANGE OF DEBT SECURITIES. SECTION 2.01. Forms generally.................................................9 SECTION 2.02. Issuable in series, terms of Debt Securities ..................10 SECTION 2.03. Denominations, authentication and dating.......................12 SECTION 2.04. Execution and authentication of Debt Securities 13 SECTION 2.05. Exchanges of Debt Securities 14 Registration and transfer of Debt Securities 14 Debt Securities to be endorsed or accompanied by instruments of transfer 15 Charges upon exchange or transfer of Debt Securities 15 Restrictions on issue, transfer or exchange at time of redemption 15 SECTION 2.06. Temporary Debt Securities, if any 16 SECTION 2.07. Mutilated, destroyed, lost or stolen Debt Securities 17 SECTION 2.08. Cancellation of surrendered Debt Securities 18 SECTION 2.09. Provisions of the Indenture and Debt Securities for the sole benefit of the parties and the Holders 19 SECTION 2.10. Interest Rights Preserved 19 ARTICLE THREE. REDEMPTION OF DEBT SECURITIES. SECTION 3.01. Application of Article Three 19 SECTION 3.02. Giving of notice of redemption 19 Selection of Debt Securities in case less than all Debt Securities of a series are to be redeemed 19 Deposit of redemption price 20 SECTION 3.03. Sinking Fund 21 SECTION 3.04. When Debt Securities called for redemption become due and payable 23 iii Page ---- Debt Securities redeemed in part 24 ARTICLE FOUR. PARTICULAR COVENANTS OF THE COMPANY. SECTION 4.01. Payment of principal of (and premium, if any) and interest on Debt Securities 24 SECTION 4.02. Maintenance of offices or agencies for registration, transfer, exchange and payment of Debt Securities 24 SECTION 4.03. Limitations on liens 25 SECTION 4.04. Limitation on sale and leaseback 27 SECTION 4.05. Limitation on transfers to Unrestricted Subsidiaries 28 SECTION 4.06. Company to preserve franchises 28 SECTION 4.07. Limitation on consolidation, merger and sale 28 SECTION 4.08. Further assurances 28 SECTION 4.09. Annual certificate 28 SECTION 4.10. Appointment to fill a vacancy in the office of Trustee 29 SECTION 4.11. (a) Duties of paying agent 29 (b) Company as paying agent 29 (c) Turnover to Trustee by paying agent or Company 30 (d) Holding sums in trust 30 ARTICLE FIVE. HOLDER LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE. SECTION 5.01. Company to furnish Trustee information as to names and addresses of Holders 30 SECTION 5.02.(a) Trustee to preserve information as to names and addresses of Holders 30 (b) Trustee to make information as to names and addresses of Holders available to "applicants" or mail communications to Holders in certain circumstances 30 Procedure if Trustee elects not to make in formation available to "applicants" 30 (c) Company and Trustee not accountable for disclosure of information 32 SECTION 5.03.(a) Annual and other reports to be filed by Company with Trustee 32 (b) Additional information and reports to be filed with Trustee and Securities and Exchange Commission 32 iv Page ---- (c) Summaries of information and reports to be transmitted by Company to Holders 32 SECTION 5.04.(a) Trustee to transmit reports to Holders 33 (b) Trustee to transmit certain further reports to Holders 34 (c) Holders to be mailed reports 34 (d) Copies of reports to be filed with stock exchanges and Securities and Exchange Commission 34 ARTICLE SIX. REMEDIES OF THE TRUSTEE AND HOLDERS ON EVENT OF DEFAULT. SECTION 6.01. Events of Default defined 35 Acceleration of maturity upon Event of Default 36 Waiver of default and rescission of declaration of maturity 37 Restoration of former position and rights 38 SECTION 6.02. Covenant of Company to pay to Trustee upon demand whole amount due on Debt Securities on default in payment of interest or principal (and premium, if any) 38 Trustee may recover judgment for whole amount due on Debt Securities on failure of Company to pay 39 Filing of proof of claim by Trustee in bankruptcy, reorganization, receivership, or other judicial proceedings 39 Rights of action and to assert claims may be enforced by Trustee without possession of Debt Securities 40 Trustee may enforce rights vested in it by indenture by appropriate judicial proceedings 40 SECTION 6.03. Application of moneys collected by Trustee 40 SECTION 6.04. Limitation on suits by Holders 41 SECTION 6.05. Remedies cumulative 42 Delay or omission in exercise of rights not a waiver of default 42 SECTION 6.06. Rights of Holders of majority in principal amount of Debt Securities to direct Trustee and to waive defaults 42 SECTION 6.07. Trustee to give notice of defaults known to it, but may withhold in certain circumstances 43 SECTION 6.08. Requirement of an undertaking to pay costs in certain suits under this Indenture or against the Trustee 44 v Page ---- ARTICLE SEVEN. CONCERNING THE TRUSTEE. SECTION 7.01. Upon Event of Default occurring and continuing, Trustee shall exercise such powers vested in it, and use same degree of care and skill in their exercise, as a prudent person would use 44 Trustee not relieved from liability for negligence or willful misconduct except as provided in this Section 44 (a) Prior to Event of Default and after the curing of all Events of Default which may have occurred 45 (1) Trustee not liable except for performance of duties specifically set forth 45 (2) In absence of bad faith, Trustee may con- clusively rely on certificates or opinions furnished it hereunder, subject to duty to examine the same if specifically re- quired to be furnished to it 45 (b) Trustee not liable for error of judgment made in good faith by responsible officer unless Trustee negligent 45 (c) Trustee not liable for action or non-action in accordance with direction of holders of majority in principal amount of Debt Securities 45 Trustee not obligated to expand or risk its funds or to incur financial liabilities if it has reasonable grounds to believe that repayment or indemnity is not reasonably assured 45 SECTION 7.02. Except as otherwise provided in Section 7.01: (a) Trustee may rely on documents believed genuine and properly signed or presented 46 | (b) Sufficient evidence by certain instruments provided for 46 (c) Trustee may act on Opinion of Counsel 46 (d) Trustee may require indemnity from Holders 46 (e) Trustee not liable for action in good faith believed to be authorized 46 (f) Trustee not bound to investigate facts 46 (g) Trustee may act through agents 47 SECTION 7.03. Trustee not liable for recitals in Indenture or in Debt Securities 47 No representations by Trustee as to validity of Indenture or of Debt Securities 47 vi Page ---- Trustee not accountable for use of Debt Securities or proceeds 47 SECTION 7.04. Trustee, paying agent or Debt Security registrar may own Debt Securities 47 SECTION 7.05. Moneys received by Trustee to be held in trust; interest not payable except by agreement 47 SECTION 7.06. Trustee entitled to compensation, reimbursement and indemnity 47 Obligations to Trustee to be secured by lien prior to Debt Securities 48 SECTION 7.07. Right of Trustee to rely on certificate of officers of Company where no other evidence specifically prescribed 48 SECTION 7.08.(a) Trustee acquiring conflicting interest to eliminate conflict or resign 49 (b) Notice to Holders in case of failure to comply with subsection (a) 49 (c) Definition of convicting interest 49 (d) Definition of certain terms 53 (e) Calculation of percentages of securities 54 SECTION 7.09. Requirements for eligibility of Trustee 55 SECTION 7.10.(a) Resignation of Trustee 55 (b) Removal of Trustee by Company or by court on Holder's application 56 (c) Removal of Trustee by Holders of majority in principal amount of Debt Securities 56 (d) Time when resignation or removal of Trustee effective 57 SECTION 7.11. Acceptance by successor to Trustee 57 Successor to be qualified and eligible 58 Mailing of notice of succession of a Trustee 58 SECTION 7.12. Successor to Trustee by merger, conversion, con- solidation or succession to business 58 SECTION 7.13.(a) Limitation on rights of Trustee as a creditor to obtain payment of certain claims within four months prior to default or during default, or to realize on property as such creditor there after 59 (b) Certain creditor relationships excluded 59 (c) Definition of certain terms 59 SECTION 7.14. Authenticating Agents 63 vii Page ---- ARTICLE EIGHT. CONCERNING THE HOLDERS. SECTION 8.01. Evidence of action by Holders 65 SECTION 8.02. Proof of execution of instruments and of holding of Debt Securities 65 SECTION 8.03. Who may be deemed owners of Debt Securities ... 65 SECTION 8.04. Debt Securities owned by Company or controlled or controlling companies disregarded for certain purposes 67 SECTION 8.05. Revocation of action by Holder; action by Holder binds future Holders 67 ARTICLE NINE. HOLDERS MEETINGS. SECTION 9.01. Purposes for which meetings may be called 68 SECTION 9.02. Manner of calling meetings 68 SECTION 9.03. Call of meetings by Company or Holders 68 SECTION 9.04. Who may attend and vote at meetings 69 SECTION 9.05. Regulations may be made by Trustee 69 Conduct of the meeting 69 Voting rights--quorum 69 Adjournment 70 SECTION 9.06. Manner of voting at meetings and record to be kept 70 ARTICLE TEN. SUPPLEMENTAL INDENTURES. SECTION 10.01. Purposes for which supplemental indentures may be entered into without consent of Holders 71 SECTION 10.02. Modification of Indenture with consent of Holders of 66-2/3% in principal amount of Debt Securities 72 SECTION 10.03. Eject of supplemental indentures 73 Opinion of Counsel 73 SECTION 10.04. Debt Securities may bear notation of changes by supplemental indentures 74 ARTICLE ELEVEN. CONSOLIDATION, MERGER, SALE OR CONVEYANCE. SECTION 11.01. Consolidation and merger of Company and sale or conveyance permitted 74 Assumption of obligations of Company by successor corporation or transferee 74 viii Page ---- SECTION 11.02. Rights and duties of successor corporation 75 Appropriate changes may be made in form of Debt Securities 75 Company may merge or acquire properties of other corporations 75 SECTION 11.03. Opinion of Counsel 75 ARTICLE TWELVE. SATISFACTION AND DISCHARGE OR INDENTURE; UNCLAIMED MONEYS. SECTION 12.01. Satisfaction and discharge of Indenture 76 SECTION 12.02. Application by Trustee of funds deposited for pay- ment of Debt Securities 77 SECTION 12.03. Repayment of moneys held by paying agent 77 SECTION 12.04. Repayment of moneys held by Trustee 77 ARTICLE THIRTEEN. IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS. SECTION 13.01. Incorporators, stockholders, officers and directors of Company exempt from individual liability 78 ARTICLE FOURTEEN. MISCELLANEOUS PROVISIONS. SECTION 14.01. Successors and assigns of Company bound by Indenture 78 SECTION 14.02. Acts of board, committee or officer of successor corporation valid 78 SECTION 14.03. Surrender of powers by Company 79 SECTION 14.04. Required notices or demands may be served by mail 79 SECTION 14.05. Notices to Holders, Waiver 79 SECTION 14.06. Officers' Certificate and Opinion of Counsel to be furnished upon applications or demands by the Company 80 Statements to be included in each certificate fir opinion with respect to compliance with a condi- tion or covenant 80 SECTION 14.07. Payments due on holidays and non-banking days 81 SECTION 14.08. Provisions required by Trust Indenture Act of 1939 to control 81 SECTION 14.09. New York Contract 81 SECTION 14.10. Indenture may be executed in counterparts 81 ix Page ---- ACCEPTANCE OF TRUST BY TRUSTEE 81 TESTIMONIUM 82 SIGNATURES AND SEALS 82 ACKNOWLEDGEMENT OF COMPANY 83 ACKNOWLEDGEMENT OF TRUSTEE 84 THIS INDENTURE, dated as of the first day of July, 1982, between GENERAL MILLS, INC., a corporation duly organized and existing under the laws of the State of Delaware (hereinafter sometimes referred to as the "Company"), party of the first part, and CONTINENTAL ILLINOIS NATIONAL BANK AND TRUST COMPANY, a national banking association duly organized and existing under the laws of the United States of America and authorized to accept and execute trusts, as Trustee (hereinafter sometimes referred to as the "Trustee"), party of the second part, WITNESSETH: The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of its unsecured debentures, notes or other evidences of indebtedness to be issued in one or more series (herein called the "Debt Securities"), as in this Indenture provided, up to such principal amount or amounts as may from time to time be authorized in or pursuant to one or more resolutions of the Finance Committee of the Board of Directors. AND WHEREAS, All things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done. Now, THEREFORE, THIS INDENTURE WITTNESSETH: For and in consideration of the premises and the purchase of the Debt Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Debt Securities or of series thereof, as follows: ARTICLE ONE. DEFINITIONS. SECTION 1.01. The terms defined in this Section 1.01 (except as herein otherwise expressly provided or unless the context otherwise requires) for all purposes of this Indenture and of any indenture supplemental hereto shall have the respective meanings specified in this Section1.01. All other terms used in this Indenture which are defined in the Trust Indenture Act of 1939, as amended, or which are by reference therein defined in the Securities Act of 1933, as amended, shall (except as herein otherwise expressly provided or unless the context otherwise requires) have the meanings assigned to such terms in said Trust Indenture Act or in said Securities Act as in force at the date of this Indenture as originally executed. All accounting terms used herein and not expressly defined shall have the meanings assigned to such terms in accordance with generally accepted accounting principles, and the term "generally accepted accounting principles" means such accounting principles as are generally accepted at the time of any computation. 2 AUTHENTICATING AGENT: The term "Authenticating Agent" shall mean any agent or agents of the Trustee which at the time shall be appointed and acting pursuant to Section 7.14. AUTHORIZED NEWSPAPER: The term "Authorized Newspaper" shall mean a newspaper of general circulation in the relevant area, printed in the English language and customarily published on each Business Day, whether or not published on Saturdays, Sundays or holidays. Whenever successive weekly publications in an Authorized Newspaper are authorized hereunder, they may be made (unless otherwise expressly provided herein) on the same or different days of the week and in the same or different Authorized Newspapers. BOARD OF DIRECTORS: The term "Board of Directors" shall mean the Board of Directors of the Company or the duly authorized Finance Committee of the Board of Directors, or any other Committee of that Board duly authorized to act hereunder. BUSINESS DAY: The term "Business Day" means any day other than a day on which banking institutions in the City of Chicago, Illinois, or the applicable Place of Payment are authorized or required by law to close. COMPANY: The term "Company" shall mean General Mills, Inc. and, subject to the provisions of Article Eleven, shall also include its successors and assigns. COUPON DEBT SECURITY: The term "Coupon Debt Security" shall mean any Debt Security authenticated and delivered with one or more interest coupons appertaining thereto. DEBT SECURITIES: The term "Debt Securities" has the meaning stated in the first recital of this Indenture and more particularly means any Debt Securities authenticated and delivered under this Indenture. 3 DEBT SECURITY REGISTER: The term "Debt Security Register" has the meaning specified in Section 2.05. EVENT OF DEFAULT: The term "Event of Default" shall mean any event specified in Section 6.01. FULLY REGISTERED DEBT SECURITY: The term "Fully Registered Debt Security" shall mean any Debt Security registered as to principal and interest. HOLDER: The term "Holder", when used with respect to any Debt Security, shall mean the bearer of an Unregistered Debt Security or a Registered Holder of a Registered Debt Security, and, when used with respect to any coupon, shall mean the bearer thereof. INDENTURE: The term "Indenture" shall mean this instrument as originally executed, or, if amended or supplemented as herein provided, as so amended or supplemented, or both, and shall include the form and terms of a particular series of Debt Securities established as contemplated hereunder. INTEREST: The term "interest" when used with respect to an Original Issue Discount Security which by its terms bears interest only after maturity, shall mean interest payable after maturity. OFFICERS' CERTIFICATE: The term "Officers' Certificate" shall mean a certificate signed by the Chairman of the Board, a Vice Chairman, or a Vice President and by the Controller, the Treasurer, an Assistant Controller, or Assistant Treasurer, or any other accounting officer of the Company. Each such certificate shall include the statements provided for in Section 14.06, if and to the extent required by the provisions thereof. OPINION OF COUNSEL: The term "Opinion of Counsel" shall mean an opinion in writing signed by legal counsel, who shall be satisfactory to the Trustee and who may be an employee of or of counsel to the Company or the Trustee or who may be any 4 other counsel acceptable to the Trustee. Each such opinion shall include the statements provided for in Section 14.06, if and to the extent required by the provisions thereof. ORIGINAL ISSUE DISCOUNT SECURITY: The term "Original Issue Discount Security" shall mean any Debt Security which provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the maturity thereof pursuant to Section 6.01. OUTSTANDING: The term "Outstanding", when used with reference to Debt Securities, shall, subject to the provisions hereof, mean, as of any particular time, all Debt Securities authenticated and delivered by the Trustee under this Indenture, except: (a) Debt Securities theretofore cancelled by the Trustee or delivered to the Trustee for cancellation; (b) Debt Securities, or portions thereof, for the payment or redemption of which moneys in the necessary amount shall have been deposited in trust with the Trustee or with any paying agent (other than the Company) or shall have been set aside and segregated in trust by the Company (if the Company shall act as its own paying agent), provided that if such Debt Securities are to be redeemed prior to the maturity thereof, notice of such redemption shall have been duly given pursuant to this Indenture, or provision therefor satisfactory to the Trustee shall have been made; and (c) Debt Securities in lieu of or in substitution for which other Debt Securities shall have been authenticated and delivered pursuant to the terms of Section 2.06. In determining whether the Holders of the requisite principal amount of Outstanding Debt Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, the principal amount of an Original Issue Discount Security that shall be deemed to be Outstanding for such purposes shall be the amount of the principal thereof that would be due and payable as of the date of such determination upon a declaration of acceleration of the maturity thereof pursuant to Section 6.01. PERSON: The term "Person" shall mean any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. PLACE OF PAYMENT: 5 The term "Place of Payment" shall mean a city or any political subdivision thereof designated as such pursuant to Section 2.02. PRINCIPAL CORPORATE TRUST OFFICE OF THE TRUSTEE: The term "Principal Corporate Trust Office of the Trustee" shall mean the principal office of the Trustee at which at any particular time its corporate trust business shall be administered, which, at the date of this Indenture, is 30 North LaSalle Street, Chicago, Illinois. PRINCIPAL PROPERTY: The term "Principal Property" shall mean any flour mill, manufacturing plant, packaging plant or research laboratory owned by the Company or any Restricted Subsidiary (whether located on land owned or leased by the Company or a Restricted Subsidiary) as of the date of this Indenture (and any future additions or improvements thereto) and located within the United States of America or Canada. RECORD DATE: The term "record date" as used with respect to any semi-annual interest payment date shall have the meaning specified pursuant to Section 2.02. REDEMPTION PRICE: The term "Redemption Price" when used with respect to any Debt Security to be redeemed, shall mean the price at which it is to be redeemed pursuant to this Indenture. REGISTERED COUPON DEBT SECURITY: The term "Registered Coupon Debt Security" shall mean any Coupon Debt Security registered as to principal only. REGISTERED DEBT SECURITY: The term "Registered Debt Security" shall mean any Debt Security registered in the Debt Security Register. REGISTERED HOLDER: The term "Registered Holder" when used with respect to a Registered Debt Security, shall mean the person in whose name such Debt Security is registered in the Debt Security Register. RESPONSIBLE OFFICER: 6 The term "responsible officer" when used with respect to the Trustee shall mean the chairman of the board of directors, the vice chairman of the board of directors, the chairman of the executive committee, the vice chairman of the executive committee, the president, any vice president, the cashier, the secretary, the treasurer, any trust officer, any assistant trust officer, any assistant vice president, any assistant cashier, any assistant secretary, any assistant treasurer, or any other officer or assistant officer of the Trustee customarily performing functions similar to those performed by the persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of his knowledge of and familiarity with the particular subject. RESTRICTED SUBSIDIARY: The term "Restricted Subsidiary" shall mean any Subsidiary other than an Unrestricted Subsidiary. SHAREHOLDERS' OWNERSHIP: The term "Shareholders' Ownership" shall mean the stockholders' equities of the Company and its subsidiaries, determined in accordance with generally accepted accounting principles. SUBSIDIARY: The term "Subsidiary" shall mean (a) any corporation of which at least a majority of the outstanding stock having by the terms thereof ordinary voting power to elect a majority of the board of directors of such corporation, irrespective of whether or not at the time stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency, is at the time directly or indirectly owned or controlled by the Company, and (b) any corporation of which at least a majority of the outstanding stock of the character described in the foregoing clause (a) shall at the time be owned or controlled, directly or indirectly, by the Company and any Subsidiary or Subsidiaries as defined in the foregoing clause (a) or by one or more such Subsidiaries. TRUSTEE: The term "Trustee" shall mean Continental Illinois National Bank and Trust Company of Chicago, Illinois and, subject to the provisions of Article Seven hereof, shall also include its successors in the trust created by this Indenture. 7 TRUST INDENTURE ACT OF 1939: The term "Trust Indenture Act of 1939" (except as herein otherwise expressly provided) shall mean the Trust Indenture Act of 1939, as amended, as in force at the date of this Indenture as originally executed. UNITED STATES OF AMERICA: The term "United States of America" shall mean the fifty States constituting the United States of America as of the date of this Indenture. UNREGISTERED DEBT SECURITY: The term "Unregistered Debt Security" shall mean any Coupon Debt Security, or bearer Debt Security (including any temporary bearer Debt Security), not registered as to principal. UNRESTRICTED SUBSIDIARY: The term "Unrestricted Subsidiary" shall mean: (a) Any Subsidiary, the greater portion of the operating assets of which is located, or the principal business of which is carried on, outside the United States of America and Canada or any Subsidiary which, during the twelve most recent calendar months (or such shorter period as shall have elapsed since its organization) derived the major portion of its gross revenues from sources outside the United States of America or Canada; (b) Any Subsidiary, the principal business of which consists of the financing or assisting in financing of dealers, distributors or other customers to facilitate (i) the acquisition or disposition of products of the Company or any Subsidiary or (ii) obtaining equipment or machinery used in connection with such acquisition or disposition; (c) Any Subsidiary, the principal business of which consists of the owning, leasing, dealing in or development of real property; (d) Any Subsidiary, substantially all the assets of which consist of securities of an Unrestricted Subsidiary as defined in clauses (a) through (c) hereof. VALUE: The term "Value" when used in connection with a sale and leaseback transaction shall mean, at any date as of which the amount thereof is to be determined, the total net amount of rent (discounted from the respective due dates thereof at the rate of interest per annum borne by all series of the Debt Securities compounded annually) required to be paid by the lessee under such lease during the remaining term thereof. The net amount of rent required to be 8 paid under any such lease for any such period shall be the total amount of the rent payable by the lessee with respect to such period, but may exclude amounts required to be paid on account of maintenance and repairs, insurance, taxes, assessments, water rates and similar charges. In the case of any lease which is terminable by the lessee upon the payment of a penalty, such net amount shall also include the amount of such penalty, but no rent shall be considered as required to be paid under such lease subsequent to the first date upon which it may be so terminated. All accounting terms not otherwise defined herein shall have the meanings assigned to them in accordance with generally accepted accounting principles. YIELD TO MATURITY: The term "Yield to Maturity" shall mean the yield to maturity, calculated at the time of issuance of a series of Debt Securities or, if applicable, at the most recent redetermination of interest on such series and calculated in accordance with accepted financial practice. ARTICLE TWO. FORMS, ISSUE, DESCRIPTION, EXECUTION, REGISTRATION, TRANSFER AND EXCHANGE OF DEBT SECURITIES. SECTION 2.01. The Debt Securities of each series and the coupons, if any, appurtenant thereto shall be in substantially the form as shall be established by or pursuant to a resolution of the Board of Directors or in one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with any law or with any rules made pursuant thereto or with any rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Debt Securities and coupons, if any, as evidenced by their execution of such Debt Securities and coupons, if any. The definitive-Debt Securities and coupons, if any, may be engraved as a whole or in part and may have such letters, numbers or other marks of identification or designation and such legends or endorsements printed, lithographed or engraved thereon as may be required to comply with any law or with any rule or regulation made pursuant thereto, or, if not inconsistent with the provisions of this Indenture, as the Company may deem appropriate or as may be required to comply with any rule or regulation of any stock exchange on which the Debt Securities may be listed, or to conform to usage. The Trustee's certificate of authentication on all Debt Securities authenticated by the Trustee shall be in substantially the following form: TRUSTEE'S CERTIFICATE OF AUTHENTICATION 9 This is one of the Debt Securities of the series designated therein referred to in the within-mentioned Indenture. CONTINENTAL ILLINOIS NATIONAL BANK AND TRUST COMPANY OF CHICAGO as Trustee By ------------------------------------------ Authorized Officer An Authenticating Agent's certificate of authentication on all Debt Securities authenticated by the Authenticating Agent shall be in substantially the following form: AUTHENTICATING AGENT'S CERTIFICATE OF AUTHENTICATION This is one of the Debt Securities of the series designated therein referred to in the within-mentioned Indenture. As Authenticating Agent for the Trustee By ------------------------------------------ Authorized Officer Section 2.02. The Debt Securities may be issued in one or more series. There shall be established in or pursuant to a resolution of the Board of Directors or established in one or more indentures supplemental hereto, prior to the issuance of Debt Securities of any series, (1) the title of the Debt Securities of the series (which shall distinguish the Debt Securities of the series from all other Debt Securities); (2) any limit upon the aggregate principal amount of the Debt Securities of the series which may be authenticated and delivered under this Indenture (except for Debt Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Debt Securities of the series pursuant to Section 2.05, 2.06, 2.07, 3.04, or 10.04); (3) the date or dates on which the principal and premium, if any, of the Debt Securities of the series is payable; 10 (4) the rate or rates (or method by which determined) at which the Debt Securities of the series shall bear interest, if any, the date or dates from which such interest shall accrue, the interest payment dates on which such interest shall be payable and, in the case of Registered Debt Securities, the record dates for the determination of Holders to whom such interest is payable; (5) if an Original issue Discount Security, the Yield to Maturity; (6) the place or places (the "Place of Payment") where the principal of, and premium, if any, and any interest on Debt Securities of the series shall be payable; (7) the price or prices at which, the period or periods within which and the terms and conditions upon which Debt Securities of the series may be redeemed, in whole or in part, at the option of the Company, pursuant to any sinking fund or otherwise; (8) the obligation, if any, of the Company to redeem, purchase or repay Debt Securities of the series pursuant to any sinking fund or analogous provisions or at the option of a Holder thereof and the price or prices at which and the period or periods within which and the terms and conditions upon which Debt Securities of the series shall be redeemed, purchased or repaid, in whole or in part, pursuant to such obligation; (9) if other than denominations of $1,000 and any integral multiple thereof, the denominations in which Debt Securities of the series shall be issuable; (10) if other than the principal amount thereof, the portion of the principal amount of Debt Securities of the series which shall be payable upon declaration of acceleration of the maturity thereof pursuant to Section 6.01 or provable in bankruptcy pursuant to Section 6.02; (11) any Events of Default with respect to the Debt Securities of a particular series, if not set forth herein; (12) whether the Debt Securities shall be issued in registered or bearer form, with or without coupons; and (13) any other terms of the series (which terms shall not be inconsistent with the provisions of this Indenture). All Debt Securities of any one series shall be substantially identical except as to denomination and except that Debt Securities of any series may be issuable as Registered Debt Securities or Unregistered Debt Securities, and except as may otherwise be provided in or pursuant to such resolution of the Board of Directors or in any such indenture supplemental hereto. SECTION 2.03. The Debt Securities of each series shall be issuable in such form and in such denominations as shall be specified as contemplated by 11 Section 2.02. In the absence of any such specification with respect to the Debt Securities of any series, the Debt Securities of such series shall be issuable in denominations of $1,000 and any integral multiple thereof. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Debt Securities of any series executed by the Company to the Trustee for authentication, provided that in the case of Coupon Debt Securities, the appropriate coupons must be attached. Except as otherwise provided in this Article Two, the Trustee shall thereupon authenticate, or cause the Authenticating Agent to authenticate, and deliver said Debt Securities to or upon the written order of the Company, signed by the Chairman of the Board, a Vice Chairman or any Executive Vice President and by the Treasurer or any Assistant Treasurer. In authenticating, or causing to be authenticated, such Debt Securities and accepting the additional responsibilities under this Indenture in relation to such Debt Securities, the Trustee and the Authenticating Agent shall be entitled to receive, and (subject to Section 7.01) shall be fully protected in relying upon: (1) a copy of any resolution or resolutions of the Board of Directors relating thereto and, if applicable, an appropriate record of any action taken pursuant to such resolution, in each case certified by the Secretary or an Assistant Secretary of the Company; (2) an executed supplemental indenture, if any; (3) an Officers' Certificate setting forth the form and terms of the Debt Securities as required pursuant to Sections 2.01 and 2.02, respectively; and (4) an Opinion of Counsel prepared in accordance with Section 14.06 which shall also state: (a) that the form of such Debt Securities has been established by or pursuant to a resolution of the Board of Directors or by a supplemental indenture as permitted by Section 2.01 in conformity with the provisions of this Indenture; (b) that the terms of such Debt Securities have been established by or pursuant to a resolution of the Board of Directors or by a supplemental indenture as permitted by Section 2.02 in conformity with the provisions of this Indenture; 12 (c) that such Debt Securities, when authenticated and delivered by the Trustee or the Authenticating Agent and issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and legally binding obligations of the Company, enforceable in accordance with their terms, subject to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting the enforcement of creditors' rights and to general equity principles; (d) that all laws and requirements in respect of the execution and delivery by the Company of the Debt Securities have been complied with and that authentication and delivery of the Debt Securities by the Trustee or the Authenticating Agent will not violate the terms of the Indenture; and (e) such other matters as the Trustee may reasonably request. The Trustee shall have the right to decline to authenticate and deliver, or to cause the Authenticating Agent to decline to authenticate and deliver, any Debt Securities under this Section if the Trustee, being advised by counsel, determines that such action may not lawfully be taken or if the Trustee in good faith by its Board of Directors or trustees, executive committee, or a trust committee of directors or trustees and/or vice presidents shall determine that such action would expose the Trustee or the Authenticating Agent to personal liability to existing Holders. Each Debt Security shall be dated the date of its authentication. SECTION 2.04. The Debt Securities and coupons, if any, shall be signed on behalf of the Company by its Chairman of the Board or a Vice Chairman or a Vice President and by its Secretary or Treasurer or an Assistant Secretary or Assistant Treasurer under its corporate seal which may, but need not, be attested by its Secretary or an Assistant Secretary. Each such signature of the Chairman of the Board, a Vice Chairman, a Vice President, the Secretary, the Treasurer, an Assistant Secretary or an Assistant Treasurer upon the Debt Securities and coupons, if any, may be in the form of a facsimile signature of the present or any future Chairman of the Board, Vice Chairman, Vice President, Secretary, Treasurer, Assistant Secretary or Assistant Treasurer and may be imprinted or otherwise reproduced on the Debt Securities and coupons, if any. The seal of the Company may be in the form of a facsimile thereof and may be impressed, affixed, imprinted or otherwise reproduced on the Debt Securities and coupons, if any. Only such Debt Securities as shall bear thereon a certificate of authentication duly executed by the Trustee or the Authenticating Agent shall be entitled to the benefits of this Indenture or be valid or obligatory for any purpose. No coupon shall be entitled to the benefits of this Indenture or become valid or obligatory for any purpose until such certificate by the Trustee or the Authenticating Agent shall have become duly executed on the Debt Security to 13 which such coupon is appurtenant. Such certificate by the Trustee or the Authenticating Agent upon any Debt Security executed by the Company shall be conclusive evidence that the Debt Security so authenticated has been duly authenticated and delivered hereunder and that the Holder of such Debt Security is entitled to the benefits of this Indenture. In case any officer Company who shall have signed any of the Debt Securities or coupons shall cease to be such officer before the Debt Securities so signed, or the Debt Securities to which such coupon appertains, shall have been authenticated and delivered by the Trustee or the Authenticating Agent, or disposed of by the Company, such Debt Securities nevertheless may be authenticated and delivered or disposed of as though such person had not ceased to be such officer of the Company; and any Debt Security or coupon may be signed on behalf of the Company by any person who, at the actual date of the execution of such Debt Security or coupon, shall be a proper officer of the Company to sign such Debt Security or coupon, although at the date of the execution of this Indenture any such person was not such officer. SECTION 2.05. Registered Debt Securities of any series may be exchanged for a like aggregate principal amount and maturity of Registered Debt Securities of the same series in other authorized denominations. Registered Debt Securities to be exchanged shall be surrendered at the office or agency to be maintained by the Company as provided in Section 4.02, and the Company shall execute and register and the Trustee shall authenticate and deliver in exchange therefor the Registered Debt Security or Registered Debt Securities which the Holder making the exchange shall be entitled to receive. The Company shall keep, at the office or agency to be maintained by the Company as provided in Section 4.02, a register or registers (the "Debt Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Debt Securities which by their terms are registrable and transfers of Registered Debt Securities as in this Article Two provided. The Debt Security Register shall be in written form or in any other form capable of being converted into written form within a reasonable time. Upon surrender for registration of transfer of any Registered Debt Security of any series at such office or agency, the Company shall execute and the Trustee shall authenticate and deliver in the name of the transferee or transferees a new Registered Debt Security or Registered Debt Securities of the same series for a like aggregate principal amount and maturity. Upon presentation for registration of any Unregistered Debt Security of any series which by its terms is registrable as to principal at the office agency of the Company for such purpose as provided in Section 4.02, such Debt Security shall be registered as to principal in the name of the Holder thereof and such registration shall be noted on such Debt Security. Any Debt Security so registered shall be transferable on the Debt Security Register, upon presentation of such Debt Security at such office or agency for similar notation thereon, but such Debt Security may be discharged from registration by being in like manner transferred to bearer, whereupon transferability by delivery shall be restored. 14 Unregistered Debt Securities shall continue to be subject to successive registrations and discharges from registration at the option of the Holders thereof. Coupon Debt Securities shall be transferable by delivery except while registered as to principal. Registration of any Coupon Debt Security shall not affect the transferability by delivery of the coupons appertaining thereto, which shall continue to be payable to bearer and transferable by delivery. At the option of the Holder thereof, Coupon Debt Securities of any series which by their terms are registrable as to principal and interest may be exchanged for Fully Registered Debt Securities of such series of any authorized denominations and of a like aggregate principal amount and stated maturity, upon surrender of the Coupon Debt Securities to be exchanged at such office or agency with all unmatured coupons and all matured coupons in default thereto appertaining, and upon payment, if the Company shall so require, of the charges hereinafter provided. At the option of the Holder thereof, Fully Registered Debt Securities of any series, which by their terms provide for the issuance of Coupon Debt Securities, may be exchanged for Coupon Debt Securities or Fully Registered Debt Securities of such series, of any authorized denominations and of a like aggregate principal amount and stated maturity, upon surrender of the Debt Securities to be exchanged at such office agency, and upon payment if the Company shall so require, of the charges hereinafter provided. Whenever any Debt Securities are so surrendered for exchange, the Company shall execute, and the Trustee or Authenticating Agent shall authenticate and deliver, the Debt Securities which the Holder making the exchange is entitled to receive. All Debt Securities issued upon any registration of transfer or exchange of Debt Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Debt Securities surrendered upon such registration of transfer or exchange. All Registered Debt Securities presented or surrendered for registration of transfer, exchange, redemption or payment shall (if so required by the Company or the Trustee) be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Company and the Trustee and duly executed by, the Holder or his attorney duly authorized in writing. The Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any exchange, registration of transfer or transfer of Debt Securities. No service charge shall be made for any such transaction. The Company shall not be required to issue, register the transfer of or exchange (a) any Debt Securities for a period of 15 days next preceding any mailing of notice of redemption of such Debt Securities to be redeemed or (b) any Debt Securities selected, called or being called for redemption except, in the case of any Debt Security to be redeemed in part, the portion thereof not to be redeemed. 15 SECTION 2.06. Pending the preparation of definitive Debt Securities of any series, the Company may execute and, where the form of definitive Debt Securities provides for registration of the definitive Debt Securities, register and the Trustee or the Authenticating Agent shall authenticate and deliver temporary Debt Securities (printed, lithographed or typewritten). Temporary Debt Securities may be of any authorized denomination and substantially in the form of the definitive Debt Securities of such series, but with such omissions, insertions and variations as may be appropriate for temporary Debt Securities, all as may be determined by the Company. Temporary Debt Securities may be issued without a recital of the specific redemption prices set forth in the form of Debt Security hereinabove recited, and may contain such reference to any provisions of this Indenture as may be appropriate. Every temporary Debt Security shall be executed and, where the form of definitive Debt Securities provides for registration of the definitive Debt Securities, registered by the Company and be authenticated by the Trustee or the Authenticating Agent upon the same conditions and in substantially the same manner, and with like effect, as the definitive Debt Securities. Without unnecessary delay the Company shall execute and, where the form of definitive Debt Securities provides for registration of the definitive Debt Securities, register and shall furnish definitive Debt Securities of such series and thereupon temporary Debt Securities of such series may be surrendered in exchange therefor at the office or agency to be maintained by the Company as provided in Section 4.02, and the Trustee or the Authenticating Agent shall authenticate and deliver in exchange for such temporary Debt Securities of such series a like aggregate principal amount and maturity of definitive Debt Securities of the same series of authorized denominations. Such exchange shall be made by the Company at its own expense without any charge therefor. Until so exchanged, the temporary Debt Securities of any series shall be entitled to the same benefits under this Indenture as definitive Debt Securities of such series. SECTION 2.07. In case any temporary or definitive Debt Security or any coupon attached to any such Debt Security shall become mutilated or be destroyed, lost or stolen, the Company in its discretion may execute and, in the case of a Registered Debt Security, register, and upon its request the Trustee or the Authenticating Agent shall authenticate and deliver (in the case of a mutilated Debt Security or coupon, upon its surrender to the Trustee), a new Debt Security of the same series, bearing a number not contemporaneously outstanding, in exchange for or in lieu of and substitution for any such mutilated, destroyed, lost or stolen Debt Security or the Coupon Debt Security to which such mutilated, destroyed, lost or stolen coupon appertains. In every case the applicant for a substitute Debt Security shall furnish to the Company and to the Trustee such security or indemnity as may be required by them to save each of them harmless, and, in every case of destruction, loss or theft, the applicant shall also furnish to the Company and the Trustee evidence to their satisfaction of the destruction, loss or theft of such Debt Security or coupon, as the case may be, and of the ownership thereof. The Trustee or the Authenticating Agent may authenticate any such substitute Debt Security and deliver the same upon the written request or authorization of any officer of the Company. Upon the 16 issuance of any substitute Debt Security, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses connected therewith. In case any Debt Security or coupon which has matured or is about to mature shall become mutilated or be destroyed, lost or stolen, the Company may, instead of issuing a substitute Debt Security, pay or authorize the payment of such Debt Security or coupon (without surrender thereof except in the case of a mutilated Debt Security or coupon) if the applicant for such payment shall furnish to the Company and to the Trustee such security or indemnity as they may require to save each of them harmless and, in case of destruction, loss or theft, evidence to the satisfaction of the Company and the Trustee of the destruction, loss or theft of such Debt Security or coupon and of the ownership thereof. Every substitute Debt Security (and appurtenant coupons) issued pursuant to the provisions of this Section 2.07 by virtue of the fact that a Debt Security or coupon was destroyed, lost or stolen shall constitute an additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Debt Security or coupon shall at any time be enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Debt Securities and coupons of that series duly issued under this Indenture. All Debt Securities and coupons shall be held and owned upon the express condition that, to the extent permitted by law, the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, destroyed, lost or stolen Debt Securities or coupons and shall preclude any and all other rights or remedies, notwithstanding any law or statute now existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities or coupons without their surrender. SECTION 2.08. All Debt Securities surrendered for payment, redemption, registration of transfer, or exchange, and all coupons surrendered for payment, shall, if surrendered to the Company, the Authenticating Agent or any paying agent, be delivered to the Trustee for cancellation, or, if surrendered to the Trustee, be cancelled by it, and no Debt Securities or coupons shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Indenture or such Debt Securities. Unless otherwise requested by the Company, the Trustee shall destroy cancelled Debt Securities and coupons and deliver a certificate of such destruction to the Company. If the Company shall acquire any of the Debt Securities or coupons, however, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Debt Securities or coupons unless and until the same are delivered or surrendered to the Trustee for cancellation. SECTION 2.09. Nothing in this Indenture or in the Debt Securities, expressed or implied, shall give or be construed to give to any person other than the parties hereto and the Holders any legal or equitable right, remedy or claim under or in respect of this Indenture, or under any covenant, condition or provision herein contained, all the covenants, conditions and provisions hereof being for the sole benefit of the parties hereto and of the Holders. 17 SECTION 2.10. Interest Rights Preserved. Each Debt Security of any series delivered under this Indenture upon transfer of or in exchange for or in lieu of any other Debt Security of such series shall carry all the rights to interest accrued and unpaid, and to accrue, which were carried by such other Debt Security of such series, and each such Debt Security of such series shall be so dated, or have attached thereto such coupons, that neither gain nor loss in interest shall result from such transfer, exchange or substitution. ARTICLE THREE. REDEMPTION OF DEBT SECURITIES. SECTION 3.01. The provisions of this Article shall be applicable to the Debt Securities of any series which are redeemable before their maturity except as otherwise specified as contemplated by Section 2.02 for Debt Securities of such series. The Company may at its option redeem all or from time to time any part of the Debt Securities of any series in accordance with their terms, at any time prior to maturity. SECTION 3.02. In case the Company shall desire to exercise such right to redeem all or any part of the Debt Securities of any series in accordance with their terms, it shall fix a date for redemption and shall give notice of such redemption to the Holders of such series to be redeemed as a whole or in part in the manner provided in Section 14.05, not less than 30 nor more than 60 days prior to the date fixed for redemption. Any notice which is given in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the Holder receives the notice. In any case, failure duly to give notice in the manner provided in Section 14.05, or any defect in the notice, to the Holder of any Debt Security of a series designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Debt Security of such series. Each such notice of redemption shall specify the date fixed for redemption and the Redemption Price and shall state that payment of the Redemption Price of the Debt Securities or portions thereof to be redeemed will be made at the office or agency to be maintained by the Company as provided in Section ax.02 upon presentation and surrender of such Debt Securities and all unmatured coupons appertaining thereto, that interest, if any, accrued to the date fixed for redemption will be paid as specified in said notice, and that on and after said date interest, if any, thereon or on the portions thereof to be redeemed will cease to accrue. If less than all the Debt Securities of a series are to be redeemed, the notice of redemption shall specify which of such Debt Securities of that series are to be redeemed in whole or in part. In case any Debt Security is to be redeemed in part only, the notice shall state the portion of the principal amount thereof to be redeemed and shall state that on and after the date fixed for redemption, upon surrender of such Debt Security, a new Debt Security or Debt Securities of that series in principal amount equal to the unredeemed portion thereof will be issued. 18 If less than all the Debt Securities of a series are to be redeemed, the Company shall give the Trustee adequate notice (but in no event less than 50 days' notice unless the Trustee shall otherwise agree) in advance as to the aggregate principal amount and maturity of Debt Securities of that series to be redeemed, and thereupon the Trustee shall select in such manner as it shall deem appropriate and fair, the Debt Securities of that series to be redeemed and shall thereafter promptly notify the Company in writing of the Debt Securities to be redeemed; provided, however, that no Debt Security of a denomination of $1,000 shall be redeemed in part and Debt Securities may be redeemed in part only in multiples of $1,000. On or before the Business Day next preceding any date fixed for redemption, the Company shall deposit with the Trustee or with a paying agent (or, if the Company is acting as its own paying agent, segregate and hold in trust as provided in Section 4.11) an amount of money sufficient to pay the Redemption Price of, and accrued interest, if any, on all the Debt Securities of such series or proportions thereof which are to be redeemed on the date fixed for redemption. SECTION 3.03. The provisions of this Section shall be applicable to any sinking fund for the retirement of Debt Securities of a series except as otherwise specified as contemplated by Section 2.02 for Debt Securities of such series. The minimum amount of any sinking fund payment provided for by the terms of Debt Securities of any series is herein referred to as a "mandatory sinking fund payment," and any payment in excess of such minimum amount provided for by the terms of Debt Securities of any series is herein referred to as an "optional sinking fund payment." In lieu of making all or any part of any mandatory sinking fund payment with respect to any series of Debt Securities in cash, the Company may at its option (a) deliver to the Trustee Debt Securities of that series theretofore purchased or otherwise acquired by the Company, or (b) receive credit for the principal amount of Debt Securities of that series which have been redeemed either at the election of the Company pursuant to the terms of such Debt Securities or through the application of permitted optional sinking fund payments pursuant to the terms of such Debt Securities; provided that such Debt Securities have not been previously so credited. Such Debt Securities shall be received and credited for such purpose by the Trustee at the Redemption Price specified in such Debt Securities for redemption through operation of the sinking fund and the amount of such mandatory sinking fund payment shall be reduced accordingly. Not less than 50 days prior to each sinking fund payment date for any series of Debt Securities, the Company will deliver to the Trustee a certificate signed by the Treasurer or any Assistant Treasurer of the Company specifying the amount of the next ensuing sinking fund payment for that series pursuant to the terms of that series, the portion thereof, if any, which is to be satisfied by payment of cash and the portion thereof, if any, which is to be satisfied by delivering and crediting Debt Securities of that series pursuant to this Section 3.03 (which Debt Securities will accompany such certificate) and whether the Company intends to 19 exercise its right to make a permitted optional sinking fund payment with respect to such series. Such certificate shall also state that no Event of Default has occurred and is continuing with respect to such series. Such certificate shall be irrevocable and upon its delivery the Company shall be obligated to make the cash payment or payments therein referred to, if any, on or before the next succeeding sinking fund payment date. In the case of the failure of the Company to deliver such certificate (or to deliver the Debt Securities specified in this paragraph), the sinking fund payment due on the next succeeding sinking fund payment date for that series shall be paid entirely in cash and shall be sufficient to redeem the principal amount of such Debt Securities subject to a mandatory sinking fund payment without the option to deliver or credit Debt Securities as provided in this Section 3.03 and without the right to make any optional sinking fund payment with respect to such series. Any sinking fund payment or payments (mandatory or optional) made in cash plus any unused balance of any preceding sinking fund payments made in cash which shall equal or exceed $100,000 (or a lesser sum if the Company shall so request) with respect to the Debt Securities of any particular series shall be applied by the Trustee on the sinking fund payment date on which such payment is made (or, if such payment is made before a sinking fund payment date, on the sinking fund payment date following the date of such payment) to the redemption of such Debt Securities at the Redemption Price specified in such Debt Securities for operation of the sinking fund together with accrued interest, if any, to the date fixed for redemption. Any sinking fund moneys not so applied or allocated by the Trustee to the redemption of Debt Securities shall be added to the next cash sinking fund payment received by the Trustee for such series and, together with such payment, shall be applied in accordance with the provisions of this Section 3.03. Any and all sinking fund moneys with respect to the Debt Securities of any particular series held by the Trustee on the last sinking fund payment date with respect to Debt Securities of such series and not held for the payment or redemption of particular Debt Securities shall be applied by the Trustee, together with other moneys, if necessary, to be deposited sufficient for the purpose, to the payment of the principal of the Debt Securities of that series at maturity. The Trustee shall select the Debt Securities to be redeemed upon such sinking fund payment date in the manner specified in Section 3.02 and the Company shall cause notice of the redemption thereof to be given in the manner provided in Section 3.02 except that the notice of redemption shall also state that the Debt Securities are being redeemed by operation of the sinking fund. Such notice having been duly given, the redemption of such Debt Securities shall be made upon the terms and in the manner stated in Section 3.04. On or before each sinking fund payment date, the Company shall pay to the Trustee in cash a sum equal to any interest accrued to the date fixed for redemption of Debt Securities or portions thereof to be redeemed on such sinking fund payment date pursuant to this Section 3.03. 20 The Trustee shall not redeem any Debt Securities of a series with sinking fund moneys or give any notice of redemption of such Debt Securities by operation of the sinking fund for such series during the continuance of a default in payment of interest on such Debt Securities or of any Event of Default (other than an Event of Default occurring as a consequence of this paragraph) with respect to such Debt Securities, except that if the notice of redemption of any such Debt Securities shall theretofore have been given in accordance with the provisions hereof, the Trustee shall redeem such Debt Securities if cash sufficient for that purpose shall be deposited with the Trustee for that purpose in accordance with the terms of this Article. Except as aforesaid, any moneys in the sinking fund for such series at the time when any such default or Event of Default shall occur and any moneys thereafter paid into such sinking fund shall, during the continuance of such default or Event of Default, be held as security for the payment of such Debt Securities; provided, however, that in case such Event of Default or default shall have been cured or waived as provided herein, such moneys shall thereafter be applied on the next sinking fund payment date for such Debt Securities on which such moneys may be applied pursuant to the provisions of this Section 3.03. SECTION 3.04. If the giving of notice of redemption shall have been completed as above provided, the Debt Securities or portions of Debt Securities specified in such notice shall become due and payable on the date and at the place stated in such notice at the applicable Redemption Price, together with interest, if any, accrued to the date fixed for redemption, and unless the Company shall default in the payment of such Debt Securities at the Redemption Price, together with interest, if any, accrued to said date, interest on the Debt Securities or portions of Debt Securities so called for redemption shall cease to accrue on and after said date. If any Debt Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal (and premium, if any) shall, until paid, bear interest from the date axed for redemption at the rate borne by the Debt Securities. On presentation and surrender of such Debt Securities and all unmatured coupons appertaining thereto at said Place of Payment in said notice specified, such Debt Securities or the specified portions thereof shall be paid and redeemed by the Company at the applicable Redemption Price, together with interest, if any, accrued thereon to the date axed for redemption. Upon presentation of any Debt Security which is redeemed in part only, the Company shall execute and, in the case of Registered Debt Securities, register and the Trustee or the Authenticating Agent shall authenticate and deliver, at the expense of the Company, a new Debt Security or Debt Securities in an authorized denomination or denominations and in the principal amount equal to the unredeemed portion of the Debt Security so presented. ARTICLE FOUR. PARTICULAR COVENANTS OF THE COMPANY. SECTION 4.01. The Company covenants and agrees for the benefit of the Holders of each series of Debt Securities that it will duly and punctually pay or 21 cause to be paid the principal of and premium, if any, and interest on the Debt Securities of that series at the places, at the respective times and in the manner provided in such Debt Securities. Each installment of interest on interest-bearing Registered Debt Securities of any series may be paid by mailing checks for such interest payable to or upon the written order of the Holders of such Registered Debt Securities entitled thereto as they shall appear on the Debt Security Register. The interest on Coupon Debt Securities shall be payable only upon presentation and surrender of the several coupons for such interest installments as are evidenced thereby as they severally mature. The interest on any temporary bearer Debt Securities shall be paid, as to the installments of interest evidenced by coupons attached thereto, if any, only upon presentation and surrender thereof, and, as to the other installments of interest, if any, only upon presentation of such Debt Securities for notation thereon of the payment of such interest. The interest on Registered Debt Securities shall be payable only to or upon the written order of the Holders thereof. SECTION 4.02. As long as any of the Debt Securities of a series remain outstanding, the Company will maintain an office or agency in the City of New York, New York, in the City of Chicago, Illinois, and in any other Place of Payment, where the Debt Securities may be presented for exchange and registration of transfer as in this Indenture provided, where notices and demands to or upon the Company in respect of the Debt Securities of this Indenture may be served and where the Debt Securities and any coupons appurtenant thereto may be presented for payment. The Principal Corporate Trust Office of the Trustee shall be said office or agency for all the aforesaid purposes, unless the Company shall maintain some other office or agency for such purposes and shall give the Trustee notice of the location thereof. In case the Company shall fail to maintain such office or agency, presentations may be made and notices and demands may be served at the Principal Corporate Trust Office of the Trustee and, in such event, the Company hereby appoints the Trustee its agent to receive all such presentations, notices and demands. SECTION 4.03. SO long as any of the Debt Securities remain Outstanding and unpaid, the Company will not create, assume or suffer to exist and will not cause, suffer or permit any Restricted Subsidiary to create, assume or suffer to exist, any mortgage, pledge or other lien or encumbrance of or upon any Principal Property, or of or upon any indebtedness of, or equity securities of, any Restricted Subsidiary, without making effective provision, and the Company covenants that in any such case it will make or cause to be made effective provision, whereby the Debt Securities of each series outstanding shall be secured by such mortgage, pledge, lien or encumbrance equally and ratably with any and all other obligations and indebtedness thereby secured so long as such indebtedness is so secured; provided, that the foregoing covenant shall not apply to any mortgage, pledge, lien or encumbrance of the following character. (a) mortgages, pledges, liens or encumbrances on property included within the foregoing covenant existing at the time of acquisition of such property or to secure the payment of all or any part of the purchase price thereof or to secure any indebtedness incurred at the time of, or within 90 days after, the acquisition 22 of such property for the purpose of financing all or any part of the purchase price thereof; (b) mortgages, pledges, liens or encumbrances existing at the time such corporation became or becomes a Restricted Subsidiary; (c) mortgages, pledges, liens or encumbrances on property of a corporation existing at the time such corporation was or is (i) merged into or consolidated with the Company or a Restricted Subsidiary or (ii) otherwise acquired by the Company or any Restricted Subsidiary; (d) mortgages, pledges, liens or encumbrances executed by any Restricted Subsidiary and exclusively securing indebtedness of such Restricted Subsidiary held by the Company or any other Restricted Subsidiary; (e) liens or encumbrances arising by reason of any judgment, decree or order of any court, so long as any appropriate legal proceedings which may have been duly initiated for the review of such judgment, decree or order shall not have been finally terminated or so long as the period within which such proceedings may be initiated shall not have expired; liens for taxes not yet due or which are being contested in good faith; or pledges or deposits to secure payment of worker's compensation or other insurance; good faith deposits in connection with tenders, contracts (other than contracts for the payment of money) or leases; deposits to secure public or statutory obligations; deposits to secure or in lieu of surety or appeal bonds; or deposits as security for the payment of taxes; (f) extensions, renewals or replacements, in whole or in part, of any mortgage, pledge, lien or encumbrance referred to in the foregoing clauses (a) to (e), inclusive, provided that the principal amount of indebtedness secured thereby shall not exceed the principal amount of indebtedness so secured at the time of such extension, renewal or replacement; and (g) other mortgages, pledges, liens or encumbrances on property included in the foregoing covenant, provided that the sum of the aggregate indebtedness secured by such other mortgages, pledges, liens and encumbrances (exclusive of indebtedness secured by mortgages, pledges, liens and encumbrances permitted by clauses (a) through (f) hereof), and the aggregate Value of sale and leaseback transactions permitted under Section 4.04, shall not exceed an amount equal to 5% of Shareholders' Ownership as of the end of the fiscal quarter of the Company last preceding the date of the computation. The Company covenants and agrees that if, upon any consolidation or merger of the Company with or into any other corporation, or upon any sale or conveyance of the properties and assets of the Company as an entirety or substantially as an entirety to any other corporation, or upon any acquisition by the Company of all or any part of the property of another corporation, any Principal Property of the Company would thereupon become subject to any mortgage, pledge, encumbrance or lien, the Company, prior to such 23 consolidation, merger, sale, conveyance or acquisition, will by indenture supplemental hereto secure the Debt Securities of all series then outstanding (equally and ratably with any other indebtedness of the Company then entitled to similar security) by a direct lien on such Principal Property of the Company prior to all liens other than any theretofore existing thereon. In the event that the Company shall hereafter secure the Debt Securities pursuant to the provisions of this Section 4.03, the Trustee is hereby authorized to enter into an indenture or agreement supplemental hereto and to take such action, if any, as it may deem advisable to enable it to enforce effectively the rights of the Holders of the Debt Securities so secured. Subject to the provisions of Section 7.01, the Trustee may receive an Opinion of Counsel as conclusive evidence that such supplemental indenture or action taken to secure the Debt Securities complies with the provisions of this Section 4.03. SECTION 4.04. The Company will not sell to anyone other than a Restricted Subsidiary any Principal Property, or any substantial portion thereof, with the intention of taking back a lease of such property except a lease for a temporary period, not to exceed three years, by the end of which it is intended that the use of such property by the Company or any Restricted Subsidiary will be discontinued, and the Company will not permit any Restricted Subsidiary to sell to anyone other than the Company or any other Restricted Subsidiary any Principal Property, or any substantial portion thereof, with the intention of taking back a lease of such property except a lease for a temporary period, not to exceed three years, by the end of which it is intended that the use of such property by any Restricted Subsidiary or the Company will be discontinued; provided, however, that the Company may make or may permit a Restricted Subsidiary to make such a sale if, in the alternative, either (a) the Company or a Restricted Subsidiary would be permitted under Section 4.03 to permit a mortgage, pledge, lien or encumbrance on a Principal Property securing indebtedness equal in amount to the Value of such sale and leaseback transaction without equally and ratably securing the Debt Securities; or (b) the net proceeds of such sale (including any purchase money mortgages received in connection with such sale) are at least equal to the fair value (as determined by the Board of Directors) of such property and the Company, within 120 days after the transfer of title to such property, applies an amount equal to the net proceeds derived from such sale (including the amount of any such purchase money mortgages) to the retirement of Debt Securities (in the manner, subject to the restrictions and at the redemption prices then applicable to redemption of Debt Securities at the option of the Company as specified in Sections 3.01 and 3.02) or other indebtedness of the Company or a Restricted Subsidiary with a maturity in excess of one year from the date of such sale and which is not subordinate in right of payment to the payment of the Debt Securities. SECTION 4.05. The Company will not, and it will not permit any Restricted Subsidiary to, transfer any Principal Property to any Unrestricted Subsidiary, 24 unless the net proceeds of such transfer are at least equal to the fair value (as determined by the Board of Directors) of the property transferred. SECTION 4.06. So long as any of the Debt Securities remain outstanding and unpaid the Company will at all times (except as otherwise provided or permitted in this Section 4.06 or elsewhere in this Indenture) do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and franchises and the corporate existence and franchises of each Restricted Subsidiary; provided, that nothing herein shall require the Company to continue the corporate existence or franchises of any Restricted Subsidiary if in the judgment of the Board of Directors it shall be necessary, advisable or in the interest of the Company to discontinue the same. SECTION 4.07. The Company will not consolidate or merge with or sell, convey or lease all or substantially all of its property to any other corporation except as permitted in Article Eleven. SECTION 4.08. From time to time the Company will make, execute and deliver to the Trustee or cause to be made, executed and delivered to the Trustee any and all such further and other instruments and assurances as may be reasonably necessary or proper to carry out the intention of or to facilitate the performance of the terms of this Indenture or to secure the rights and remedies hereunder of the Holders of the Debt Securities. SECTION 4.09. On or before May 1, 1983, and on or before May 1 in each year thereafter, the Company shall file with the Trustee a statement, signed by the Chairman of the Board, Vice Chairman of the Board, or any Vice President and by the Treasurer or any Assistant Treasurer or the Secretary or any Assistant Secretary of the Company, stating that in the course of the performance by the signers of their duties as such officers of the Company they would normally obtain knowledge of any default by the Company in the performance or fulfillment of any covenant, agreement or condition contained in this Indenture, stating whether or not they have obtained knowledge of any such default, and, if so, specifying each such default of which the signers have knowledge and the nature and status thereof. 25 SECTION 4.10. The Company, whenever necessary to avoid or tell a vacancy in the office Trustee, will appoint, in the manner provided in Section 7.10, a Trustee, so that there shall at all times be a Trustee with respect to each series of Debt Securities hereunder. SECTION 4.11. (a) Whenever the Company shall appoint a paying agent (other than the Trustee) with respect to the Debt Securities of any series it will cause such paying agent to execute and deliver to the Trustee an instrument in which such agent shall agree with the Trustee, subject to the provisions of this Section 4.11, (1) that it will hold all sums held by it as such agent for the payment of the principal of (and premium, if any) or interest on the Debt Securities of such series (whether such sums have been paid to it by the Company or by any other obliger on the Debt Securities of such series) in trust for the benefit of the respective Holders of the Debt Securities of such series or of the Trustee, as the case may be, and will notify the Trustee of the receipt of sums to be so held, (2) that it will give the Trustee notice of any failure by the Company (or by any other obliger on the Debt Securities of such series) to make any payment of the principal of (and premium, if any) or interest on the Debt Securities of such series when the same shall be due and payable, and (3) that it will at any time during the continuance of an Event of Default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held by it as such agent. (b) If the Company shall act as its own paying agent, it will, on or before each due date of the principal of (and premium, if any) or interest on the Debt Securities of any series, set aside, segregate and hold in trust for the benefit of the respective Holders of Debt Securities of such series or of the Trustee, as the case may be, a sum sufficient to pay such principal (and premium, if any) or interest so becoming due. The Company will promptly notify the Trustee of any failure to take such action. (c) Anything in this Section 4.11 to the contrary notwithstanding, the Company may, at any time, for the purpose of obtaining a satisfaction and discharge of this Indenture, or for any other reason, pay or cause to be paid to the Trustee all sums held in trust by it or any paying agent hereunder as required by this Section 4.11, such sums to be held by the Trustee upon the trusts herein contained. (d) Anything in this Section 4.11 to the contrary notwithstanding, the agreement to hold sums in trust as provided in this Section 4.11 is subject to the provisions of Sections 12.03 and 12.04. 26 ARTICLE FIVE. HOLDER LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE SECTION 5.01. The Company covenants and agrees that it will furnish or cause to be furnished to the Trustee semi-annually, not more than 15 days after each record date for the payment of semi-annual interest on Registered Debt Securities, and on dates to be determined pursuant to Section 2.02 for non-interest bearing securities, a list, in such form as the Trustee may reasonably require, containing all the information in the possession or control of the Company as to the names and addresses of the Holders of the Debt Securities of each series as of such record date or dates, and at such other times as the Trustee may request in writing, within 30 days after receipt by the Company of any such request, a list similar in form and in content as of a date not more than 15 days prior to the time such list is furnished, provided that so long as the Trustee is the registrar of the Debt Securities and all the Debt Securities of any series are Fully Registered Debt Securities, no such list shall be required to be furnished in respect of such series. SECTION 5.02. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, all information as to the names and addresses of the Holders of each series of Debt Securities contained in the most recent list furnished to it as provided in Section 5.01 and received by it in its capacity as paying agent or registrar (if so acting). The Trustee may destroy any list furnished to it as provided in Section 5.01 upon receipt of a new list so furnished. (b) In case three or more Holders of Debt Securities (hereinafter referred to as "applicants") apply in writing to the Trustee and furnish to the Trustee reasonable proof that each such applicant has owned a Debt Security of a particular series for a period of at least six months preceding the date of such application, and such application states that the applicants desire to communicate with other Holders of Debt Securities of a particular series (in which case the applicants must all hold Debt Securities of such series) or with Holders of all Debt Securities with respect to their rights under this Indenture or under such Debt Securities and is accompanied by a copy of the form of proxy or other communication which such applicants propose to transmit, then the Trustee shall, within five Business Days after the receipt of such application, at its election, either (1) afford such applicants access to all information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section 5.02, or (2) inform such applicants as to the approximate number of Holders of Debt Securities of such series or all Debt Securities, as the case may be, whose names and addresses appear in the information preserved at the time by the Trustee, in accordance with the provisions of subsection (a) of this Section 5.02, and as to the approximate cost of 27 mailing to such Holders the form of proxy or other communication, if any, specified in such application. If the Trustee shall elect not to afford such applicants access to such information, the Trustee shall, upon the written request of such applicants, mail to each Holder of a Debt Security of such series or all Debt Securities, as the case may be, whose name and address appear in the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section 5.02 a copy of the form of proxy or other communication which is specified in such request, with reasonable promptness after a tender to the Trustee of the material to be mailed and of payment, or provisions for the payment, of the reasonable expenses of mailing, unless within five days after such tender the Trustee shall mail to such applicants and file with the Securities and Exchange Commission, together with a copy of the material to be mailed, a written statement to the effect that, in the opinion of the Trustee, such mailing would be contrary to the best interests of the Holders of Debt Securities of such series or all Debt Securities, as the case may be, or would be in violation of applicable law. Such written statement shall specify the basis of such opinion. If said Commission, after opportunity for a hearing upon the objections specified in the written statement so filed, shall enter an order refusing to sustain any of such objections or if, after the entry of an order sustaining one or more of such objections, said Commission shall find, after notice and opportunity for hearing, that all preceding the date of such application, and such application states that the applicants desire to communicate with other Holders of Debt Securities of a particular series (in which case the applicants must all hold Debt Securities of such series) or with Holders of all Debt Securities with respect to their rights under this Indenture or under such Debt Securities and is accompanied by a copy of the form of proxy or other communication which such applicants propose to transmit, then the Trustee shall, within five Business Days after the receipt of such application, at its election, either (1) afford such applicants access to all information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section 5.02, or (2) inform such applicants as to the approximate number of Holders of Debt Securities of such series or all Debt Securities, as the case may be, whose names and addresses appear in the information preserved at the time by the Trustee, in accordance with the provisions of subsection (a) of this Section 5.02, and as to the approximate cost of mailing to such Holders the form of proxy or other communication, if any, specified in such application. If the Trustee shall elect not to afford such applicants access to such information, the Trustee shall, upon the written request of such applicants, mail to each Holder of a Debt Security of such series or all Debt Securities, as the case may be, whose name and address appear in the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section 5.02 a copy of the form of proxy or other communication which is 28 specified in such request, with reasonable promptness after a tender to the Trustee of the material to be mailed and of payment, or provisions for the payment, of the reasonable expenses of mailing, unless within five days after such tender the Trustee shall mail to such applicants and file with the Securities and Exchange Commission, together with a copy of the material to be mailed, a written statement to the effect that, in the opinion of the Trustee, such mailing would be contrary to the best interests of the Holders of Debt Securities of such series or all Debt Securities, as the case may be, or would be in violation of applicable law. Such written statement shall specify the basis of such opinion. If said Commission, after opportunity for a hearing upon the objections specified in the written statement so filed, shall enter an order refusing to sustain any of such objections or if, after the entry of an order sustaining one or more of such objections, said Commission shall find, after notice and opportunity for hearing, that all the objections so sustained have been met and shall enter an order so declaring, the Trustee shall mail copies of such material to all such Holders with reasonable promptness after the entry of such order and the renewal of such tender; otherwise the Trustee shall be relieved of any obligation or duty to such applicants respecting their application. (c) Each and every Holder, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any paying agent shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders in accordance with the provisions of subsection (b) of this Section 5.02, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under said subsection (b). SECTION 5.03. The Company covenants: (a) to file with the Trustee, within 15 days after the Company is required to file the same with the Securities and Exchange Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as said Commission may from time to time by rules and regulations prescribe) which the Company may be required to file with said Commission pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934, or if the Company is not required to file information, documents or reports pursuant to either of such sections, then to file with the Trustee and said Commission, in accordance with rules and regulations prescribed from time to time by said Commission, such of the supplementary and periodic information, documents and reports which may be required pursuant to section 13 of the Securities Exchange Act of 1934 in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations; (b) to file with the Trustee and the Securities and Exchange Commission, in accordance with the rules and regulations prescribed from time to time by said Commission, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants provided for in 29 this Indenture as may be required from time to time by such rules and regulations; and (c) to transmit by mail to all Holders, in the manner and to the extent provided in Section 5.04(c), within 30 days after the filing thereof with the Trustee, such summaries of any information, documents and reports required to be filed by the Company pursuant to subsections (a) and (b) of this Section 5.03 as may be required by rules and regulations prescribed from time to time by the Securities and Exchange Commission. SECTION 5.04. (a) On or before August l, 1983, and on or before August 1 in every year thereafter so long as any Debt Securities are Outstanding, the Trustee shall transmit to the Holders of each series, as provided in subsection (c) of this Section 5.04, a brief report dated as of the preceding June 1 with respect to: (1) its eligibility under Section 7.09, and its qualifications under Section 7.08, or in lieu thereof, if to the best of its knowledge it has continued to be eligible and qualified under such Sections, a written statement to such effect; (2) the character and amount of any advances (and if the Trustee elects so to state, the circumstances surrounding the making thereof) made by the Trustee as such which remain unpaid on the date of such Debt Securities report, and for the reimbursement of which it claims or may claim a lien or charge, prior to that of the Debt Securities, on any property or funds held or collected by it as Trustee, except that the Trustee shall not be required (but may elect) to report such advances if such advances so remaining unpaid aggregate not more than one-half of one per cent, of the principal amount of the Debt Securities for any series Outstanding on the date of such report; (3) the amount, interest rate, and maturity date of all other indebtedness owing by the Company (or by any other obliger on the Debt Securities) to the Trustee in its individual capacity on the date of such report, with a brief description of any property held as collateral security therefor, except an indebtedness based upon a creditor relationship arising in any manner described in paragraph (2), (3), (4), or (6) of subsection (b) of Section 7.13; (4) the property and funds, if any, physically in the possession of the Trustee as such on the date of such report; (5) any additional issue of Debt Securities which it has not previously reported; and (6) any action taken by the Trustee in the performance of its duties under this Indenture which it has not previously reported and which in its opinion materially affects the Debt Securities, except action in 30 respect of a default, notice of which has been or is to be withheld by it in accordance with provisions of Section 6.07. (b) The Trustee shall transmit to the Holders, as provided in subsection (c) of this Section 5.04, a brief report with respect to the character and amount of any advances (and if the Trustee elects so to state, the circumstances surrounding the making thereof) made by the Trustee as such since the date of the last report transmitted pursuant to the provisions of subsection (a) of this Section 5.04 (or if no such report has yet been so transmitted, since the date of execution of this Indenture), for the reimbursement of which it claims or may claim a lien or charge prior to that of the Debt Securities on property or funds held or collected by it as Trustee, and which it has not previously reported pursuant to this subsection, except that the Trustee shall not be required (but may elect) to report such advances if such advances remaining unpaid at any time aggregate ten percent or less of the principal amount of Debt Securities Outstanding at such time, such report to be transmitted within 90 days from such time. (c) Reports pursuant to this Section 5.04 shall be transmitted by mail: (1) to all Registered Holders of Debt Securities, as the names and addresses of such Holders appear in the Debt Security Register; (2) to those Holders of Debt Securities who have, within the two years preceding such transmission, filed their names and addresses with the Trustee for that purpose; and (3) except in the case of reports pursuant to subsection (b) of this Section 5.04, to each Holder whose name and address is preserved at the time by the Trustee, as provided in Section 5.02(a). (d) A copy of each such report shall, at the time of such transmission to Holders, to be filed by the Trustee with each stock exchange upon which the Debt Securities are listed and also with the Securities and Exchange Commission. The Company agrees to notify the Trustee with respect to any series when and as the Debt Securities of such series become listed on any stock exchange. 31 ARTICLE SIX. REMEDIES OF THE TRUSTEE AND HOLDERS ON EVENT OF DEFAULT SECTION 6.01. "Event of Default" whenever used herein with respect to Debt Securities of any series means any of the following events (and such other events as may be established with respect to Debt Securities of that series as contemplated by Section 2.02), whatever the reason, which shall have occurred and be continuing: (a) default in the payment of any installment of interest upon any of the Debt Securities of that series as and when the same shall become due and payable, and continuance of such default for a period of 30 days; or (b) default in the payment of the principal of (and premium, if any, on) any Debt Security of that series as and when the same shall become due and payable either at maturity, upon redemption, by declaration or otherwise; or (c) default in the payment or satisfaction of any sinking fund installment, as and when the same shall become due and payable by the terms of a Debt Security of that series; or (d) failure on the part of the Company duly to observe or perform any other of the covenants or agreements on the part of the Company in the Debt Securities or in this Indenture (other than those set forth exclusively in the terms of any particular series of Debt Securities established as contemplated in this Indenture) contained for a period of 60 days after the date on which written notice of such failure, requiring the Company to remedy the same, shall have been given to the Company by the Trustee or to the Company and the Trustee by the Holders of at least twenty-five percent in aggregate principal amount of the Debt Securities at the time Outstanding; or (e) a court having jurisdiction in the premises shall enter a decree or order for relief in respect of the Company in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Company or for any substantial part of its property or ordering the winding up or liquidation of its affairs, and such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (f) the Company shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consent to the entry of an order for relief in an involuntary case under any such law, or consent to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Company or for any substantial part of its property, or make any general assignment for the benefit of creditors. 32 If an Event of Default described in clause (a), (b) or (c) or established pursuant to Section 2.02 with respect to Debt Securities of any series at the time Outstanding occurs and is continuing, then and in each and every such case, unless the principal of all the Debt Securities of such series shall have already become due and payable, either the Trustee or the Holders of not less than twenty-five percent, in aggregate principal amount of the Debt Securities of all series affected then Outstanding, by notice in writing to the Company (and to the Trustee if given by Holders), may declare the entire principal (or, if the Debt Securities of such series are Original Issue Discount Securities, such portion of the principal amount as may be specified in the terms of such series) of all the Debt Securities affected thereby and the interest accrued thereon, if any, to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and payable. If an Event of Default described in clause (d), (e) or (f) occurs and is continuing, then and in each and every such case, unless the principal of all the Debt Securities shall have already become due and payable, either the Trustee or the Holders of not less than twenty-five percent in aggregate principal amount of all the Debt Securities then Outstanding hereunder (treated as one class), by notice in writing to the Company (and to the Trustee if given by Holders), may declare the entire principal (or, if any Debt Securities are Original Issue Discount Securities, such portion of the principal as may be specified in the terms thereof) of all the Debt Securities then Outstanding and interest accrued thereon, if any, to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable. These provisions, however, are subject to the condition that if, at any time after the principal amount (or, if the Debt Securities of such series are Original Issue Discount Securities, such portion of the principal amount as may be specified in the terms of such series) of the Debt Securities of any series (or of all the Debt Securities, as the case may be) shall have been so declared due and payable, and before any judgment or decree for the payment of the moneys due shall have been obtained or entered as hereinafter provided, the Company shall pay, or shall deposit with the Trustee a sum sufficient to pay, all matured installments of interest upon all the Debt Securities of such series (or of all the Debt Securities, as the case may be) and the principal of (and premium, if any) on any and all Debt Securities of such series (or of all the Debt Securities, as the case may be) which shall have become due otherwise than by acceleration, (with interest upon such principal to the extent that payment of such interest is enforceable under applicable law) upon any overdue installments of interest at the same rate as the rate of interest specified in the Debt Securities of such series, or, at the rates of interest or Yield to Maturity (in the case of Original Issue Discount Securities) specified in the Debt Securities of such series (or at the rates of interest or Yields to Maturity of all the Debt Securities, as the case may be), to the date of such payment or deposit and such amount as shall be sufficient to cover reasonable compensation to the Trustee, its agents and counsel, and all other expenses and liabilities incurred, and all advances made, by the Trustee except as a result of its negligence or bad faith, and if any and all defaults under this Indenture, other than the nonpayment of the principal of Debt Securities of such series (or of all the Debt Securities, as the case may be) 33 which shall have become due by declaration, shall have been remedied--then and in every such case the Holders of a majority in aggregate principal amount of the Debt Securities of such series (or, of all the Debt Securities, as the case may be) then Outstanding, by written notice to the Company and to the Trustee, may waive all defaults and rescind and annul such declaration and its consequences; but no such waiver or rescission or annulment shall extend to or shall affect any subsequent default or shall impair any right consequent thereon. In case the Trustee shall have proceeded to enforce any right under this Indenture and such proceedings shall have been discontinued or abandoned because of such waiver or rescission or annulment or for any other reason or shall have been determined adversely to the Trustee, then and in every such case the Company and the Trustee shall be restored respectively to their former positions and rights hereunder, and all rights, remedies and powers of the Company, the Trustee and the Holders shall continue as though no such proceedings had been taken. SECTION 6.02. The Company covenants that (1) in case default shall be made in the payment of any installment of interest on any of the Debt Securities of any series, as and when the same shall become due and payable, and such default shall have continued for a period of 30 days, or (2) in case default shall be made in the payment of the principal of (or premium, if any) on any of the Debt Securities of any series when the same shall have become due and payable, whether upon maturity or upon redemption or upon declaration or otherwise, or (3) in case of default in the payment or satisfaction of any sinking fund obligation, as and when the same shall become due and payable as in this Indenture expressed then, upon demand of the Trustee, the Company shall pay to the Trustee, for the benefit of the Holders of the Debt Securities of that series, and the Holders of any coupons appurtenant thereto the whole amount that then shall have become due and payable on all such Debt Securities and coupons for principal (and premium, if any) and interest, with interest upon any overdue principal (and premium, if any) and (to the extent that payment of such interest is enforceable under applicable law) upon any overdue installments of interest at the same rate as the rate of interest or Yield to Maturity (in the case of Original Issue Discount Securities) specified in the Debt Securities of that series and, in addition thereto, such further amount as shall be sufficient to cover reasonable compensation to the Trustee, its agents and counsel, and all other expenses and liabilities incurred, and all advances made, by the Trustee except as a result of its negligence or bad faith. In case the Company shall fail forthwith to pay such amount upon such demand, the Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any action or proceedings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceedings to judgment or final decree and may enforce any such judgment or final decree against the Company and collect in the manner provided by law out of the property of the Company wherever situated the moneys adjudged or decreed to be payable. 34 In case there shall be pending proceedings for the bankruptcy or for the reorganization of the Company under the Bankruptcy Reform Act of 1978 or any other applicable bankruptcy, insolvency or similar law, or in case a receiver or trustee shall have been appointed for the property of the Company, or in case of any other judicial proceedings relative to the Company, or to the creditors or property of the Company, the Trustee, irrespective of whether the principal of any Debt Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective or whether the Trustee shall have made any demand pursuant to the provisions of this Section 6.02, shall be entitled and empowered, by intervention in such proceedings or otherwise, to file and prove a claim or claims for the whole amount of principal and interest (or, if the Debt Securities of any series are Original Issue Discount Securities, such portion of the principal amount as may be specified in the terms of that series) owing and unpaid in respect of the Debt Securities of any series and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for reasonable compensation to the Trustee, its agents and counsel, and for reimbursement of all expenses except as a result of its negligence or bad faith) and of the Holders allowed in any judicial proceedings relative to the Company or to the creditors or property of the Company, and to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute all amounts received with respect to the claims of the Holders and of the Trustee on their behalf; and any receiver, assignee or trustee in bankruptcy or reorganization is hereby authorized by each of the Holders to make payments to the Trustee and, in the event that the Trustee shall consent to the making of payments directly to the Holders, to pay to the Trustee such amount as shall be sufficient to cover reasonable compensation to the Trustee, its agents and counsel, and all other expenses and liabilities incurred, and all advances made, by the Trustee except as a result of its negligence or bad faith. All rights of action and to assert claims under this Indenture, or under any of the Debt Securities, may be enforced by the Trustee without the possession of any of the Debt Securities of such series or coupons appurtenant to such Debt Securities, or the production thereof on any trial or other proceedings relative thereto, and any such action or proceedings instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall be for the ratable benefit of the Holders of the Debt Securities or coupons appurtenant to such Debt Securities in respect of which such action was taken. In case of a default hereunder the Trustee may in its discretion proceed to protect and enforce the rights vested in it by this Indenture by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any of such rights, either at law or in equity or in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture, or otherwise, and the Trustee may enforce any other legal or equitable right vested in the Trustee by this Indenture or by law. 35 SECTION 6.03. Any moneys collected by the Trustee pursuant to Section 6.02 shall be applied in the order following, at the date or dates fixed by the Trustee and, in case of the distribution of such moneys on account of principal (and premium, if any) or interest, upon presentation of the several Debt Securities in respect of which moneys have been collected and coupons appurtenant to such Debt Securities and stamping (or otherwise noting) thereon the payment if only partially paid, and upon surrender thereof if fully paid: FIRST: TO the payment of costs and expenses applicable to such series of collection, reasonable compensation to the Trustee, its agents and counsel, and all other expenses and liabilities incurred, and all advances made, by the Trustee except as a result of its negligence or bed faith; SECOND: In case the principal of the Debt Securities Outstanding in respect of which moneys have been collected shale not have become due, to the payment of interest on such Debt Securities, in the order of the maturity of the installments of such interest, with interest (to the extent that such interest has been collected by the Trustee) upon the overdue installments of interest at the same rate as the rate of interest or Yield to Maturity (in the case of Original Issue Discount Securities) specified in such Debt Securities, such payments to be made ratably to the persons entitled thereto; THIRD: In case the principal of the Debt Securities Outstanding in respect of which moneys have been collected shall have become due by declaration or otherwise, to the payment of the whole amount then owing and unpaid upon the Debt Securities of that series for principal (and premium, if any) and interest, with interest upon the overdue principal (and premium, if any) and (to the extent that such interest has been collected by the Trustee) upon overdue installments of interest, at the same rate as the rate of interest or Yield to Maturity (in the case of Original Issue Discount Securities) specified in the Debt Securities of that series; and in case such moneys shall be insufficient to pay in full the whole amount so due and unpaid upon the Debt Securities of that series, then to the payment of such principal (and premium, if any) and interest, without preference or priority of principal (and premium, if any) over interest, or of interest over principal (and premium, if any), or of any installment of interest over any other installment of interest, or of any Debt Security of that series over any other Debt Security of that series ratably to the aggregate of such principal (and premium, if any) and interest; and FOURTH: The remainder, if any, shall be paid to the Company, its successors or assigns, or to whomsoever may be lawfully entitled to receive the same, or as a court of competent jurisdiction may direct. SECTION 6.04. No Holder of any Debt Securities of any series or of any coupon appurtenant thereto shall have any right by virtue or by availing of any provision of this Indenture to institute any action or proceeding at law or in equity or in bankruptcy or otherwise upon or under or with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless such Holder previously shall have given to the Trustee written notice of an 36 Event of Default and unless also the Holders of not less than twenty-five percent in aggregate principal amount of the Debt Securities of that series then Outstanding shall have made written request upon the Trustee to institute such action or proceedings in its own name as trustee hereunder and shall have offered to the Trustee such reasonable security and indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby and the Trustee, for 60 days after its receipt of such notice, request and offer of indemnity, shall have failed to institute any such action or proceedings and no direction inconsistent with such written request shall have been given to the Trustee pursuant to Section 6.06; it being understood and intended and being expressly covenanted by the taker and Holder of every Debt Security or coupon with every other taker and Holder and the Trustee that no one or more Holders of Debt Securities or coupons appurtenant thereto shall have any right in any manner whatever by virtue or by availing of any provision of this Indenture to affect, disturb or prejudice the rights of any other Holder of such Debt Security of that or any other series or coupons appertaining thereto, or to obtain or seek to obtain priority over or preference to any other such Holder, or to enforce any right under this Indenture except in the manner herein provided and for the equal, ratable and common benefit of all Holders of Debt Securities and coupons of the applicable series. For the protection and enforcement of the provisions of this Section 6.04 each and every Holder of Debt Securities and coupons and the Trustee shall be entitled to such relief as can be given either at law or in equity. Notwithstanding any other provision in this Indenture, however, the right of any Holder of any Debt Security or coupon to receive payment of the principal of (and premium, if any) and interest on SUP' Debt Security or coupon, on or after the respective due dates expressed in such Debt Security (or, in the case of redemption, on or after the date fixed for redemption), or to institute suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 6.05. All powers and remedies given by this Article Six to the Trustee or to the Holders of Debt Securities or coupons shall, to the extent permitted by law, be deemed cumulative and not exclusive of any thereof or of any other powers and remedies available to the Trustee or the Holders of the Debt Securities or coupons, by judicial proceedings or otherwise, to enforce the performance or observance of the covenants and agreements contained in this Indenture, and no delay or omission of the Trustee or of any Holder to exercise any right or power accruing upon any default occurring and continuing as aforesaid shall impair any such tight or power or shall be construed to be a waiver of any such default or an acquiescence therein; and, subject to the provisions of Section 6.04, every power and remedy given by this Article Six or by law to the Trustee or to the Holders of Debt Securities or coupons may be exercised from time to time, and as often as shall be deemed expedient, by the Trustee or by the Holders of Debt Securities or coupons, as the case may be. SECTION 6.06. The Holders of a majority in aggregate principal amount of the Debt Securities of any or all series affected (voting as one class) at the time Outstanding shall have the right to direct the time, method, and place of 37 conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee; provided, however, that such direction shall not be otherwise than in accordance with law and the provisions of this Indenture and the Trustee, subject to the provisions of Section 7.01, shall have the right to decline to follow any such direction if the Trustee in good faith shall by a responsible officer determine that the proceeding or other action so directed would involve it in a personal liability, and provided further, that the Trustee may decline any such direction which it deems unduly prejudicial to any Holders not joining in such direction, and provided further, that nothing in this Indenture contained shall impair the right of the Trustee in its discretion to take any action deemed proper by the Trustee and which is not inconsistent with such direction by the Holders. Subject to the provisions of Section 6.01, the Holders of a majority in aggregate principal amount of the Debt Securities of any series at the time Outstanding may on behalf of the Holders of all of the Debt Securities of that series waive any past default hereunder and its consequences, except a default in the payment of the principal of (or premium, if any) or interest on any of the Debt Securities of that series. In the case of any such waiver, the Company, the Trustee and the Holders of the Debt Securities of that series shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. SECTION 6.07. The Trustee shall, within 90 days after the occurrence of a default with respect to the Debt Securities of any series, give to all Holders of Debt Securities of that series, in the manner and to the extent provided in Section 5.04(c), notice of all defaults with respect to that series known to the Trustee, unless such defaults shall have been cured before the giving of such notice (the term "default" or "defaults" for the purposes of this Section 6.07 being hereby defined to be any event or events, as the case may be, specified in clauses (a), (b), (c), (d), (e) and (f) of Section 6.01, not including periods of grace, if any, provided for therein and irrespective of the giving of written notice specified in clause (d) thereof); provided, that, except in the case of default in the payment of the principal of (or premium, if any) or interest on any of the Debt Securities of such series or in the payment or satisfaction of any sinking fund obligation with respect to such series, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee, or a trust committee of directors and/or responsible officers of the Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of the Debt Securities of such series. SECTION 6.08. All parties to this Indenture agree, and each Holder of any Debt Security or coupon by acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant (other than the Trustee) in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant (including the Trustee) in such suit, having due regard to the merits and good faith of the claims or defenses made 38 by such party litigant; but the provisions of this Section 6.08 shall not apply to any suit instituted by the Trustee, to any suit instituted by any Holder or group of Holders of Debt Securities of any series holding in the aggregate more than ten percent, of the principal amount of the Debt Securities Outstanding, or to any suit instituted by any Holder for the enforcement of the payment of the principal of (or premium, if any) or interest on any Debt Security or coupon on or after the due date thereof (or, in the case of redemption, on or after the date fixed for redemption). ARTICLE SEVEN. CONCERNING THE TRUSTEE. SECTION 7.01. With respect to the Holders of any series of Debt Securities issued hereunder, the Trustee, prior to the occurrence of an Event of Default with respect to the Debt Securities of a particular series and after the curing or waiving of all Events of Default which may have occurred with respect to that series, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee. In case an Event of Default with respect to Debt Securities of a series has occurred (which has not been cured or waived) the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. No provisions of this indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that (a) prior to the occurrence of an Event of Default with respect to the Debt Securities of any series and after the curing of all Events of Default with respect to such series which may have occurred: (1) the duties and obligations of the Trustee shall be determined solely by the express provisions of this Indenture, and the Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on the part of the Trustee, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture; 39 (b) the Trustee shall not be liable for any error of judgment made in good faith by a responsible officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; and (c) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders as provided in Section 6.06 relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture. No provision of this Indenture shall require the Trustee to expand or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if there shall be reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. SECTION 7.02. Subject to the provisions of Section 7.01: (a) the Trustee may rely and shall be protected in acting or refraining from acting in reliance upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request, direction, order or demand of the Company mentioned herein shall be sufficiently evidenced by an instrument signed in the name of the Company by the Chairman of the Board, a Vice Chairman or a Vice President and the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer (unless other evidence in respect thereof be herein specifically prescribed); and any resolution of the Board of Directors may be evidenced to the Trustee by a copy thereof certified by the Secretary or an Assistant Secretary of the Company; (c) the Trustee may consult with counsel and any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, omitted or suffered by it hereunder in good faith and in accordance with such Opinion of Counsel; (d) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Holders, pursuant to the provisions of this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred therein or thereby; (e) the Trustee shall not be liable for any action taken by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture; 40 (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally, or by agent or attorney; and (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. SECTION 7.03. The recitals contained herein and in the Debt Securities (except in the certificates of authentication of the Trustee and the Authenticating Agent) shall be taken as the statements of the Company, and the Trustee and the Authenticating Agent assume no responsibility for the correctness of the same. The Trustee and the Authenticating Agent make no representations as to the validity or sufficiency of this Indenture or of any Debt Securities or coupons; provided that neither the Trustee nor the Authenticating Agent shall be relieved of its duty to authenticate Debt Securities only as authorized by this Indenture. The Trustee and the Authenticating Agent shall not be accountable for the use or application by the Company of any of the Debt Securities or of the proceeds thereof. SECTION 7.04. The Trustee or any Authenticating Agent or any paying agent or Debt Security registrar, in its individual or any other capacity, may become the owner or pledges of Debt Securities or coupons with the same rights it would have if it were not a Trustee, Authenticating Agent, paying agent or Debt Security registrar. SECTION 7.05 Subject to the provisions of Section 12.04, all moneys received by the Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any moneys received by it hereunder except such as it may agree with the Company to pay thereon. So long as no Event of Default shall have occurred and be continuing, all interest allowed on any such moneys shall be paid from time to time upon the written order of the Company, signed by its Chairman of the Board, a Vice Chairman, or a Vice President or its Treasurer or an Assistant Treasurer. SECTION 7.06. The Company covenants and agrees to pay to the Trustee from time to time, and the Trustee shall be entitled to, reasonable compensation (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust) and, except as otherwise expressly provided, the Company will pay or reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in 41 accordance with any of the provisions of this Indenture (including, without limitation, the reasonable compensation and the expenses and disbursements of its counsel and of all persons not regularly in its employ and amounts paid by the Trustee to the Authenticating Agent pursuant to Section 7.14) except any such expense, disbursement or advance as may be attributable to its negligence or bad faith. If any property other than cash shall at any time be subject to the lien of this Indenture, the Trustee, if and to the extent authorized by a receivership or bankruptcy court of competent jurisdiction or by the supplemental instrument subjecting such property to such lien, shall be entitled to make advances for the purpose of preserving such property or of discharging tax liens or other prior liens or encumbrances thereon. The Company also covenants to indemnify the Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on the part of the Trustee, arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim of liability in the premises. The obligations of the Company under this Section 7.06 to compensate the Trustee and to pay or reimburse the Trustee for expenses, disbursements and advances shall constitute additional indebtedness hereunder. Such additional indebtedness shall be secured by a lien prior to that of the Debt Securities upon all property and funds held or collected by the Trustee as such, except funds held in trust for the benefit of the holders of particular Debt Securities or coupons. SECTION 7.07. Except as otherwise provided in Section 7.01, whenever in the administration of the provisions of this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of negligence or bad faith on the part of the Trustee, be deemed to be conclusively proved and established by a certificate signed by the Chairman of the Board, a Vice Chairman or a Vice President and by the Secretary or Treasurer or an Assistant Secretary or an Assistant Treasurer of the Company and delivered to the Trustee and such certificate, in the absence of negligence or bad faith on the part of the Trustee, shall be full warrant to the Trustee for any action taken, suffered or omitted by it under the provisions of this Indenture upon the faith thereof. SECTION 7.08. (a) If the Trustee has or shall acquire any conflicting interest, as defined in this Section 7.08, it shall, within 90 days after ascertaining that it has such convicting interest, either eliminate such convicting interest or resign in the manner and with the effect specified in Section 7.10. (b) In the event that the Trustee shall fail to comply with the provisions of subsection (a) of this Section 7.08, the Trustee shall, within ten days after the expiration of such 90-day period, transmit by mail notice of such failure to all Holders of Debt Securities, in the manner and to the extent provided in Section 5.04(c). 42 (c) For the purposes of this Section 7.08 the Trustee shall be deemed to have a conflicting interest with respect to the Debt Securities of any series if (1) the Trustee is trustee under this Indenture with respect to the outstanding Debt Securities of any other series or is a trustee under another indenture under which any other securities, or certificates of interest or participation in any other securities, of the Company are outstanding unless such other indenture is a collateral trust indenture under which the only collateral consists of Debt Securities issued under this Indenture, provided that there shall be excluded from the operation of this paragraph this Indenture with respect to the Debt Securities of any other series, any indenture or indentures under which other securities, or certificates of interest or participation in other securities, of the Company are outstanding if (i) this Indenture and such other indenture or indentures are wholly unsecured and such other indenture or indentures are hereafter qualified under the Trust Indenture Act of 1939, unless the Securities and Exchange Commission shall have found and declared by order pursuant to subsection (b) of Section 305 or subsection (c) of Section 307 of the Trust Indenture Act of 1939 that differences exist between the provisions of this Indenture and the provisions of such other indenture or indentures which are so likely to involve a material conflict of interest as to make it necessary in the public interest or for the protection of investors to disqualify the Trustee from acting as such under this Indenture or such other indenture or indentures, or (ii) the Company shall have sustained the burden of proving, on application to the Securities and Exchange Commission and after opportunity for hearing thereon, that trusteeship under this Indenture with respect to Debt Securities of such series and such other series, or under this Indenture and such other indenture or indentures is not so likely to involve a material conflict as to make it necessary in the public interest or for the protection of investors to disqualify the Trustee from acting as such under this Indenture with respect to Debt Securities of such series and such other series, or under this Indenture and one of such indentures; (2) the Trustee or any of its directors or executive officers is an obliger upon the Debt Securities issued under this Indenture or an underwriter for the Company; (3) the Trustee directly or indirectly controls or is directly or indirectly controlled by or is under direct or indirect common control with the Company or an underwriter for the Company; (4) the Trustee or any of its directors or executive officers is a director, officer, partner, employee, appointee, or representative of the Company, or of an underwriter (other than the Trustee itself) for the Company who is currently engaged in the business of underwriting, except that (A) one individual may be a director and/or an executive officer of the Trustee and a director and/or an executive officer of the Company, but may not be at the same time an executive officer of both 43 the Trustee and the Company; (B) if and so long as the number of directors of the Trustee in office is more than nine, one additional individual may be a director and/or an executive officer of the Trustee and a director of the Company; and (C) the Trustee may be designated by the Company or by any underwriter for the Company to act in the capacity of transfer agent, registrar, custodian, paying agent, fiscal agent, escrow agent, or depositary, or in any other similar capacity, or, subject to the provisions of paragraph (1) of this subsection (c), to act as trustee whether under an indenture or otherwise; (5) ten percent or more of the voting securities of the Trustee is beneficially owned either by the Company or by any director, partner, or executive officer thereof, or twenty percent or more of such voting securities is beneficially owned, collectively, by any two or more of such persons; or ten percent or more of the voting securities of the Trustee is beneficially owned either by an underwriter for the Company or by any director, partner, or executive officer thereof, or is beneficially owned, collectively, by any two or more such persons; (6) the Trustee is the beneficial owner of, or holds as collateral security for an obligation which is in default, (A) five percent or more of the voting securities, or ten percent or more of any other class of security, of the Company, not including the Debt Securities issued under this Indenture and securities issued under any other indenture under which the Trustee is also trustee, or (B) ten percent or more of any class of security of an underwriter for the Company; (7) the Trustee is the beneficial owner of, or holds as collateral security for an obligation which is in default, five percent or more of the voting securities of any person who, to the knowledge of the Trustee, owns ten percent or more of the voting securities of, or controls directly or indirectly or is under direct or indirect common control with, the Company; 44 (8) the Trustee is the beneficial owner of, or holds as collateral security for an obligation which is in default, ten percent or more of any class of security of any person who, to the knowledge of the Trustee, owns fifty percent or more of the voting securities of the Company; or (9) the Trustee owns on May 15 in any calendar year, in the capacity of executor, administrator, testamentary or inter vivos trustee, guardian, committee or conservator, or in any other similar capacity, an aggregate of twenty-five percent or more of the voting securities, or of any class of security, of any person, the beneficial ownership of a specified percentage of which would have constituted a conflicting interest under paragraph (6), (7), or (8) of this subsection (c). As to any such securities of which the Trustee acquired ownership through becoming executor, administrator, or testamentary trustee of an estate which included them, the provisions of the preceding sentence shall not apply, for a period of two years from the date of such acquisition, to the extent that such securities included in such estate do not exceed twenty-five percent of such voting securities or twenty-five percent of any such class of security. Promptly after May 15 in each calendar year, the Trustee shall make a check of its holdings of such securities in any of the above mentioned capacities as of such May 15. If the Company fails to make payment in full of principal of or interest on any of the Debt Securities when and as the same becomes due and payable, and such failure continues for 30 days thereafter, the Trustee shall make a prompt check of its holdings of such securities in any of the above date of the expiration of such 30-day period, and after such date, notwithstanding the foregoing provisions of this paragraph (9), all such securities so held by the Trustee, with sole or joint control over such securities vested in it, shall, but only so long as such failure shall continue, be considered as though beneficially owned by the Trustee for the purposes of paragraphs (6), (7), and (8) of this subsection (c). The specification of percentages in paragraphs (5) to (9), inclusive, of this subsection (c) shall not be construed as indicating that the ownership of such percentages of the securities of a person is or is not necessary or sufficient to constitute direct or indirect control for the purposes of paragraph (3) or (7) of this subsection (c). For the purposes of paragraphs (6), (7), (8), and (9) of this subsection (c) only, (A) the terms "security" and "securities" shall include only such securities as are generally known as corporate securities, but shall not include any note or other evidence of indebtedness issued to evidence an obligation to repay moneys lent to a person by one or more banks, trust companies or banking firms, or any certificate of interest or participation in any such note or evidence of indebtedness; (B) an obligation shall be deemed to be in default when a default in payment of principal shall have continued for 30 days or more and shall not have been cured; and (C) the Trustee shall not be deemed to be the owner or holder of (i) any security which it holds as collateral security (as trustee or 45 otherwise) for an obligation which is not in default as defined in clause (B) above, or (ii) any security which it holds as collateral security under this Indenture, irrespective of any default hereunder, or (iii) any security which it holds as agent for collection, or as custodian, escrow agent, or depositary, or in any similar representative capacity. Except as provided above, the word "security" or "securities" as used in this Indenture shall mean any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit sharing agreement, collateral-trust certificate, pre-organization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, or, in general, any interest or instrument commonly known as a "security", or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing. (d) For the purposes of this Section 7.08: (1) The term "underwriter" when used with reference to the Company shall mean every person who, within three years prior to the time as of which the determination is made, has purchased from the Company with a view to, or has offered or has sold for the Company in connection with, the distribution of any security of the Company outstanding at such time, or has participated or has had a direct or indirect participation in any such undertaking, or has participated or has had a participation in the direct or indirect underwriting of any such undertaking; but such term shall not include a person whose interest was limited to a commission from an underwriter or dealer not in excess of the usual and customary distributors' or sellers' commission. (2) The term "director" shall mean any director of a corporation or any individual performing similar functions with respect to any organization whether incorporated or unincorporated. (3) The term "person" shall mean an individual, a corporation, a partnership, an association, a joint-stock company, a trust, an unincorporated organization, or a government or political subdivision thereof. As used in this paragraph, the term "trust" shall include only a trust where the interest or interests of the beneficiary or beneficiaries are evidenced by a security. (4) The term "voting security" shall mean any security presently entitling the owner or holder thereof to vote in the direction or management of the affairs of a person, or any security issued under or pursuant to any trust, agreement or arrangement whereby a trustee or trustees or agent or agents for the owner or holder of such security are presently entitled to vote in the direction or management of the affairs of a person. 46 (5) The term "Company" shall mean any obliger the Debt Securities. (6) The term "executive officer" shall mean the president, every vice president, every trust officer, the cashier, the secretary, and the treasurer of a corporation, and any individual customarily performing similar functions with respect to any organization whether incorporated or unincorporated, but shall not include the chairman of the board of directors. (e) The percentages of voting securities and other securities specified in this Section 7.08 shall be calculated in accordance with the following provisions: (1) A specified percentage of the voting securities of the Trustee, the Company or any other person referred to in this Section 7.08 (each of whom is referred to as a "person" in this subsection) means such amount of the outstanding voting securities of such person as entitles the holder or holders thereof to cast such specified percentage of the aggregate votes which the holders of all the outstanding voting securities of such person are entitled to cast in the direction or management of the affairs of such person. (2) A specified percentage of a class of security of a person means such percentage of the aggregate amount of securities of the class outstanding. (3) The term "amount", when used in regard to securities, means the principal amount if relating to evidences of indebtedness, the number of shares if relating to capital shares, and the number of units if relating to any other kind of security. (4) The term "outstanding" means issued and not held by or for the account of the issuer. The following securities shall not be deemed outstanding within the meaning of this definition: (i) securities of an issuer held in a sinking fund relating to securities of the issuer of the same class; (ii) securities of an issuer held in a sinking fund relating to another class of securities of the issuer, if the obligation evidenced by such other class of securities is not in default as to principal or interest or otherwise; 47 (iii) securities pledged by the issuer thereof as security for an obligation of the issuer not in default as to principal or interest or otherwise; and (iv) securities held in escrow if placed in escrow by the issuer thereof; provided, however, that any voting securities of an issuer shall be deemed outstanding if any person other than the issuer is entitled to exercise the voting rights thereof. (5) A security shall be deemed to be of the same class as another security if both securities confer upon the holder or holders thereof substantially the same rights and privileges; provided, however, that, in the case of secured evidences of indebtedness, all of which are issued under a single indenture, differences in the interest rates or maturity dates of various series thereof shall not be deemed sufficient to constitute such series different classes; and provided further, that, in the case of unsecured evidences of indebtedness, differences in the interest rates or maturity dates thereof shall not be deemed sufficient to constitute them securities of different classes, whether or not they are issued under a single indenture. SECTION 7.09. The Trustee hereunder shall at all times be a corporation organized and doing business under the laws of the United States of America or of any State or Territory or of the District of Columbia authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least ten million dollars and being subject to supervision or examination by Federal, State, Territorial, or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section 7.09 the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 7.09, the Trustee shall resign immediately in the manner and with the effect specified in Section 7.10. SECTION 7.10. (a) The Trustee, or any trustee or trustees hereafter appointed, may at any time resign by giving written notice of resignation with respect to one or more of all series of Debt Securities to the Company and to Holders of Debt Securities of the applicable series in the manner and to the extent provided in Section 14.05. Upon receiving such notice of resignation the Company shall promptly appoint a successor trustee or trustees with respect to the applicable series by written instrument, in duplicate, executed by order of the Board of Directors, one copy of which instrument shall be delivered to the resigning Trustee and one copy to the successor trustee. If no successor trustee shall have been so appointed with respect to any series and have accepted appointment within 60 days after the publication or mailing, as the case may be, of such notice of resignation, the resigning Trustee may petition any court of 48 competent jurisdiction for the appointment of a successor trustee or any Holder who has been a bona fide Holder of a Debt Security or Debt Securities of the applicable series for at least six months may, subject to the provisions of Section 6.08, on behalf of himself and all others similarly situated, petition any such court for the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, appoint a successor trustee. (b) In case at any time any of the following shall occur (1) the Trustee shall fail to comply with the provisions of subsection (a) of Section 7.08 with respect to any series of Debt Securities after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Debt Security or Debt Securities of that series for at least six months, or (2) the Trustee shall cease to be eligible in accordance with the provisions of Section 7.09 and shall fail to resign after written request therefor by the Company or by any such Holder, or (3) the Trustee shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, the Company may remove the Trustee with respect to the applicable series of Debt Securities and appoint a successor trustee for that series by written instrument, in duplicate, executed by order of the Board of Directors, one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor trustee, or, subject to the provisions of Section 6.08, any Holder who has been a bona fide Holder of a Debt Security or Debt Securities of that series for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor trustee with respect to that series. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Trustee and appoint a successor trustee. (c) The Holders of a majority in aggregate principal amount of the Debt Securities of one or more series (each series voting as a class) or all series at the time Outstanding may at any time remove the Trustee with respect to the applicable series of Debt Securities or all series, as the case may be, and nominate with respect to the applicable series of Debt Securities or all series, as the case may be, a successor trustee by written notice of such action to the Company and the successor trustee which shall be deemed appointed as successor trustee with respect to the applicable series of Debt Securities or all series, as the case may be, unless within ten days after such nomination the Company objects thereto, in which case the Trustee so removed or any Holder of a Debt Security of the applicable series (in the case of any such objection to a nomination of a successor trustee with respect to such series) or any Holder (in the case of any such objection to a 49 nomination of a successor trustee with respect to all series), upon the terms and conditions and otherwise as in subsection (a) of this Section 7.10 provided, may petition any court of competent jurisdiction for the appointment of a successor trustee with respect to such series of Debt Securities or all series, as the case may be. (d) Any resignation or removal of the Trustee and any appointment of a successor trustee pursuant to any of the provisions of this Section 7.10 shall become effective upon acceptance of appointment by the successor trustee as provided in Section 7.11. SECTION 7.11. Any successor trustee appointed as provided in Section 7.10 shall execute, acknowledge and deliver to the Company and to its predecessor trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor Trustee with respect to all or any applicable series shall become effective and such successor trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, duties and obligations with respect to such series of its predecessor hereunder, with like effect as if originally named as trustee for such series; but nevertheless, on the written request of the Company or of the successor trustee, the trustee ceasing to act shall, upon payment of any amounts then due pursuant to the provisions of Section 7.06, execute and deliver an instrument transferring to such successor trustee all of the rights and powers with respect to such series of the trustee so ceasing to act. Upon request of any such successor trustee, the Company shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor trustee all such rights and powers. Any trustee ceasing to act shall, nevertheless, retain a lien upon all property or funds held or collected by such trustee to secure any amounts then due it pursuant to In case of the appointment hereunder of a successor trustee with respect to the Debt Securities of one or more (but not all) series, the Company, the predecessor Trustee and each successor trustee with respect to the Debt Securities of any applicable series shall execute and deliver an indenture supplemental hereto which shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the predecessor Trustee with respect to the Debt Securities of any series as to which the predecessor Trustee is not retiring shall continue to be vested in the predecessor Trustee and shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such trustees co-trustees of the same trust and that each such trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such trustee. No successor trustee shall accept appointment as provided in this Section 7.11 unless at the time of such acceptance such successor trustee shall be 50 qualified under the provisions of Section 7.08 and eligible under the provisions of Section 7.09. Upon acceptance of appointment by a successor trustee as provided in this Section 7.11, the Company shall give notice of the succession of such Trustee hereunder to the Holders of Debt Securities of any applicable series in the manner and to the extent provided in Section 14.05. If the Company fails to publish or mail such notice, as the case may be, in the prescribed manner within ten days after acceptance of appointment by the successor trustee, the successor trustee shall cause such notice to be so published or mailed, as the case may be, at the expense of the Company. SECTION 7.12. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be qualified under the provisions of Section 7.08 and eligible under the provisions of Section 7.09, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. SECTION 7.13. (a) Subject to the provisions of subsection (b) of this Section 7.13, if the Trustee shall be or shall become a creditor, directly or indirectly, secured or unsecured, of the Company within four months prior to a default, as defined in subsection (c) of this Section 7.13, or subsequent to such a default, then, unless and until such default shall be cured, the Trustee shall set apart and hold in a special account for the benefit of the Trustee individually, the Holders of the Debt Securities and coupons, if any, and the holders of other indenture securities (as defined in subsection (c) of this Section 7.13): (1) an amount equal to any and all reductions in the amount due and owing upon any claim as such creditor in respect of principal or interest, effected after the beginning of such four months' period and valid as against the Company and its other creditors, except any such reduction resulting from the receipt or disposition of any property described in paragraph (2) of this subsection (a), or from the exercise of any right of set-off which the Trustee could have exercised if a petition in bankruptcy had been filed by or against the Company upon the date of such default; and (2) all property received by the Trustee in respect of any claim as such creditor, either as security therefor, or in satisfaction or composition thereof, or otherwise, after the beginning of such four months' period, or an amount equal to the proceeds of any such property, if disposed of, subject, however, to the rights, if any, of the Company and its other creditors in such property or such proceeds. Nothing herein contained, however, shall affect the right of the Trustee: 51 (A) to retain for its own account (i) payments made on account of any such claim by any person (other than the Company) who is liable thereon, and (ii) the proceeds of the bona fide sale of any such claim by the Trustee to a third person, and (iii) distributions made in cash, securities, or other property in respect of claims filed against the Company in bankruptcy or receivership or in proceedings for reorganization pursuant to the Bankruptcy Reform Act of 1978 or applicable State law; (B) to realize, for its own account, upon any property held by it as security for any such claim, if such property was so held prior to the beginning of such four months' period; (C) to realize, for its own account, but only to the extent of the claim hereinafter mentioned, upon any property held by it as security for any such claim, if such claim was created after the beginning of such four months' period and such property was received as security therefor simultaneously with the creation thereof, and if the Trustee shall sustain the burden of proving that at the time such property was so received the Trustee had no reasonable cause to believe that a default as defined in subsection (c) of this Section 7.13 would occur within four months; or (D) to receive payment on any claim referred to in paragraph (B) or (C), against the release of any property held as security for such claim as provided in paragraph (B) or (C), as the case may be, to the extent of the fair value of such property. For the purposes of paragraphs (B), (C) and (D), property substituted after the beginning of such four months' period for property held as security at the time of such substitution shall, to the extent of the fair value of the property released, have the same status as the property released, and, to the extent that any claim referred to in any of such paragraphs is created in renewal of or in substitution for or for the purpose of repaying or refunding any preexisting claim of the Trustee as such creditor, such claim shall have the same status as such preexisting claim. If the Trustee shall be required to account, the funds and property held in such special account and the proceeds thereof shall be apportioned among the Trustee, the Holders and the holders of other indenture securities, in such manner that the Trustee, the Holders and the holders of other indenture securities realize, as a result of payments from such special account and payments of dividends on claims filed against the Company in bankruptcy or receivership or in proceedings for reorganization pursuant to the Bankruptcy Reform Act of 1978 or any successor statute or applicable State law, the same percentage of their respective claims, figured before crediting to the claim of the Trustee anything on account of the receipt by it from the Company of the funds and property in such special account and before crediting to the respective claims of the Trustee, the Holders and the holders of other indenture securities dividends on claims filed against the Company in bankruptcy or receivership or in proceedings for reorganization pursuant to the Bankruptcy Reform Act of 1978 52 or applicable State law, but after crediting thereon receipts on account of the indebtedness represented by their respective claims from all sources other than from such dividends and from the funds and property so held in such special account. As used in this paragraph, with respect to any claim, the term "dividends" shall include any distribution with respect to such claim, in bankruptcy or receivership or in proceedings for reorganization pursuant to the Bankruptcy Reform Act of 1978 or any successor statute or applicable State law, whether such distribution is made in cash, securities, or other property, but shall not include any such distribution with respect to the secured portion, if any, of such claim. The court in which such bankruptcy, receivership, or proceeding for reorganization is pending shall have jurisdiction (i) to apportion between the Trustee, the Holders and the holders of other indenture securities, in accordance with the provisions of this paragraph, the funds and property held in such special account and the proceeds thereof, or (ii) in lieu of such apportionment, in whole or in part, to give to the provisions of this paragraph due consideration in determining the fairness of the distributions to be made to the Trustee, the Holders and the holders of other indenture securities with respect to their respective claims, in which event it shall not be necessary to liquidate or to appraise the value of any securities or other property held in such special account or as security for any such claim, or to make a specific allocation of such distributions as between the secured and unsecured portions of such claims, or otherwise to apply the provisions of this paragraph as a mathematical formula. Any Trustee who has resigned or been removed after the beginning of such four months' period shall be subject to the provisions of this subsection (a) as though such resignation or removal had not occurred. If any Trustee has resigned or been removed prior to the beginning of such four months' period, it shall be subject to the provisions of this subsection (a) if and only if the following conditions exist: (i) the receipt of property or reduction of claim which would have given rise to the obligation to account, if such Trustee had continued as Trustee, occurred after the beginning of such four months' period; and (ii) such receipt of property or reduction of claim occurred within four months after such resignation or removal. (b) There shall be excluded from the operation of subsection (a) of this Section 7.13 a creditor relationship arising from (1) the ownership or acquisition of securities issued under any indenture, or any security or securities having a maturity of one year or more at the time of acquisition by the Trustee; (2) advances authorized by a receivership or bankruptcy court of competent jurisdiction, or by this Indenture, for the purpose of preserving any property which shall at any time be subject to the lien of this Indenture or of discharging tax liens or other prior liens or encumbrances 53 thereon, if notice of such advance and of the circumstances surrounding the making thereof is given to the Holders at the time and in the manner provided in this Indenture; (3) disbursements made in the ordinary course of business in the capacity of trustee under an indenture, transfer agent, registrar, custodian, paying agent, fiscal agent or depositary, or other similar capacity; (4) an indebtedness created as a result of services rendered or premises rented; or an indebtedness created as a result of goods or securities sold in a cash transaction as defined in subsection (c) of this Section 7.13; (5) the ownership of stock or of other securities of a corporation organized under the provisions of Section 25(a) of the Federal Reserve Act, as amended, which is directly or indirectly a creditor of the Company; or (6) the acquisition, ownership, acceptance or negotiation of any drafts, bills of exchange, acceptances or obligations which fall within the classification of self-liquidating paper as defined in subsection (c) of this Section 7.13. (c) As used in this Section 7.13: (1) The term "default" shall mean any failure to make payment in full of the principal of or interest upon any of the Debt Securities or upon the other indenture securities when and as such principal or interest becomes due and payable. (2) The term "other indenture securities" shall mean securities upon which the Company is an obliger (as defined in the Trust Indenture Act of 1939) outstanding under any other indenture (A) under which the Trustee is also trustee, (B) which contains provisions substantially similar to the provisions of subsection (a) of this Section 7.13, and (C) under which a default exists at the time of the apportionment of the funds and property held in said special account. (3) The term "cash transaction" shall mean any transaction in which full payment for goods or securities sold is made within seven days after delivery of the goods or securities in currency or in checks or other orders drawn upon banks or bankers and payable upon demand. (4) The term "self-liquidating paper" shall mean any draft, bill of exchange, acceptance or obligation which is made, drawn, negotiated or incurred by the Company for the purpose of financing the purchase, processing, manufacture, shipment, storage or sale of goods, wares or merchandise and which is secured by documents evidencing title to, 54 possession of, or a lien upon, the goods, wares or merchandise or the receivables or proceeds arising from the sale of the goods, wares or merchandise previously constituting the security, provided the security is received by the Trustee simultaneously with the creation of the creditor relationship with the Company arising from the making, drawing, negotiating or incurring of the draft, bill of exchange, acceptance or obligation. (5) The term "Company" shall mean any obliger upon the Debt Securities. SECTION 7.14. There may be one or more Authenticating Agents appointed by the Trustee, with the consent of the Company, having power to act on behalf of the Trustee and subject to its direction in the authentication and delivery of Debt Securities of one or more series issued upon exchange or transfer thereof as fully to all intents and purposes as though any such Authenticating Agent had been expressly authorized to authenticate and deliver such Debt Securities. Any such Authenticating Agent shall at all times be a corporation organized and doing business under the laws of the United States of America or of any State or Territory thereof or of the District of Columbia authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of at least five million dollars and being subject to supervision or examination by Federal, State, Territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually pursuant to law or the requirements of such authority, then for the purposes of this Section 7.14 the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect herein specified in this Section. Any corporation into which any Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, consolidation or conversion to which any Authenticating Agent shall be a party, or any corporation succeeding to the corporate trust business of any Authenticating Agent, shall be the successor of such Authenticating Agent hereunder, if such successor corporation is otherwise eligible under this Section 7.14, without the execution or filing of any paper or any further act on the part of the parties hereto or such Authenticating Agent. 55 Any Authenticating Agent may at any time resign by giving written notice of resignation to the Trustee and to the Company. The Trustee may at any time, with the consent of the Company, terminate the agency of any Authenticating Agent by giving written notice of termination to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time any Authenticating Agent shall cease to be eligible under this Section 7.14, the Trustee may, and upon the request of the Company shall, promptly appoint a successor Authenticating Agent eligible under this Section 7.14, shall give written notice of such appointment to the Company and shall give notice of such appointment to the Holders of Debt Securities in the manner and to the extent provided in Section 14.05. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all rights, powers, duties and responsibilities of its predecessor hereunder, with like effect as if originally named as Authenticating Agent herein. The Trustee agrees to pay to any Authenticating Agent from time to time reasonable compensation for its services, and the Trustee shall be entitled to be reimbursed for such payments, subject to Section 7.06. Any Authenticating Agent shall have no responsibility or liability for any action taken by it as such in accordance with the directions of the Trustee. ARTICLE EIGHT. CONCERNING THE HOLDERS. SECTION 8.01. Whenever in this Indenture it is provided that the Holders of a specified percentage in aggregate principal amount of the Debt Securities of any or all series may take any action (including the making of any demand or request, the giving of any notice, consent or waiver or the taking of any other action), the fact that at the time of taking any such action the Holders of such specified percentage have joined therein may be evidenced (a) by any instrument or any number of substantially concurrent instruments of similar tenor executed by Holders in person or by agent or proxy appointed in writing, or (b) by the record of the Holders voting in favor thereof at any meeting of such Holders duly called and held in accordance with the provisions of Article Nine, or (c) by a combination of such instrument or instruments and any such record of such a meeting of such Holders. SECTION 8.02. Subject to the provisions of Sections 7.01, 7.02 and 9.05, the fact and date of the execution of any instrument by a Holder of Debt Securities or his agent or proxy may be proved by the certificate of any notary public or other officer authorized to take acknowledgments of deeds to be recorded within the United States of America or territories, commonwealths, or possessions thereof that the person executing such instrument acknowledged to him the execution thereof, or by an affidavit of a witness to such execution sworn to before any such notary or other such officer, provided that the Trustee may require such additional proof as it shall deem reasonable. Where such execution is by or on behalf of any legal entity other than an individual, such certificate or 56 affidavit shall also constitute sufficient proof of the authority of the person executing the same. The fact of the holding by any Holder of a Debt Security of any series, and the identifying number of such Debt Security and the date of his holding the same, may be proved by the production of such Debt Security or by a certificate executed by any trust company, bank, banker or recognized securities dealer satisfactory to the Trustee wherever situated, if such certificate shall be deemed by the Trustee to be satisfactory. Each such certificate shall be dated and shall state that on the date thereof a Debt Security of such series bearing a specified identifying number was deposited with or exhibited to such trust company, bank, banker or recognized securities dealer by the person named in such certificate. Any such certificate may be issued in respect of one or more Debt Securities of one or more series specified therein. The holding by the person named in any such certificate of any Debt Securities of any series specified therein shall be presumed to continue for a period of one year from the date of such certificate unless at the time of any determination of such holding (1) another certificate bearing a later date issued in respect of the same Debt Securities shall be produced, or (2) the Debt Security of such series specified in such certificate shall be produced by some other person, or (3) the Debt Security of such series specified in such certificate shall have ceased to be Outstanding. Subject to Sections 7.01, 7.02 and 9.05, the fact and date of the execution of any such instrument and the amount and numbers of Debt Securities of any series held by the person so executing such instrument and the amount and numbers of any Debt Security or Debt Securities for such series may also be proven in accordance with such reasonable rules and regulations as may be prescribed by the Trustee for such series or in any other manner which the Trustee for such series may deem sufficient. In the case of Registered Debt Securities, the ownership of Debt Securities shall be proved by the Debt Security Register or by a certificate of the registrar thereof. The record of any Holders' meeting shall be proved in the manner provided in Section 9.06. SECTION 8.03 Prior to due presentment for registration of transfer of any Debt Security, the Company, the Trustee, any Authenticating Agent, any paying agent and any Debt Security registrar may deem and treat the Holder of any Unregistered Debt Security, and the Holder of any coupon and the person in whose name any Unregistered Debt Security shall be registered upon the Debt Security Register for that series as the absolute owner of such Debt Security or coupon (whether or not such Debt Security or coupon shall be overdue and notwithstanding any notation of ownership or other writing thereon made by anyone other than the Company, any Debt Security registrar or the Trustee) for the purpose of receiving payment of or on account thereof and for all other purposes; and neither the Company nor the Trustee nor any Authenticating Agent nor any paying agent nor any Debt Security registrar shall be affected by any notice to the contrary. All such payments so made to any such person, or upon his order, shall be valid, and, to the extent of the sum or sums so paid, 57 effectual to satisfy and discharge the liability for moneys payable upon any such Debt Security. SECTION 8.04. In determining whether the Holders of the requisite aggregate principal amount of Debt Securities have concurred in any demand or request, the giving of any notice, direction, consent or waiver or the taking of any other action under this Indenture, Debt Securities which are owned by the Company or by any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company shall be disregarded and deemed not to be Outstanding for the purpose of any such determination, except that for the purpose of determining whether the Trustee shall be protected in relying on any such demand, request, notice, direction, consent or waiver only Debt Securities which the Trustee knows are so owned shall be so disregarded. SECTION 8.05. At any time prior to (but not after) the evidencing to the Trustee, as provided in Section 8.01, of the taking of any action by the Holders of the percentage in aggregate principal amount of the Debt Securities of any or all series, as the case may be, specified in this Indenture in connection with such action, any Holder of a Debt Security which is shown by the evidence to be included in the Debt Securities the Holders of which have joined in such action may, by filing written notice with the Trustee at its office and upon proof of holding as provided in Section 8.02, revoke such action so far as concerns such Debt Security. Except as aforesaid any such action taken by the Holder of any Debt Security shall be conclusive and binding upon such Holder and upon all future Holders and owners of such Debt Security and of any Debt Security issued in exchange or substitution therefor, irrespective of whether or not any notation in regard thereto is made upon such Debt Security. Any action taken by the Holders of the percentage in aggregate principal amount of the Debt Securities specified in this indenture in connection with such action shall be conclusively binding upon the Company, the Trustee and the Holders of all the Debt Securities. ARTICLE NINE. HOLDERS' MEETINGS. SECTION 9.01. A meeting of Holders of Debt Securities of any or all series may be called at any time and from time to time pursuant to the provisions of this Article Nine for any of the following purposes: (1) to give any notice to the Company or to the Trustee, or to give any directions to the Trustee, or to waive any default hereunder and its consequences, or to take any other action authorized to be taken by Holders pursuant to any of the provisions of Article Six; (2) to remove the Trustee and appoint a successor trustee pursuant to the provisions of Article Seven; 58 (3) to consent to the execution of an indenture or indentures supplemental hereto pursuant to the provisions of Section 10.02; or (4) to take any other action authorized to be taken by or on behalf of the Holders of any specified percentage in aggregate principal amount of the Debt Securities of any or all series, as the case may be, under any other provision of this indenture or under applicable law. SECTION 9.02. The Trustee may at any time call a meeting of Holders of Debt Securities of any or all series to take any action specified in Section 9.01, such meeting to be held at such time and at such place as the Trustee shall determine. Notice of every meeting of the Holders, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be given to Holders of Debt Securities of each series affected, in the manner and to the extent provided in Section 14.05, not less than 20 nor more than 180 days prior to the date fixed for the meeting; provided, however, that publication shall occur at least twice, with the first publication to be not less than 20 nor more than 180 days prior to the date fixed for the meeting. SECTION 9.03. In case at any time the Company, pursuant to a resolution of the Board of Directors, or the Holders of at least ten percent in aggregate principal amount of the Debt Securities of any or all series then Outstanding, shall have requested the Trustee in writing to call a meeting of Holders to take any action authorized in Section 9.01, which request shall set forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee shall not have mailed the notice of such meeting within 20 days after receipt of such request then the Company or the Holders of the percentage in aggregate principal amount of the Debt Securities above specified may determine the time and the place for such meeting and may call such meeting by mailing or publishing notice thereof as provided in Section 9.02. SECTION 9.04. To be entitled to vote at any meeting of Holders a Person shall be a Holder of one or more Debt Securities of any or all series, as the case may be, with respect to which such meeting is being held or a Person appointed by an instrument in writing as proxy by such Holder. The only Persons who shall be entitled to be present or to speak at any meeting of Holders shall be the Persons entitled to vote at such meeting and their counsel and any representatives of the Trustee and its counsel and any representatives of the Company and its counsel. SECTION 9.05. Notwithstanding any other provisions of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any meeting of Holders in regard to proof of the holding of Debt Securities and of the appointment of proxies in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and in regard to such other matters concerning the conduct of the meeting as it shall think fit. Except as otherwise permitted or required by any such regulations, the holding of Debt Securities shall be proved in the manner specified in Section 8.02 and the appointment of any proxy shall 59 be proved in the manner specified in Section 8.02 or by having the signature of the person executing the proxy witnessed or guaranteed by any bank, banker or trust company satisfactory to the Trustee. The Trustee shall, by an instrument in writing, appoint a temporary chairman of the meeting, unless the meeting shall have been called by the Company or by Holders as provided in Section 9.03, in which case the Company or the Holders calling the meeting, as the case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall be elected by majority vote of the meeting. Subject to the provisions of Section 8.04, at any meeting each Holder of Debt Securities with respect to which such meeting is being held or proxy shall be entitled to one vote for each $1,000 principal amount (in the case of Original Issue Discount Securities, such principal amount to be determined as provided in the definition of "Outstanding") of Debt Securities held or represented by each Holder, provided, however, that no vote shall be cast or counted at any meeting in respect of any Debt Security challenged as not Outstanding and ruled by the chairman of the meeting to be not Outstanding. The chairman of the meeting shall have no right to vote except as a Holder or proxy. At any meeting of Holders, the presence of persons holding or representing Debt Securities in an aggregate principal amount sufficient to take action on any business for the transaction of which such meeting was called shall constitute a quorum. Any meeting of Holders duly called pursuant to the provisions of Section 9.02 or 9.03 may be adjourned from time to time by vote of the Holders of a majority in aggregate principal amount of the Debt Securities of any or all series, as the case may be, represented at the meeting and entitled to vote, whether or not a quorum be then present at such meeting, and the meeting may be held as so adjourned without further notice. SECTION 9.06. The vote upon any resolution submitted to any meeting of Holders of Debt Securities with respect to which such meeting is being held or represented by them shall be by written ballots on which shall be subscribed the signatures of the Holders or proxies and the serial number or numbers and principal amount of the Debt Securities of each series held or represented by them. The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in duplicate of all votes cast at the meeting. A record in duplicate of the proceedings of each meeting of Holders shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that said notice was given as provided in Section 9.02. The record shall be signed and verified by the permanent chairman and secretary of the meeting and one of the duplicates shall be delivered to the Company and the other to the Trustee to be preserved 60 by the Trustee, the latter to have attached thereto the ballots voted at the meeting. Any record so signed and verified shall be conclusive evidence of the matters therein stated. ARTICLE TEN. SUPPLEMENTAL INDENTURES. SECTION 10.01. The Company, when authorized by a resolution of the Board of Directors, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto (which shall conform to the provisions of the Trust Indenture Act of 1939 as in force at the date of execution of such supplemental indenture) for one or more of the following purposes: (a) to evidence the succession of another corporation to the Company, or successive successions, and the assumption by the successor corporation of the covenants, agreements and obligations of the Company pursuant to Article Eleven hereof; (b) to add to the covenants or agreements herein such further covenants, restrictions, conditions or provisions as the Board of Directors and the Trustee shall consider to be for the protection of the Holders of all or any series of Debt Securities (and if such covenants are to be for the benefit of less than all series of Debt Securities stating that such covenants are expressly being included solely for the benefit of such series), and to make the occurrence, or the occurrence and continuance, of a default in any of such additional covenants, restrictions, conditions or provisions a default or an Event of Default permitting the enforcement of all or any of the several remedies provided in this Indenture; provided, however, that in respect of any such additional covenant, restriction, condition or provision such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such default or may limit the remedies available to the Trustee upon such default or may limit the right of the Holders of a majority in aggregate principal amount of the Debt Securities to waive such default, and (c) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture, to convey, transfer, assign, mortgage or pledge any property to or with the Trustee or to make such other provisions in regard to matters or questions arising under this Indenture as shall not adversely affect the interests of any Holder; (d) to establish the form or terms of Debt Securities of any series as permitted by Sections 2.01 and 2.02; and 61 (e) to evidence and provide for the acceptance of appointment hereunder by a successor trustee with respect to the Debt Securities of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one trustee, pursuant to the requirements of Section 7.11. The Trustee is hereby authorized to join with the Company in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations which may be therein contained and to accept the conveyance, transfer, assignment, mortgage or pledge of any property thereunder, but the Trustee shall not be obligated to enter into any such supplemental indenture which affects the Trustee's own rights, duties, liabilities or immunities under this Indenture or otherwise. Any supplemental indenture authorized by the provisions of this Section 10.01 may be executed by the Company and the Trustee without the consent of the Holders of any of the Debt Securities at the time Outstanding. SECTION 10.02. With the consent (evidenced as provided in Section 8.01) of the Holders of not less than 662/3% in aggregate principal amount of the Outstanding Debt Securities of all series issued under the Indenture which are affected by the modification or amendment (voting as one class), the Company, when authorized by a resolution of the Board of Directors, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto (which shall conform to the provisions of the Trust Indenture Act of 1939 as in force at the date of execution of such supplemental indenture) for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the rights of the Holders of the Debt Securities of each such series, provided, however, that no such supplemental indenture shall (i) extend the fixed maturity of any Debt Securities, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon, or reduce any premium payable upon the redemption thereof, or reduce the amount of the principal of an Original Issue Discount Security that would be due and payable upon an acceleration of the maturity thereof without the consent of the Holder of each Debt Security so affected, or (ii) change the aforesaid percentage of Debt Securities, the consent of the Holders of which is required for any such supplemental indenture, without the consent of the Holders of all Debt Securities affected then Outstanding. A supplemental indenture which changes or eliminates any covenant or other provision of this Indenture which has expressly been included solely for the benefit of one or more particular series of Debt Securities, or which modifies the rights of the Holders of Debt Securities of such series with respect to such covenant or other provision, shall be deemed not to affect rights under this Indenture of the Holders of Debt Securities of any other series. Upon the request of the Company, accompanied by a copy of a resolution of the Board of Directors certified by the Secretary or an Assistant Secretary of 62 the Company authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of Holders as aforesaid, the Trustee shall join with the Company in the execution of such supplemental indenture unless such supplemental indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion but shall not be obligated to enter into such supplemental indenture. It shall not be necessary for the Holders under this Section 10.02 to consent to the particular form of any proposed supplemental indenture, but it shall be sufficient if they consent to the substance thereof. Promptly after the execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of this Section 10.02, the Company shall give notice, setting forth in general terms the substance of such supplemental indenture, to all Holders of Debt Securities affected in the manner and to the extent provided in Section 14.05. Any failure of the Company to give such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. SECTION 10.03. Upon the execution of any supplemental indenture pursuant to the provisions of this Article Ten or of Section 4.03, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitation of rights, obligations, duties and immunities under this Indenture of the Trustee, the Company and the Holders shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes. The Trustee, subject to the provisions of Sections 7.01 and 7.02, may receive an Opinion of Counsel as conclusive evidence that any such supplemental indenture complies with the provisions of this Article Ten. SECTION 10.04. Debt Securities authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article Ten may bear a notation in form approved by the Trustee for such series as to any matter provided for in such supplemental indenture. New Debt Securities so modified as to conform, in the opinion of the Trustee and the Board of Directors, to any modification or amendment of this Indenture contained in any such supplemental indenture may be prepared by the Company, authenticated by the Trustee and delivered in exchange for the Debt Securities of that series then Outstanding. 63 ARTICLE ELEVEN. CONSOLIDATION, MERGER, OR CONVEYANCE. SECTION 11.01. Subject to the provisions of Section 4.03, nothing contained in this Indenture or in any of the Debt Securities shall prevent any consolidation of the Company with, or merger of the Company into, any other corporation or corporations (whether or not affiliated with the Company), or successive consolidations or mergers to which the Company or its successor or successors shall be a party or parties, or shall prevent any sale or conveyance of the property of the Company as an entirety or substantially as an entirety to any other corporation (whether or not affiliated with the Company) authorized to acquire and operate the same; provided, however, and the Company hereby covenants and agrees, that upon any such consolidation, merger, sale or conveyance, the due and punctual payment of the principal of (and premium, if any) and interest on all of the Debt Securities and any coupons appurtenant thereto, according to their tenor, and the due and punctual performance and observance of all of the covenants and conditions of this Indenture to be performed or observed by the Company, shall be expressly assumed, by supplemental indenture, satisfactory in form to the Trustee, executed and delivered to the Trustee by the corporation formed by such consolidation (unless the Company shall be the surviving corporation), or into which the Company shall have been merged, or which shall have acquired such property. In the event of the sale by the Company of its properties and assets as, or substantially as, an entirety upon the terms and conditions of this Section and Section 4.03, the Company shall be released from all its liabilities and obligations hereunder and under the Debt Securities and coupons, if any. SECTION 11.02. In case of any such consolidation, merger, sale or conveyance, and following such an assumption by the successor corporation, such successor corporation shall succeed to and be substituted for the Company, with the same effect as if it had been named herein as the party of the first part. Such successor corporation thereupon may cause to be signed, and may issue either in its own name or in the name of the Company, any or all of the Debt Securities issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee; and, upon the order of such successor corporation instead of the Company and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee or the Authenticating Agent shall authenticate and shall deliver any Debt Securities, together with any coupons appurtenant thereto, which previously shall have been signed and delivered by the officers Company to the Trustee for authentication and any Debt Securities which such successor corporation thereafter shall cause to be signed and delivered to the Trustee on its behalf for that purpose. All the Debt Securities so issued shall in all respects have the same legal rank and benefit under this Indenture as the Debt Securities theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Debt Securities had been issued at the date of the execution hereof. 64 In case of any such consolidation, merger, sale or conveyance such changes in phraseology and form may be made in the Debt Securities thereafter to be issued as may be appropriate. Subject to the provisions of Section 4.03, nothing contained in this Indenture or in any of the Debt Securities shall prevent the Company from merging into itself any other corporation (whether or not affiliated with the Company) or acquiring by purchase or otherwise all or any part of the property of any other corporation (whether or not affiliated with the Company). SECTION 11.03. The Company covenants and agrees that if it shall consolidate, merge, sell, or convey its properties as an entirety or substantially as an entirety, the Company will promptly furnish to the Trustee: (1) an Officers' Certificate; (2) an executed counterpart of any instrument or instruments executed by the Company or the successor corporation in the performance of such covenants; and (3) an Opinion of Counsel. Subject the provisions of Section 7.01, the Trustee may receive and be entitled to rely on an Opinion of Counsel conforming to the requirements of Section 14.06 as conclusive evidence that any such consolidation, merger, sale or conveyance and any such supplemental indenture or other instrument or instruments comply with the provisions of this Article Eleven. ARTICLE TWELVE. SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS. SECTION 12.01. If at any time (a) the Company shall have paid or caused to be paid the principal of and interest on all the Debt Securities of any series Outstanding, and any coupons appurtenant thereto, as and when the same shall have become due and payable, or (b) the Company shall have delivered to the Trustee for cancellation all the Debt Securities of any series theretofore authenticated and all unmatured coupons appurtenant thereto (other than any Debt Securities of that series (and appurtenant coupons) which shall have been destroyed, lost or stolen and which shall have been replaced or paid as provided in Section 2.07), or (c) (i) all the Debt Securities of any series and coupons appurtenant to such Debt Securities not theretofore delivered to the Trustee for cancellation shall have become due and payable, or are by their terms to become due and payable within one year or are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption, and (ii) the Company shall have irrevocably deposited or caused to be deposited with the Trustee as trust funds the entire amount in cash (other than moneys repaid by the Trustee or any paying agent to the Company in accordance with Section 12.04 or moneys paid to any state pursuant to its 65 unclaimed property or similar laws) or direct obligations of the United States or any agency thereof backed by the full faith and credit of the United States, maturing as to principal and interest in such amounts and at such times as will assure the availability of cash sufficient to pay at maturity or upon redemption all Debt Securities of that series and all coupons appurtenant to such Debt Securities not theretofore delivered to the Trustee for cancellation, including principal (and premium, if any) and interest due or to become due to such date of maturity or date fixed for redemption, as the case may be, and if in any such case the Company shall also pay or cause to be paid all other sums payable hereunder by the Company, then this Indenture shall cease to be of further effect with respect to Debt Securities of such series and coupons appurtenant to such Debt Securities (except as to (i) rights of registration of transfer and exchange, and the Company's right of optional redemption (if any), (ii) substitution of apparently mutilated, defaced, destroyed, lost or stolen Debt Securities or coupons, (iii) rights of Holders to receive payments of principal thereof and interest thereon upon the original stated due dates therefor (but not upon acceleration), and remaining rights of the Holders to receive mandatory sinking fund payments, if any, (iv) the rights, obligations and immunities of the Trustee hereunder and (v) the rights of the Holders of such series as beneficiaries hereof with respect to the property so deposited with the Trustee payable to all or any of them) and the Trustee, on demand of and at the cost and expense of the Company, shall execute proper instruments acknowledging satisfaction of and discharging this Indenture. Notwithstanding the satisfaction and discharge of this Indenture, the Company agrees to reimburse the Trustee for any costs or expenses thereafter reasonably and properly incurred by the Trustee in connection with this Indenture or the Debt Securities. SECTION 12.02. All moneys deposited with the Trustee pursuant to Section 12.01 shall be held in trust and applied by it to the payment, either directly or through any paying agent (including the Company acting as its own paying agent), to the Holders of the particular Debt Securities of that series, and any coupons appurtenant thereto, for the payment or redemption of which such moneys have been deposited with the Trustee, of all sums due and to become due thereon for principal and interest and premium, if any. SECTION 12.03. In connection with the satisfaction and discharge of this Indenture all moneys then held by any paying agent under the provisions of this Indenture shall, upon demand of the Company, be repaid to it or paid to the Trustee and thereupon such paying agent shall be released from all further liability with respect to such moneys. SECTION 12.04. Any moneys deposited with or paid to the Trustee pursuant to any provision of this Indenture for payment of the principal of (and premium, if any) or interest on Debt Securities or coupons and not applied but remaining unclaimed by the Holders of Debt Securities or coupons for three years after the date upon which the principal of (and premium, if any) or interest on such Debt Securities or coupons, as the case may be, shall have become due and payable, shall be repaid to the Company by the Trustee on demand; and the 66 Holder of any of the Debt Securities or coupons shall thereafter look only to the Company for any payment which such Holder may be entitled to collect. ARTICLE THIRTEEN. IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS. SECTION 13.01. NO recourse under or upon any obligation, covenant or agreement of this Indenture, or of any Debt Security or coupon, or for any claim based thereon or otherwise in respect thereof, shall be had against any incorporator, stockholder, officer or director, as such, past, present or future, of the Company or of any successor corporation, either directly or through the Company, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that this Indenture and the obligations issued hereunder are solely corporate obligations, and that no such personal liability whatever shall attach to, or is or shall be incurred by, the incorporators, stockholders, officers or directors, as such, of the Company or of any successor corporation, or any of them, because of the creation of the indebtedness hereby authorized, or under or by reason of the obligations, covenants or agreements contained in this Indenture or in any of the Debt Securities or coupons or implied therefrom; and that any and all such personal liability, either at common law or in equity or by constitution or statute, of, and any and all such rights and claims against, every such incorporator, stockholder, officer or director, as such, because of the creation of the indebtedness hereby authorized, or under or by reason of the obligations, covenants or agreements contained in this Indenture or in any of the Debt Securities or coupons or implied therefrom, are hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issue of such Debt Securities and coupons. ARTICLE FOURTEEN. MISCELLANEOUS PROVISIONS. SECTION 14.01. All the covenants, stipulations, promises and agreements in this Indenture contained by or on behalf of the Company shall bind its successors and assigns, whether so expressed or not. SECTION 14.02. Any act or proceeding by any provision of this Indenture authorized or required to be done or performed by any board, committee or officer of the Company shall and may be done and performed with like force and eject by the like board, committee or officer of any corporation that shall at the time be the lawful sole successor of the Company. SECTION 14.03. The Company by instrument in writing executed by authority of the Board of Directors and delivered to the Trustee may surrender any of the powers or rights reserved to the Company and thereupon such power or right so surrendered shall terminate both as to the Company and as to any successor corporation. 67 SECTION 14.04. Any notice or demand which by any provision of this Indenture is required or permitted to be given or served by the Trustee or by the Holders of Debt Securities to or on the Company may be given or served by being deposited postage prepaid in a post office box addressed (until another address is filed by the Company with the Trustee) as follows: (general Mills, Inc., P.O. BOX 1113, Minneapolis, Minnesota 55440, Attention: Treasurer. Any notice, direction, request or demand by any Holder to or upon the Trustee shall be deemed to have been sufficiently given or made for all purposes if given or made in writing at the Principal Corporate Trust Office of the Trustee. SECTION 14.05. Where this Indenture or any of the Debt Securities provides for notice to Holders of any event, (1) if any of the Debt Securities affected by such event are Registered Debt Securities, such notice shall be sufficiently given (unless otherwise herein or in such Debt Securities expressly provided) if in writing and mailed, first-class, postage prepaid, to each Registered Holder of such Debt Securities, at such Holder's address as it appears in the Debt Security Register, not later than the latest date, and not earlier than the earliest date prescribed for the giving of such notice and (2) if any of the Debt Securities affected by such event are Unregistered Debt Securities, such notice shall be sufficiently given (unless otherwise herein or in such Debt Securities expressly provided) (a) to the Holders of Unregistered Debt Securities who have filed their names and addresses pursuant to clause (ii) of subparagraph (c) of Section 5.04(C), if in writing and mailed, first-class, postage prepaid, to each such Unregistered Holder at such Holder's address as so furnished to the Trustee, and (b) to all other Holders of Unregistered Debt Securities, if published once in an Authorized Newspaper in each Place of Payment provided for such Debt Securities pursuant to Section 2.02, in each case, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver In case, by reason of the suspension of publication of any Authorized Newspaper, or by reason of any other cause, it shall be impossible to make publication of any notice in an Authorized Newspaper or Authorized Newspapers as required by any Debt Security or this Indenture, then such method of publication or notification as shall be made with the approval of the Trustee shall constitute a sufficient publication of such notice. In case, by reason of the suspension of regular mail service as a result of a strike, work stoppage or otherwise, it shall be impractical to mail notice of any event to the Holders of Debt Securities when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such 68 notice as shall be satisfactory to the Trustee and the Company shall be deemed to be a sufficient giving of such notice. SECTION 14.06 Upon any application or demand by the Company to the Trustee to take any action under any of the provisions of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent have been complied with, except that in the case of any such application or demand as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or demand, no additional certificate or opinion need be furnished. Each certificate or opinion provided for in this Indenture and delivered to the Trustee with respect to compliance with a condition or covenant provided for in this Indenture shall include (1) a statement that the person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such person, he or she has made such examination or investigation as is necessary to enable such person to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such person, such condition or covenant has been complied with. SECTION 14.07. If the date of maturity of interest on or principal of the Debt Securities or the date fixed for redemption of any Debt Security shall be in the City of New York, New York, the City of Chicago, Illinois, or any other Place of Payment a day on which banking institutions are authorized or obligated by law to close, then payment of interest or principal (and premium, if any) need not be made on such date, but may be made on the next succeeding day not in said City of New York, New York, City of Chicago, Illinois, and Place of Payment, respectively, a legal holiday or a day on which banking institutions are authorized or obligated by law to close with the same force and effect as if made on the date of maturity or the date fixed for redemption, and no interest shall accrue for the period after such date. SECTION 14.08. If and to the extent that any provision of this Indenture limits, qualifies or conflicts with another provision included in this Indenture which is required to be included in this Indenture by any of Sections 310 to 317, inclusive, of the Trust Indenture Act of 1939, such required provision shall control. SECTION 14.09. This Indenture and each Debt Security issued hereunder shall be deemed to be a contract made under the laws of the State of New York, and for all purposes shall be construed in accordance with and governed by the laws of said State. 69 SECTION 14.10. This Indenture may be executed in any number of counterparts, each of which shall be an original; but such counterparts shall together constitute but one and the same instrument. CONTINENTAL ILLINOIS NATIONAL BANK AND TRUST COMPANY OF CHICAGO, the party of the second part, hereby accepts the trust in this Indenture declared and provided, upon the terms and conditions hereinabove set forth. IN WITNESS WHEREOF, GENERAL MILLS, INC., the party of the first part, has caused this Indenture to be signed, acknowledged and delivered by its Chairman of the Board, Executive Vice President-Chief Financial Officer or Vice President-Treasurer and its corporate seal to be affixed hereunto and the same to be attested by its Secretary or an Assistant Secretary; and CONTINENTAL ILLINOIS NATIONAL BANK AND TRUST COMPANY OF CHICAGO, the party of the second part, has caused this Indenture to be signed, acknowledged and delivered by one of its Vice Presidents, and its seal to be affixed hereunto and the same to be attested by one of its Trust Officers, all as of the day and year first written above. GENERAL MILLS, INC. (CORPORATE SEAL) By: /s/ James L. Weaver Vice President-Treasurer Attest: /s/ James M. Neville CONTINENTAL ILLINOIS NATIONAL BANK AND TRUST COMPANY OF CHICAGO, as Trustee (CORPORATE SEAL) By: /s/ Richard L. LaVarnway Second Vice President Attest: /s/ E.D. Butler Trust Officer STATE OF MINNESOTA } ss: COUNTY OF HENNEPIN } On the 9th day of August, in the year one thousand nine hundred eighty-two, before me appeared James L. Weaver, to me personally known, 70 who, being by me duly sworn, did say that he resides at 4235 DuPont Ave. S., Minneapolis, Minn.; that he is a Vice President-Treasurer of GENERAL MILLS, INC., one of the corporations described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order. /s/ IVY S. BERNHARDSON Notary Public 71 STATE OF ILLINOIS } ss: COUNTY OF COOK } On the 4th day of August, in the year one thousand nine hundred eighty-two, before me appeared Richard L. LaVarnway, to me personally known, who, being by me duly sworn, did say that he resides at (Glendale Heights, Ill.; that he is a Second Vice President of CONTINENTAL ILLINOIS NATIONAL BANK AND TRUST COMPANY OF CHICAGO, one of the corporations described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority. [NOTARIAL SEAL] /s/ NANCY STEVENS Notary Public GENERAL MILLS, INC. SUPPLEMENTAL INDENTURE NO. 1 DATED AS OF JULY 27, 1982 SERIES OF MONEY MULTIPLIER NOTES (ZERO COUPON) DUE 1988 $100,000,000 Supplemental Indenture No. 1 dated as of July 27, 1982, between GENERAL MILL,S, INC., a corporation organized and existing under the laws of the State of Delaware (hereinafter sometimes referred to as the "Company"), and CONTINENTAL ILLINOIS NATIONAL BANK AND TRUST COMPANY OF Chicago, a national banking association duly organized and existing under the laws of the United States of America (hereinafter sometimes referred to as the "Trustee"), WITNESSETH: The Company and the Trustee have executed and delivered an Indenture dated as of July 1, 1982 (the "Indenture"). Section 10.01 of the Indenture provides for the Company, when authorized by the Board of Directors, and the Trustee to enter into an indenture supplemental to the Indenture to establish the form or terms of Debt Securities of any series of Debt Securities as permitted by Section 2.02 of the Indenture. Section 2.02 of the Indenture provides for Debt Securities of any series to be established pursuant to an indenture supplemental to the Indenture. NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the series of Debt Securities provided for herein, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of such series of Debt Securities, as follows: ARTICLE ONE RELATION TO INDENTURE; DEFINITIONS. SECTION 1.01. This Supplemental Indenture No. 1 constitutes an integral part of the Indenture. SECTION 1.02. For all purposes of this Supplemental Indenture: (1) Capitalized terms used herein without definition shall have the meanings specified in the Indenture; (2) All references herein to Articles and Sections, unless otherwise specified, refer to the corresponding Articles and Sections of this Supplemental Indenture No. 1; and (3) The terms "hereof", "herein", "hereby", "hereto", "hereunder" and "herewith" refer to this Supplemental Indenture. ARTICLE TWO THE SERIES OF NOTES SECTION 2.01. There shall be a series of Debt Securities designated the "Money Multiplier Notes (Zero Coupon) Due 1988" (the "Notes"). The Notes shall be Original Issue Discount Securities and shall be limited to $100,000,000 aggregate principal amount. The initial public offering price of each Note shall be 50% of its principal amount payable at maturity. SECTION 2.02. The principal amount of the Notes shall be payable on January 4, 1988. SECTION 2.03. There shall be no periodic payments of interest on the Notes. SECTION 2.04. The Yield to Maturity on the Notes shall be 13.30% per annum, which Yield to Maturity shall be the rate of interest payable on any overdue principal of the Notes pursuant to Section 6.02 of the indenture. Interest on any such overdue principal shall be computed on the basis of a 360-day year of twelve 30-day months. SECTION 2.05. The Places of Payment for the Notes shall be the City of Chicago, Illinois and the City of New York, New York. The Trustee and Morgan Guaranty Trust Company of New York shall be the paying agents for the Notes. SECTION 2.06. The Notes shall be subject to redemption at the option of the Company at their principal amount at any time prior to maturity. The Company shall have no obligation to redeem, purchase or repay the Notes pursuant to any sinking fund. SECTION 2.07. The Notes shall be issued in denominations of $1,000, $5,000, $25,000 and $100,000. In addition, Notes in certain denominations in excess of $100,000 shall be available to securities depositories registered as clearing agencies under the Securities Exchange Act of 1934. SECTION 2.08. The amount which shall be payable upon declaration of acceleration of maturity pursuant to Section 6.01 of the Indenture or provable in bankruptcy pursuant to Section 6.02 of the Indenture shall be the initial public offering price of each Note plus the portion of the original issue discount attributable ratably on a daily basis to the period from the date of issue to the date of declaration. Upon payment of such amount following such acceleration or bankruptcy, all of the Company's obligations it in respect of payment of the principal of such Note shall terminate. SECTION 2.09. The Notes shall be issued in bearer form, without coupon, and shall be transferable by delivery. The Company, the Trustee and the Authenticating Agent and co-paying agent may treat the bearer of a Note as the Holder and absolute owner thereof without regard to any notice to the contrary. SECTION 2.10. Notes of any authorized denomination shall be exchangeable for a like aggregate principal amount of Notes of different authorized denominations upon surrender of such Notes, with a request for such exchange, at the designated office of the Trustee in the City of Chicago, Illinois or at the designated office of the Authenticating Agent in the City of New York, New York. SECTION 2.11. The Notes shall be in the form attached as Exhibit A hereto. SECTION 2.12. The dates on which the Company shall provide information regarding the Holders of the Notes to the Trustee pursuant to Section 5.01 of the Indenture shall be June 15 and December 15 of every year, commencing on December 15, 1982, for so long as any of the Notes are Outstanding. Such information shall be current as of the previous June 1 or December 1, as the case may be. IN WITNESS WHEREOF, GENERAL MILLS, INC. has caused this Supplemental Indenture No. 1 to be signed, acknowledged and delivered by its Chairman of the Board, Executive Vice President-Chief Financial Officer or Vice President-Treasurer and its corporate seal to be affixed hereunto and the same to be attested by its Secretary or Assistant Secretary; and CONTINENTAL ILLINOIS NATIONAL BANK AND TRUST COMPANY OF CHICAGO has caused this Supplemental Indenture No. 1 to be signed, acknowledged and delivered by one of its Vice Presidents, and its seal to be affixed hereunto and the same to be attested by one of its Trust Officers, all as of the day and year first written above. GENERAL MILLS, INC. [CORPORATE SEAL] By: /s/ JAMES L. WEAVER VICE PRESIDENT-TREASURER ATTEST: /s/ JAMES M. NEVILLE SECRETARY CONTINENTAL ILLINOIS NATIONAL BANK AND TRUST COMPANY OF CHICAGO, as Trustee [CORPORATE SEAL] By: /s/ RICHARD L. LAVARNWAY SECOND VICE PRESIDENT Attest: /s/ E.D. BUTLER TRUST OFFICER GENERAL MILLS, INC. SUPPLEMENTAL INDENTURE NO. 2 DATED AS OF AUGUST 23, 1982 SERIES OF 12 5/8% NOTES DUE AUGUST 15, 1985 $50,000,000 Supplemental Indenture No. 2 dated as of August 23, 1982, between GENERAL MILLS, INC., a corporation organized and existing under the laws of the State of Delaware (hereinafter sometimes referred to as the "Company"), and CONTINENTAL ILLINOIS NATIONAL BANK AND TRUST COMPANY OF CHICAGO, a national banking association duly organized and existing under the laws of the United States of America (hereinafter sometimes referred to as the "Trustee"), W I T N E S S E T H: The Company and the Trustee have executed and delivered an Indenture dated as of July 1, 1982 (the "Indenture"). Section 10.01 of the Indenture provides for the Company, when authorized by the Board of Directors, and the Trustee to enter into an indenture supplemental to the Indenture to establish the form or terms of Debt Securities of any series of Debt Securities as permitted by Section 2.02 of the Indenture. Section 2.02 of the Indenture provides for Debt Securities of any Series to be established pursuant to an indenture supplemental to the Indenture. NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the series of Debt Securities provided for herein, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of such series of Debt Securities, as follows: ARTICLE ONE Relation to Indenture; Definitions. Section 1.01. This Supplemental Indenture No. 2 constitutes an integral part of the Indenture. Section 1.02. For all purposes of this- Supplemental Indenture: (1) Capitalized terms used herein without definition shall have the meanings specified in the Indenture; (2) All references herein to Articles and Sections, unless otherwise specified, refer to the corresponding Articles and Sections of this Supplemental Indenture No. 2; and (3) The terms "hereof", "herein", "hereby", "hereto", "hereunder" and "herewith" refer to this Supplemental Indenture. ARTICLE TWO The Series of Notes Section 2.01. There shall be a series of Debt Securities designated the "12 5/8% Notes due August 15, 1985" (the "Notes"). The Notes shall be limited to $50,000,000 aggregate principal amount. The original issue date of the Notes shall be August 24, 1982. Section 2.02. The principal on the Notes shall be payable on August 15, 1985. Section 2.03. The rate of interest on the Notes shall be 12 5/8% per annum, which interest shall be payable semiannually on February 15 and August 15, for so long as the Notes are outstanding, commencing on February 15, 1983. Interest payable on the Notes shall be computed on the basis of a 360-day year of twelve 30-day months. Section 2.04. The rate of interest payable on any overdue principal of the Notes pursuant to Section 6.02 of the Indenture shall be 12 5/8% per annum. Interest on any such overdue principal shall be computed on the basis of a 360-day year of twelve 30-day months. Section 2.05. The Places of Payment for the Notes shall be the City of Chicago, Illinois and the City of New York, New York. The Trustee and Morgan Guaranty Trust Company of New York shall be the paying agents for the Notes. Section 2.06. The Notes shall not be subject to redemption at any time prior to maturity. The Company shall have no obligation to redeem, purchase or repay the Notes pursuant to any sinking fund. Section 2.07. The amount which shall be payable upon declaration of acceleration of maturity pursuant to Section 6.01 of the Indenture or provable in bankruptcy pursuant to Section 6.02 of the Indenture shall be the entire principal amount of the Notes plus accrued interest thereon. Upon payment of such amount following such acceleration or bankruptcy, all of the Company's obligations in respect of payment of the principal of and interest on such Note shall terminate. Section 2.08. The Notes shall be issued in registered form, without coupon, and shall be transferable as provided in Article Two of the Indenture. Section 2.09. Notes of any authorized denomination shall be exchangeable for a like aggregate principal amount of Notes of different authorized denominations upon surrender of such Notes, with a request for such exchange, at the designated office of the Trustee in the City of Chicago, Illinois or at the designated office of the Authenticating Agent in the City of New York, New York. Section 2.10. The dates on which the Company shall provide information regarding the Holders of the Notes to the Trustee pursuant to Section 5.01 of the Indenture shall be February 15 and August 15 of every year, commencing on February 15, 1983, for so long as any of the Notes are Outstanding. Such information shall be current as of the previous January 31 or July 31, as the case may be. Section 2.11. Prior to due presentment for registration of transfer of any Note, the Company, the Trustee, any Authenticating Agent, any paying agent and any Debt Security registrar may deem and treat the Holder of such Note as the absolute owner of such Note (whether or not such Note shall be overdue and notwithstanding any notation of ownership or other writing thereon made by anyone other than the Company, any Debt Security registrar or the Trustee) for the purpose of receiving payment of or on account thereof and for all other purposes; and neither the Company nor the Trustee nor any Authenticating Agent nor any paying agent nor any Debt Securities registrar shall be affected by any notice to the contrary. All such payments so made to any such person, or upon such person's order, shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Note. Section 2.12. The Notes shall be in the form attached as Exhibit A hereto. IN WITNESS WHEREOF, GENERAL MILLS, INC. has caused this Supplemental Indenture No. 2 to be signed, acknowledged and delivered by its Chairman of the Board, Executive Vice President-Treasurer-Chief Financial Officer or Vice President-Treasurer and its corporate seal to be affixed hereunto and the same to be attested by its Secretary or Assistant Secretary; and CONTINENTAL ILLINOIS NATIONAL BANK AND TRUST COMPANY OF CHICAGO has caused this Supplemental Indenture No. 2 to be signed, acknowledged and delivered by one of its Vice Presidents, and its seal to be affixed hereunto and the same to be attested by one of its Trust Officers, all as of the day and year first written above. GENERAL MILLS, INC. [CORPORATE SEAL] By: /s/ JAMES L. WEAVER VICE PRESIDENT-TREASURER ATTEST: /s/ JAMES M. NEVILLE SECRETARY CONTINENTAL ILLINOIS NATIONAL BANK AND TRUST COMPANY OF CHICAGO, as Trustee [CORPORATE SEAL] By: /s/ RICHARD L. LAVARNWAY SECOND VICE PRESIDENT Attest: /s/ E.D. BUTLER TRUST OFFICER STATE OF MINNESOTA ss.: COUNTY OF HENNEPIN On the 20th day of August, in the year one thousand nine hundred eighty-two before me appeared J.L. Weaver to me personally known, who, being by me duly sworn, did say that he resides at Minneapolis, Minnesota, that he is a Vice President-Treasurer of GENERAL MILLS, INC., one of the corporations described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order. /s/ IVY S. BERNHARDSON NOTARY PUBLIC - MINNESOTA HENNEPIN COUNTY My Commission Expires Sept. 28, 1985 STATE OF NEW YORK SS.: COUNTY OF NEW YORK On the 24th day of August, in the year one thousand nine hundred eighty-two, before me appeared Richard L. LaVarnway to me personally known, who, being by me duly sworn, did say that he resides at 42 Campbell Dr., Glendale Heights, IL that he is a Vice President of CONTINENTAL ILLINOIS NATIONAL BANK AND TRUST COMPANY OF CHICAGO, one of the corporations described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; the it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority. /s/ DORIS J. BAILER NOTARY PUBLIC, State of New York No 24 - 0284525 Qualified in Kings County Cert. filed in New York County Commission Expires March 30, 1983 GENERAL MILLS, INC. SUPPLEMENTAL INDENTURE NO. 3 DATED AS OF OCTOBER 18, 1982 SERIES OF 10 3/8% NOTES DUE OCTOBER 15, 1984 $50,000,000 Supplemental Indenture No. 3 dated as of October 18, 1982, between GENERAL MILLS, INC., a corporation ORGANIZED and existing under the laws of the State of Delaware (hereinafter sometimes referred to as the "Company"), and CONTINENTAL ILLINOIS NATIONAL BANK AND TRUST COMPANY OF CHICAGO, a national banking association duly organized and existing under the laws of the United States of America (hereinafter sometimes referred to as the "Trustee"), W I T N E S S E T H.: The Company and the Trustee have executed and delivered an Indenture dated as of July 1, 1982 (the "Indenture"). Section 10.01 of the Indenture provides for the Company, when authorized by the Board of Directors, and the Trustee to enter into an indenture supplemental to the Indenture to establish the form or terms of Debt Securities of any series of Debt Securities as permitted by Section 2.02 of the Indenture. Section 2.02 of the Indenture provides for Debt Securities of any series to be established pursuant to an indenture supplemental to the Indenture. NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the series of Debt Securities provided for herein, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of such series of Debt Securities, as follows: ARTICLE ONE Relation to Indenture; Definitions Section 1.01. This Supplemental Indenture No. 3 constitutes an integral part of the Indenture. Section 1.02. For all purposes of this Supplemental Indenture: (1) Capitalized terms used herein without definition shall have the meanings specified in the Indenture; (2) All references herein to Articles and Sections, unless otherwise specified, refer to the corresponding Articles and Sections of this Supplemental Indenture No. 3; and (3) The terms "hereof", "herein", "hereby", "hereto", "hereunder" and "herewith" refer to this Supplemental Indenture. ARTICLE TWO The Series of Notes Section 2.01. There shall be a series of Debt Securities designated the "10 3/8% Notes due October 15, 1984" (the "Notes"). The Notes shall be limited to $50,000,000 aggregate principal amount. The original issue date of the Notes shall be October 19, 1982. Section 2.02. The principal on the Notes shall be payable on October 15, 1984. Section 2.03. The rate of interest on the Notes shall be 10 3/8% per annum, payable on each Note from the April 15 or October 15, as the case may be, next preceding the date of such Note to which interest on the Notes has been paid or, if no interest has been paid on the Notes since the original issue date, from October 15, 1982. Interest shall be payable semi-annually on April 15 and October 15 to the person in whose name each Note is registered at the close of business on the last day of the month next preceding such April 15 or October 15, whether or not such day is a business day, for so long as the Notes are outstanding, commencing on April 15, 1983. Interest payable on the Notes shall be computed on the basis of a 360-day year of twelve 30-day months. Section 2.04. The rate of interest payable on any overdue principal of the Notes pursuant to Section 6.02 of the Indenture shall be 10 3/8% per annum. Interest on any such overdue principal shall be computed on the basis of a 360-day year of twelve 30-day months. Section 2.05. The Places of Payment for the Notes shall be the City of Chicago, Illinois and the City of New York, New York. The Trustee and Morgan Guaranty Trust Company of New York shall be the paying agents for the Notes. Section 2.06. The Notes shall not be subject to redemption at any time prior to maturity. The Company shall have no obligation to redeem, purchase or repay the Notes pursuant to any sinking fund. Section 2.07. The amount which shall be payable upon declaration of acceleration of maturity pursuant to Section 6.01 of the Indenture or provable in bankruptcy pursuant to Section 6.02 of the Indenture shall be the entire principal amount of the Notes plus accrued interest thereon. Upon payment of such amount following such acceleration or bankruptcy, all of the Company's obligations in respect of payment of the principal of and interest on such Note shall terminate. Section 2.08. The Notes shall be issued in registered form, without coupon, and shall be transferable as provided in Article Two of the Indenture. Section 2.09. Notes of any authorized denomination shall be exchangeable for a like aggregate principal amount of Notes of different authorized denominations upon surrender of such Notes, with a request for such exchange, at the designated office of the Trustee in the City of Chicago, Illinois or at the designated office of the Authenticating Agent in the City of New York, New York. Section 2.10. The dates on which the Company shall provide information regarding the Holders of the Notes to the Trustee pursuant to Section 5.01 of the Indenture shall be April 15 and October 15 of every year, commencing on April 15, 1983, for so long as any of the Notes are Outstanding. Such information shall be current as of the previous March 31 or September 30, as the case may be. Section 2.11. Prior to due presentment for registration of transfer of any Note, the Company, the Trustee, any Authenticating Agent, any paying agent and any Debt Security registrar may deem and treat the Holder of such Note as the absolute owner of such Note (whether or not such Note shall be overdue and notwithstanding any notation of ownership or other writing thereon made by anyone other than the Company, any Debt Security registrar or the Trustee) for the purpose of receiving payment of or on account thereof and for all other purposes; and neither the Company nor the Trustee nor any Authenticating Agent nor any paying agent nor any Debt Security registrar shall be affected by any notice to the contrary. All such payments so made to any such person, or upon such person's order, shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Note. Section 2.12. The Notes shall be in the form attached as Exhibit A hereto. IN WITNESS WHEREOF, GENERAL MILLS, INC. has caused this Supplemental Indenture No. 3 to be signed, acknowledged and delivered by its Chairman of the Board, Executive Vice President-Chief Financial Officer or Vice President-Treasurer and its corporate seal to be affixed hereunto and the same to be attested by its Secretary or Assistant Secretary; and CONTINENTAL ILLINOIS NATIONAL BANK AND TRUST COMPANY OF CHICAGO has caused this Supplemental Indenture No. 3 to be signed, acknowledged and delivered by one of its Vice Presidents, and its seal to be affixed hereunto and the same to be attested by one of its Trust Officers, all as of the day and year first written above. GENERAL MILLS, INC. [CORPORATE SEAL] By: /s/ J.L. WEAVER ATTEST: /s/ JAMES M. NEVILLE SECRETARY CONTINENTAL ILLINOIS NATIONAL BANK AND TRUST COMPANY OF CHICAGO, as Trustee [CORPORATE SEAL] By: /s/ RICHARD L. LAVARNWAY SECOND VICE PRESIDENT Attest: /s/ L.M. HACKETT 2ND VICE PRESIDENT STATE OF MINNESOTA ss.: COUNTY OF HENNEPIN On the 14th day of October, in the year one thousand, nine hundred eighty-two, before me appeared J.L. Weaver to me personally known, who, being by me duly sown, did say that he resides at Minneapolis, Minnesota, that he is a Vice President-Treasurer of GENERAL MILLS, INC., one of the corporations described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order. IVY S. BERNHARDSON NOTARY PUBLIC - MINNESOTA HENNEPIN COUNTY My Commission Expires Sept. 28, 1985 On the 18th day of October, in the year one thousand nine hundred eighty-two, before me appeared Richard L. LaVarnway to me personally known, who, being by me duly sworn, did say that he resides at 42 Campbell Dr., Glendale Heights, IL that he is a 2nd Vice President of CONTINENTAL ILLINOIS NATIONAL BANK AND TRUST COMPANY OF CHICAGO, one of the corporations described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; the it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority. DORIS J. BAILER NOTARY PUBLIC, State of New York No 24 - 0284525 Qualified in Kings County Cert. filed in New York County Commission Expires March 30, 1983 GENERAL MILLS, INC. SUPPLEMENTAL INDENTURE NO. 4 DATED AS OF JULY 8, 1987 A$100,000,000 14% AUSTRALIAN DOLLAR NOTES DUE JULY 27, 1990 Supplemental Indenture No. 4 dated as of July 8, 1987, between GENERAL MILLS, INC., a corporation organized and existing under the laws of the State of Delaware (hereinafter sometimes referred to as the "Company"), and CONTINENTAL ILLINOIS NATIONAL BANK AND TRUST COMPANY OF CHICAGO, a national banking association duly organized and existing under the laws of the United States of America (hereinafter sometimes referred to as the "Trustee"), W I T N E S S E T H: The Company and the Trustee have executed and delivered an Indenture dated as of July 1, 1982 (the "Indentures). Section 10.01 of the Indenture provides for the Company, when authorized by the Board of Directors, and the Trustee to enter into an indenture supplemental to the Indenture to establish the form or terms of Debt Securities of any series of Debt Securities as permitted by Sections 2.01 and 2.02 of the Indenture and to cure any ambiguity or to correct or supplement any provision contained in the Indenture or in any Supplemental Indenture which may be defective or inconsistent with any other provision contained in the Indenture or any Supplemental Indenture or to make such other provisions in regard to matters or questions &rising under this Indenture as shall not adversely affect the interest of any Holder. Section 2.02 of the Indenture provides for Debt Securities of any Series to be established pursuant to an indenture supplemental to the Indenture. NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the series of Debt Securities provided for herein, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of such series of Debt Securities, as follows: ARTICLE ONE Relation to Indenture; Definitions. Section 1.01. This Supplemental Indenture No. 4 constitutes an integral part of the Indenture. Section 1.02. For all purposes of this Supplemental Indenture: (1) Capitalized teems used herein without definition shall have the meanings specified in the Indenture; (2) All references herein to Articles and Sections, unless otherwise specified, refer to the corresponding Articles and Sections of this Supplemental Indenture No. 4; and (3) The terms "hereof", "herein", "hereby", "hereto", "hereunder" and "herewith" refer to this Supplemental Indenture. ARTICLE TWO The Series of Notes Section 2.01. There shall be a series of Debt Securities designated the 14% Australian Dollar Notes Due July 27, 1990 (the "Notes"). The Notes shall be limited to One Hundred Million Australian Dollars (A$100,000,000) in aggregate principal amount (except for the Notes authenticated and delivered upon registration or transfer of, or in exchange for, or in lieu of other notes pursuant to Sections 2.05, 2.06, 2.07, 3.04 or 10.04 of the Indenture). The original issue date of the Notes shell be July 27, 1987. Section 2.02. The principal of the Notes shall be payable on July 27, 1990. Section 2.03. The rate of interest on the Notes shall be 14% per annum, which interest shall be payable semi-annually on January 27 and July 27 for so long as the Notes are outstanding, commencing on January 27, 1988. Interest payable on the Notes shall be computed on the basis of 360-day year of twelve 30-day months. Interest shall accrue commencing on July 27, 1987. Interest so payable shall be paid to the person in whose name the Notes are registered at the close of business on the immediately preceding January 12 or July 12, respectively. Section 2.04. The rate of interest payable on any overdue principal of the Notes pursuant to Section 6.02 of the Indenture shall be 14% per annum. Interest on any such overdue principal shall be computed on the basis of a 360day year of twelve 30-day months. Section 2.05. The Place of Payment for the principal of the Notes shall be Chicago, Illinois and New York, New York. Interest on the Notes will be paid by check, draft, or wire, as specified. The Trustee shall be the paying agent for the Notes. Section 2.06. The Notes shall not be subject to redemption at any time prior to maturity. The Company shall have no obligation to redeem, purchase or repay the Notes pursuant to any sinking fund. Section 2.07. The Notes shall be issued in registered form, without coupons, in denominations of A$10,000 and integral multiples of A$10,000 in excess thereof, and shall be transferable as provided in Article Two of the Indenture. Section 2.08. Notes of any authorized denomination shall be exchangeable for a like aggregate principal amount of Notes of different authorized denominations upon surrender of such Notes, with a request for such exchange, at the designated office of the Trustee in the City of Chicago, Illinois. Section 2.09. The principal of and interest on the Notes is payable by the Company in Australian dollars. However, the Exchange Rate Agent wail convert &11 payments of principal of and interest on the Notes to U.S. dollars, unless the Holder elects to receive such payments in Australian dollars as described below. The U.S. dollar amount to be received by a Holder not electing to receive Australian dollars will be based on the highest bid quotation received by the Exchange Rate Agent from three recognized foreign exchange dealers (one of which may be the Exchange Rate Agent) at approximately 11:00 a.m. New York City time on the second Business Day preceding the applicable payment date for the purchase by the quoting dealer of Australian dollars for U.S. dollars for settlement on such payment date in the aggregate amount of Australian dollars payable to all Holders receiving U.S. dollar payments (eg. Holders who have not elected to receive Australian dollars) and at which the applicable dealer commits to execute a contract. If such bid quotations are not available, payment may be made in Australian dollars. All currency exchange costs will be borne by the Holder by deductions from such payments. The Exchange Rate Agent shall be appointed by the Company with the consent of the Trustee, which consent shall not be unreasonably withheld. Section 2.10. The Notes shell be in the form attached as Exhibit A hereto. Section 2.11. All other terms in the Notes as set forth in Exhibit A. Section 2.12. The term "Business Day" as defined in Section 1.01 of the Indenture, for the purposes of this Series of Notes, shall mean a day which is not a Saturday or a Sunday and which is neither & legal holiday nor a day on which banking institutions are authorized or required by law or regulation to close in Sydney, Australia; London, England; New York, New York; or Chicago, Illinois. If a date fixed for payment of interest or principal of the Notes is not a Business Day, then payment of interest or principal shall be made on the next succeeding Business Day. ARTICLE THREE Amendments to the Indenture Section 3.01. Section 2.02 of the Indenture is amended to add the following subsection: "(14) if other than United States dollars, the currency or currencies in which the Debt Securities shall be issuable." Section 3.02. The term "Business Day" in Article One, Section 1.01 of the Indenture is amended to read as follows: "The term 'Business Day' means any day other than a day on which banking institutions in the City of Chicago, Illinois, or the applicable Place of Payment are authorized or required by law to close, and as may be otherwise specified in a supplemental indenture establishing the terms of & particular series of Debt Securities." Section 3.03. Article Eight is amended to add the following as new Section 8.06: "Whenever this Indenture provides for (i) any action by, or the determination of any of the rights of, Holders of Securities of any series in which not all of such Debt Securities are denominated in the same coin or currency, or (ii) any distribution to Holders of Debt Securities, unless otherwise specified as contemplated by Section 3.01 for Debt Securities of such series. any amount in respect of any Debt Security denominated in & coin or currency other than United States dollars shall be treated for any such action or distribution as that amount of United States dollars that could be obtained for such amount on such reasonable basis of exchange and as of the record date for such action, determination of rights or distribution (or, if there shall be no applicable record date, such other date reasonably proximate to the date of such action, determination of rights or distribution) as the Company may specify in a written notice to the Trustee or, in absence of such written notice, as the Trustee may determine." IN WITNESS WHEREOF, GENERAL MILLS, INC. has caused this Supplemental Indenture No. 4 to be signed, acknowledged and delivered by its Chairman of the Board, Vice Chairman of the Board and Chief Financial Officer or Senior Vice President-Treasurer and its corporate seal to be affixed hereto and the same to be attested by its Secretary or an Assistant Secretary; and CONTINENTAL ILLINOIS NATIONAL BANK AND TRUST COMPANY OF CHICAGO has caused this Supplemental Indenture No. 4 to be signed, acknowledged and delivered by one of its Vice Presidents, and its seal to be affixed hereunto and the same to be attested by one of its Second Vice Presidents, all as of the day and year first written above. GENERAL MILLS, INC. [CORPORATE SEAL] By: /s/ D.E. KELBY ------------------------------ Name: D.E. Kelby Title: Senior Vice President and Treasurer ATTEST: /s/ B.L. ROSENBERG CONTINENTAL ILLINOIS NATIONAL BANK AND TRUST COMPANY OF CHICAGO, as Trustee [CORPORATE SEAL] By: /s/ THOMAS H. RANSOM ------------------------------ Name: Thomas H. Ransom Title: Vice President Attest: /s/ LAWRENCE M. HACKETT GENERAL MILLS , INC. SUPPLEMENTAL INDENTURE NO. 5 DATED AS OF APRIL 1, 1989 Supplemental Indenture No. 5 dated as of April 1, 1989, between GENERAL MILLS, INC., a corporation organized and existing under the laws of the State of Delaware (hereinafter referred to as the "Company"), and CONTINENTAL BANK N.A., a national banking association duly organized and existing under the laws of the United States of America (hereinafter referred to as the "Trustee"). W I T N E S S E T H : The Company and the Trustee have executed and delivered an Indenture dated as of July 1, 1982 (the "Indenture"). The Company desires to amend the Indenture to provide for the issuance of Debt Securities of a series on a continuous basis and with differing terms and to expressly provide that the Debt Securities of such series may be denominated in currencies other than the currency of the United States of America or may provide that the amount of payments of principal of and any premium or interest thereon may be determined with reference to an index. Section 10.01 of the Indenture provides for the Company, when authorized by the Board of Directors, and the Trustee to enter into an indenture supplemental to the Indenture to amend such Indenture by creating such provisions as shall not adversely affect the interests of any Holder. NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Debt Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of Debt Securities or of such series thereof, as follows: ARTICLE ONE RELATION TO INDENTURE; DEFINITIONS SECTION 1.01. This Supplemental Indenture No. 5 constitutes an integral part of the Indenture. SECTION 1.02. For all purposes of this Supplemental Indenture: (1) Capitalized terms used herein without definition shall have the meanings specified in the Indenture; (2) All references herein to Articles and Sections, unless otherwise specified, refer to the corresponding Articles and Sections of this Supplemental Indenture No. 5; and (3) The terms "hereof", "herein", "hereby", "hereto", "hereunder" and "herewith" refer to this Supplemental Indenture. ARTICLE TWO PROVISIONS APPLICABLE EXCLUSIVELY TO THE SERIES OF MEDIUM-TERM NOTES SECTION 2.01. There shall be a series of Debt Securities designated the "Medium-Term Notes" (the "Notes"). The Notes shall be limited to an aggregate principal amount resulting in not more than U.S. $229,620,000 of proceeds to the Company (or the equivalent thereof, determined as of the respective dates of issuance of Notes, in any other currency or currencies) and shall be issued at any time or from time to time. SECTION 2.02. Each Note shall have the particular terms (which need not be substantially identical to the terms of any other Notes) established in accordance with or as contemplated by this Section 2.02. Each fixed rate Note ("Fixed Rate Note") shall be in substantially the form attached as Exhibit A hereto, and each floating rate Note ("Floating Rate Note") shall be in substantially the form attached as Exhibit B hereto. Each of the Chairman of the Board, the President, the Chief Financial Officer and the Treasurer (each an "Authorized Officer") may, at any time and from time to time, on behalf of the Company, authorize the issuance of Notes and in connection therewith establish, or, if all of the Notes of such series may not be originally issued at one time, to the extent deemed appropriate prescribe the manner of determining within any limitations established by such Authorized Officer (subject in either case to the limitations set forth in this Supplemental Indenture and the Indenture), the following: (1) the date or dates on which the principal and premium, if any, of the Notes is payable; (2) the rate or rates (or method by which determined) at which the Notes shall bear interest, if any, the date or dates from which such interest shall accrue, the interest payment dates on which such interest shall be payable and, in the case of registered Notes, the record dates for the determination of Holders to whom such interest is payable; (3) if an Original Issue Discount Security, the Yield to Maturity; (4) the price or prices at which, the period or periods within which and the terms and conditions upon which Notes may be redeemed, in whole or in part, at the option of the Company, pursuant to any sinking fund or otherwise; (5) the obligation, if any, of the Company to redeem, purchase or repay Notes pursuant to any sinking fund or analogous provisions or at the option of a Holder thereof and the price or prices at which and the period or periods within which and the terms and conditions upon which Notes shall be redeemed, purchased or repaid, in whole or in part, pursuant to such obligation; (6) if other than denominations of $100,000 and integral multiples of $1,000 in excess thereof (or, in the case of any Note denominated in other than U.S. dollars, the amount of the Specified Currency (as defined below) for such Note which is equivalent, at the noon buying rate in The City of New York for cable transfers for such Specified Currency on the first Business Day in The City of New York and the country issuing such Specified Currency (or, in the case of European Currency Units, in Brussels, Belgium) next preceding the date on which the Company accepts the offer to purchase such Note, to U.S. $100,000 (rounded down to an integral multiple of 10,000 units of such Specified Currency) and any greater amount that is an integral multiple of 10,000 units of such Specified Currency), the denominations in which Notes shall be issuable; (7) if the amount of payments of principal of and any premium or interest on the Notes may be determined with reference to an index, the manner in which such amounts shall be determined; (8) if other than the principal amount thereof, the portion of the principal amount of Notes which shall be payable upon declaration of acceleration of the maturity thereof pursuant to Section 6.01 of the Indenture or provable in bankruptcy pursuant to Section 6.02 of the Indenture; (9) any Events of Default with respect to the Notes, if not set forth in the Indenture; (10) whether the Notes shall be issued in registered or bearer form, with or without coupons; (11) whether the Notes shall be issued in whole or in part in the form of one or more Global Notes and, in such case, the Depositary for such Global Note or Notes, which Depositary must be a clearing agency registered under the Securities Exchange Act of 1934; (12) if other than United States dollars, the currency or currencies, including composite currencies, in which payment of the principal of and any premium and interest on the Notes shall be payable (the "Specified Currency"); and (13) any other terms of the Notes (which terms shall not be inconsistent with the provisions of this Supplemental Indenture or the Indenture). In connection with the Notes, the officers of the Company specified in the Indenture may execute and deliver one or more Officers' Certificates setting forth, or, if all of the Notes may not be originally issued at one time, to the extent deemed appropriate describing the manner of determining, the foregoing terms of the Notes, established or prescribed, as the case may be, in accordance with the foregoing. SECTION 2.03. The Places of Payment for the principal of the Notes shall be the City of Chicago, Illinois and The City of New York, New York. Interest, if any, on the Notes will be paid by check, draft or wire, as specified in the terms thereof. The Trustee shall be the paying agent ("Paying Agent") for the Notes. SECTION 2.04. Unless otherwise provided in the terms of a particular Note, definitive Notes of any authorized denomination shall be exchangeable for a like aggregate principal amount of Notes denominated in the same Specified Currency and bearing interest (if any) at the same rate or having the same Yield to Maturity and Stated Maturity and of different authorized denominations upon surrender of such Notes with a request for such exchange at the designated office of the Trustee in the City of Chicago, Illinois or in the Borough of Manhattan, The City of New York. SECTION 2.05. Unless otherwise specified in a particular Note, payments of principal of (and premium, if any) and interest on each Note will be made in the applicable Specified Currency, provided, however, that payments of principal (and premium, IF any) and interest on Notes denominated in other than U.S. dollars will nevertheless be made in U.S. dollars (i) at the option of the Holders thereof under the procedures described in the two following paragraphs and (ii) at the option of the Company in the case of imposition of exchange controls or other circumstances beyond the control of the Company as described below in this Section 2.05. If specified in a particular Note, the amount of principal payable on such Note will be determined by reference to an index or formula described therein. Unless otherwise specified in the terms of a Note, and except as provided in the next paragraph, payments of interest and principal (and premium, if any) with respect to any Note denominated in other than U.S. dollars will be made in U.S. dollars if the registered Holder of such Note on the relevant Regular Record Date or at maturity, as the case may be, has transmitted a written request for such payment in U.S. dollars to the Trustee at its Corporate Trust Office or agency in the City of Chicago, Illinois or in The City of New York, New York on or prior to such Regular Record Date or the date 15 days prior to maturity, as the case may be. Such request may be in writing (mailed or hand delivered) or by cable or telex or, if promptly confirmed in writing, by other form of facsimile transmission. Any such request made with respect to any Note by a registered Holder will remain in effect with respect to any further payments of interest and principal (and premium, if any) with respect to such Note payable to such Holder, unless such request is revoked on or prior to the relevant Regular Record Date or the date 15 days prior to maturity, as the case may be. Unless otherwise provided in the applicable Officers' Certificate, Continental Bank N.A. will be the Exchange Rate Agent (the "Exchange Rate Agent") with respect to the Notes. Unless otherwise indicated in the terms of a particular Note, the "Regular Record Date" with respect to any Floating Rate Note shall be the date 15 calendar days prior to each Interest Payment Date, whether or not such date shall be a Business Day, and the "Regular Record Date" with respect to any Fixed Rate Note shall be the March 1 and September 1 next preceding the March 15 and September 15 Interest Payment Dates. Unless otherwise indicated in the terms of a particular Note and except as provided below, interest will be payable, in the case of Floating Rate Notes which reset weekly, on the third Wednesday of March, June, September and December of each year: in the case of Floating Rate Notes which reset monthly, on the third Wednesday of each month or on the third Wednesday of March, June, September and December of each year (as respectively indicated in such Notes); in the case of Floating Rate Notes which reset quarterly, on the third Wednesday of March, June, September and December of each year; in the case of Floating Rate Notes which reset semi-annually, on the third Wednesday of the two months of each year specified in such Notes; and in the case of Floating Rate Notes which reset annually, on the third Wednesday of the month specified in such Notes (each an "Interest Payment Date"), and in each case, at maturity. Payments of interest on any Fixed Rate Note or Floating Rate Note with respect to any Interest Payment Date will include interest accrued to but excluding such Interest Payment Date; provided, however, that if the Interest Reset Dates (as defined in a particular Note) with respect to any Floating Rate Note are weekly, interest payable on such Note on any Interest Payment Date, other than interest payable on the date on which principal on such Note is payable, will include interest accrued to but excluding the day following the next preceding Regular Record Date. With respect to a Floating Rate Note, accrued interest from the date of issue or from the last date to which interest has been paid shall be calculated by multiplying the face amount of such Floating Rate Note by an accrued interest factor. Such accrued interest factor shall be computed by adding the interest factor calculated for each day from the date of issue, or from the last date to which interest has been paid, to but excluding the date for which accrued interest is being calculated. The interest factor for a Floating Rate Note (expressed as a decimal) for each such day shall be computed either (i) by dividing the interest rate (expressed as a decimal) applicable to such date by 360 or (ii) by the actual number of days in the year, as specified in such Note. Interest on Fixed Rate Notes will be computed on the basis of a 360-day year of twelve 30-day months. SECTION 2.06. For the purposes of the Notes and this Section 2.06, the term "Agent Member" means a member of, or participant in, a Depositary; the term "Depositary" means, with respect to Notes issuable or issued in whole or in part in the form of one or more Global Notes, the Person designated as Depositary by the Company pursuant to Section 2.02 hereof, and if at any time there is more than one such Person, "Depositary" as used with respect to the Notes shall mean the respective Depositary with respect to particular Notes; and the term "Global Note" means a global certificate evidencing all or part of the series of Notes, issued to the Depositary for the series or such portion of the series, and registered in the name of such Depositary or its nominee. Notwithstanding Section 2.05 of the Indenture, except as otherwise specified as contemplated by Section 2.02 hereof, any Global Note shall be exchangeable only as provided in this paragraph. A Global Note shall be exchangeable pursuant to this Section if (x) the Depositary notifies the Company that it is unwilling or unable to continue as Depositary for such Global Note or if at any time the Depositary ceases to be a clearing agency registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (y) the Company in its sole discretion determines that all Global Notes then outstanding hereunder and under the Indenture shall be exchangeable for definitive Notes in registered form or (z) an Event of Default with respect to the Notes represented by such Global Note has occurred and is continuing. Any Global Note that is exchangeable pursuant to the preceding sentence shall be exchangeable for definitive Notes in registered form, bearing interest (if any) at the same rate or pursuant to the same formula, having the same date of issuance, redemption provisions, if any, Specified Currency, Stated Maturity and other terms and of differing denominations aggregating a like amount. Such definitive Notes shall be registered in the names of the owners of the beneficial interests in such Global Note as such names are from time to time provided by the relevant participants in the Depositary holding such Global Note (as such participants are identified from time to time by such Depositary). No Global Note may be transferred except as a whole by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor of the Depositary or a nominee of such successor. Except as provided above, owners solely of beneficial interests in a Global Note shall not be entitled to receive physical delivery of Notes in definitive form and will not be considered the Holders thereof for any purpose under the Indenture or this Supplemental Indenture. Any Global Note that is exchangeable pursuant to the preceding paragraph shall be exchangeable for Notes issuable in denominations of $100,000 and integral multiples of $1,000 in excess thereof and registered in such names as the Depositary that is the Holder of such Global Note shall direct. In the event that a Global Note is surrendered for redemption in part pursuant to Section 3.04 of the Indenture, the Company shall execute, and the Trustee shall authenticate and deliver to the Depositary for such Global Note, without service charge, a new Global Note in a denomination equal to and in exchange for the unredeemed portion of the principal of the Global Note so surrendered. The Trustee shall fix a record date for the purpose of determining the Persons entitled to waive any past default hereunder or the Persons entitled to consent to any indenture supplemental to the Indenture. If a record date is fixed, the Holders on such record date, or their duly designated proxies, and only such Persons, shall be entitled to waive any default hereunder, or to retract any such waiver previously given, or to consent to such supplemental indenture or to revoke any such consent previously given, as the case may be, whether or not such Holders remain Holders after such record date. No such waiver or consent shall be valid or effective for more than 90 days after such record date. The Agent Members shall have no rights under the Indenture or this Supplemental Indenture with respect to any Global Note held on their behalf by a Depositary, and such Depositary may be treated by the Company, the Trustee, and any agent of the Company or the Trustee as the owner of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee, or any Agent of the Company or the Trustee, from giving effect to any written certification, proxy or other authorization furnished by a Depositary or impair, as between a Depositary and its Agent Members, the operation of customary practices governing the exercise of the rights of a Holder of any Note, including without limitation the granting of proxies or other authorization of participants to give or take any request, demand, authorization, direction, notice, consent, waiver or other action which a Holder is entitled to give or take under the Indenture. SECTION 2.07. In determining whether the Holders of the requisite principal amount of the Outstanding Notes have given any request, demand, authorization, direction, notice, consent or waiver under the Indenture, the principal amount of a Note denominated in a foreign currency or currencies shall be the U.S. dollar equivalent, determined on the date of original issuance of such Note, of the principal amount (or, in the case of a Note which is an Original Issue Discount Security, the U.S. dollar equivalent on the date of the original issuance of such Note of the amount of the principal thereof that would be due and payable as of the date of such determination upon a declaration of acceleration of the maturity thereof pursuant to Section 6.01 of the Indenture) of such Note; provided, however, that if such Holders are, pursuant to Section 6.06 of the Indenture, acting together with the Holders of other Debt Securities as a single class in giving any such request, demand, authorization, direction, notice, consent or waiver, the provisions of Section 8.06 of the Indenture shall instead govern such a determination with respect to such Notes, the provisions of this Section 2.07 notwithstanding. SECTION 2.08. References in the Indenture to the "Yield to Maturity" of Debt Securities shall be deemed, solely with respect to the Notes, to refer to the respective yields to maturity, calculated at the respective times of issuance of the particular Notes or, if applicable, at the respective most recent redeterminations of interest on such respective Notes and calculated in accordance with accepted financial practice. References in Article VI of the Indenture to the "rate" or "rate of interest" of Debt Securities shall be deemed, solely with respect to the Notes, to refer to the respective rates or rates of interest of the particular Notes. SECTION 2.09. Notwithstanding the provisions of Sections 2.03 and 14.06 of the Indenture, if all Notes are not to be originally issued at one time, it shall not be necessary to deliver the Officers' Certificate and the Opinion of Counsel otherwise required pursuant to Section 14.06 or the written order of the Company otherwise required pursuant to Section 2.03 at or prior to the time of authentication of each Note if such documents are delivered at or prior to the SECTION 2.10. If any Debt Securities described in subsections (a), (b) or (c)(i) of Section 12.01 of the Indenture are Notes which are denominated in a currency or currencies other than United States dollars, then in order to satisfy the deposit conditions in subsection (c)(ii) of Section 12.01 with respect to any such Notes, the Company shall deposit or cause to be deposited as specified in Section 12.01 the required amount in the currency or currencies in which such Notes are denominated or in direct obligations of the sovereign nation or sovereign nations issuing such currency or currencies and denominated in such currency or currencies. ARTICLE THREE AMENDMENT TO INDENTURE SECTION 3.01. Section 4.01 of the Indenture is hereby amended to read in its entirety: SECTION 4.01. The Company covenants and agrees for the benefit of the Holders of each series of Debt Securities that it will duly and punctually pay or cause to be paid the principal of and premium, if any, and interest on the Debt Securities of that series at the places, at the respective times and in the manner provided in such Debt Securities. Unless otherwise provided as contemplated by Section 2.02 with respect to any series of Debt Securities, each installment of interest on interest-bearing Registered Debt Securities of any series may be paid by mailing checks for such interest payable to or upon the written order of the Holders of such Registered Debt Securities entitled thereto as they shall appear on the Debt Security Register. The interest on Coupon Debt Securities shall be payable only upon presentation and surrender of the several coupons for such interest installments as are evidenced thereby as they severally mature. The interest on any temporary bearer Debt Securities shall be paid, as to the installments of interest evidenced by coupons attached thereto, if any, only upon presentation and surrender thereof, and, as to the other installments of interest, if any, only upon presentation of such Debt Securities for notation thereon of the payment of such interest. Unless otherwise provided as contemplated by Section 2.02 with respect to any series of Debt Securities, the interest on Registered Debt Securities shall be payable only to or upon the written order of the Holders thereof." IN WITNESS WHEREOF, GENERAL MILLS, INC. has caused this Supplemental Indenture No. 5 to be signed, acknowledged and delivered by its Chairman of the Board, President, Vice Chairman, Chief Financial and Administrative Officer or Senior Vice President-Treasurer and its corporate seal to be affixed hereunto and the same to be attested by its Secretary or Assistant Secretary; and CONTINENTAL BANK N.A. has caused this Supplemental Indenture No. 5 to be signed, acknowledged and delivered by one of its Vice Presidents, and its seal to be affixed hereunto and the same to be attested by one of its Trust Officers, all as of the day and year first written above. GENERAL MILLS, INC. [CORPORATE SEAL] By: /s/ D.E. KELBY ---------------------- Title: Senior Vice President, Treasurer ATTEST: /s/ IVY S. BERNHARDSON ASSISTANT SECRETARY CONTINENTAL BANK N.A., as Trustee [CORPORATE SEAL] By: /s/ ---------------------- Title: Vice President Attest: /s/ TRUST OFFICER GENERAL MILLS, INC. SUPPLEMENTAL INDENTURE NO. 6 DATED AS OF NOVEMBER 8, 1990 Supplemental Indenture No. 6 dated as of November 8, 1990, between GENERAL MILLS, INC., a corporation organized and existing under the laws of the State of Delaware (hereinafter referred to as the "Company"), and CONTINENTAL BANK N.A., a national banking association duly organized and existing under the laws of the United States of America (hereinafter referred to as the "Trustee"). W I T N E S S E T H : The Company and the Trustee have executed and delivered an Indenture dated as of July 1, 1982 (the "Indenture"). The Company desires to amend the Indenture to provide for the issuance of Debt Securities of a series on a continuous basis and with differing terms and to expressly provide that the Debt Securities of such series may be denominated in currencies other than the currency of the United States of America or may provide that the amount of payments of principal of and any premium or interest thereon may be determined with reference to an index. Section 10.01 of the Indenture provides for the Company, when authorized by the Board of Directors, and the Trustee to enter into an indenture supplemental to the Indenture to amend such Indenture by creating such provisions as shall not adversely affect the interests of any Holder. NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Debt Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of Debt Securities or of such series thereof, as follows: ARTICLE ONE RELATION TO INDENTURE; DEFINITIONS SECTION 1.01. This Supplemental Indenture No. 6 constitutes an integral part of the Indenture. SECTION 1.02. For all purposes of this Supplemental Indenture: (1) Capitalized terms used herein without definition shall have the meanings specified in the Indenture; (2) All references herein to Articles and Sections, unless otherwise specified, refer to the corresponding Articles and Sections of this Supplemental Indenture No. 6; and (3) The terms "hereof," "herein," "hereby," "hereto," "hereunder," and "herewith" refer to this Supplemental Indenture. ARTICLE TWO PROVISIONS APPLICABLE EXCLUSIVELY TO THE SERIES OF MEDIUM-TERM NOTES SECTION 2.01. There shall be a series of Debt Securities designated the "Medium-Term Notes - Series B" (the "Notes"). The Notes shall be limited to an aggregate principal amount resulting in not more than U.S. $300,000,000 of proceeds to the Company (or the equivalent thereof, determined as of the respective dates of issuance of Notes, in any other currency or currencies) and shall be issued at any time or from time to time. SECTION 2.02. Each Note shall have the particular terms (which need not be substantially identical to the terms of any other Notes) established in accordance with or as contemplated by this Section 2.02. Each fixed rate Note ("Fixed Rate Note") shall be in substantially the form attached hereto as Exhibit A; each floating rate Note ("Floating Rate Note") shall be in substantially the form attached hereto as Exhibit B; and each indexed Note ("Indexed Note") shall be in substantially the form attached hereto as Exhibit C. Each of the Chairman of the Board, the President, the Chief Financial Officer and the Treasurer (each an "Authorized Officer") may, at any time and from time to time, on behalf of the Company, authorize the issuance of Notes and in connection therewith establish, or, if all of the Notes of such series may not be originally issued at one time, to the extent deemed appropriate prescribe the manner of determining within any limitations established by such Authorized Officer (subject in either case to the limitations set forth in this Supplemental Indenture and the Indenture), the following: (1) the date or dates on which the principal and premium, if any, of the Notes is payable; (2) the rate or rates (or method by which determined) at which the Notes shall bear interest, if any, the date or dates from which such interest shall accrue, the interest payment dates on which such interest shall be payable and, in the case of registered Notes, the record dates for the determination of Holders to whom such interest is payable; (3) if an Original Issue Discount Security, the Yield to Maturity; (4) the price or prices at which, the period or periods within which and the terms and conditions upon which Notes may be redeemed, in whole or in part, at the option of the Company, pursuant to any sinking fund or otherwise; (5) the obligation, if any, of the Company to redeem, purchase or repay Notes pursuant to any sinking fund or analogous provisions or at the option of a Holder thereof and the price or prices at which and the period or periods within which and the terms and conditions upon which Notes shall be redeemed, purchased or repaid, in whole or in part, pursuant to such obligation; (6) if other than denominations of $100,000 and integral multiples of $1,000 in excess thereof (or, in the case of any Note denominated in other than U.S. dollars, the amount of the Specified Currency (as defined below) for such Note which is equivalent, at the noon buying rate in The City of New York for cable transfers for such Specified Currency on the first Business Day in The City of New York and the country issuing such Specified Currency (or, in the case of European Currency Units, in Luxemborg) next preceding the date on which the Company accepts the offer to purchase such Note, to U.S. $100,000 (rounded down to an integral multiple of 10,000 units of such Specified Currency) and any greater amount that is an integral multiple of 10,000 units of such Specified Currency), the denominations in which Notes shall be issuable; (7) if the amount of payments of principal of and any premium or interest on the Notes may be determined with reference to an index, the manner in which such amounts shall be determined; (8) if other than the principal amount thereof, the portion of the principal amount of Notes which shall be payable upon declaration of acceleration of the maturity thereof pursuant to Section 6.01 of the Indenture or provable in bankruptcy pursuant to Section 6.02 of the Indenture; (9) any Events of Default with respect to the Notes, if not set forth in the Indenture; (10) whether the Notes shall be issued in registered or bearer form, with or without coupons; (11) whether the Notes shall be issued in whole or in part in the form of one or more Global Notes and, in such case, the Depositary for such Global Note or Notes, which Depositary must be a clearing agency registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act"); (12) if other than United States dollars, the currency or currencies, including composite currencies, in which payment of the principal of and any premium and interest on the Notes shall be payable (the "Specified Currency"); and (13) any other terms of the Notes (which terms shall not be inconsistent with the provisions of this Supplemental Indenture or the Indenture). In connection with the Notes, the officers of the Company specified in the Indenture may execute and deliver one or more Officers' Certificates setting forth, or, if all of the Notes may not be originally issued at one time, to the extent deemed appropriate describing the manner of determining, the foregoing terms of the Notes, established or prescribed, as the case may be, in accordance with the foregoing. SECTION 2.03. The Places of Payment for the principal of the Notes shall be the City of Chicago, Illinois and The City of New York, New York. Interest, if any, on the Notes will be paid by check, draft or wire, as specified in the terms thereof. The Trustee shall be the paying agent ("Paying Agent") for the Notes. SECTION 2.04. Unless otherwise provided in the terms of a particular Note, definitive Notes of any authorized denomination shall be exchangeable for a like aggregate principal amount of Notes denominated in the same Specified Currency and bearing interest (if any) at the same rate or having the same Yield to Maturity and Stated Maturity and of different authorized denominations upon surrender of such Notes with a request for such exchange at the designated office of the Trustee in the City of Chicago, Illinois or in the Borough of Manhattan, The City of New York. SECTION 2.05. Unless otherwise specified in a particular Note, payments of principal of (and premium, if any) and interest on each Note will be made in the applicable Specified Currency; provided, however, that payments of principal (and premium, if any) and interest on Notes denominated in other than U.S. dollars will nevertheless be made in U.S. dollars (i) at the option of the Holders thereof under the procedures described in the two following paragraphs and (ii) at the option of the Company in the case of imposition of exchange controls or other circumstances beyond the control of the Company as described below in this Section 2.05. If specified in a particular Note, the amount of principal payable on such Note will be determined by reference to an index or formula described therein. Unless otherwise specified in the terms of a Note, and except as provided in the next paragraph, payments of interest and principal (and premium, if any) with respect to any Note denominated in other than U.S. dollars will be made in U.S. dollars if the registered Holder of such Note on the relevant Regular Record Date or at maturity, as the case may be, has transmitted a written request for such payment in U.S. dollars to the Trustee at its Corporate Trust Office or agency in the City of Chicago, Illinois or in The City of New York, New York on or prior to such Regular Record Date or the date 15 days prior to maturity, as the case may be. Such request may be in writing (mailed or hand delivered) or by cable or telex or, if promptly confirmed in writing, by other form of facsimile transmission. Any such request made with respect to any Note by a registered Holder will remain in effect with respect to any further payments of interest and principal (and premium, if any) with respect to such Note payable to such Holder, unless such request is revoked on or prior to the relevant Regular Record Date or the date 15 days prior to maturity, as the case may be. Unless otherwise provided in the applicable Officers' Certificate, Continental Bank N.A. will be the Exchange Rate Agent (the "Exchange Rate Agent") with respect to the Notes. Unless otherwise indicated in the terms of a particular Note, the "Regular Record Date" with respect to any Floating Rate Note shall be the date 15 calendar days prior to each Interest Payment Date, whether or not such date shall be a Business Day, and the "Regular Record Date" with respect to any Fixed Rate Note shall be the March 1 and September 1 next preceding the March 15 and September 15 Interest Payment Dates. Unless otherwise indicated in the terms of a particular Note and except as provided below, interest will be payable, in the case of Floating Rate Notes which reset weekly, on the third Wednesday of March, June, September and December of each year; in the case of Floating Rate Notes which reset monthly, on the third Wednesday of each month on the third Wednesday of March, June, September and December of each year (as respectively indicated in such Notes); in the case of Floating Rate Notes which reset quarterly, on the third Wednesday of March, June, September and December of each year; in the case of Floating Rate Notes which reset semi-annually, on the third Wednesday of the two months of each year specified in such Notes; and in the case of Floating Rate Notes which reset annually, on the third Wednesday of the month specified in such Notes (each an "Interest Payment Date"), and in each case, at maturity. Payments of interest on any Fixed Rate Note or Floating Rate Note with respect to any Interest Payment Date will include interest accrued to but excluding such Interest Payment Date; provided, however, that if the Interest Reset Dates (as defined in a particular Note) with respect to any Floating Rate Note are weekly, interest payable on such Note on any Interest Payment Date, other than interest payable on the date on which principal on such Note is payable, will include interest accrued to but excluding the day following the next preceding Regular Record Date. With respect to a Floating Rate Note, accrued interest from the date of issue or from the last date to which interest has been paid shall be calculated by multiplying the face amount of such Floating Rate Note by an accrued interest factor. Such accrued interest factor shall be computed by adding the interest factor calculated for each day from the date of issue, or from the last date to which interest has been paid, to but excluding the date for which accrued interest is being calculated. The interest factor for a Floating Rate Note (expressed as a decimal) for each such day shall be computed either (i) by dividing the interest rate (expressed as a decimal) applicable to such date by 360 or (ii) by the actual number of days in the year, as specified in such Note. Interest on Fixed Rate Notes will be computed on the basis of a 360-day year of twelve 30-day months. SECTION 2.06. For the purposes of the Notes and this Section 2.06, the term "Agent Member" means a member of, or participant in, a Depositary; the term "Depositary" means, with respect to Notes issuable or issued in whole or in part in the form of one or more Global Notes, the Person designated as Depositary by the Company pursuant to Section 2.02 hereof, and if at any time there is more than one such Person, "Depositary" as used with respect to the Notes shall mean the respective Depositary with respect to particular Notes; and the term "Global Note" means a global certificate evidencing all or part of the series of Notes, issued to the Depositary for the series or such portion of the series, and registered in the name of such Depositary or its nominee. Notwithstanding Section 2.05 of the Indenture, except as otherwise specified as contemplated by Section 2.02 hereof, any Global Note shall be exchangeable only as provided in this paragraph. A Global Note shall be exchangeable pursuant to this Section if (x) the Depositary notifies the Company that it is unwilling or unable to continue as Depositary for such Global Note or if at any time the Depositary ceases to be a clearing agency registered under the Exchange Act, (y) the Company in its sole discretion determines that all Global Notes then outstanding hereunder and under the Indenture shall be exchangeable for definitive Notes in registered form or (z) an Event of Default with respect to the Notes represented by such Global Note has occurred and is continuing. Any Global Note that is exchangeable pursuant to the preceding sentence shall be exchangeable for definitive Notes in registered form, bearing interest (if any) at the same rate or pursuant to the same formula, having the same date of issuance, redemption provisions, if any, Specified Currency, Stated Maturity and other terms and of differing denominations aggregating a like amount. Such definitive Notes shall be registered in the names of the owners of the beneficial interests in such Global Note as such names are from time to time provided by the relevant participants in the Depositary holding such Global Note (as such participants are identified from time to time by such Depositary.) No Global Note may be transferred except as a whole by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor of the Depositary or a nominee of such successor. Except as provided above, owners solely of beneficial interests in a Global Note shall not be entitled to receive physical delivery of Notes in definitive form and will not be considered the Holders thereof for any purpose under the Indenture or this Supplemental Indenture. Any Global Note that is exchangeable pursuant to the preceding paragraph shall be exchangeable for Notes issuable in denominations of $100,000 and integral multiples of S1,000 in excess thereof and registered in such names as the Depositary that is the Holder of such Global Note shall direct. In the event that a Global Note is surrendered for redemption in part pursuant to Section 3.04 of the Indenture, the Company shall execute, and the Trustee shall authenticate and deliver to the Depositary for such Global Note, without service charge, a new Global Note in a denomination equal to and in exchange for the unredeemed portion of the principal of the Global Note so surrendered. The Trustee shall fix a record date for the purpose of determining the Persons entitled to waive any past default hereunder or the Persons entitled to consent to any indenture supplemental to the Indenture. If a record date is fixed, the Holders on such record date, or their duly designated proxies, and only such Persons, shall be entitled to waive any default hereunder, or to retract any such waiver previously given, or to consent to such supplemental indenture or to revoke any such consent previously given, as the case may be, whether or not such Holders remain Holders after such record date. No such waiver or consent shall be valid or effective for more than 90 days after such record date. The Agent Members shall have no rights under the Indenture or this Supplemental Indenture with respect to any Global Note held on their behalf by a Depositary, and such Depositary may be treated by the Company, the Trustee, and any agent of the Company or the Trustee as the owner of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee, or any Agent of the Company or the Trustee, from giving effect to any written certification, proxy or other authorization furnished by a Depositary or impair, as between a Depositary and its Agent Members, the operation of customary practices governing the exercise of the rights of a Holder of any Note, including without limitation the granting of proxies or other authorization of participants to give or take any request, demand, authorization, direction, notice, consent, waiver or other action which a Holder is entitled to give or take under the Indenture. SECTION 2.07. In determining whether the Holders of the requisite principal amount of the Outstanding Notes have given any request, demand, authorization, direction, notice, consent or waiver under the Indenture, the principal amount of a Note denominated in a foreign currency or currencies shall be the U.S. dollar equivalent, determined on the date of original issuance of such Note, of the principal amount (or, in the case of a Note which is an Original Issue Discount Security, the U.S. dollar equivalent on the date of the original issuance of such Note of the amount of the principal thereof that would be due and payable as of the date of such determination upon a declaration of acceleration of the maturity thereof pursuant to Section 6.01 of the Indenture) of such Note; provided, however, that if such Holders are, pursuant to Section 6.06 of the Indenture, acting together with the Holders of other Debt Securities as a single class in giving any such request, demand, authorization, direction, notice, consent or waiver, the provisions of Section 8.06 of the Indenture shall instead govern such a determination with respect to such Notes, the provisions of this Section 2.07 notwithstanding. SECTION 2.08. References in the Indenture to the "Yield to Maturity" of Debt Securities shall be deemed, solely with respect to the Notes, to refer to the respective yields to maturity, calculated at the respective times of issuance of the particular Notes or, if applicable, at the respective most recent redeterminations of interest on such respective Notes and calculated in accordance with accepted financial practice. References in Article VI of the Indenture to the "rate" or "rate of interest" of Debt Securities shall be deemed, solely with respect to the Notes, to refer to the respective rates or rates of interest of the particular Notes. SECTION 2.09. Notwithstanding the provisions of Sections 2.03 and 14.06 of the Indenture, if all Notes are not to be originally issued at one time, it shall not be necessary to deliver the Officers' Certificate and the Opinion of Counsel otherwise required pursuant to Section 14.06 or the written order of the Company otherwise required pursuant to Section 2.03 at or prior to the time of authentication of each Note if such documents are delivered at or prior to the time of authentication upon original issuance of the first Note to be issued. SECTION 2.10. If any Debt Securities described in subsections (a), (b) or (c) (i) of Section 12.01 of the Indenture are Notes which are denominated in a currency or currencies other than United States dollars, then in order to satisfy the deposit conditions in subsection (c) (ii) of Section 12.01 with respect to any such Notes, the Company shall deposit or cause to be deposited as specified in Section 12.01 the required amount in the currency or currencies in which such Notes are denominated or in direct obligations of the sovereign nation or sovereign nations issuing such currency or currencies and denominated in such currency or currencies. IN WITNESS WHEREOF, GENERAL MILLS, INC. has caused this Supplemental Indenture No. 6 to be signed, acknowledged and delivered by its Chairman of the Board, President, Vice Chairman, Chief Financial and Administrative Officer or Senior Vice President-Treasurer and its corporate seal to be affixed hereunto and the same to be attested by its Secretary or Assistant Secretary; and CONTINENTAL BANK N.A. has caused this Supplemental Indenture No. 6 to be signed, acknowledged and delivered by one of its Vice Presidents, and its seal to be affixed hereunto and the same to be attested by one of its Trust Officers, all as of the day and year first written above. GENERAL MILLS, INC. [CORPORATE SEAL] By: /s/ D.E. Kelby Vice Chairman, Chief Financial and Administrative Officer ATTEST: /S/ B.R. ROSENBERG ASSISTANT SECRETARY CONTINENTAL BANK N.A. as Trustee [CORPORATE SEAL] By: /s/ Richard L. LaVarnway VICE PRESIDENT ATTEST: /S/ LAWRENCE M. HACKETT TRUST OFFICER GENERAL MILLS, INC. SUPPLEMENTAL INDENTURE NO. 7 DATED AS OF FEBRUARY 19, 1992 Supplemental Indenture No. 7 dated as of February 19, 1992, between GENERAL MILLS, INC., a corporation organized and existing under the laws of the State of Delaware (hereinafter referred to as the "Company"), and CONTINENTAL BANK N.A., a national banking association duly organized and existing under the laws of the United States of America (hereinafter referred to as the "Trustee"). W I T N E S S E T H : The Company and the Trustee have executed and delivered an Indenture dated as of July 1, 1982 (the "Indenture"). The Company desires to amend the Indenture to provide for the issuance of Debt Securities of a series on a continuous basis and with differing terms and to expressly provide that the Debt Securities of such series may be denominated in currencies other than the currency of the United States of America or may provide that the amount of payments of principal of and any premium or interest thereon may be determined with reference to an index. Section 10.01 of the Indenture provides for the Company, when authorized by the Board of Directors, and the Trustee to enter into an indenture supplemental to the Indenture to amend such Indenture by creating such provisions as shall not adversely affect the interests of any Holder. NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Debt Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of Debt Securities or of such series thereof, as follows: ARTICLE ONE RELATION TO INDENTURE; DEFINITIONS SECTION 1.01. This Supplemental Indenture No. 7 constitutes an integral part of the Indenture. SECTION 1.02. For all purposes of this Supplemental Indenture: (1) Capitalized terms used herein without definition shall have the meanings specified in the Indenture; (2) All references herein to Articles and Sections, unless otherwise specified, refer to the corresponding Articles and Sections of this Supplemental Indenture No. 7; and (3) The terms "hereof," "herein," "hereby," "hereto," "hereunder," and "herewith" refer to this Supplemental Indenture. ARTICLE TWO PROVISIONS APPLICABLE EXCLUSIVELY TO THE SERIES OF MEDIUM-TERM NOTES SECTION 2.01. There shall be a series of Debt Securities designated the "Medium-Term Notes - Series C" (the "Notes.). The Notes shall be limited to an aggregate principal amount resulting in not more than U.S. $400,000,000 of proceeds to the Company (or the equivalent thereof, determined as of the respective dates of issuance of Notes, in any other currency or currencies) and shall be issued at any time or from time to time. SECTION 2.02. Each Note shall have the particular terms (which need not be substantially identical to the terms of any other Notes) established in accordance with or as contemplated by this Section 2.02. Each fixed rate Note ("Fixed Rate Note") shall be in substantially the form attached hereto as Exhibit A-1; each fixed rate amortizing note ("Fixed Rate Amortizing Note") shall be in substantially the form attached hereto as Exhibit A-2; each floating rate Note ("Floating Rate Note") shall be in substantially the form attached hereto as Exhibit B; and each indexed Note ("Indexed Note") shall be in substantially the form attached hereto as Exhibit C. Each of the Chairman of the Board, the President, the Chief Financial Officer, the Executive Vice President-Finance and the Treasurer (each an "Authorized Officer") may, at any time and from time to time, on behalf of the Company, authorize the issuance of Notes and in connection therewith establish, or, if all of the Notes of such series may not be originally issued at one time, to the extent deemed appropriate by such Authorized Officer, prescribe the manner of determining within any limitations established by such Authorized Officer (subject in either case to the limitations set forth in this Supplemental Indenture and the Indenture), the following: (1) the date or dates on which the principal and premium, if any, of the Notes is payable; (2) the rate or rates (or method by which determined) at which the Notes shall bear interest, if any, the date or dates from which such interest shall accrue, the interest payment dates on which such interest shall be payable and, in the case of registered Notes, the record dates for the determination of Holders to whom such interest is payable; (3) if an Original Issue Discount Security, the Yield to Maturity; (4) the price or prices at which, the period or periods within which and the terms and conditions upon which Notes may be redeemed, in whole or in part, at the option of the Company, pursuant to any sinking fund or otherwise; (5) the obligation, if any, of the Company to redeem, purchase or repay Notes pursuant to any sinking fund or analogous provisions or at the option of a Holder thereof and the price or prices at which and the period or periods within which and the terms and conditions upon which Notes shall be redeemed, purchased or repaid, in whole or in part, pursuant to such obligation; (6) if other than denominations of $100,000 and integral multiples of $1,000 in excess thereof (or, in the case of any Note denominated in other than U.S. dollars, the amount of the Specified Currency (as defined below) for such Note which is equivalent, at the noon buying rate in The City of New York for cable transfers for such Specified Currency on the first Business Day in The City of New York and the country issuing such Specified Currency (or, in the case of European Currency Units, in Luxemborg) next preceding the date on which the Company accepts the offer to purchase such Note, to U.S. $100,000 (rounded down to an integral multiple of 10,000 units of such Specified Currency) and any greater amount that is an integral multiple of 10,000 units of such Specified Currency), the denominations in which Notes shall be issuable; (7) if the amount of payments of principal of and any premium or interest on the Notes may be determined with reference to an index, the manner in which such amounts shall be determined; (8) if other than the principal amount thereof, the portion of the principal amount of Notes which shall be payable upon declaration of acceleration of the maturity thereof pursuant to Section 6.01 of the Indenture or provable in bankruptcy pursuant to Section 6.02 of the Indenture; (9) any Events of Default with respect to the Notes, if not set forth in the Indenture; (10) whether the Notes shall be issued in registered or bearer form, with or without coupons; (11) whether the Notes shall be issued in whole or in part in the form of one or more Global Notes and, in such case, the Depositary for such Global Note or Notes, which Depositary must be a clearing agency registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act"); (12) if other than United States dollars, the currency or currencies, including composite currencies, in which payment of the principal of and any premium and interest on the Notes shall be payable (the "Specified Currency"); and (13) any other terms of the Notes (which terms shall not be inconsistent with the provisions of this Supplemental Indenture or the Indenture). In connection with the Notes, the officers of the Company specified in the Indenture may execute and deliver one or more Officers' Certificates setting forth, or, if all of the Notes may not be originally issued at one time, to the extent deemed appropriate by any such officer, describing the manner of determining the foregoing terms of the Notes established or prescribed, as the case may be, in accordance with the foregoing. SECTION 2.03. The Places of Payment for the principal of the Notes shall be the City of Chicago, Illinois and The City of New York, New York. Interest, if any, on the Notes will be paid by check, draft or wire, as specified in the terms thereof. The Trustee shall be the paying agent ("Paying Agent") for the Notes. SECTION 2.04. Unless otherwise provided in the terms of a particular Note, definitive Notes of any authorized denomination shall be exchangeable for a like aggregate principal amount of Notes denominated in the same Specified Currency and bearing interest (if any) at the same rate or having the same Yield to Maturity and Stated Maturity and of different authorized denominations upon surrender of such Notes with a request for such exchange at the designated office of the Trustee in the City of Chicago, Illinois or in the Borough of Manhattan, The City of New York. SECTION 2.05. Unless otherwise specified in a particular Note, payments of principal of (and premium, if any) and interest on each Note will be made in the applicable Specified Currency; provided, however, that payments of principal (and premium, if any) and interest on Notes denominated in other than U.S. dollars will nevertheless be made in U.S. dollars (i) at the option of the Holders thereof under the procedures described in the two following paragraphs and (ii) at the option of the Company in the case of imposition of exchange controls or other circumstances beyond the control of the Company as described below in this Section 2.05. If specified in a particular Note, the amount of principal payable on such Note will be determined by reference to an index or formula described therein. Unless otherwise specified in the terms of a Note, and except as provided in the next paragraph, payments of interest and principal (and premium, if any) with respect to any Note denominated in other than U.S. dollars will be made in U.S. dollars if the registered Holder of such Note on the relevant Regular Record Date or at maturity, as the case may be, has transmitted a written request for such payment in U.S. dollars to the Trustee at its Corporate Trust Office or agency in the City of Chicago, Illinois or in The City of New York, New York on or prior to such Regular Record Date or the date 15 days prior to maturity, as the case may be. Such request may be in writing (mailed or hand delivered) or by cable or telex or, if promptly confirmed in writing, by other form of facsimile transmission. Any such request made with respect to any Note by a registered Holder will remain in effect with respect to any further payments of interest and principal (and premium, if any) with respect to such Note payable to such Holder, unless such request is revoked on or prior to the relevant Regular Record Date or the date 15 days prior to maturity, as the case may be. Unless otherwise provided in the applicable Officers' Certificate, Continental Bank N.A. will be the Exchange Rate Agent (the "Exchange Rate Agent") with respect to the Notes. Unless otherwise indicated in the terms of a particular Note, the "Regular Record Date" with respect to any Floating Rate Note shall be the date 15 calendar days prior to each Interest Payment Date, whether or not such date shall be a Business Day, and the "Regular Record Dates" with respect to any Fixed Rate Note shall be the March 1 and September 1 next preceding the March 15 and September 15 Interest Payment Dates. Unless otherwise indicated in the terms of a particular Note and except as provided below, interest will be payable, in the case of Floating Rate Notes which reset weekly, on the third Wednesday of March, June, September and December of each year; in the case of Floating Rate Notes which reset monthly, on the third Wednesday of each month or on the third Wednesday of March, June, September and December of each year (as respectively indicated in such Notes); in the case of Floating Rate Notes which reset quarterly, on the third Wednesday of March, June, September and December of each year; in the case of Floating Rate Notes which reset semi-annually, on the third Wednesday of the two months of each year specified in such Notes; and in the case of Floating Rate Notes which reset annually, on the third Wednesday of the month specified in such Notes (each an "Interest Payment Date"), and in each case, at maturity. Payments of interest on any Fixed Rate Note or Floating Rate Note with respect to any Interest Payment Date will include interest accrued to but excluding such Interest Payment Date; provided, however, that if the Interest Reset Dates (as defined in a particular Note) with respect to any Floating Rate Note are weekly, interest payable on such Note on any Interest Payment Date, other than interest payable on the date on which principal on such Note is payable, will include interest accrued to but excluding the day following the next preceding Regular Record Date. With respect to a Floating Rate Note, accrued interest from the date of issue or from the last date to which interest has been paid shall be calculated by multiplying the face amount of such Floating Rate Note by an accrued interest factor. Such accrued interest factor shall be computed by adding the interest factor calculated for each day from the date of issue, or from the last date to which interest has been paid, to but excluding the date for which accrued interest is being calculated. The interest factor for a Floating Rate Note (expressed as a decimal) for each such day shall be computed by dividing the interest rate (expressed as a decimal) applicable to such date either (i) by 360 or (ii) by the actual number of days in the year, as specified in such Note. Interest on Fixed Rate Notes will be computed on the basis of a 360-day year of twelve 30-day months. SECTION 2.06. For the purposes of the Notes and this Section 2.06, the term "Agent Member" means a member of, or participant in, a Depositary; the term "Depositary" means, with respect to Notes issuable or issued in whole or in part in the form of one or more Global Notes, the Person designated as Depositary by the Company pursuant to Section 2.02 hereof, and if at any time there is more than one such Person, "Depositary" as used with respect to the Notes shall mean the respective Depositary with respect to particular Notes; and the term "Global Note" means a global certificate evidencing all or part of the series of Notes, issued to the Depositary for the series or such portion of the series, and registered in the name of such Depositary or its nominee. Notwithstanding Section 2.05 of the Indenture, except as otherwise specified as contemplated by Section 2.02 hereof, any Global Note shall be exchangeable only as provided in this paragraph. A Global Note shall be exchangeable pursuant to this Section if (x) the Depositary notifies the Company that it is unwilling or unable to continue as Depositary for such Global Note or if at any time the Depositary ceases to be a clearing agency registered under the Exchange Act, (y) the Company in its sole discretion determines that all Global Notes then outstanding hereunder and under the Indenture shall be exchangeable for definitive Notes in registered form or (z) an Event of Default with respect to the Notes represented by such Global Note has occurred and is continuing. Any Global Note that is exchangeable pursuant to the preceding sentence shall be exchangeable for definitive Notes in registered form, bearing interest (if any) at the same rate or pursuant to the same formula, having the same date of issuance, redemption provisions, if any, Specified Currency, Stated Maturity and other terms and of differing denominations aggregating a like amount. Such definitive Notes shall be registered in the names of the owners of the beneficial interests in such Global Note as such names are from time to time provided by the relevant participants in the Depositary holding such Global Note (as such participants are identified from time to time by such Depositary.) No Global Note may be transferred except as a whole by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor of the Depositary or a nominee of such successor. Except as provided above, owners solely of beneficial interests in a Global Note shall not be entitled to receive physical delivery of Notes in definitive form and will not be considered the Holders thereof for any purpose under the Indenture or this Supplemental Indenture. Any Global Note that is exchangeable pursuant to the preceding paragraph shall be exchangeable for Notes issuable in denominations of $100,000 and integral multiples of $1,000 in excess thereof and registered in such names as the Depositary that is the Holder of such Global Note shall direct. In the event that a Global Note is surrendered for redemption in part pursuant to Section 3.04 of the Indenture, the Company shall execute, and the Trustee shall authenticate and deliver to the Depositary for such Global Note, without service charge, a new Global Note in a denomination equal to and in exchange for the unredeemed portion of the principal of the Global Note so surrendered. The Trustee shall fix a record date for the purpose of determining the Persons entitled to waive any past default hereunder or the Persons entitled to consent to any indenture supplemental to the Indenture. If a record date is fixed, the Holders on such record date, or their duly designated proxies, and only such Persons, shall be entitled to waive any default hereunder, or to retract any such waiver previously given, or to consent to such supplemental indenture or to revoke any such consent previously given, as the case may be, whether or not such Holders remain Holders after such record date. No such waiver or consent shall be valid or effective for more than DO days after such record date unless prior to such time the Holders of the requisite principal amount of the Outstanding Notes as specified in the Indenture shall have given waivers or consents, as applicable. The Agent Members shall have no rights under the Indenture or this Supplemental Indenture with respect to any Global Note held on their behalf by a Depositary, and such Depositary may be treated by the Company, the Trustee, and any agent of the Company or the Trustee as the owner of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee, or any Agent of the Company or the Trustee, from giving effect to any written certification, proxy or other authorization furnished by a Depositary or impair, as between a Depositary and its Agent Members, the operation of customary practices governing the exercise of the rights of a Holder of any Note, including without limitation the granting of proxies or other authorization of participants to give or take any request, demand, authorization, direction, notice, consent, waiver or other action which a Holder is entitled to give or take under the Indenture. SECTION 2.07. In determining whether the Holders of the requisite principal amount of the Outstanding Notes have given any request, demand, authorization, direction, notice, consent or waiver under the Indenture, the principal amount of a Note denominated in a foreign currency or currencies shall be the U.S. dollar equivalent, determined on the date of original issuance of such Note, of the principal amount (or, in the case of a Note which is an Original Issue Discount Security, the U.S. dollar equivalent on the date of the original issuance of such Note of the amount of the principal thereof that would be due and payable as of the date of such determination upon a declaration of acceleration of the maturity thereof pursuant to Section 6.01 of the Indenture) of such Note; provided, however, that if such Holders are, pursuant to Section 6.06 of the Indenture, acting together with the Holders of other Debt Securities as a single class in giving any such request, demand, authorization, direction, notice, consent or waiver, the provisions of Section 6.06 of the Indenture shall instead govern such a determination with respect to such Notes, the provisions of this Section 2.07 notwithstanding. SECTION 2.08. References in the Indenture to the "Yield to Maturity" of Debt Securities shall be deemed, solely with respect to the Notes, to refer to the respective yields to maturity, calculated at the respective times of issuance of the particular Notes or, if applicable, at the respective most recent redeterminations of interest on such respective Notes and calculated in accordance with accepted financial practice. References in Article VI of the Indenture to the "rate" or "rate of interest" of Debt Securities shall be deemed, solely with respect to the Notes, to refer to the respective rates or rates of interest of the particular Notes. SECTION 2.09. Notwithstanding the provisions of Sections 2.03 and 14.06 of the Indenture, if all Notes are not to be originally issued at one time, it shall not be necessary to deliver the Officers' Certificate and the Opinion of Counsel otherwise required pursuant to Section 14.06 or the written order of the Company otherwise required pursuant to Section 2.03 at or prior to the time of authentication of each Note if such documents are delivered at or prior to the time of authentication upon original issuance of the first Note to be issued. SECTION 2.10. If any Debt Securities described in subsections (a), (b) or (c) (i) of Section 12.01 of the Indenture are Notes which are denominated in a currency or currencies other than United States dollars, then in order to satisfy the deposit conditions in subsection (c) (ii) of Section 12.01 with respect to any such Notes, the Company shall deposit or cause to be deposited as specified in Section 12.01 the required amount in the currency or currencies in which such Notes are denominated or in direct obligations of the sovereign nation or sovereign nations issuing such currency or currencies and denominated in such currency or currencies. IN WITNESS WHEREOF, GENERAL MILLS, INC. has caused this Supplemental Indenture No. 7 to be signed, acknowledged and delivered by its Chairman of the Board, President, Vice Chairman, Chief Financial and Administrative Officer or Senior Vice President-Treasurer and its corporate seal to be affixed hereunto and the same to be attested by its Secretary or Assistant Secretary; and CONTINENTAL BANK N.A. has caused this Supplemental Indenture No. 7 to be signed, acknowledged and delivered by one of its Vice Presidents, and its seal to be affixed hereunto and the same to be attested by one of its Trust Officers, all as of the day and year first written above. GENERAL MILLS, INC. [CORPORATE SEAL] By: /s/ D.E. KELBY ------------------ Attest: /s/ IVY S. BERNHARDSON ------------------------ Assistant Secretary CONTINENTAL BANK N.A. as Trustee [CORPORATE SEAL] By: /s/ ------------------ Vice President Attest: /s/ JOANNE M. MURPHY ------------------------ Trust Officer GENERAL MILLS, INC. SUPPLEMENTAL INDENTURE NO. 8 DATED AS OF JANUARY 8, 1993 Supplemental Indenture No. 8 dated as of January 8, 1993, between GENERAL MILLS, INC., a corporation organized and existing under the laws of the State of Delaware (hereinafter referred to as the "Company"), and CONTINENTAL BANK, NATIONAL ASSOCIATION, a national banking association duly organized and existing under the laws of the United States of America (hereinafter referred to as the "Trustee"). W I T N E S S E T H : The Company and the Trustee have executed and delivered an Indenture dated as of July 1, 1982 (the "Indenture"). Section 10.01 of the Indenture provides for the Company, when authorized by the Board of Directors, and the Trustee to enter into an indenture supplemental to the Indenture to amend such Indenture by creating such provisions as shall not adversely affect the interests of any Holder. NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Debt Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of Debt Securities or of such series thereof, as follows: ARTICLE ONE RELATION TO INDENTURE; DEFINITIONS SECTION 1.01. This Supplemental Indenture No. 8 constitutes an integral part of the Indenture. SECTION 1.02. For all purposes of this Supplemental Indenture: (1) Capitalized terms used herein without definition shall have the meanings specified in the Indenture; (2) All references herein to Articles and Sections, unless otherwise specified, refer to the corresponding Articles and Sections of this Supplemental Indenture No. 8; and (3) The terms "hereof," "herein," "hereby," "hereto," "hereunder," and "herewith" refer to this Supplemental Indenture. ARTICLE TWO PROVISIONS APPLICABLE EXCLUSIVELY TO THE SERIES OF MEDIUM-TERM NOTES SECTION 2.01. There shall be a series of Debt Securities designated the "Medium-Term Notes - Series D" (the "Notes"). The Notes shall be limited to an aggregate principal amount resulting in not more than U.S. $500,000,000 of proceeds to the Company (or the equivalent thereof, determined as of the respective dates of issuance of Notes, in any other currency or currencies) and shall be issued at any time or from time to time. SECTION 2.02. Each Note shall have the particular terms (which need not be substantially identical to the terms of any other Notes) established in accordance with or as contemplated by this Section 2.02. Each fixed rate Note ("Fixed Rate Note") shall be in substantially the form attached hereto as Exhibit A; each fixed rate amortizing note ("Fixed Rate Amortizing Note") shall be in substantially the form attached hereto as Exhibit B; each floating rate Note ("Floating Rate Note") shall be in substantially the form attached hereto as Exhibit C; and each indexed Note ("Indexed Note") shall be in substantially the form attached hereto as Exhibit D. Each of the Chairman of the Board, any Vice Chairman and the Treasurer (each an "Authorized Officer") may, at any time and from time to time, on behalf of the Company, authorize the issuance of Notes and in connection therewith establish, or, if all of the Notes of such series may not be originally issued at one time, to the extent deemed appropriate by such Authorized Officer, prescribe the manner of determining within any limitations established by such Authorized Officer (subject in either case to the limitations set forth in this Supplemental Indenture and the Indenture), the following: (1) the date or dates on which the principal and premium, if any, of the Notes is payable; (2) the rate or rates (or method by which determined) at which the Notes shall bear interest, if any, the date or dates from which such interest shall accrue, the interest payment dates on which such interest shall be payable and, in the case of registered Notes, the record dates for the determination of Holders to whom such interest is payable; (3) if an Original Issue Discount Security, the Yield to Maturity; (4) the price or prices at which, the period or periods within which and the terms and conditions upon which Notes may be redeemed, in whole or in part, at the option of the Company, pursuant to any sinking fund or otherwise; (5) the obligation, if any, of the Company to redeem, purchase or repay Notes pursuant to any sinking fund or analogous provisions or at the option of a Holder thereof and the price or prices at which and the period or periods within which and the terms and conditions upon which Notes shall be redeemed, purchased or repaid, in whole or in part, pursuant to such obligation; (6) if other than denominations of $1,000 and integral multiples thereof (or, in the case of any Note denominated in other than U.S. dollars, the amount of the Specified Currency (as defined below) for such Note which is equivalent, at the noon buying rate in The City of New York for cable transfers for such Specified Currency on the first Business Day in The City of New York and the country issuing such Specified Currency (or, in the case of European Currency Units, in Luxembourg) next preceding the date on which the Company accepts the offer to purchase such Note, to U.S. $1,000 (rounded down to an integral multiple of 1,000 units of such Specified Currency) and any greater amount that is an integral multiple of 1,000 units of such Specified Currency), the denominations in which Notes shall be issuable; provided, however. that all Notes denominated in amounts of less than $100,000 (or, in the case of any Note denominated in other than U.S. dollars, the equivalent amount of Specified Currency) shall be issued solely in the form of one or more Global Notes; (7) if the amount of payments of principal of and any premium or interest on the Notes may be determined with reference to an index, the manner in which such amounts shall be determined; (8) if other than the principal amount thereof, the portion of the principal amount of Notes which shall be payable upon declaration of acceleration of the maturity thereof pursuant to Section 6.01 of the Indenture or provable in bankruptcy pursuant to Section 6.02 of the Indenture; (9) any Events of Default with respect to the Notes, if not set forth in the Indenture; (10) whether the Notes shall be issued in registered or bearer form, with or without coupons; (11) whether the Notes shall be issued in whole or in part in the form of one or more Global Notes and, in such case, the Depositary for such Global Note or Notes, which Depositary must be a clearing agency registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act"); (12) if other than United States dollars, the currency or currencies, including composite currencies, in which payment of the principal of and any premium and interest on the Notes shall be payable (the "Specified Currency"); (13) if the Notes are Amortizing Notes, repayment information with respect to installments of principal and interest; and (14) any other terms of the Notes (which terms shall not be inconsistent with the provisions of this Supplemental Indenture or the Indenture). In connection with the Notes, the officers of the Company specified in the Indenture may execute and deliver one or more Officers' Certificates setting forth, or, if all of the Notes may not be originally issued at one time, to the extent deemed appropriate by any such officer, describing the manner of determining the foregoing terms of the Notes established or prescribed, as the case may be, in accordance with the foregoing. SECTION 2.03. The Places of Payment for the principal of the Notes shall be the City of Chicago, Illinois and The City of New York, New York. Interest, if any, on the Notes will be paid by check, draft or wire, as specified in the terms thereof. The Trustee shall be the paying agent ("Paying Agent") for the Notes. SECTION 2.04. Unless otherwise provided in the terms of a particular Note, definitive Notes of any authorized denomination shall be exchangeable for a like aggregate principal amount of Notes denominated in the same Specified Currency and bearing interest (if any) at the same rate or having the same Yield to Maturity and Stated Maturity and of different authorized denominations upon surrender of such Notes with a request for such exchange at the designated office of the Trustee in the City of Chicago, Illinois or in the Borough of Manhattan, The City of New York. SECTION 2.05. Unless otherwise specified in a particular Note, payments of principal of (and premium, if any) and interest on each Note will be made in the applicable Specified Currency; provided, however, that payments of principal (and premium, if any) and interest on Notes denominated in other than U.S. dollars will nevertheless be made in U.S. dollars (i) at the option of the Holders thereof under the procedures described in the two following paragraphs and (ii) at the option of the Company in the case of imposition of exchange controls or other circumstances beyond the control of the Company as described below in this Section 2.05. If specified in a particular Note, the amount of principal payable on such Note will be determined by reference to an index or formula described therein. Unless otherwise specified in the terms of a Note, and except as provided in the next paragraph, payments of interest and principal (and premium, if any) with respect to any Note denominated in other than U.S. dollars will be made in U.S. dollars if the registered Holder of such Note on the relevant Regular Record Date or at maturity, as the case may be, has transmitted a written request for such payment in U.S. dollars to the Trustee at its Corporate Trust Office or agency in the City of Chicago, Illinois or in The City of New York, New York on or prior to such Regular Record Date or the date 15 days prior to maturity, as the case may be. Such request may be in writing (mailed or hand delivered) or by cable or telex or, if promptly confirmed in writing, by other form of facsimile transmission. Any such request made with respect to any Note by a registered Holder will remain in effect with respect to any further payments of interest and principal (and premium, if any) with respect to such Note payable to such Holder, unless such request is revoked on or prior to the relevant Regular Record Date or the date 15 days prior to maturity, as the case may be. Unless otherwise provided in the applicable Officers' Certificate, Continental Bank, National Association will be the Exchange Rate Agent (the "Exchange Rate Agent") with respect to the Notes. Unless otherwise indicated in the terms of a particular Note, the "Regular Record Date" with respect to any Floating Rate Note shall be the date 15 calendar days prior to each Interest Payment Date, whether or not such date shall be a Business Day, and the "Regular Record Dates" with respect to any Fixed Rate Note shall be the March 1 and September 1 next preceding the March 15 and September 15 Interest Payment Dates. Unless otherwise indicated in the terms of a particular Note and except as provided below, interest will be payable, in the case of Floating Rate Notes which reset daily or weekly, on the third Wednesday of March, June, September and December of each year; in the case of Floating Rate Notes which reset monthly, on the third Wednesday of each month or on the third Wednesday of March, June, September and December of each year (as respectively indicated in such Notes); in the case of Floating Rate Notes which reset quarterly, on the third Wednesday of March, June, September and December of each year; in the case of Floating Rate Notes which reset semi-annually, on the third Wednesday of the two months of each year specified in such Notes; and in the case of Floating Rate Notes which reset annually, on the third Wednesday of the month specified in such Notes (each an "Interest Payment Date"), and in each case, at maturity. Payments of interest on any Fixed Rate Note or Floating Rate Note with respect to any Interest Payment Date will include interest accrued to but excluding such Interest Payment Date; provided, however, that if the Interest Reset Dates (as defined in a particular Note) with respect to any Floating Rate Note are daily or weekly, interest payable on such Note on any Interest Payment Date, other than interest payable on the date on which principal on such Note is payable, will include interest accrued to but excluding the day following the next preceding Regular Record Date. With respect to a Floating Rate Note, accrued interest from the date of issue or from the last date to which interest has been paid shall be calculated by multiplying the face amount of such Floating Rate Note by an accrued interest factor. Such accrued interest factor shall be computed by adding the interest factor calculated for each day from the date of issue, or from the last date to which interest has been paid, to but excluding the date for which accrued interest is being calculated. The interest factor for a Floating Rate Note (expressed as a decimal) for each such day shall be computed by dividing the interest rate (expressed as a decimal) applicable to such date either (i) by 360 or (ii) by the actual number of days in the year, as specified in such Note. Interest on Fixed Rate Notes will be computed on the basis of a 360-day year of twelve 30-day months. SECTION 2.06. For the purposes of the Notes and this Section 2.06, the term "Agent Member" means a member of, or participant in, a Depositary; the term "Depositary" means, with respect to Notes issuable or issued in whole or in part in the form of one or more Global Notes, the Person designated as Depositary by the Company pursuant to Section 2.02 hereof, and if at any time there is more than one such Person, "Depositary" as used with respect to the Notes shall mean the respective Depositary with respect to particular Notes; and the term "Global Note" means a global certificate evidencing all or part of the series of Notes, issued to the Depositary for the series or such portion of the series, and registered in the name of such Depositary or its nominee. Notwithstanding Section 2.05 of the Indenture, except as otherwise specified as contemplated by Section 2.02 hereof, any Global Note shall be exchangeable only as provided in this paragraph. A Global Note shall be exchangeable pursuant to this Section if (x) the Depositary notifies the Company that it is unwilling or unable to continue as Depositary for such Global Note or if at any time the Depositary ceases to be a clearing agency registered under the Exchange Act, (y) the Company in its sole discretion determines that all Global Notes then outstanding hereunder and under the Indenture shall be exchangeable for definitive Notes in registered form or (z) an Event of Default with respect to the Notes represented by such Global Note has occurred and is continuing. A Global Note shall only be exchangeable into Notes issuable in denominations of $100,000 and integral multiples of $1,000 in excess thereof. No Notes shall be issuable in denominations of less than $100,000. Any Global Note that is exchangeable pursuant to the preceding sentences shall be exchangeable for definitive Notes in registered form, bearing interest (if any) at the same rate or pursuant to the same formula, having the same date of issuance, redemption provisions, if any, Specified Currency, Stated Maturity and other terms and of differing denominations aggregating a like amount. Such definitive Notes shall be registered in the names of the owners of the beneficial interests in such Global Note as such names are from time to time provided by the relevant participants in the Depositary holding such Global Note (as such participants are identified from time to time by such Depositary. ) No Global Note may be transferred except as a whole by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor of the Depositary or a nominee of such successor. Except as provided above, owners solely of beneficial interests in a Global Note shall not be entitled to receive physical delivery of Notes in definitive form and will not be considered the Holders thereof for any purpose under the Indenture or this Supplemental Indenture. Any Global Note that is exchangeable pursuant to the preceding paragraph shall be exchangeable for Notes issuable in denominations of $100,000 and integral multiples of $1,000 in excess thereof and registered in such names as the Depositary that is the Holder of such Global Note shall direct. In the event that a Global Note is surrendered for redemption in part pursuant to Section 3.04 of the Indenture, the Company shall execute, and the Trustee shall authenticate and deliver to the Depositary for such Global Note, without service charge, a new Global Note in a denomination equal to and in exchange for the unredeemed portion of the principal of the Global Note so surrendered. The Trustee shall fix a record date for the purpose of determining the Persons entitled to waive any past default hereunder or the Persons entitled to consent to any indenture supplemental to the Indenture. If a record date is fixed, the Holders on such record date, or their duly designated proxies, and only such Persons, shall be entitled to waive any default hereunder, or to retract any such waiver previously given, or to consent to such supplemental indenture or to revoke any such consent previously given, as the case may be, whether or not such Holders remain Holders after such record date. No such waiver or consent shall be valid or effective for more than 90 days after such record date unless prior to such time the Holders of the requisite principal amount of the Outstanding Notes as specified in the Indenture shall have given waivers or consents, as applicable. The Agent Members shall have no rights under the Indenture or this Supplemental Indenture with respect to any Global Note held on their behalf by a Depositary, and such Depositary may be treated by the Company, the Trustee, and any agent of the Company or the Trustee as the owner of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee, or any Agent of the Company or the Trustee, from giving effect to any written certification, proxy or other authorization furnished by a Depositary or impair, as between a Depositary and its Agent Members, the operation of customary practices governing the exercise of the rights of a Holder of any Note, including without limitation the granting of proxies or other authorization of participants to give or take any request, demand, authorization, direction, notice, consent, waiver or other action which a Holder is entitled to give or take under the Indenture. SECTION 2.07. In determining whether the Holders of the requisite principal amount of the Outstanding Notes have given any request, demand, authorization, direction, notice, consent or waiver under the Indenture, the principal amount of a Note denominated in a foreign currency or currencies shall be the U.S. dollar equivalent, determined on the date of original issuance of such Note, of the principal amount (or, in the case of a Note which is an Original Issue Discount Security, the U.S. dollar equivalent on the date of the original issuance of such Note of the amount of the principal thereof that would be due and payable as of the date of such determination upon a declaration of acceleration of the maturity thereof pursuant to Section 6.01 of the Indenture) of such Note; provided, however, that if such Holders are, pursuant to Section 6.06 of the Indenture, acting together with the Holders of other Debt Securities as a single class in giving any such request, demand, authorization, direction, notice, consent or waiver, the provisions of Section 6.06 of the Indenture shall instead govern such a determination with respect to such Notes, the provisions of this Section 2.07 notwithstanding. SECTION 2.08. References in the Indenture to the "Yield to Maturity" of Debt Securities shall be deemed, solely with respect to the Notes, to refer to the respective yields to maturity, calculated at the respective times of issuance of the particular Notes or, if applicable, at the respective most recent redeterminations of interest on such respective Notes and calculated in accordance with accepted financial practice. References in Article Vl of the Indenture to the "rate" or "rate of interest" of Debt Securities shall be deemed, solely with respect to the Notes, to refer to the respective rates or rates of interest of the particular Notes. SECTION 2.09. Notwithstanding the provisions of Sections 2.03 and 14.06 of the Indenture, if all Notes are not to be originally issued at one time, it shall not be necessary to deliver the Officers' Certificate and the Opinion of Counsel otherwise required pursuant to Section 14.06 or the written order of the Company otherwise required pursuant to Section 2.03 at or prior to the time of authentication of each Note if such documents are delivered at or prior to the time of authentication upon original issuance of the first Note to be issued. SECTION 2.10. If any Debt Securities described in subsections (a), (b) or (c) (i) of Section 12.01 of the Indenture are Notes which are denominated in a currency or currencies other than United States dollars, then in order to satisfy the deposit conditions in subsection (c) (ii) of Section 12.01 with respect to any such Notes, the Company shall deposit or cause to be deposited as specified in Section 12.01 the required amount in the currency or currencies in which such Notes are denominated or in direct obligations of the sovereign nation or sovereign nations issuing such currency or currencies and denominated in such currency or currencies. IN WITNESS WHEREOF, GENERAL MILLS, INC. has caused this Supplemental Indenture No. 8 to be signed, acknowledged and delivered by its Chairman of the Board, Vice Chairman, Senior Vice President, Treasurer and its corporate seal to be affixed hereunto and the same to be attested by its Secretary or Assistant Secretary; and CONTINENTAL BANK, NATIONAL ASSOCIATION, has caused this Supplemental Indenture No. 8 to be signed, acknowledged and delivered by one of its Vice Presidents, and its seal to be affixed hereunto and the same to be attested by one of its Trust Officers, all as of the day and year first written above. GENERAL MILLS, INC. [CORPORATE SEAL] By: /s/ D.E. KELBY ------------------------ Senior Vice President, Treasurer Attest: /s/ IVY S. BERNHARDSON -------------------------- Assistant Secretary CONTINENTAL BANK N.A. as Trustee [CORPORATE SEAL] By: /s/ ------------------------ Vice President Attest: /s/ JOANNE M. MURPHY ---------------------- Trust Officer EX-4.4 7 genmills023880_ex4-4.txt INDENTURE EXHIBIT 4.4 RALCORP HOLDINGS, INC. ISSUER AND THE FIRST NATIONAL BANK OF CHICAGO TRUSTEE INDENTURE DATED AS OF SEPTEMBER 23, 1994 ---------------------------------------------------- Reconciliation and tie between Trust Indenture Act of 1939 and Indenture, dated as of September 23, 1994 Trust Indenture Act Section Indenture Section(1)/ - --------------------------- ----------------- 310 (a)(1)(2)(5) 6.9 (a)(3) and (4) Not Applicable (b) 6.8, 6.10, 11.4 (c) Not Applicable 311 (a) * (b) * (c) Not Applicable 312 (a) * (b) * (c) * 313 (a) * (b) * (c) 4.3 (d) 4.3 314 (a) 4.2 (b) Not Applicable (c) * (d) Not Applicable (e) * (f) * 315 (a) * (b) * (c) * (d) * (e) * 316 (a)(1) * (a)(2) Not Applicable (b) 5.7 (c) Not Applicable 317 (a) 5.2 (b) 3.4 318 11.7 - ---------------------- Note: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture. - ---------------------- 1/ Provisions marked by an asterisk are not included in the Indenture as permitted by the Trust Indenture Reform Act of 1990. TABLE OF CONTENTS ----------------- PAGE ---- PARTIES 1 RECITALS 1 Authorization of Indenture 1 Compliance with Legal Requirements 1 Purpose of and Consideration for Indenture 1 ARTICLE ONE DEFINITIONS Section 1.1 Certain Terms Defined 1 Attributable Debt 1 Board of Directors 2 Brussels Business Day 2 Business Day 2 Capitalized Lease Obligations 2 Commission 2 Component Currency 2 Consolidated Net Equity 2 Consolidated Net Tangible Assets 2 Consolidated Total Assets 2 Conversion Date 2 Corporate Trust Office 2 Coupon 2 Coupon Security 2 Credit Agreement 3 Defeasance 3 Depositary 3 Dollar 3 Dollar Equivalent of the ECU 3 Dollar Equivalent of the Foreign Currency 3 ECU 3 European Communities 3 Events of Default 3 Exchange Rate Officer's Certificate 3 Foreign Currency 3 Fully Registered Security 3 GAAP 3 Global Security 3 Guaranty Obligations 4 Holder, Holder of Securities, Securityholder 4 Indebtedness 4 Indenture 4 Investment 4 Issuer 4 Issuer Request or Issuer Order 4 Market Exchange Rate 4 Mortgage 4 Officers' Certificate 4 Official ECU Exchange Rate 4 Opinion of Counsel 5 Original issue date 5 Outstanding 5 Paying Agent 5 Permitted Lien 5 Person 5 Place of Payment 5 Principal 5 Principal Property 5 Registered Holder 5 Registered Security 6 Responsible Officer 6 Restricted Subsidiary 6 Sale and Lease-Back Transaction 6 Security, Securities 6 Specified Amount 6 Stated Maturity 6 Subsidiary 6 Trustee 6 Trust Indenture Act 6 United States of America 6 Unregistered Security 6 Valuation Date 6 vice president 6 ARTICLE TWO SECURITIES Section 2.1 Forms Generally 7 Section 2.2 Form of Trustee's Certificate of Authentication 7 Section 2.3 Amount Unlimited; Issuable in Series 7 Section 2.4 Authentication and Delivery of Securities 8 Section 2.5 Execution of Securities 9 Section 2.6 Certificate of Authentication 10 Section 2.7 Denomination and Date of Securities; Payments of Interest 10 Section 2.8 Registration, Transfer and Exchange 12 Section 2.9 Mutilated, Defaced, Destroyed, Lost and Stolen Securities 13 Section 2.10 Cancellation of Securities; Destruction Thereof 14 Section 2.11 Temporary Securities 14 Section 2.12 Currency and Manner of Payments in Respect of Securities 15 Section 2.13 Compliance with Certain Laws and Regulations 18 Section 2.14 Securities Issuable in the Form of a Global Security 18 Section 2.15 Appointment of Agents with Respect to Certain Calculations 19 ARTICLE THREE COVENANTS OF THE ISSUER Section 3.1 Payment of Principal and Interest 20 Section 3.2 Offices for Payments, etc. 20 Section 3.3 Appointment to Fill a Vacancy in Office of Trustee 20 Section 3.4 Paying Agents 20 Section 3.5 Written Statement to Trustee 21 Section 3.6 Limitation on Liens 21 Section 3.7 Limitation on Sale and Lease-Back Transactions 22 Section 3.8 Additional Amounts 23 Section 3.9 Limitations on Restricted Subsidiary Debt 24 Section 3.10 Corporate Existence 24 Section 3.11 Waiver of Certain Covenants 24 ARTICLE FOUR SECURITYHOLDERS' LISTS AND REPORTS BY THE ISSUER AND THE TRUSTEE Section 4.1 Securityholders Lists 25 Section 4.2 Reports by the Issuer 25 Section 4.3 Reports by the Trustee 25 ARTICLE FIVE REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS ON EVENT OF DEFAULT Section 5.1 Event of Default Defined; Acceleration of 25 Maturity; Waiver of Default Section 5.2 Collection of Indebtedness by Trustee; 27 Trustee May Prove Debt Section 5.3 Application of Proceeds 28 Section 5.4 Suits for Enforcement Section 5.5 Restoration of Rights on Abandonment of Proceedings 29 Section 5.6 Limitations on Suits by Securityholders 29 Section 5.7 Unconditional Right of Securityholders to 30 Institute Certain Suits Section 5.8 Powers and Remedies Cumulative; Delay or 30 Omission Not Waiver of Default Section 5.9 Control by Securityholders 30 Section 5.10 Waiver of Past Defaults 31 Section 5.11 Trustee to Give Notice of Default, But May 31 Withhold in Certain Circumstances Section 5.12 Right of Court to Require Filing of Undertaking 31 to Pay Costs ARTICLE SIX CONCERNING THE TRUSTEE Section 6.1 Duties and Responsibilities of the Trustee; During 32 Default; Prior to Default Section 6.2 Certain Rights of the Trustee 33 Section 6.3 Trustee Not Responsible for Recitals, Disposition of 33 Securities or Application of Proceeds Thereof Section 6.4 Trustee and Agents May Hold Securities; Collections, etc. 34 Section 6.5 Moneys Held by Trustee 34 Section 6.6 Compensation and Indemnification of Trustee and its 34 Prior Claim Section 6.7 Right of Trustee to Rely on Officers' Certificate, etc. 34 Section 6.8 Disqualification; Conflicting Interests 35 Section 6.9 Persons Eligible for Appointment as Trustee 35 Section 6.10 Resignation and Removal; Appointment of Successor Trustee 35 Section 6.11 Acceptance of Appointment by Successor Trustee 36 Section 6.12 Merger, Conversion, Consolidation or Succession to 37 Business of Trustee ARTICLE SEVEN CONCERNING THE SECURITYHOLDERS Section 7.1 Evidence of Action Taken by Securityholders 37 Section 7.2 Proof of Execution of Instruments and of Holding 38 of Securities Section 7.3 Holders to be Treated as Owners 38 Section 7.4 Securities Owned by Issuer Deemed Not Outstanding 38 Section 7.5 Right of Revocation of Action Taken 38 ARTICLE EIGHT SUPPLEMENTAL INDENTURES Section 8.1 Supplemental Indentures Without Consent of 39 Securityholders Section 8.2 Supplemental Indentures With Consent of Securityholders 40 Section 8.3 Effect of Supplemental Indenture 40 Section 8.4 Documents to Be Given to Trustee 41 Section 8.5 Notation on Securities in Respect of Supplemental 41 Indentures ARTICLE NINE CONSOLIDATION, MERGER, SALE OR CONVEYANCE Section 9.1 Issuer May Consolidate, Etc., on Certain Terms 41 Section 9.2 Successor Corporation Substituted 41 Section 9.3 Opinion of Counsel to Trustee 42 ARTICLE TEN SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS Section 10.1 Issuer's Option to Effect Defeasance or Covenant Defeasance 42 Section 10.2 Defeasance and Discharge 42 Section 10.3 Covenant Defeasance 42 Section 10.4 Conditions to Defeasance or Covenant Defeasance 43 Section 10.5 Deposited Money and U.S. Government Obligations 44 to be Held in Trust; Miscellaneous Provisions Section 10.6 Reinstatement 45 Section 10.7 Return of Moneys Held by Trustee 45 ARTICLE ELEVEN MISCELLANEOUS PROVISIONS Section 11.1 Incorporators, Stockholders, Officers and Directors 45 of Issuer Exempt from Individual Liability Section 11.2 Provisions of Indenture for Sole Benefit of Parties 45 and Securityholders Section 11.3 Successors and Assigns of Issuer Bound by Indenture 46 Section 11.4 Notices and Demands on Issuer, Trustee and Securityholders 46 Section 11.5 Officers' Certificates and Opinions of Counsel; 46 Statements to be Contained Therein Section 11.6 Payments Due on Saturdays, Sundays and Holidays 47 Section 11.7 Conflict of Any Provision of Indenture with Trust 47 Indenture Act of 1939 Section 11.8 New York Law to Govern 47 Section 11.9 Counterparts 47 Section 11.10 Effect of Headings 47 ARTICLE TWELVE REDEMPTION OF SECURITIES AND SINKING FUNDS Section 12.1 Applicability of Article 47 Section 12.2 Notice of Redemption; Partial Redemptions 48 Section 12.3 Payment of Securities Called for Redemption 48 Section 12.4 Exclusion of Certain Securities from Eligibility 49 for Selection for Redemption Section 12.5 Mandatory and Optional Sinking Funds 49 Section 12.6 Repayment at the Option of the Holders 51 ARTICLE THIRTEEN GUARANTEE Section 13.1 Issuer's Option to Have Securities Guaranteed 51 Section 13.2 Subsidiary Guarantors 51 Section 13.3 Subsidiary Guarantee 51 Section 13.4 Execution and Delivery of Guarantee 53 Section 13.5 Guarantors May Consolidate, Etc. on Certain Terms 53 Section 13.6 "Trustee" to Include Paying Agent 54 TESTIMONIUM 54 SIGNATURES 54 ACKNOWLEDGMENTS 56 EXHIBIT A 57 THIS INDENTURE, dated as of September 23, 1994, among RALCORP HOLDINGS, INC., a Missouri corporation (the "Issuer"), Beech-Nut Nutrition Corporation, Bremner, Inc., Keystone Resorts Management, Inc., and Ralston Foods, Inc. (as Guarantors) and The First National Bank of Chicago, a national banking association organized and existing under the laws of the United States of America, as Trustee (the "Trustee"), WITNESSETH: WHEREAS, the Issuer has duly authorized the issue from time to time of its unsecured debentures, notes or other evidences of indebtedness to be issued in one or more series (the "Securities") up to such principal amount or amounts as may from time to time be authorized in accordance with the terms of this Indenture and to provide, among other things, for the authentication, delivery and administration thereof, the Issuer has duly authorized the execution and delivery of this Indenture; and WHEREAS, all things necessary to make this Indenture a valid indenture and agreement according to its terms have been done; NOW, THEREFORE: In consideration of the premises and the purchases of the Securities by the holders thereof, the Issuer and the Trustee mutually covenant and agree for the equal and proportionate benefit of the respective holders from time to time of the Securities as follows: ARTICLE ONE DEFINITIONS SECTION 1.1 CERTAIN TERMS DEFINED. The following terms (except as otherwise expressly provided or unless the context otherwise clearly requires) for all purposes of this Indenture and of any indenture supplemental hereto shall have the respective meanings specified in this Section. All other terms used in this Indenture that are defined in the Trust Indenture Act or the definitions of which in the Securities Act of 1933 are referred to in the Trust Indenture Act, including terms defined therein by reference to the Securities Act of 1933, or the Investment Company Act of 1940 (except as herein otherwise expressly provided or unless the context otherwise clearly requires), shall have the meanings assigned to such terms in said Trust Indenture Act and in said Securities Act as in force at the date of this Indenture. All accounting terms used herein and not expressly defined shall have the meanings assigned to such terms in accordance with generally accepted accounting principles, and the term "GAAP" means such accounting principles as are generally accepted in the United States at the time of any computation. The words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole, as supplemented and amended from time to time, and not to any particular Article, Section or other subdivision. The terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular. "Attributable Debt" means, as to any particular lease under which the Company or any Restricted Subsidiary is at the time liable, at any date as of which the amount thereof is to be determined, the total net amount of rent required to be paid by the Company or any Restricted Subsidiary under such lease during the remaining term thereof, discounted from the respective due dates thereof to such date at the weighted average rate per annum borne by the Securities compounded annually. The net amount of rent required to be paid under any such lease for any such period shall be the aggregate amount of the rent payable by the lessee with respect to such period after excluding amounts required to be paid on account of maintenance and repairs, insurance, taxes, assessments, water rates and similar charges. In the case of any lease which is terminable by the lessee upon the payment of a penalty, such net amount shall also include the amount of such penalty, but not rent shall be considered as required to be paid under such lease subsequent to the first date upon which it may be so terminated. "Board of Directors" means either the Board of Directors or any committee of the Board of Directors of the Issuer duly authorized to act hereunder. "Brussels Business Day" means any day other than a day on which banking institutions in Brussels, Belgium, are authorized or required by law to close. "Business Day" means, with respect to any Place of Payment, except as may otherwise be provided in the form of Securities of any particular series, each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which the Corporate Trust Office or banking institutions in that Place of Payment are authorized or obligated by law or executive order to close. "Capitalized Lease Obligations" of any Person means the obligations of such Person to pay rent or other amounts under a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP, and the amount of such obligation shall be the capitalized amount thereof determined in accordance with GAAP. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, as amended, or if at any time after the execution and delivery of this Indenture such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties on such date. "Component Currency" has the meaning specified in Section 2.12. "Consolidated Equity" means, at any time for the Issuer and its Subsidiaries, an amount calculated as the Issuer's equity determined on a consolidated basis for the Issuer and its Subsidiaries in conformity with GAAP. "Consolidated Net Earnings" means, at any time, net earnings after taxes for the Company and its subsidiaries, on a consolidated basis, as determined in accordance with GAAP. "Consolidated Net Tangible Assets" means the aggregate of assets (less applicable reserves and other properly deductible items) after deducting therefrom all current liabilities for (i) notes and loans payable, (ii) current maturities of long-term debt and (iii) current maturities of obligations under capital leases, less all goodwill, trade names, trademarks, patents, unamortized debt discount and other like intangibles, all as set forth on the most recent balance sheet of the Company and its Subsidiaries and computed in accordance with GAAP. "Consolidated Revenues" means, at any time, net sales of the Company and its subsidiaries, on a consolidated basis, as determined in accordance with GAAP. "Consolidated Total Assets" means, at any time, all items which, in accordance with GAAP, would be classified as assets on a consolidated balance sheet of the Issuer and its Subsidiaries. "Conversion Date" has the meaning specified in Section 2.12. "Corporate Trust Office" means the office of the Trustee at which the corporate trust business of the Trustee shall, at any particular time, be principally administered, which office is, at the date as of which this Indenture is dated, located at One First National Plaza, Suite 0126, Chicago, Illinois 60670-0126. -2- "Coupon," means any interest coupon appertaining to any Security. "Coupon Security" means any Security authenticated and delivered with one or more Coupons appertaining thereto. "Credit Agreement" means the Credit Agreement dated March 30, 1994 entered into by Ralston Purina Company with a syndicate of commercial banks and assigned to the Issuer and comprised of a $200 million revolving credit arrangement and a $250 million term loan both with a maturity date of March 31, 1999. "Defeasance" has the meaning specified in Section 10.2. "Depositary" means, unless otherwise specified by the Issuer pursuant to either Section 2.3 or 2.14, with respect to Securities of any series issuable or issued as a Global Security, The Depository Trust Company, New York, New York, or any successor thereto registered under the Securities and Exchange Act of 1934, as amended, or other applicable statute or regulation. "Dollar" means the coin or currency of the United States of America which as of the time of payment is legal tender for the payment of public and private debts. "Dollar Equivalent of the ECU" has the meaning specified in Section 2.12. "Dollar Equivalent of the Foreign Currency" has the meaning specified in Section 2.12. "ECU" means the European Currency Unit as defined and revised from time to time by the Council of the European Communities. "European Communities" means the European Economic Community, the European Coal and Steel Community and the European Atomic Energy Community. "Event of Default" means any event or condition specified as such in Section 5.1. "Exchange Rate Officer's Certificate" means a telex or a certificate setting forth the applicable Official ECU Exchange Rate and the Dollar or Foreign Currency amounts payable on the basis of such Official ECU Exchange Rate in respect of the principal of and interest on Registered Securities, sent (in the case of a telex) or signed (in the case of a certificate) by the treasurer or any assistant treasurer of the Issuer, and delivered to the Trustee. "Foreign Currency" means a currency issued by the government of any country other than the United States. "Fully Registered Security" means any Security registered as to principal and interest, if any. "GAAP" means generally accepted accounting principles in the United States at the time of any computation. "Global Security" means a Security issued to evidence all or a part of any series of Securities which is executed by the Issuer and authenticated and delivered by the Trustee to the Depositary or pursuant to the Depositary's instruction, all in accordance with this Indenture and pursuant to an Issuer Order, which shall be registered in the name of the Depositary or its nominee. -3- "Guarantee" means, individually and collectively, the guarantees given by the Guarantors pursuant to Article Thirteen, including a notation in the Securities substantially in the form attached hereto as Exhibit A. "Guarantee Date" means the date of the execution and delivery of a Guarantee. "Guarantee Obligations" shall mean, with respect to any Person, without duplication, any obligations of such Person (other than endorsements in the ordinary course of business of negotiable instruments for deposit or collection) guaranteeing or intended to guarantee any Indebtedness of any other Person in any manner, whether direct or indirect. "Guarantor" means any Subsidiary (or successor of such Subsidiary) of the Company which executes a Guarantee. "Holder", "Holder of Securities", "Securityholder" or other similar terms mean the holder of an Unregistered Security or a Registered Holder of a Registered Security and, when used with respect to any Coupon, means the holder thereof. "Indebtedness", with respect to any person, means (i) all indebtedness, of such Person for borrowed money, (ii) all assets or services which in accordance with GAAP would be shown to be a liability of such Person (or on the liability side of a balance sheet of such Person), (iii) indebtedness of such person created or arising under any conditional sale or title retention agreement, (iv) the principal portion of all obligations of such person under Capital Leases, (v) the maximum available amount of all letters of credit or acceptances issued or created for the account of such Person, (vi) all Guaranty Obligations of such Person with respect to Indebtedness of another entity, (vii) all Indebtedness of another entity secured by a Lien on any Property of such person, whether or not such Indebtedness has been assumed by such person and (viii) all Indebtedness of any partnership or joint venture (except for any such Indebtedness with respect to which recourse by the holder thereof is limited to the assets of such partnership or joint venture) where such person is a general partner, net of any assets of such partnership or joint venture. "Indenture" means this instrument as originally executed and delivered or, if amended or supplemented as herein provided, as so amended or supplemented or both, and shall include the forms and terms of particular series of Securities established as contemplated hereunder. "Issuer" means Ralcorp Holdings, Inc., and, subject to Article Nine, its successors and assigns. "Issuer Request" or "Issuer Order" means a written request or order signed in the name of the Issuer by its Chairman of the Board, its Vice Chairman of the Board, a Chief Executive Officer, its President or a Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee. "Market Exchange Rate" has the meaning specified in Section 2.12. "Mortgage" has the meaning specified in Section 3.6. "Officers' Certificate" means a certificate signed by the president or any vice president and by the treasurer, secretary or an assistant secretary of the Issuer, and delivered to the Trustee. Each such certificate shall include the statements provided for in Section 11.5. "Official ECU Exchange Rate" applicable to any currency with respect to any payment to be made hereunder means the exchange rate between the ECU and such currency reported by the Commission of the European Communities (currently based on the rates in effect at 2:30 p.m., -4- Brussels time, on the relevant exchange markets) or if such exchange rate ceases to be so reported, then such exchange rate shall be determined by the Trustee using, in its sole discretion and without liability on its part, quotations from one or more major banks in New York City or such other quotations as the Trustee shall deem appropriate, on the applicable record date. "Opinion of Counsel" means an opinion in writing signed by legal counsel who may be an employee of or counsel to the Issuer. Each such opinion shall include the statements provided for in Section 11.5, if and to the extent required hereby. "Original issue date" of any Security (or portion thereof) means the earlier of (a) the date of such Security or (b) the date of any Security (or portion thereof) for which such Security was issued (directly or indirectly) on registration of transfer, exchange or substitution. "Outstanding", when used with reference to Securities, shall, subject to the provisions of Section 7.4, mean, as of any particular time, all Securities authenticated and delivered by the Trustee under this Indenture, except (a) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation; (b) Securities, or portions thereof, for the payment or redemption of which moneys in the necessary amount shall have been deposited in trust with the Trustee or with any paying agent (other than the Issuer) or shall have been set aside, segregated and held in trust by the Issuer for the holders of such Securities (if the Issuer shall act as its own paying agent), provided that if such Securities, or portions thereof, are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as herein provided, or provision satisfactory to the Trustee shall have been made for giving such notice; and (c) Securities in substitution for which other Securities shall have been authenticated and delivered, or which shall have been paid, pursuant to the terms of Section 2.9 (except with respect to any such Security as to which proof satisfactory to the Trustee is presented that such Security is held by a person in whose hands such Security is a legal, valid and binding obligation of the Issuer). "Paying Agent" means any Person (which may include the Issuer) authorized by the Issuer to pay the principal of or interest, if any, on any Security on behalf of the Issuer. "Permitted Lien" has the meaning specified in Section 3.6. "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Place of Payment", when used with respect to the Securities of any series, means the place or places where the principal of and interest, if any, on the Securities of that series are payable as specified pursuant to Section 3.2. "Principal" whenever used with reference to the Securities or any Security or any portion thereof, shall be deemed to include "and premium, if any". "Principal Property" means any real property, manufacturing plant, processing plant, office building, warehouse or other physical facility, or any other like depreciable or depletable asset of the Company or any Subsidiary, whether owned at the date of this Indenture or thereafter acquired, with a gross book value in excess of 2% of Consolidated Net Tangible Assets, other than properties that in -5- the opinion of the Board of Directors of the Issuer are not of material importance to the total business conducted by the Issuer and its Restricted Subsidiaries, as a whole. "Registered Holder" when used with respect to a Registered Security means the person in whose name such Security is registered in the Security register. "Registered Security" means any Security registered in the Security register. "Responsible Officer" when used with respect to the Trustee shall mean any officer in the Corporate Trust Services Division (or any successor group) of the Trustee including any vice president, assistant vice president, assistant secretary, or any other officer or assistant officer of the Trustee customarily performing functions similar to those performed by the persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred at the Corporate Trust Office because of his or her knowledge of and familiarity with the particular subject. "Restricted Subsidiary" means any Subsidiary of the Issuer substantially all of the assets of which are located in the United States (excluding territories or possessions). "Sale and Lease-Back Transaction" has the meaning specified in Section 3.7. "Security" or "Securities" has the meaning stated in the first recital of this Indenture, or, as the case may be, Securities that have been authenticated and delivered under this Indenture. "Specified Amount" has the meaning specified in Section 2.12. "Stated Maturity", when used with respect to any Security or any installment of principal thereof or interest thereon, means the date specified in such Security as the fixed date on which the principal of such Security or such installment of principal or interest is due and payable. "Subsidiary" means any corporation more than 50% of whose voting stock is at the time owned by the Issuer directly or indirectly by or through Subsidiaries, and (ii) any partnership, association, joint venture or other entity in which the Issuer directly or indirectly through Subsidiaries has more than 50% equity interest at any time. The term "'voting stock" means outstanding shares of stock having voting power for the election of directors, whether at all times or only so long as no senior class of stock has such voting power because of default in dividends or some other default. "Trustee" means the Person identified as "Trustee" in the first paragraph hereof and, subject to the provisions of Article Six, any successor trustee. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990, and as in force at the date as of which this Indenture was originally executed. "United States of America" means the fifty states constituting the United States of America as of the date of this Indenture. "Unregistered Security" means any Security not registered as to principal. "Valuation Date" has the meaning specified in Section 2.12. "vice president" when used with respect to the Issuer or the Trustee, means any vice president, whether or not designated by a number or a word or words added before or after the title of "vice president". -6- ARTICLE TWO SECURITIES SECTION 2.1 FORMS GENERALLY. The Securities of each series and the Coupons, if any, shall be substantially in such form or forms (not inconsistent with this Indenture) as shall be established by or pursuant to a resolution of the Board of Directors or in one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture (the provisions of which shall be appropriate to reflect the terms of each series of Securities, including the currency or denomination, which may be Dollars, Foreign Currency or ECU) and may have imprinted or otherwise reproduced thereon such legend or legends, not inconsistent with the provisions of this Indenture, as may be required to comply with any law or with any rules or regulations pursuant thereto, or with any rules of any securities exchange or to conform to general usage, all as may be determined by the officers executing such Securities and Coupons, if any, as evidenced by their execution of the Securities and Coupons, if any. The definitive Securities and Coupons, if any, shall be printed, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the officers executing such Securities and Coupons, if any, as evidenced by their execution of such Securities and Coupons, if any. The Guarantees, if any, to be endorsed on the Securities of any series shall be substantially in the form attached hereto as Exhibit A. SECTION 2.2 FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION. The Trustee's certificate of authentication on all Securities shall be in substantially the following form: This is one of the Securities of the series designated herein and referred to in the within-mentioned Indenture. The First National Bank of Chicago, as Trustee By:________________________________ Authorized Officer SECTION 2.3 AMOUNT UNLIMITED; ISSUABLE IN SERIES. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is unlimited. The Securities may be issued in one or more series. There shall be established in or pursuant to a resolution of the Board of Directors and set forth in an Officers' Certificate, or established in one or more indentures supplemental hereto, prior to the issuance of Securities of any series, (1) the title of the Securities of the series (which shall distinguish the Securities of the series from all other Securities); (2) any limit upon the aggregate principal amount of the Securities of the series that may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of, transfer of, or in exchange for, or in lieu of, other Securities of the series pursuant to Sections 2.8, 2.9, 2.11, 2.14 or 12.3); -7- (3) the date or dates on which the principal of the Securities of the series is payable; (4) the rate or rates at which the Securities of the series shall bear interest, the date or dates from which such interest shall accrue, the interest payment dates on which such interest shall be payable and the record dates for the determination of Holders to whom interest is payable; (5) the place or places where the principal and interest on Securities of the series shall be payable (if other than as provided in Section 3.2); (6) the right, if any, of the Issuer to redeem, purchase or repay Securities of the series, the price or prices at which, the period or periods within which and the terms and conditions upon which Securities of the series may be redeemed, in whole or in part, at the option of the Issuer, pursuant to any sinking fund or otherwise; (7) the obligation, if any, of the Issuer to redeem, purchase or repay Securities of the series pursuant to any sinking fund or analogous provisions or at the option of a Holder thereof and the price or prices at which and the period or periods within which and the terms and conditions upon which Securities of the series shall be redeemed, purchased or repaid, in whole or in part, pursuant to such obligation; (8) the issuance as Registered Securities or Unregistered Securities or both, and the rights of the Holders to exchange Unregistered Securities for Registered Coupon Securities or Fully Registered Securities of the series or to exchange Registered Securities of the series for Unregistered Securities of the series and the circumstances under which any such exchanges, if permitted, may be made; (9) if other than denominations of $1,000 and any multiple thereof, the denominations, which may be in Dollars, any Foreign Currency or ECU, in which Securities of the series shall be issuable; (10) whether the Securities of the series shall be issued in whole or in part in the form of a Global Security or Securities; the terms and conditions, if any, upon which such Global Security or Securities may be exchanged in whole or in part for other individual Securities; and the Depositary for such Global Security or Securities; (11) any addition to or change in (a) the Events of Default or (b) covenants set forth in Article Three which applies to any Securities of the series and any change in the right of the Trustee or the requisite Holders of such Securities to declare the principal amount thereof due and payable pursuant to Section 5.1. (12) any other terms or conditions upon which the Securities of the series are to be issued (which terms shall not be inconsistent with the provisions of this Indenture); (13) any trustees, authenticating or paying agents, transfer agents or registrars or any other agents with respect to the Securities of such series; and (14) whether the Securities of the series shall be entitled to the benefit of the Guarantees set forth in Article Thirteen. All Securities of any one series shall be substantially identical except as to denomination and except as may otherwise be provided in or pursuant to such resolution of the Board of Directors or in any such indenture supplemental hereto. All Securities of any one series need not be issued at the -8- same time, and unless otherwise provided, a series may be reopened for issuances of additional Securities of such series. SECTION 2.4 AUTHENTICATION AND DELIVERY OF SECURITIES. At any time and from time to time after the execution and delivery of this Indenture, the Issuer may deliver Securities of any series having attached thereto appropriate Coupons, if any, executed by the Issuer to the Trustee for authentication, and the Trustee shall thereupon authenticate and deliver such Securities to or upon the Issuer Order without any further action by the Issuer. In authenticating such Securities and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive and (subject to Section 6.1) shall be fully protected in relying upon: (1) a certified copy of any resolution or resolutions of the Board of Directors authorizing the action taken pursuant to the resolution or resolutions delivered under clause (2) below; (2) a copy of any resolution or resolutions of the Board of Directors relating to such series, in each case certified by the secretary or an assistant secretary of the Issuer; (3) an executed supplemental indenture, if any; (4) an Officers' Certificate setting forth the form and terms of the Securities as required pursuant to Sections 2.1 and 2.3, respectively, and prepared in accordance with Section 11.5; (5) an Opinion of Counsel, prepared in accordance with Section 11.5, which shall state (a) that the form or forms and terms of such Securities have been established by or pursuant to a resolution of the Board of Directors or by a supplemental indenture as permitted by Sections 2.1 and 2.3 in conformity with the provisions of this Indenture; (b) that such Securities, when authenticated and delivered by the Trustee and issued by the Issuer in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and binding obligations of the Issuer; (c) that all laws and requirements in respect of the execution and delivery by the Issuer of the Securities have been complied with; (d) that the Indenture and any supplemental indenture has been duly authorized, executed and delivered by and constitutes the valid and binding obligation of, the Issuer; and (e) such other matters as the Trustee may reasonably request. The Trustee shall have the right to decline to authenticate and deliver any Securities under this Section if the Trustee, being advised by counsel, determines that such action may not lawfully be taken by the Issuer or if the Trustee in good faith by its board of directors or board of trustees, executive committee, or a trust committee of directors or trustees or Responsible Officers shall determine that such action would expose the Trustee to personal liability to existing Holders. SECTION 2.5 EXECUTION OF SECURITIES. The Securities shall be signed on behalf of the Issuer by both (a) the chairman of its Board of Directors or any vice chairman of its Board of Directors or its president or any vice president and (b) by its treasurer or any assistant treasurer or its secretary or -9- any assistant secretary, under its corporate seal which may, but need not, be attested. Such signatures may be the manual or facsimile signatures of the present or any future such officers. The seal of the Issuer may be in the form of a facsimile thereof and may be impressed, affixed, imprinted or otherwise reproduced on the Securities. Typographical and other minor errors or defects in any such reproduction of the seal or any such signature shall not affect the validity or enforceability of any Security that has been duly authenticated and delivered by the Trustee. Any Coupons attached to any Unregistered Security shall be executed on behalf of the Issuer by the manual or facsimile signature of any such officer of the Issuer. In case any officer of the Issuer who shall have signed any of the Securities or Coupons shall cease to be such officer before the Security or Coupon so signed shall be authenticated and delivered by the Trustee or disposed of by the Issuer, such Security or Coupon nevertheless may be authenticated and delivered or disposed of as though the person who signed such Security or Coupon had not ceased to be such officer of the Issuer; and any Security or Coupon may be signed on behalf of the Issuer by such persons as, at the actual date of the execution of such Security or Coupon, shall be the proper officers of the Issuer, although at the date of the execution and delivery of this Indenture any such person was not such an officer. SECTION 2.6 CERTIFICATE OF AUTHENTICATION. Only such Securities and Coupons appertaining thereto as shall bear thereon a certificate of authentication substantially in the form hereinbefore recited, executed by the Trustee by the manual signature of one of its authorized officers, shall be entitled to the benefits of this Indenture or be valid or obligatory for any purpose. Such certificate by the Trustee upon any Security executed by the Issuer shall be conclusive evidence that the Security so authenticated has been duly authenticated and delivered hereunder and that the Holder is entitled to the benefits of this Indenture. The Trustee shall not authenticate or deliver any Unregistered Security until any matured Coupons appertaining thereto have been detached and canceled, except as otherwise provided or permitted by this Indenture. SECTION 2.7 DENOMINATION AND DATE OF SECURITIES; PAYMENTS OF INTEREST. The Securities shall be issuable in denominations as shall be specified as contemplated by Section 2.3. In the absence of any such specification with respect to the Securities of any series, the Securities of such series shall be issuable in denominations of $1,000 and any multiple thereof, which may be in Dollars, any Foreign Currency or ECU, and interest shall be computed on the basis of a 360-day year of twelve 30-day months. The Securities shall be numbered, lettered, or otherwise distinguished in such manner or in accordance with such plan as the officers of the Issuer executing the same may determine with the approval of the Trustee as evidenced by the execution and authentication thereof. Each Security shall be dated the date of its authentication, shall bear interest from the date and shall be payable on the dates, in each case, which shall be specified as contemplated by Section 2.3. Interest on any Security which is payable, and is punctually paid or duly provided for, on any interest payment date shall be paid, in the case of Registered Securities, to the person in whose name that Security (or one or more predecessor Securities) is registered at the close of business on the regular record date for the payment of such interest and, in the case of Unregistered Securities, upon surrender of the Coupon appertaining thereto in respect of the interest due on such interest payment date. The term "record date" as used with respect to any interest payment date (except a date for payment of defaulted interest) shall mean the date specified as such in the terms of the Securities of any particular series, or, if no such date is so specified, if such interest payment date is the first day of a calendar month, the fifteenth day of the next preceding calendar month or, if such interest payment -10- date is the fifteenth day of a calendar month, the first day of such calendar month, whether or not such record date is a Business Day. Any interest on any Security of any series which is payable, but is not punctually paid or duly provided for, on any interest payment date (called "defaulted interest" for the purpose of the Section) shall forthwith cease to be payable to the Registered Holder on the relevant regular record date by virtue of his having been such Holder; and such defaulted interest may be paid by the Issuer, at its election, as provided in clause (1) or clause (2) below: (1) The Issuer may elect to make payment of any defaulted interest to the persons in whose names any such Registered Securities (or their respective predecessor Securities) are registered at the close of business on a special record date for the payment of such defaulted interest, which shall be fixed in the following manner. The Issuer shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Security of such series and the date of the proposed payment, and at the same time the Issuer shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such defaulted interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the persons entitled to such defaulted interest as in this clause provided. Thereupon the Trustee shall fix a special record date for the payment of such defaulted interest in respect of Registered Securities of such series which shall be not more than 15 nor less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Issuer of such special record date and, in the name and at the expense of the Issuer, shall cause notice of the proposed payment of such defaulted interest and the special record date thereof to be mailed, first class postage prepaid, to each Registered Holder at his address as it appears in the Security register, not less than 10 days prior to such special record date. Notice of the proposed payment of such defaulted interest and the special record date therefor having been mailed as aforesaid, such defaulted interest in respect of Registered Securities of such series shall be paid to the person in whose names such Securities (or their respective predecessor Securities) are registered on such special record date and such defaulted interest shall no longer be payable pursuant to the following clause (2). (2) The Issuer may make payment of any defaulted interest on the Securities of any series in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of that series may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Issuer to the Trustee of the proposed payment pursuant to this clause, such payment shall be deemed practicable by the Trustee. Any defaulted interest payable in respect of any Security of any series which is an Unregistered Security shall be payable pursuant to such procedures as may be satisfactory to the Trustee in such manner that there is no discrimination as between the Holders of Registered Securities and other Securities of the same series, and notice of the payment date therefor shall be given by the Trustee, in the name and at the expense of the Issuer, by publication at least once in a newspaper of general circulation in New York, New York. Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. SECTION 2.8 REGISTRATION, TRANSFER AND EXCHANGE. The Issuer will keep at each office or agency to be maintained for the purpose as provided in Section 3.2 a register or registers in which, -11- subject to such reasonable regulations as it may prescribe, it will register, and will register the transfer of, Registered Securities as in this Article provided. Such register shall be in written form in the English language or in any other form capable of being converted into such form within a reasonable time. At all reasonable times such register or registers shall be open for inspection by the Trustee. Upon due presentation for registration of transfer of any Registered Security of any series at any such office or agency to be maintained for the purpose as provided in Section 3.2, the Issuer shall execute and the Trustee shall authenticate and deliver in the name of the transferee or transferees a new Registered Security or Registered Securities of the same series in authorized denominations for a like aggregate principal amount. Subject to Section 2.14, at the option of the Holder thereof, Securities of a series, whether Registered Securities or Unregistered Securities, which by their terms are registerable as to principal only or as to principal and interest, may, to the extent and under the circumstances specified pursuant to Section 2.3, be exchanged for Registered Coupon Securities or Fully Registered Securities of such series, as may be issued by the terms thereof. At the option of the Holder thereof, Securities of a series, whether Registered Securities or Unregistered Securities, which by their terms provide for the issuance of Unregistered Securities, may, to the extent and under the circumstances specified pursuant to Section 2.3, be exchanged for Unregistered Securities of such series. Securities so issued in exchange for other Securities shall be of any authorized denomination and of like principal amount and stated maturity, and shall be issued upon surrender of the Securities for which they are to be exchanged and, in the case of Coupon Securities, together with all unmatured Coupons and matured Coupons in default appertaining thereto, at the office of Issuer provided for in Section 2.3 and upon payment, if the Issuer shall require, of charges provided therein. Unregistered Securities of any series issued in exchange for Registered Securities of such series between the regular record date for such Registered Security and the next interest payment date will be issued without the Coupon relating to such interest payment date, and Unregistered Securities surrendered in exchange for Registered Securities between such dates shall be surrendered without the Coupon relating to such interest payment date. Whenever any Securities are so surrendered for exchange, the Issuer shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. Notwithstanding the foregoing, an Unregistered Security will not be delivered in exchange for a Registered Security or Securities unless the Trustee receives a certificate signed by the person entitled to delivery of such Security or other items or documents fulfilling such conditions as shall be required by regulations of the United States Department of the Treasury, or shall be notified by the Issuer that such a certificate shall not be required by such regulations; provided, however, that no such Unregistered Security shall be delivered by the Trustee if the Trustee or such agent shall have, or shall have been notified in writing by the Issuer that the Issuer has, actual knowledge that such certificate is false. Upon presentation for registration of any Unregistered Securities of any series which by its terms is registerable as to principal, at the office or agency of the Issuer to be maintained as provided in Section 3.2, such Security shall be registered as to principal in the name of the Holder thereof and such registration shall be noted on such Security. Any Security so registered shall be transferable on the registry books of the Issuer upon presentation of such Security at such office or agency for similar notation thereon, but such Security may be discharged from registration by being in a like manner transferred to bearer, whereupon transferability by delivery shall be restored. Unregistered Securities shall continue to be subject to successive registrations and discharges from registration at the option of the Holders thereof. Unregistered Securities shall be transferable by delivery, except while registered as to principal. Registration of any Coupon Security shall not effect the transferability by delivery of the Coupons appertaining thereto which shall continue to be payable to bearer and transferable by delivery. -12- All Securities and Coupons issued upon any transfer or exchange of Securities shall be the valid obligations of the Issuer, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities and Coupons surrendered upon such transfer or exchange. Every Security presented or surrendered for registration of transfer or exchange shall (if so required by the Issuer or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Issuer and the Security registrar duly executed, by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange of Securities, but the Issuer may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Securities, other than exchanges pursuant to Sections 2.11, 8.5 or 12.3 not involving any transfer. The Issuer shall not be required (i) to issue, register the transfer of or exchange any Security during a period beginning at the opening of business 15 days before the day of the selection of Securities for redemption under Article Twelve or (ii) to register the transfer of or exchange any Security so selected for redemption in whole or in part. All Securities issued upon any transfer or exchange of Securities shall be valid obligations of the Issuer, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such transfer or exchange. All Securities issued upon any transfer or exchange of Securities shall have endorsed thereon, if applicable to Securities of such series, a Guarantee or Guarantees executed by the Guarantors. None of the Issuer, the Trustee or any Paying Agent will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a Global Security or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. SECTION 2.9 MUTILATED, DEFACED, DESTROYED, LOST AND STOLEN SECURITIES. In case any temporary or definitive Security or Coupon shall become mutilated, defaced or be destroyed, lost or stolen, the Issuer in its discretion may execute, and upon the written request of any officer of the Issuer, the Trustee shall authenticate and deliver, a new Security of the same series or Coupon, bearing a number not contemporaneously outstanding, in exchange and substitution for the mutilated or defaced Security or Coupon, or in lieu of and substitution for the Security or Coupon so destroyed, lost or stolen. In every case the applicant for a substitute Security or Coupon shall furnish to the Issuer and to the Trustee and to any agent of the Issuer or the Trustee such security or indemnity as may be required by them to indemnify and defend and to save each of them harmless and, in every case of destruction, loss or theft, evidence to their satisfaction of the destruction, loss or theft of such Security or Coupon and of the ownership thereof. Upon the issuance of any substitute Security or Coupon, the Issuer may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. In case any Security or Coupon which has matured or is about to mature or has been called for redemption in full shall become mutilated or defaced or be destroyed, lost or stolen, the Issuer may, instead of issuing a substitute Security or Coupon, pay or authorize the payment of the same (without surrender thereof except in the case of a mutilated or defaced Security or Coupon), if the applicant for such payment shall furnish to the Issuer and to the Trustee and any agent of the Issuer or the Trustee such security or indemnity as any of them may require to save each of them harmless, and, in every case of destruction, loss or theft, the applicant shall also furnish to the Issuer -13- and the Trustee and any agent of the Issuer or the Trustee evidence to their satisfaction of the destruction, loss or theft of such Security or Coupon and of the ownership thereof. Every substitute Security of any series or Coupon issued pursuant to the provisions of this Section by virtue of the fact that any such Security or Coupon is destroyed, lost or stolen shall constitute an additional contractual obligation of the Issuer, whether or not the destroyed, lost or stolen Security or Coupon shall be at any time enforceable by anyone and shall be entitled to all the benefits of (but shall be subject to all the limitations of rights set forth in) this Indenture equally and proportionately with any and all other Securities of such series or Coupons duly authenticated and delivered hereunder. All Securities or Coupons shall be held and owned upon the express condition that, to the extent permitted by law, the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, defaced, destroyed, lost or stolen Securities or Coupons and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender. Every substitute Security of any series issued pursuant to the provisions of this Section shall have endorsed thereon, if applicable to Securities of such series, a Guarantee or Guarantees executed by the Guarantors. SECTION 2.10 CANCELLATION OF SECURITIES; DESTRUCTION THEREOF. All Securities surrendered for payment, redemption, registration of transfer or exchange, or for any future credit against any payment in respect of a sinking or analogous fund which have been otherwise acquired by Issuer and all Coupons surrendered for payment or exchange, shall, if surrendered to the Issuer or any agent of the Issuer or the Trustee, be delivered to the Trustee for cancellation or, if surrendered to the Trustee, shall be canceled by it; and no Securities or Coupons shall be issued in lieu thereof, except as expressly permitted by any of the provisions of this Indenture. The Trustee shall destroy canceled Securities and Coupons held by it and deliver a certificate of destruction to the Issuer. If the Issuer shall acquire any of the Securities and Coupons, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Securities and Coupons unless and until the same are delivered to the Trustee for cancellation. SECTION 2.11 TEMPORARY SECURITIES. Pending the preparation of definitive Securities for any series, the Issuer may execute and the Trustee shall authenticate and deliver temporary Securities for such series (printed, lithographed, typewritten or otherwise reproduced, in each case in form satisfactory to the Trustee). Temporary Securities of any series may be issued as Registered Securities or Unregistered Securities with or without Coupons attached thereto, of any authorized denomination, and substantially in the form of the definitive Securities of such series but with such omissions, insertions and variations as may be appropriate for temporary Securities, all as may be determined by the Issuer with the concurrence of the Trustee. Temporary Securities may contain such reference to any provisions of this Indenture as may be appropriate. Every temporary Security shall be executed by the Issuer and be authenticated by the Trustee upon the same conditions and in substantially the same manner, and with like effect, as the definitive Securities. Without unreasonable delay the Issuer shall execute and shall furnish definitive Securities of such series and thereupon temporary Securities of such series may be surrendered in exchange therefor without charge at each office or agency to be maintained by the Issuer for that purpose pursuant to Section 3.2, and the Trustee shall authenticate and deliver in exchange for such temporary Securities of such series a like aggregate principal amount of definitive Securities of the same series of authorized denominations and, in the case of Unregistered Securities, having attached thereto any appropriate Coupons. Until so exchanged, the temporary Securities of any series shall be entitled to the same benefits under this Indenture as definitive Securities of such series. -14- All temporary Security of any series issued pursuant to the provisions of this Section shall have endorsed thereon, if applicable to Securities of such series, a Guarantee or Guarantees executed by the Guarantors. SECTION 2.12 CURRENCY AND MANNER OF PAYMENTS IN RESPECT OF SECURITIES. (a) With respect to Registered Securities denominated in Dollars or Foreign Currency and with respect to Registered Securities denominated in ECU with respect to which the Holders of such Securities have not made the election provided for in paragraph (b) below, the following payment provisions shall apply: (1) Except as provided in subparagraph (a) (2) or in paragraph (e) below, payment of the principal of any Registered Security will be made at the Place of Payment by delivery of a check in the currency in which the Security is denominated on the payment date against surrender of such Registered Security, and any interest on any Registered Security will be paid at the Place of Payment by mailing a check in the currency in which the Securities were issued to the Person entitled thereto at the address of such Person appearing on the Security register. (2) Payment of the principal of and interest on such Security may also, subject to applicable laws and regulations, be made at such other place or places as may be designated by the Issuer by any appropriate method. (b) With respect to Registered Securities denominated in ECU, the following payment provisions shall apply, except as otherwise provided in paragraphs (e) and (f) below: (1) The Board of Directors of the Issuer may provide with respect to any series of such Securities that Holders shall have the option to receive payments of principal of and interest on such Security in any of the currencies which may be designated for such election in such Security by delivering to the Trustee a written election, to be in form and substance satisfactory to the Trustee, not later than the close of business on the record date immediately preceding the applicable payment date. Such election will remain in effect for such Holder until changed by the Holder by written notice to the Trustee (but any such change must be made not later than the close of business on the record date immediately preceding the next payment date to be effective for the payment to be made on such payment date and no such change may be made with respect to payments to be made on any Security with respect to which notice of redemption has been given by the Issuer pursuant to Article Twelve). Any Holder of any such Security who shall not have delivered any such election to the Trustee not later than the close of business on the applicable record date will be paid the amount due on the applicable payment date in ECU as provided in paragraph (a) of this Section 2.12. Payment of principal shall be made on the payment date against surrender of such Securities. Payment of principal and interest shall be made at the Place of Payment by mailing at such location a check in the applicable currency to the Person entitled thereto at the address of such Person appearing on the Security register. (2) Payment of the principal of and interest on such Security may also, subject to applicable laws and regulations, be made at such other place or places as may be designated by the Issuer by any appropriate method. (c) Payment of the principal of and interest on any Unregistered Security will be made at such place or places outside the United States as may be designated by the Issuer by any appropriate method only in the currency in which the Security is denominated (except as provided in paragraph ( e) below) on the payment date against surrender of the Unregistered Security, in the case of payment of principal, or the relevant Coupon, in the case of payment of interest. Except as provided in -15- paragraph (e) below, payment with respect to Unregistered Securities and Coupons will be made by check, subject to any limitations on the methods of effecting such payment as shall be specified in the terms of the Security established as provided in Section 2.3 and as shall be required under applicable laws and regulations. Payment of the principal of and interest on Unregistered Securities may also, subject to applicable laws and regulations, be made at such other place or places as may be designated by the Issuer by any appropriate method. (d) Not later than the fourth Business Day after the record date for each payment date, the Trustee will deliver to the Issuer a written notice specifying, in the currency in which each series of the Securities are denominated, the respective aggregate amounts of principal of and interest on the Securities to be made on such payment date, specifying the amounts so payable in respect of the Registered and the Unregistered Securities and in respect of the Registered Securities as to which the Holders of Securities denominated in ECU shall have elected to be paid in another currency as provided in paragraph (b) above. If the Board of Directors has provided for the election referred to in paragraph (b) above and if at least one Holder has made such election, then not later than the eighth Business Day following each record date the Company will deliver to the Trustee an Exchange Rate Officer's Certificate in respect of the Dollar or Foreign Currency payments to be made on such payment date. The Dollar or Foreign Currency amount receivable by Holders of Registered Securities denominated in ECU who have elected payment in such currency as provided in paragraph (b) above shall be determined by the Issuer on the basis of the applicable Official ECU Exchange Rate set forth in the applicable Exchange Rate Officer's Certificate. (e) If the Foreign Currency in which any of the Securities are denominated ceases to be used both by the government of the country which issued such currency and for the settlement of transactions by public institutions of or within the international banking community, or if the ECU ceases to be used both within the European Monetary System and for the settlement of transactions by public institutions of or within the European Communities, then with respect to each date for the payment of principal of, premium, if any, and interest on the applicable Foreign Currency or ECU denominated Securities occurring after the last date on which the Foreign Currency or ECU was so used (the "Conversion Date"), the Dollar shall be the currency of payment for use on each such payment date. The Dollar amount to be paid by the Issuer to the Trustee and by the Trustee or any Paying Agent to the Holders of such Securities with respect to such payment date shall be the Dollar Equivalent of the Foreign Currency or, in the case of ECU, the Dollar Equivalent of the ECU as determined by the Trustee as of the record date (the "Valuation Date") in the manner provided in paragraphs (g) or (h) below. (f) If the Holder of a Registered Security denominated in ECU elects payment in a specified Foreign Currency as provided for by paragraph (b) and such Foreign Currency ceases to be used both by the government of the country which issued such currency and for the settlement of transactions by public institutions of or within the international banking community, such Holder shall receive payment in ECU, and if ECU ceases to be used both within the European Monetary System and for the settlement of transactions by public institutions of or within the European Communities, such Holder shall receive payment in Dollars. (g) The "Dollar Equivalent of the Foreign Currency" shall be determined by the Trustee as of each Valuation Date and shall be obtained by converting the specified Foreign Currency into Dollars at the Market Exchange Rate on the Valuation Date. (h) The "Dollar Equivalent of the ECU" shall be determined by the Trustee as of each Valuation Date and shall be the sum obtained by adding together the results obtained by converting the Specified Amount of each Component Currency into Dollars at the Market Exchange Rate on the Valuation Date for such Component Currency. (i) For purposes of this Section 2.12 the following terms shall have the following meanings: -16- A "Component Currency" shall mean any currency which, on the Conversion Date, was a component currency of the ECU. A "Specified Amount" of a Component Currency shall mean the number of units or fractions thereof which such Component Currency represented in the ECU on the Conversion Date. If after the Conversion Date the official unit of any Component Currency is altered by way of combination or subdivision, the Specified Amount of such Component Currency shall be divided or multiplied in the same proportion. If after the Conversion Date two or more Component Currencies are consolidated into a single currency, the respective Specified Amounts of such Component Currencies shall be replaced by an amount in such single currency equal to the sum of the respective Specified Amounts of such consolidated Component Currencies expressed in such single currency, and such amount shall thereafter be a Specified Amount and such single currency shall thereafter be a Component Currency. If after the Conversion Date any Component Currency shall be divided into two or more currencies, the Specified Amount of such Component Currency shall be replaced by specified amounts of such two or more currencies, the sum of which, at the Market Exchange Rate of such two or more currencies on the date of such replacement, shall be equal to the Specified Amount of such former Component Currency divided by the number of currencies into which such Component Currency was divided, and such amounts shall thereafter be Specified Amounts and such currencies shall thereafter be Component Currencies. "Market Exchange Rate" shall mean for any currency the noon Dollar buying rate for that currency for cable transfers quoted in New York City on the Valuation Date as certified for customs purposes by the Federal Reserve Bank of New York. If such rates are not available for any reason with respect to one or more currencies for which an Exchange Rate is required, the Trustee shall use, in its sole discretion and without liability on its part, such quotation of the Federal Reserve Bank of New York as of the most recent available date, or quotations from one or more major banks in New York City or in the country of issue of the currency in question, or such other quotations as the Trustee shall deem appropriate. Unless otherwise specified by the Trustee, if there is more than one market for dealing in any currency by reason of foreign exchange regulations or otherwise, the market to be used in respect of such currency shall be that upon which a nonresident issuer of securities designated in such currency would purchase such currency in order to make payments in respect of such securities. All decisions and determinations of the Trustee regarding the Dollar Equivalent of the Foreign Currency, the Dollar Equivalent of the ECU and the Market Exchange Rate shall be in its sole discretion and shall, in the absence of manifest error, be conclusive for all purposes and irrevocably binding upon the Issuer and all Holders of the Securities. In the event that the Foreign Currency ceases to be used both by the government of the country which issued such currency and for the settlement of transactions by public institutions of or within the international banking community, the Issuer, after learning thereof, will immediately give notice thereof to the Trustee (and the Trustee will promptly thereafter give notice in the manner provided in Section 11.4 to the Holders) specifying the Conversion Date. In the event the ECU ceases to be used both within the European Monetary System and for the settlement of transactions by public institutions of or within the European Communities, the Issuer, after learning thereof, will immediately give notice thereof to the Trustee (and the Trustee will promptly thereafter give notice in the manner provided in Section 11.4 to the Holders) specifying the Conversion Date and the Specified Amount of each Component Currency on the Conversion Date. In the event of any subsequent change in any Component Currency as set forth in the definition of Specified Amount above, the Issuer, after learning thereof, will similarly give notice to the Trustee. The Trustee shall be fully justified and protected in relying on and acting upon the information so received by it from the Issuer and shall not otherwise have any duty or obligation to determine such information independently. SECTION 2.13 COMPLIANCE WITH CERTAIN LAWS AND REGULATIONS. -17- If any Unregistered Securities are to be issued in any series of Securities, the Issuer, Trustee, or any Paying Agent will use reasonable efforts to provide for arrangements and procedures designed pursuant to then applicable laws and regulations, if any, to ensure that Unregistered Securities are sold or resold, exchanged, transferred and paid only in compliance with such laws and regulations and without adverse consequences to the Issuer. SECTION 2.14. SECURITIES ISSUABLE IN THE FORM OF A GLOBAL SECURITY. (a) If the Issuer shall establish pursuant to Section 2.3 that the Securities of a particular series are to be issued in whole or in part in the form of one or more Global Securities, then the Issuer shall execute and the Trustee shall, in accordance with Section 2.4 and the Issuer order delivered to the Trustee thereunder, authenticate and deliver, such Global Security or Securities, which (i) shall represent, and shall be denominated in an amount equal to the aggregate principal amount of, the Outstanding Securities of such series to be represented by such Global Security or Securities, (ii) shall be registered in the name of the Depositary for such Global Security or Securities or its nominee, (iii) shall be delivered by the Trustee to the Depositary or pursuant to the Depositary's instruction and (iv) shall bear a legend substantially to the following effect: "Unless and until it is exchanged in whole or in part for the individual Securities represented hereby, this Global Security may not be transferred except as a whole by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary." (b) Notwithstanding any other provision of this Section 2.14 or of Section 2.8, unless the terms of a Global Security expressly permit such Global Security to be exchanged in whole or in part for individual Securities, a Global Security may be transferred, in whole but not in part and in the manner provided in Section 2.8, only to another nominee of the Depositary for such Global Security, or to a successor Depositary for such Global Security selected or approved by the Issuer or to a nominee of such successor Depositary. (c)(i) If at any time the Depositary for a Global Security notifies the Issuer that it is unwilling or unable to continue as Depositary for such Global Security or if at any time the Depositary for the Securities for such series shall no longer by eligible or in good standing under the Securities Exchange Act of 1934, as amended, or other applicable statute or regulation, the Issuer shall appoint a successor Depositary with respect to such Global Security. If a successor Depositary for such Global Security is not appointed by the Issuer within 90 days after the Issuer receives such notice or becomes aware of such ineligibility, the Issuer's election pursuant to Section 2.3(10) shall no longer be effective with respect to such Global Security and the Issuer will execute, and the Trustee, upon receipt of an Issuer order for the authentication and delivery of individual Securities of such series in exchange for such Global Security, will authenticate and deliver individual Securities of such series of like tenor and terms in definitive form in an aggregate principal amount equal to the principal amount of the Global Security in exchange for such Global Security. (ii) The Issuer may at any time and in its sole discretion determine that the Securities of any series issued or issuable in the form of one or more Global Securities shall no longer be represented by such Global Security or Securities. In such event the Issuer will execute, and the Trustee, upon receipt of a Issuer order for the authentication and delivery of individual Securities of such series in exchange in whole or in part for such Global Security, will authenticate and deliver individual Securities of such series of like tenor and terms in definitive form in an aggregate principal amount equal to the principal amount of such Global Security or Securities representing such series in exchange for such Global Security or Securities. -18- (iii) If specified by the Issuer pursuant to Section 2.3 with respect to Securities issued or issuable in the form of a Global Security, the Depositary for such Global Security may surrender such Global Security in exchange in whole or in part for individual Securities of such series of like tenor and terms in definitive form on such terms as are acceptable to the Issuer and such Depositary. Thereupon the Issuer shall execute, and the Trustee shall authenticate and deliver, without service charge, (1) to each Person specified by such Depositary a new Security or Securities of the same series of like tenor and terms and of any authorized denomination as requested by such Person in aggregate principal amount equal to and in exchange for such Person's beneficial interest in the Global Security; and (2) to such Depositary a new Global Security of like tenor and terms and in a denomination equal to the difference, if any, between the principal amount of the surrendered Global Security and the aggregate principal amount of Securities delivered to Holders thereof. (iv) if there shall have occurred and be continuing an Event of Default or an event which with the giving of notice or lapse of time or both, would constitute an Event of Default with respect to Securities represented by such Global Security or Securities, thereupon the Issuer shall execute, and the Trustee shall authenticate and deliver, without service charge, to each Person specified by the Depositary a new Security or Securities of the same series of like tenor and terms and of any authorized denomination as requested by such Person in aggregate principal amount equal to and in exchange for such Person's beneficial interest in the Global Security. (v) In any exchange provided for in any of the preceding four paragraphs, the Issuer will execute and the Trustee will authenticate and deliver individual Securities in definitive registered form in authorized denominations. Upon the exchange of a Global Security for individual Securities, such Global Security shall be canceled by the Trustee. Securities issued in exchange for a Global Security pursuant to this Section shall be registered in such names and in such authorized denominations as the Depositary for such Global Security, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. The Trustee shall deliver such Securities to the persons in whose names such Securities are so registered. SECTION 2.15 APPOINTMENT OF AGENTS WITH RESPECT TO CERTAIN CALCULATIONS. The Issuer may appoint an Agent or Agents with respect to one or more Series of Securities which Agent or Agents shall be authorized to determine the rate or rates of interest applicable to the Securities of any Series from time to time in effect, the amount of principal or premium, if any, payable on the Securities of any Series and the rates of exchange applicable to the Securities of any Series denominated in a currency other than United States dollars from time to time in effect, all in accordance with the terms of the Securities of such Series. Wherever reference is made in this Indenture to any such calculation by the Trustee, it shall be deemed to refer to the calculation by such agent or agents. Such agent, upon calculating the amounts so to be calculated pursuant to the terms of the Securities of any Series shall communicate promptly in writing the amounts so calculated to the Issuer and the Trustee. Absent manifest error, all amounts so calculated shall be binding on the Issuer, the Trustee and the Holders of the Securities of such Series. Any such agent may resign at any time by giving written notice thereof to the Issuer and to the Trustee. The Issuer may at any time terminate the agency of any such agent by giving written notice thereof to such agent and to the Trustee. Upon receiving such a notice of resignation or upon such a termination, the Issuer may appoint a successor agent and shall give notice of such appointment to all Holders of Securities in the manner provided in Section 11.4. ARTICLE THREE COVENANTS OF THE ISSUER -19- SECTION 3.1 PAYMENT OF PRINCIPAL AND INTEREST. The Issuer covenants and agrees for the benefit of each series of Securities that it will duly and punctually pay or cause to be paid the principal of, premium, if any, and interest on, each of the Securities of such series in accordance with the terms of the Securities of such series, any Coupons appertaining thereto and this Indenture. The interest on Unregistered Securities shall be payable only upon presentation and surrender of the several Coupons for such interest installments as are evidenced thereby as they severally mature. The interest on any temporary Unregistered Security shall be paid, as to any installment of interest evidenced by a Coupon attached thereto, if any, only upon presentation and surrender of such Coupon, and, as to the other installments of interest, if any, only upon presentation of such Securities for notation thereon of the payment of such interest. SECTION 3.2 OFFICES FOR PAYMENTS, ETC. So long as any of the Securities remain outstanding, the Issuer will maintain the following for each series: an office or agency (a) where the Securities may be presented for payment, (b) where the Securities may be presented for registration of transfer and for exchange as in this Indenture provided and (c) where notices and demands to or upon the Issuer in respect of the Securities or of this Indenture may be served. The Issuer will give to the Trustee written notice of the location of any such office or agency and of any change of location thereof. In case the Issuer shall fail to so designate or maintain any such office or agency or shall fail to give such notice of the location or of any change in the location thereof, presentations and demands may be made and notices may be served at the Corporate Trust Office. SECTION 3.3 APPOINTMENT TO FILL A VACANCY IN OFFICE OF TRUSTEE. The Issuer, whenever necessary to avoid or fill a vacancy in the office of Trustee, will appoint, in the manner provided in Section 6.11, a Trustee, so that there shall at all times be a Trustee with respect to each series of Securities hereunder. SECTION 3.4 PAYING AGENTS. Whenever the Issuer shall appoint a Paying Agent other than the Trustee with respect to the Securities of any series, it will cause such Paying Agent to execute and deliver to the Trustee an instrument in which such Agent shall agree with the Trustee, subject to the provisions of this Section, (a) that it will hold all sums received by it as such Agent for the payment of the principal of or interest on the Securities of such series or Coupons (whether such sums have been paid to it by the Issuer or by any other obligor on the Securities of such series or Coupons) in trust for the benefit of the Holders of the Securities of such series or of the Trustee, and upon the occurrence of an Event of Default pay over all such sums received by it to the Trustee, (b) that it will give the Trustee notice of any failure by the Issuer (or by any other obligor on the Securities of such series) to make any payment of the principal of or interest on the Securities of such series or Coupons when the same shall be due and payable, (c) pay any such sums so held in trust by it to the Trustee upon the Trustee's written request at any time during the continuance of the failure referred to in clause (b) above, and (d) that it will give the Trustee notice of any change of address of any Holder of which it is aware. The Issuer will, on or prior to each due date of the principal of or interest on the Securities of such series or Coupons, deposit with the Paying Agent a sum sufficient to pay such principal or interest so becoming due, and (unless such Paying Agent is the Trustee) the Issuer will promptly notify the Trustee of any failure to take such action. -20- If the Issuer shall act as its own Paying Agent with respect to the Securities of any series or Coupons, it will, on or before each due date of the principal of or interest on the Securities of such series or Coupons, set aside, segregate and hold in trust for the benefit of the Holders of the Securities of such series or Holders of such Coupons a sum sufficient to pay such principal or interest so becoming due. The Issuer will promptly notify the Trustee of any failure to take such action. Anything in this Section to the contrary notwithstanding, the Issuer may at any time, for the purpose of obtaining a satisfaction and discharge with respect to one or more or all series of Securities or Coupons hereunder, or for any other reason, pay or cause to be paid to the Trustee all sums held in trust for any such series by the Issuer or any Paying Agent hereunder, as required by this Section, such sums to be held by the Trustee upon the trusts herein contained. Anything in this Section to the contrary notwithstanding, the agreement to hold sums in trust as provided in this Section is subject to the provisions of Sections 10.3 and 10.4. SECTION 3.5 WRITTEN STATEMENT TO TRUSTEE. The Issuer will deliver to the Trustee on or before January 1 in each year (beginning with 1995) brief certificates (which need not comply with Section 11.5) from the principal executive, financial or accounting officer of the Issuer as to his or her knowledge of the Issuer's compliance with all conditions and covenants under the Indenture (such compliance to be determined without regard to any period of grace or requirement of notice provided under the Indenture). SECTION 3.6 LIMITATION ON LIENS. (a) So long as any of the Securities remain Outstanding and unpaid, the Issuer will not create, assume or suffer to exist and will not cause, suffer to exist or permit any Restricted Subsidiary to create, assume or suffer to exist, any mortgage, pledge, security interest or other lien or encumbrance (herein referred to as a "Mortgage") of or upon any of its or their properties or assets, real or personal, whether owned at the date of this Indenture or thereafter acquired, or of or upon any income or profits therefrom, without making effective provision, and the Issuer covenants that in any such case it will make or cause to be made effective provision, whereby the Securities then Outstanding shall be secured by such mortgage, pledge, lien or encumbrance equally and ratably with any and all other obligations and indebtedness thereby secured so long as such indebtedness is so secured; provided, that the foregoing covenant shall not apply to any mortgage of the following character (each, a "Permitted Lien"): (i) Mortgages on property existing at the time of acquisition of such property (provided such mortgages are limited to such property and improvements thereon) or to secure the payment of all or any part of the purchase price thereof or to secure any indebtedness incurred at the time of, or within 180 days after, the acquisition of such property for the purpose of financing all or any part of the purchase price thereof; (ii) Mortgages on property of any Person, which Mortgages are existing at the time (A) such person became a Restricted Subsidiary, (B) such person is merged into or consolidated with the Issuer or any Subsidiary or (C) another Subsidiary merges into or consolidates with such person (in a transaction in which such person becomes a Restricted Subsidiary), which Mortgage was not incurred in anticipation of such transaction and was outstanding prior to such transaction; (iii) Mortgages existing on the date of this Indenture; (iv) Mortgages which secure debt owing to the Issuer or a Restricted Subsidiary by a Restricted Subsidiary; -21- (v) Mortgages on any property created, assumed or otherwise brought into existence in contemplation of the sale or other disposition of such property, whether directly or indirectly by way of share disposition or otherwise; provided that after 120 days from the creation of such mortgage such property shall not be owned by the Issuer or any Restricted Subsidiary and any indebtedness secured by such mortgage shall be without recourse to the Issuer or any Restricted Subsidiary; (vi) Mortgages arising by reason of any judgment, decree or order of any court, so long as any appropriate legal proceedings which may have been duly initiated for the review of such judgment, decree or order shall not have been finally terminated or so long as the period within which such proceedings may be initiated shall not have expired; or pledges or deposits to secure payment of workmen's compensation or other insurance, good faith deposits in connection with tenders, contracts (other than contracts for the payment of money) or leases, deposits to secure public or statutory obligations, deposits to secure or in lieu of surety or appeal bonds, or deposits as security for the payment of taxes; (vii) Mortgages in favor of any governmental body to secure progress, advance or other payments pursuant to any contract or provision of any statute; and (viii) extensions, renewals or replacements, in whole or in part, of any Mortgage referred to in the foregoing clauses (i) to (vii), inclusive, provided that the principal amount of indebtedness secured thereby shall not exceed the principal amount of indebtedness so secured at the time of such extension, renewal or replacement, and that such extension, renewal or replacement shall be limited to all or any part of the same property that secured the Mortgage extended, renewed or replaced (plus improvements on such property). (b) Notwithstanding the provisions contained in subdivision (a) of this Section 3.6, the Issuer and its Restricted Subsidiaries, or any of them, may create Mortgages without equally and ratably securing the Securities or create, incur, assume or permit to exist Indebtedness of Restricted Subsidiaries otherwise prohibited, if, after giving effect thereto and to the retirement of any indebtedness or obligations which are concurrently being retired, the aggregate amount of all outstanding indebtedness of the Issuer and its Restricted Subsidiaries secured by Mortgages which could not exist without equally and ratably securing the Securities except for the provisions of this subdivision (b) plus the aggregate amount of Attributable Debt in respect of Sale and Lease-Back Transactions (as defined in Section 3.7) existing at such time which could not have been entered into by the Issuer or a Restricted Subsidiary except for the provisions of clause (a) of Section 3.7 plus the aggregate amount of Indebtedness of Restricted Subsidiaries otherwise prohibited does not at such time exceed 10% of the Consolidated Net Tangible Assets of the Issuer and its Restricted Subsidiaries. In the event that the Issuer shall hereafter secure the Securities pursuant to the provisions of this Section 3.6, the Trustee is hereby authorized to enter into an indenture supplemental hereto and to take such action, if any, as it may deem advisable to enable it to enforce effectively the rights of the holders of the Securities so secured. SECTION 3.7 LIMITATION ON SALE AND LEASE-BACK TRANSACTIONS. The Issuer will not enter into any arrangements with any person, nor will the Issuer permit any Restricted Subsidiary to enter into any arrangements with any person other than the Issuer, providing for the leasing by the Issuer or any Restricted Subsidiary of all or any substantial portion of any Principal Property (except for leases for temporary periods not to exceed three years by the end of which it is intended that the use of the leased property by the lessee will be discontinued), which property has been or is to be sold or transferred by the Issuer or such Restricted Subsidiary to such person with the intention of taking back a lease of such Principal Property (herein referred to as a "Sale and Lease-Back Transaction") -22- unless the net proceeds of the sale or transfer of the property to be leased are at least equal to the fair value (as determined by the Board of Directors) of such Principal Property and either (a) the Issuer or such Restricted Subsidiary would, at the time entering into such arrangement, be entitled, without equally and ratably securing the Securities, to create or assume a mortgage on such property securing indebtedness in an amount at least equal to the Attributable Debt in respect of such Sale and Lease-Back Transaction, pursuant to subdivision (b) of Section 3.6, or (b) the Issuer, within 120 days after the transfer of title to such Principal Property, shall apply an amount equal to the net proceeds derived from such sale or transfer to the retirement, repayment or other discharge of Securities in accordance with the terms thereof or other indebtedness for borrowed money of the Issuer which ranks pari passu with the Securities and which by its terms matures at, or is extendible or renewable at the option of the obligor to, a date more than 12 months after the date of the creation of such indebtedness. A Sale and Lease-Back Transaction shall not be deemed to result in the creation of a mortgage. SECTION 3.8 ADDITIONAL AMOUNTS. If the Securities of a Series provide for the payment of additional amounts, the Issuer will pay to the Holder of any Security of such Series or any Coupon appertaining thereto additional amounts as provided therein. Whenever in this Indenture there is mentioned, in any context, the payment of the principal of or interest on, or in respect of, any Security of any Series or payment of any related Coupon or the net proceeds received on the sale or exchange of any Security of any Series, such mention shall be deemed to include mention of the payment of additional amounts provided for in this Section to the extent that, in such context, additional amounts are, were or would be payable in respect thereof pursuant to the provisions of this Section and express mention of the payment of additional amounts (if applicable) in any provisions hereof shall not be construed as excluding additional amounts in those provisions hereof where such express mention is not made. If the Securities of a Series provide for the payment of additional amounts, at least 10 days prior to the first interest payment dated with respect to that Series of Securities (or if the Securities of that Series will not bear interest prior to maturity, the first day on which a payment of principal is made), and at least 10 days prior to each date of payment of principal or interest if there has been any change with respect to the matters set forth in the below-mentioned Officer's Certificate, the Issuer will furnish the Trustee and the Issuer's principal Paying Agent or Paying Agents, if other than the Trustee, with an Officer's Certificate instructing the Trustee and such Paying Agent or Paying Agents whether such payment of principal of or interest on the Securities of that Series shall be made to Holders of Securities of that Series or any related Coupons who are United States Aliens without withholding for or on account of any tax, assessment or other governmental charge described in the Securities of that Series. If any such withholding shall be required, then such Officers' Certificate shall specify by country the amount, if any, required to be withheld on such payments to such Holders of Securities of Coupons and the Issuer will pay to the Trustee or such Paying Agent the additional amounts required by this Section. The Issuer covenants to indemnify the Trustee and any Paying Agent for, and to hold them harmless against, any loss, liability or expense reasonably incurred without negligence or bad faith on their part arising our of or in connection with actions taken or omitted by any of them in reliance on any Officers' Certificate furnished pursuant to this Section. SECTION 3.9 LIMITATIONS ON RESTRICTED SUBSIDIARY INDEBTEDNESS. -23- The Issuer will not permit any Restricted Subsidiary to incur or assume any indebtedness except: (1) Indebtedness outstanding on the date of this Indenture; (2) Indebtedness that is or could be secured by a Mortgage permitted pursuant to Section 3.6; (3) Indebtedness issued to and held by the Issuer or another Restricted Subsidiary; (4) Indebtedness incurred by a Person prior to the time (A) such Person became a Restricted Subsidiary, (B) such Person is merged into or consolidated with the Company or any Subsidiary or (C) another Subsidiary merges into or consolidates with such Person (in a transaction in which such Person becomes a Restricted Subsidiary), which Indebtedness was not incurred in anticipation of such transaction and was outstanding prior to such transaction; (5) indebtedness incurred in the ordinary course of business and maturing within one year; and (6) extensions, renewals or replacements of any of the foregoing; Provided, however, that the Issuer may permit a Restricted Subsidiary to incur Indebtedness otherwise prohibited by this Section 3.9 if such Indebtedness may be incurred pursuant to subdivision (b) of Section 3.6. SECTION 3.10. CORPORATE EXISTENCE. Subject to Articles Nine and Thirteen hereof, the Issuer shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and the corporate, partnership or other existence of each Restricted Subsidiary in accordance with the respective organizational documents of each Restricted Subsidiary and the rights (charter and statutory), licenses and franchises of the Issuer and its Restricted Subsidiaries, provided that the Issuer shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any Restricted Subsidiary, if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Issuer and its Restricted Subsidiaries taken as a whole and that the loss thereof is not adverse in any material respect to the Holders. SECTION 3.11. WAIVER OF CERTAIN COVENANTS. Except as otherwise specified as contemplated by Section 2.3 for Securities of such series, the Issuer may, with respect to the Securities of any series, omit in any particular instance to comply with any term, provision or condition set forth in any covenant provided pursuant to Section 2.3(12), 8.1(c) or 8.1(e) for the benefit of the Holders of such series or in Section 3.6, 3.7, 3.9 or 3.10 if before the time for such compliance the Holders of at least a majority in aggregate principal amount of the Outstanding Securities of such series shall, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such term, provision or condition, but no such waiver shall extend to or affect such term, provision or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Issuer and the duties of the Trustee in respect of any such term, provision or condition shall remain in full force and effect. ARTICLE FOUR SECURITYHOLDERS' LISTS AND REPORTS BY THE -24- ISSUER AND THE TRUSTEE SECTION 4.1 SECURITYHOLDERS LISTS. If and so long as the Trustee shall not be the Security registrar for the Registered Securities of any series, the Issuer will furnish or cause to be furnished to the Trustee a list in such form as the Trustee may reasonably require of the names and addresses of the holders of the Registered Securities of such series pursuant to Section 312 of the Trust Indenture Act (a) semi-annually not more than 15 days after each record date for the payment of interest on such Registered Securities, as hereinabove specified, as of such record date and on dates to be determined pursuant to Section 2.3 for non-interest bearing securities in each year, and (b) at such other times as the Trustee may request in writing, within thirty days after receipt by the Issuer of any such request as of a date not more than 15 days prior to the time such information is furnished. SECTION 4.2 REPORTS BY THE ISSUER. The Issuer covenants to file with the Trustee, within 15 days after the issuer is required to file the same with the Commission, copies of the annual reports and of the information, documents, and other reports which the Issuer may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934. SECTION 4.3 REPORTS BY THE TRUSTEE. Any Trustee's report required under Section 313(a) of the Trust Indenture Act shall be transmitted on or before July 15 in each year following the date hereof, so long as any Securities are outstanding hereunder, and shall be dated as of a date convenient to the Trustee no more than 60 nor less than 45 days prior thereto. ARTICLE FIVE REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS ON EVENT OF DEFAULT Section 5.1 EVENT OF DEFAULT DEFINED; ACCELERATION OF MATURITY; WAIVER OF DEFAULT. "Event of Default" with respect to Securities of any series wherever used herein means each one of the following events which shall have occurred and be continuing (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (a) default in the payment of any installment of interest upon any of the Securities of such series as and when the same shall become due and payable, and continuance of such default for a period of 30 days; or (b) default in the payment of all or any part of the principal on any of the Securities of such series as and when the same shall become due and payable either at maturity, upon redemption, by declaration or otherwise; or (c) default in the payment of any sinking fund installment as and when the same shall become due and payable by the terms of the Securities of such series; or (d) default in the performance of any covenant or warranty of the Issuer in respect of the Securities of such series (other than a covenant or warranty in respect of the Securities of such series a default in whose performance or whose breach is elsewhere in this Section specifically dealt with), and continuance of such default or breach for a period of 90 days after there has been given, by registered or certified mail, to the Issuer by the Trustee or to the Issuer and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Securities of such series affected thereby, a written notice specifying such default or breach -25- and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (e) a court having jurisdiction in the premises shall enter a decree or order for relief in respect of the Issuer in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee or sequestrator (or similar official) of the Issuer or for any substantial part of its property or ordering the winding up or liquidation of its affairs, and such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (f) the Issuer shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consent to the entry of an order for relief in an involuntary case under any such law, or consent to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee or sequestrator (or similar official) of the Issuer or for any substantial part of its property, or make any general assignment for the benefit of creditors; or (g)(i) default under any Indebtedness of the Issuer or any Subsidiary or under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness of the Issuer or any Subsidiary resulting in the acceleration of such Indebtedness, or (ii) any default in payment of such Indebtedness (after expiration of any applicable grace periods), if the aggregate amount of all such Indebtedness that has been so accelerated and with respect to which there has been a default in payment shall exceed the greater of $20,000,000 or 3% of Consolidated Net Tangible Assets and there shall have been a failure to obtain rescission or annulment of all such accelerations or to discharge all such defaulted Indebtedness within 10 days after written notice of the type specified in the foregoing clause (d); or (h) any other Event of Default provided in the supplemental indenture or resolution of the Board of Directors under which such series of Securities is issued or in the form of Security for such series. If an Event of Default occurs and is continuing, then, and in each and every such case, unless the principal of all of the Securities of such series shall have already become due and payable, either the Trustee or the Holders of not less than 25% in aggregate principal amount of the Securities of such series then Outstanding hereunder (each such series treated as a separate class), by notice in writing to the Issuer (and to the Trustee if given by the Securityholders), may declare the entire principal of all Securities of such series and the interest accrued thereon to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable. The foregoing provisions, however, are subject to the condition that if, at any time after the principal of the Securities of any series shall have been so declared due and payable, and before any judgment or decree for the payment of the moneys due shall have been obtained or entered as hereinafter provided, the Issuer shall pay or shall deposit with the Trustee a sum sufficient to pay all matured installments of interest upon all the Securities of such series and the principal of any and all Securities of such series which shall have become due otherwise than by acceleration (with interest upon such principal and, to the extent that payment of such interest is enforceable under applicable law, on overdue installments of interest, at the same rate as the rate of Securities, as the case may be) to the date of such payment or deposit) and such amount as shall be sufficient to cover reasonable compensation to the Trustee, its agents, attorneys and counsel, and all other expenses and liabilities incurred, and all advances made, by the Trustee except as a result of negligence or bad faith, and if any and all Events of Default under the Indenture, other than the non- payment of the principal of Securities which shall have become due by acceleration, shall have been cured, waived or otherwise remedied as provided herein---then and in every such case the Holders of a majority in -26- aggregate principal amount of all the Securities of such series, each series treated as a separate class, then outstanding, by written notice to the Issuer and to the Trustee, may waive all defaults with respect to such series and rescind and annul such declaration and its consequences, but no such waiver or rescission and annulment shall extend to or shall affect any subsequent default or shall impair any right consequent thereon. SECTION 5.2 COLLECTION OF INDEBTEDNESS BY TRUSTEE; TRUSTEE MAY PROVE DEBT. The Issuer covenants that (a) in case default shall be made in the payment of any installment of interest on any of the Securities of any series when such interest shall have become due and payable, and such default shall have continued for a period of 30 days or (b) in case default shall be made in the payment of all or any part of the principal of any of the Securities of any series when the same shall have become due and payable, whether upon maturity of the Securities of such series or upon any redemption or by declaration or otherwise---then upon demand of the Trustee, the Issuer will pay to the Trustee for the benefit of the Holders of the Securities of such series and the Holders of any Coupons appertaining thereto the whole amount that then shall have become due and payable on all Securities of such series or such Coupons for principal of or interest, as the case may be (with interest to the date of such payment upon the overdue principal and, to the extent that payment of such interest is enforceable under applicable law, on overdue installments of interest at the same rate as the rate of interest specified in the Securities of such series); and in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including reasonable compensation to the Trustee and each predecessor Trustee, their respective agents, attorneys and counsel, and any expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee except as a result of its negligence or bad faith. Until such demand is made by the Trustee, the Issuer may pay the principal of and interest on the Securities of any series to the Registered Holders, whether or not the principal of and interest on the Securities of such series are overdue. In case the Issuer shall fail forthwith to pay such amounts upon such demand, the Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any action or proceedings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceedings to judgment or final decree, and may enforce any such judgment or final decree against the Issuer or other obligor upon such Securities and collect in the manner provided by law out of the property of the Issuer or other obligor upon such Securities, wherever situated, the moneys adjudged or decreed to be payable. In case there shall be pending proceedings relative to the Issuer or any other obligor upon the Securities under Title 11 of the United States Code or any other applicable Federal or state bankruptcy, insolvency or other similar law, or in case a receiver, assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Issuer or its property or such other obligor, or in case of any other comparable judicial proceedings relative to the Issuer or other obligor upon the Securities of any series, or to the creditors or property of the Issuer or such other obligor, the Trustee, irrespective of whether the principal of any Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand pursuant to the provisions of this Section, shall be entitled and empowered, by intervention in such proceedings or otherwise: (a) to file and prove a claim or claims for the whole amount of principal and interest owing and unpaid in respect of the Securities of any series, and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for reasonable compensation to the Trustee and each -27- predecessor Trustee, and their respective agents, attorneys and counsel, and for reimbursement of all expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee, except as a result of negligence or bad faith) and of the Securityholders and the Holders of any Coupons appertaining thereto allowed in any judicial proceedings relative to the Issuer or other obligor upon the Securities of any series, or to the creditors or property of the Issuer or such other obligor, (b) unless prohibited by applicable law and regulations, to vote on behalf of the holders of the Securities of any series in any election of a trustee or a standby trustee in arrangement, reorganization, liquidation or other bankruptcy or insolvency proceedings or person performing similar functions in comparable proceedings, and (c) to collect and receive any moneys or other property payable or deliverable on any such claims, and to distribute all amounts received with respect to the claims of the Securityholders and of the Trustee on their behalf; and any trustee, receiver, or liquidator, custodian or other similar official is hereby authorized by each of the Holders to make payments to the Trustee, and, in the event that the Trustee shall consent to the making of payments directly to the Securityholders, to pay to the Trustee such amounts as shall be sufficient to cover reasonable compensation to the Trustee, each predecessor Trustee and their respective agents, attorneys and counsel, and all other expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee except as a result of negligence or bad faith and all other amounts due to the Trustee or any predecessor Trustee pursuant to Section 6.6. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Securityholder any plan of reorganization, arrangement, adjustment or composition affecting the Securities of any series or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Securityholder in any such proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar person. All rights of action and of asserting claims under this Indenture, or under any of the Securities may be enforced by the Trustee without the possession of any of the Securities or the production thereof at any trial or other proceedings relative thereto, and any such action or proceedings instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the expenses, disbursements and compensation of the Trustee, each predecessor Trustee and their respective agents and attorneys, shall be for the ratable benefit of the Holders of the Securities and Holders of any Coupons in respect of which such action was taken. In any proceedings brought by the Trustee (and also any proceedings involving the interpretation of any provision of this Indenture to which the Trustee shall be a party), the Trustee shall be held to represent all the Holders of the Securities and Coupons appertaining thereto in respect to which such action was taken, and it shall not be necessary to make any Holders of such Securities and Coupons appertaining thereto parties to any such proceedings. SECTION 5.3 APPLICATION OF PROCEEDS. Any moneys collected by the Trustee pursuant to this Article in respect of the Securities of any series shall be applied in the following order at the date or dates fixed by the Trustee and, in case of the distribution of such moneys on account of principal or interest, upon presentation of the several Securities and any Coupons appertaining thereto in respect of which moneys have been collected and stamping (or otherwise noting) thereon the payment, or issuing Securities of such series in reduced principal amounts in exchange for the presented Securities of like series if only partially paid, or upon surrender thereof if fully paid: FIRST: To the payment of costs and expenses applicable to such series in respect of which moneys have been collected, including reasonable compensation to the Trustee and -28- each predecessor Trustee and their respective agents and attorneys and of all expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee except as a result of negligence or bad faith, and all other amounts due to the Trustee or any predecessor Trustee pursuant to Section 6.6; SECOND: In case the principal of the Securities of such series in respect of which moneys have been collected shall not have become and be then due and payable, to the payment of interest on the Securities of such series in default in the order of the maturity of the installments of such interest, with interest (to the extent that such interest has been collected by the Trustee) upon the overdue installments of interest at the same rate as the rate of interest specified in such Securities, such payments to be made ratably to the persons entitled thereto, without discrimination or preference; THIRD: In case the principal of the Securities of such series in respect of which moneys have been collected shall have become and shall be then due and payable, to the payment of the whole amount then owing and unpaid upon all the Securities of such series for principal and interest, with interest upon the overdue principal, and (to the extent that payment of such interest is permissible by law and that such interest has been collected by the Trustee) upon overdue installments of interest at the same rate as the rate of interest specified in the Securities of such series; and in case such moneys shall be insufficient to pay in full the whole amount so due and unpaid upon the Securities of such series, then to the payment of such principal and interest without preference or priority of principal over interest or of interest over principal, or of any installment of interest over any other installment of interest, or of any Security of such series over any other Security of such series, ratably to the aggregate of such principal and accrued and unpaid interest; and FOURTH: To the payment of the remainder, if any, to the Issuer or any other person lawfully entitled thereto. SECTION 5.4 SUITS FOR ENFORCEMENT. In case an Event of Default has occurred, has not been waived and is continuing, the Trustee may in its discretion proceed to protect and enforce the rights vested in it by this Indenture by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any of such rights, either at law or in equity or in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture or to enforce any other legal or equitable right vested in the Trustee by this Indenture or by law. SECTION 5.5 RESTORATION OF RIGHTS ON ABANDONMENT OF PROCEEDINGS. In case the Trustee shall have proceeded to enforce any right under this Indenture and such proceedings shall have been discontinued or abandoned for any reason, or shall have been determined adversely to the Trustee, then and in every such case the Issuer and the Trustee shall be restored respectively to their former positions and rights hereunder, and all rights, remedies and powers of the Issuer, the Trustee and the Securityholders shall continue as though no such proceedings had been taken. SECTION 5.6 LIMITATIONS ON SUITS BY SECURITYHOLDERS. No Holder of any Security of any series or Holder of any Coupon shall have any right by virtue or by availing of any provision of this Indenture to institute any action or proceeding at law or in equity or in bankruptcy or otherwise upon or under or with respect to this Indenture, or for the appointment of a trustee, receiver, liquidator, custodian or other similar official or for any other remedy hereunder, unless such Holder previously shall have given to the Trustee written notice of default and of the continuance thereof, as hereinbefore provided, and unless also the Holders of not less than 25% in aggregate principal amount of the Securities of such series then Outstanding shall have made written request upon the Trustee to institute such action or proceedings in its own name as trustee hereunder and shall have offered to the Trustee such reasonable indemnity, as it may require against the costs, expenses and -29- liabilities to be incurred therein or thereby and the Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such action or proceeding and no direction inconsistent with such written request shall have been given to the Trustee pursuant to Section 5.9; it being understood and intended, and being expressly covenanted by the taker and Holder of every Security or Holder of any Coupon appertaining thereto and the Trustee, that no one or more Holders of Securities of any series or one or more Holders of any Coupons appertaining thereto shall have any right in any manner whatever, by virtue or by availing of any provision of this Indenture to affect, disturb or prejudice the rights of any other such Holder of Securities or any other Holders of such Coupons, or to obtain or seek to obtain priority over or preference to any other such Holder or to enforce any right under this Indenture, except in the manner herein provided and for the equal, ratable and common benefit of all Holders of Securities of the applicable series and all the Holders of any Coupons appertaining thereto. For the protection and enforcement of the provisions of this Section, each and every Securityholder and the Trustee shall be entitled to such relief as can be given either at law or in equity. SECTION 5.7 UNCONDITIONAL RIGHT OF SECURITYHOLDERS TO INSTITUTE CERTAIN SUITS. Notwithstanding any other provision in this Indenture and any provision of any Security or Coupon, the right of any Holder of any Security and the right of the Holder of any Coupon appertaining thereto to receive payment of the principal of and interest on such Security on or after the respective due dates expressed in such Security, or to institute suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 5.8 POWERS AND REMEDIES CUMULATIVE; DELAY OR OMISSION NOT WAIVER OF DEFAULT. Except as provided in Section 5.6, no right or remedy herein conferred upon or reserved to the Trustee or to the Securityholders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. No delay or omission of the Trustee or of any Securityholder to exercise any right or power accruing upon any Event of Default occurring and continuing as aforesaid shall impair any such right or power or shall be construed to be a waiver of any such Event of Default or an acquiescence therein; and, subject to Section 5.6, every power and remedy given by this Indenture or by law to the Trustee, to the Securityholders or to the Holder of any Coupon appertaining thereto may be exercised from time to time, and as often as shall be deemed expedient, by the Trustee, the Securityholders or Holders of any Coupon. SECTION 5.9 CONTROL BY SECURITYHOLDERS. The Holders of a majority in aggregate principal amount of the Securities of each series affected (with each series treated as a separate class) or of the Holders of any Coupons appertaining thereto at the time Outstanding shall have the right to direct the time, method, and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee with respect to the Securities of such series by this Indenture; provided that such direction shall not be otherwise than in accordance with law and the provisions of this Indenture and provided further that (subject to the provisions of Section 6.1) the Trustee shall have the right to decline to follow any such direction if the Trustee, being advised by counsel, shall determine that the action or proceeding so directed may not lawfully be taken or if the Trustee in good faith by its board of directors, the executive committee, or a trust committee of directors or Responsible Officers of the Trustee shall determine that the action or proceedings so directed would involve the Trustee in personal liability or if the Trustee in good faith shall so determine that the actions or forbearances specified in or pursuant to such direction would be unduly prejudicial to the interests of Holders of the Securities of all series or of the Holders of any Coupons appertaining thereto so affected not joining in the giving of said direction, it being understood that -30- (subject to Section 6.1) the Trustee shall have no duty to ascertain whether or not such actions or forbearances are unduly prejudicial to such Holders. Nothing in this Indenture shall impair the right of the Trustee in its discretion to take any action deemed proper by the Trustee and which is not inconsistent with such direction or directions by Securityholders. SECTION 5.10 WAIVER OF PAST DEFAULTS. Prior to the declaration of the acceleration of the maturity of the Securities of any series as provided in Section 5.1, the Holders of a majority in aggregate principal amount of the Securities of such series at the time Outstanding (each such series voting as a separate class) may on behalf of the Holders of all the Securities of such series waive any past default or Event of Default described in Section 5.1 which relates to Securities of such series then Outstanding, except a default in the payment of principal or of interest on the Securities of such series or in respect of a covenant or provision hereof which cannot be modified or amended with the consent of each Holder affected as provided in Section 8.2. In the case of any such waiver, the Issuer, the Trustee and the Holders of the Securities of each series affected shall be restored to their former positions and rights hereunder, respectively. Upon any such waiver, such default shall cease to exist and be deemed to have been cured and not to have occurred, and any Event of Default arising therefrom shall be deemed to have been cured and not to have occurred for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. SECTION 5.11 TRUSTEE TO GIVE NOTICE OF DEFAULT, BUT MAY WITHHOLD IN CERTAIN CIRCUMSTANCES. The Trustee shall transmit to the Securityholders of any series, as the names and addresses of such Holders appear on the registry books, notice by mail of all defaults which have occurred with respect to such series, such notice to be transmitted within 90 days after the occurrence thereof, unless such defaults shall have been cured before the giving of such notice (the term "default" or "defaults" for the purposes of this Section being hereby defined to mean any event or condition which is, or with notice or lapse of time or both would become, an Event of Default); provided that, except in the case of default in the payment of the principal of or interest on any of the Securities of such series, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee, or a trust committee of directors or trustees or Responsible Officers of the Trustee in good faith determines that the withholding of such notice is in the interests of the Securityholders of such, series. SECTION 5.12 RIGHT OF COURT TO REQUIRE FILING OF UNDERTAKING TO PAY COSTS. All parties to this Indenture agree, and each Holder of any Security and each Holder of any Coupon, by his acceptance thereof, shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Trustee, to any suit instituted by any Securityholder or group of Securityholders of any series holding in the aggregate more than 10% in aggregate principal amount of the Securities of such series, or, in the case of any suit relating to or arising under clause (d) of Section 5.1 (if the suit relates to Securities of more than one but less than all series), 10% in aggregate principal amount of Securities Outstanding affected thereby, or in the case of any suit relating to or arising under clause (d) (if the suit under clause (d) relates to all the Securities then Outstanding), (e), (f) or (g) of Section 5.1, 10% in aggregate principal amount of all Securities Outstanding, or to any suit instituted by any Securityholder for the enforcement of the payment of the principal of or interest on any Security on or after the due date expressed in such Security. -31- ARTICLE SIX CONCERNING THE TRUSTEE SECTION 6.1 DUTIES AND RESPONSIBILITIES OF THE TRUSTEE; DURING DEFAULT; PRIOR TO DEFAULT. With respect to the Holders of any series of Securities issued hereunder, the Trustee, prior to the occurrence of an Event of Default with respect to the Securities of a particular series and after the curing or waiving of all Events of Default which may have occurred with respect to such series, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture. In case an Event of Default with respect to the Securities of a series has occurred (which has not been cured or waived), the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that (a) prior to the occurrence of an Event of Default with respect to the Securities of any series and after the curing or waiving of all such Events of Default with respect to such series which may have occurred: (i) the duties and obligations of the Trustee with respect to the Securities of any Series shall be determined solely by the express provisions of this Indenture, and the Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on the part of the Trustee, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any statements, certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such statements, certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture; (b) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Responsible Officers of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; and (c) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders pursuant to Section 5.9 relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture. None of the provisions contained in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if there shall be reasonable ground for believing that the repayment of such funds or adequate indemnity against such liability is not reasonably assured to it. The provisions of this Section 6.1 are in furtherance of and subject to Sections 315 and 316 of the Trust Indenture Act. -32- SECTION 6.2 CERTAIN RIGHTS OF THE TRUSTEE. In furtherance of and subject to the Trust Indenture Act, and subject to Section 6.1: (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, Officers' Certificate or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture, note, coupon, security or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request, direction, order or demand of the Issuer mentioned herein shall be sufficiently evidenced by an Officers' Certificate (unless other evidence in respect thereof be herein specifically prescribed); and any resolution of the Board of Directors may be evidenced to the Trustee by a copy thereof certified by the secretary or an assistant secretary of the Issuer; (c) the Trustee may consult with counsel and any advice or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and in accordance with such advice or Opinion of Counsel; (d) the Trustee shall be under no obligation to exercise any of the trusts or powers vested in it by this Indenture at the request, order or direction of any of the Securityholders pursuant to the provisions of this Indenture, unless such Securityholders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred therein or thereby; (e) the Trustee shall not be liable for any action taken or omitted by it in good faith and believed by it to be authorized or within the discretion, rights or powers conferred upon it by this Indenture; (f) prior to the occurrence of an Event of Default hereunder and after the curing or waiving of all Events of Default, the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, appraisal, bond, debenture, note, coupon, security, or other paper or document unless requested in writing to do so by the Holders of not less than a majority in aggregate principal amount of the Securities of all series affected then Outstanding; provided that, if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the security afforded to it by the terms of this Indenture, the Trustee may require reasonable indemnity against such expenses or liabilities as a condition to proceeding; the reasonable expenses of every such investigation shall be paid by the Issuer or, if paid by the Trustee or any predecessor Trustee, shall be repaid by the Issuer upon demand; and (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys not regularly in its employ and the Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed with due care by it hereunder. SECTION 6.3 TRUSTEE NOT RESPONSIBLE FOR RECITALS, DISPOSITION OF SECURITIES OR APPLICATION OF PROCEEDS THEREOF. The recitals contained herein and in the Securities, except the Trustee's certificate of authentication, shall be taken as the statements of the Issuer, and the Trustee assumes no responsibility for the correctness of the same. The Trustee makes no representation as to the -33- validity or sufficiency of this Indenture or of the Securities. The Trustee shall not be accountable for the use or application by the Issuer of any of the Securities or of the proceeds thereof. SECTION 6.4 TRUSTEE AND AGENTS MAY HOLD SECURITIES; COLLECTIONS, ETC. The Trustee, any Paying Agent, Security Registrar, or any agent of the Issuer or the Trustee, in its individual or any other capacity, may become the owner or pledgee of Securities or Coupons with the same rights it would have if it were not the Trustee or such agent and, if operative, may otherwise deal with the Issuer and receive, collect, hold and retain collections from the Issuer with the same rights it would have if it were not the Trustee or such agent. SECTION 6.5 MONEYS HELD BY TRUSTEE. Subject to the provisions of Section 10.4 hereof, all moneys received by the Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required by mandatory provisions of law. Neither the Trustee nor any agent of the Issuer or the Trustee shall be under any liability for interest on any moneys received by it hereunder. SECTION 6.6 COMPENSATION AND INDEMNIFICATION OF TRUSTEE AND ITS PRIOR CLAIM. The Issuer covenants and agrees to pay to the Trustee from time to time, and the Trustee shall be entitled to,' reasonable compensation (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust) and the Issuer covenants and agrees to pay or reimburse the Trustee and each predecessor Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by or on behalf of it in accordance with any of the provisions of this Indenture (including the reasonable compensation and the expenses and disbursements of its counsel and of all agents and other persons not regularly in its employ) except any such expense, disbursement or advance as may arise from its negligence or bad faith. The Issuer also covenants to indemnify the Trustee and each predecessor Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this Indenture or the trusts hereunder and its duties hereunder, including the costs and expenses of defending itself against or investigating any claim of liability in the premises. The obligations of the Issuer under this Section to compensate and indemnify the Trustee and each predecessor Trustee and to pay or reimburse the Trustee and each predecessor Trustee for expenses, disbursements and advances shall constitute additional indebtedness hereunder and shall survive the satisfaction and discharge of this Indenture. Such additional indebtedness shall be a senior claim to that of the Securities upon all property and funds held or collected by the Trustee as such, except funds held in trust for the benefit of the Holders of particular Securities or the Holders of particular Coupons, and the Securities are hereby subordinated to such senior claim. When the Trustee incurs expenses, after the occurrence of an Event of Default specified in Section 5.1(e) or (f), the expenses are intended to constitute expenses of administration under applicable bankruptcy laws. SECTION 6.7 RIGHT OF TRUSTEE TO RELY ON OFFICERS' CERTIFICATE, ETC. Subject to Sections 6.1 and 6.2, whenever in the administration of the trusts of this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering or omitting any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of negligence or bad faith on the part of the Trustee, be deemed to be conclusively proved and established by an Officers' Certificate delivered to the Trustee, and such certificate, in the absence of negligence or bad faith on the part of the Trustee, shall be full warrant to the Trustee for any action taken, suffered or omitted by it or under the provisions of this Indenture upon the faith thereof. SECTION 6.8 DISQUALIFICATION; CONFLICTING INTERESTS. If the Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall either eliminate -34- such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture. SECTION 6.9 PERSONS ELIGIBLE FOR APPOINTMENT AS TRUSTEE. The Trustee for each series of Securities hereunder shall at all times be a corporation organized and doing business under the laws of the United States of America or of any State or the District of Columbia having a combined capital and surplus of at least $50,000,000, and which is eligible in accordance with the provisions of Section 310(a) of the Trust Indenture Act. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of a federal, state or District of Columbia supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, the Trustee shall resign immediately in the manner and with the effect specified in Section 6.10. SECTION 6.10 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR TRUSTEE. (a) The Trustee, or any trustee or trustees hereafter appointed, may at any time resign with respect to one or more or all series of Securities by giving written notice of resignation to the Issuer and by mailing notice thereof by first class mail to Holders of the applicable series of Securities at their last addresses as then shall appear on the Security register. Upon receiving such notice of resignation, the Issuer shall promptly appoint a successor trustee or trustees with respect to the applicable series by written instrument in duplicate, executed by authority of the Board of Directors of the Issuer, one copy of which instrument shall be delivered to the resigning Trustee and one copy to the successor trustee or trustees. If no successor trustee shall have been so appointed with respect to any series and have accepted appointment within 30 days after the mailing of such notice of resignation, the resigning trustee may petition any court of competent jurisdiction for the appointment of a successor trustee, or any Securityholder who has been a bona fide Holder of a Security or Securities of the applicable series for at least six months may, subject to the provisions of Section 5.12, on behalf of himself and all others similarly situated, petition any such court for the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, appoint a successor trustee. (b) In case at any time any of the following shall occur: (i) the Trustee shall fail to comply with the provisions of Section 310 (b) of the Trust Indenture Act with respect to any series of Securities after written request therefor by the Issuer or by any Securityholder who has been a bona fide Holder of a Security or Securities of such series for at least six months; or (ii) the Trustee shall cease to be eligible in accordance with the provisions of Section 310 (a) of the Trust Indenture Act and shall fail to resign after written request therefor by the Issuer or by any Securityholder; or (iii) the Trustee shall become incapable of acting with respect to any series of the Securities, or shall be adjudged a bankrupt or insolvent, or a receiver or liquidator of the Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; then in any such case, the Issuer may remove the Trustee with respect to the applicable series of Securities and appoint a successor trustee for such series by written instrument, in duplicate, executed by order of the Board of Directors of the Issuer, one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor trustee, or, subject to the provisions of Section 315(e) of the Trust Indenture Act of 1939, any Securityholder who has been a -35- bona fide Holder of a Security or Securities of such series for at least six months may on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor trustee with respect to such series. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Trustee and appoint a successor trustee. (c) The Holders of a majority in aggregate principal amount of the Securities of each series at the time Outstanding may at any time remove the Trustee with respect to Securities of such series and appoint a successor trustee with respect to the Securities of such series by delivering to the Trustee so removed, to the successor trustee so appointed and to the Issuer the evidence provided for in Section 7.1 of the action in that regard taken by the Securityholders. (d) Any resignation or removal of the Trustee with respect to any series and any appointment of a successor trustee with respect to such series pursuant to any of the provisions of this Section 6.10 shall become effective upon acceptance of appointment by the successor trustee as provided in Section 6.11. SECTION 6.11 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR TRUSTEE. Any successor trustee appointed as provided in Section 6.10 shall execute and deliver to the Issuer and to its predecessor Trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor Trustee with respect to all or any applicable series shall become effective and such successor trustee, without any further act, deed or conveyance, shall become vested with all rights, powers, duties and obligations with respect to such series of its predecessor hereunder, with like effect as if originally named as trustee for such series hereunder; but, nevertheless, on the written request of the Issuer or of the successor trustee, upon payment of its charges then unpaid, the trustee ceasing to act shall, subject to Section 10.4, pay over to the successor trustee all moneys at the time held by it hereunder and shall execute and deliver an instrument transferring to such successor trustee all such rights, powers, duties and obligations. Upon request of any such successor trustee, the Issuer shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor trustee all such rights and powers. Any trustee ceasing to act shall, nevertheless, retain a prior claim upon all property or funds held or collected by such trustee to secure any amounts then due it pursuant to the provisions of Section 6.6. If a successor trustee is appointed with respect to the Securities of one or more (but not all) series, the Issuer the predecessor Trustee and each successor trustee with respect to the Securities of any applicable series shall execute and deliver an indenture supplemental hereto which shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the predecessor Trustee with respect to the Securities of any series as to which the predecessor Trustee is not retiring shall continue to be vested in the predecessor Trustee, and shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such trustees co-trustees of the same trust and that each such trustee shall be trustee of a trust or trusts under separate indentures. Upon acceptance of appointment by any successor trustee as provided in this Section 6.11, the Issuer shall mail notice thereof by first-class mail to the Holders of Securities of any series for which such successor trustee is acting as trustee at their last addresses as they shall appear in the Security register. If the acceptance of appointment is substantially contemporaneous with the resignation, then the notice called for by the preceding sentence may be combined with the notice called for by Section 6.10. If the Issuer fails to mail such notice within ten days after acceptance of appointment by the successor trustee, the successor trustee shall cause such notice to be mailed at the expense of the Issuer. -36- SECTION 6.12 MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS OF TRUSTEE. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided that such corporation shall be eligible under the provisions of Section 6.9, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. In case at the time such successor to the Trustee shall succeed to the trusts created by this Indenture any of the Securities of any series shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor Trustee and deliver such Securities so authenticated; and, in case at that time any of the Securities of any series shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor Trustee hereunder or in the name of the successor Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Securities of such series or in this Indenture provided that the certificate of the Trustee shall have; provided, that the right to adopt the certificate of authentication of any predecessor Trustee or to authenticate Securities of any series in the name of any predecessor Trustee shall apply only to its successor or successors by merger, conversion or consolidation. ARTICLE SEVEN CONCERNING THE SECURITYHOLDERS SECTION 7.1 EVIDENCE OF ACTION TAKEN BY SECURITYHOLDERS. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by a specified percentage in principal amount of the Securityholders of any or all series may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such specified percentage of Securityholders in person or by agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee. Proof of execution of any instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Sections 6.1 and 6.2) conclusive in favor of the Trustee, the Issuer, if made in the manner provided in this Article. (b) The ownership of Registered Securities shall be proved by the Security register. (c) The amount of Unregistered Securities held by any Person executing any instrument or writing as a Securityholder, the numbers of such Unregistered Securities, and the date of his holding the same may be proved by the production of such Securities or by a certificate executed by any trust company, bank, broker or member of a national securities exchange (wherever situated), as depositary, if such certificate is in form satisfactory to the Trustee, showing that at the date therein mentioned such Person had on deposit with such depositary, or exhibited to it, the Unregistered Securities therein described; or such facts may be proved by the certificate or affidavit of the Person executing such instrument or writing as a Securityholder, if such certificate or affidavit is in form satisfactory to the Trustee. The Trustee and the Issuer may assume that such ownership of any Unregistered Security continues until (i) another certificate or affidavit bearing a later date issued in respect of the same Unregistered Security is produced, or (ii) such Unregistered Security is produced by some other person, or (iii) such Unregistered Security is surrendered in exchange for a Registered Security, or (iv) such Unregistered Security has been canceled in accordance with Section 2.10. SECTION 7.2 PROOF OF EXECUTION OF INSTRUMENTS AND OF HOLDING OF SECURITIES. Subject to Sections 6.1 and 6.2, the execution of any instrument by a Securityholder or his agent or proxy may be proved in accordance with such reasonable rules and regulations as may be prescribed by the -37- Trustee or in such manner as shall be satisfactory to the Trustee. The holding of Securities shall be proved by the Security register or by a certificate of the registrar thereof. The Issuer may set a record date for purposes of determining the identity of holders of Securities of any series entitled to vote or consent to any action referred to in Section 7.1, which record date may be set at any time or from time to time by notice to the Trustee, for any date or dates ( in the case of any adjournment or reconsideration) not more than 60 days nor less than five days prior to the proposed date of such vote or consent, and thereafter, notwithstanding any other provisions hereof, only holders of Securities of such series of record on such record date shall be entitled to so vote or give such consent or revoke such vote or consent. SECTION 7.3 HOLDERS TO BE TREATED AS OWNERS. The Issuer, the Trustee and any Agent of the Issuer or the Trustee may deem and treat the person in whose name any Security shall be registered upon the Security register for such series as the absolute owner of such Security (whether or not such Security shall be overdue and notwithstanding any notation of ownership or other writing thereon) for the purpose of receiving payment of or on account of the principal of and interest on such Security and for all other purposes; and neither the Issuer nor the Trustee nor any Agent of the Issuer or the Trustee shall be affected by any notice to the contrary. All such payments so made to any such person, or upon his order, shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Security. SECTION 7.4 SECURITIES OWNED BY ISSUER DEEMED NOT OUTSTANDING. In determining whether the Holders of the requisite aggregate principal amount of Outstanding Securities of any or all series have concurred in any direction, consent or waiver under this Indenture, or are to be selected for any redemption or optional repayment, Securities which are owned by the Issuer or any other obligor on the Securities with respect to which such determination is being made or by any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Issuer or any other obligor on the Securities with respect to which such determination is being made shall be disregarded and deemed not to be Outstanding for the purpose of any such determination, except that for the purpose of determining whether the Trustee shall be protected in relying on any such direction, consent or waiver only Securities which the Trustee knows are so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Issuer or any other obligor upon the Securities or any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Issuer or any other obligor on the Securities. In case of a dispute as to such right, the advice of counsel shall be full protection in respect of any decision made by the Trustee in accordance with such advice. Upon request of the Trustee, the Issuer shall furnish to the Trustee promptly an Officers' Certificate listing and identifying all Securities, if any, known by the Issuer to be owned or held by or for the account of any of the above-described persons; and, subject to Sections 6.1 and 6.2, the Trustee shall be entitled to accept such Officers' Certificate as conclusive evidence of the facts therein set forth and of the fact that all Securities not listed therein are Outstanding for the purpose of any such determination. SECTION 7.5 RIGHT OF REVOCATION OF ACTION TAKEN. At any time prior to (but not after) the evidencing to the Trustee, as provided in Section 7.1, of the taking of any action by the Holders of the percentage in aggregate principal amount of the Securities of any or all series, as the case may be, specified in this Indenture in connection with such action, any Holder of a Security the serial number of which is shown by the evidence to be included among the serial numbers of the Securities the Holders of which have consented to such action may, by filing written notice at the Corporate Trust Office and upon proof of holding as provided in this Article, revoke such action so far as concerns such Security. Except as aforesaid any such action taken by the Holder of any Security shall be conclusive and binding upon such Holder and upon all future Holders and owners of such Security and of any Securities issued in exchange or substitution therefor, irrespective of whether or not any notation in regard thereto is made upon any such Security. Any action taken by the Holders of the -38- percentage in aggregate principal amount of the Securities of any or all series, as the case may be, specified in this Indenture in connection with such action shall be conclusively binding upon the Issuer, the Trustee and the Holders of all the Securities affected by such action. ARTICLE EIGHT SUPPLEMENTAL INDENTURES SECTION 8.1 SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF SECURITYHOLDERS. The Issuer, when authorized by a resolution of its Board of Directors, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto for one or more of the following purposes: (a) to convey, transfer, assign, mortgage or pledge to the Trustee as security for the Securities of one or more series any property or assets; (b) to evidence the succession of another corporation to the Issuer, or successive successions, and the assumption by the successor corporation of the covenants, agreements and obligations of the Issuer pursuant to Article Nine; (c) to add to the covenants of the Issuer such further covenants, restrictions, conditions or provisions as their respective Boards of Directors and the Trustee shall consider to be for the protection of the Holders of Securities, and to make the occurrence, or the occurrence and continuance, of a default in any such additional covenants, restrictions, conditions or provisions an Event of Default permitting the enforcement of all or any of the several remedies provided in this Indenture as herein set forth; provided, that in respect of any such additional covenant, restriction, condition or provision such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such an Event of Default or may limit the remedies available to the Trustee upon such an Event of Default or may limit the right of the Holders of a majority in aggregate principal amount of the Securities of such series to waive such an Event of Default; (d) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture; or to make such other provisions in regard to matters or questions arising under this Indenture or under any supplemental indenture as the Board of Directors of the Issuer may deem necessary or desirable and which shall not in any material way adversely affect the interests of the Holders of the Securities or the Holders of any Coupons; (e) to establish the form or terms of Securities of any series as permitted by Sections 2.1 and 2.3; or (f) to evidence and provide for the acceptance of appointment hereunder by a successor trustee with respect to the Securities of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than the one trustee, pursuant to the requirements of Section 6.11. The Trustee is hereby authorized to join with the Issuer in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations which may be therein contained and to accept the conveyance, transfer, assignment, mortgage or pledge of any property thereunder, but the Trustee shall not be obligated to enter into any such supplemental -39- indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. Any supplemental indenture authorized by the provisions of this Section may be executed without the consent of the Holders of any of the Securities at the time Outstanding, notwithstanding any of the provisions of Section 8.2. SECTION 8.2 SUPPLEMENTAL INDENTURES WITH CONSENT OF SECURITYHOLDERS. With the consent (evidenced as provided in Article Seven) of the Holders of not less than a majority in aggregate principal amount of the Securities at the time Outstanding of all series affected by such supplemental indenture (treated as one class), the Issuer, when authorized by a resolution of its Boards of Directors, and the Trustee may, from time to time and at any time, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the rights of the Holders of the Securities of each such series; provided, that no such supplemental indenture shall (a) extend the final maturity of any Security, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon, or reduce any amount payable on redemption thereof, or impair or affect the right of any Securityholder to institute suit for the payment thereof or, if the Securities provide therefor, any right of repayment at the option of the Securityholder without the consent of the Holder of each Security so affected, or (b) reduce the aforesaid percentage of Securities of any series, the consent of the Holders of which is required for any such supplemental indenture, without the consent of the Holders of all Outstanding Securities of the series affected. Upon the request of the Issuer, accompanied by a copy of a resolution of the Board of Directors of the Issuer authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of Securityholders as aforesaid and other documents, if any, required by Section 7.1, the Trustee shall join with the Issuer in the execution of such supplemental indenture unless such supplemental indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture. It shall not be necessary for the consent of the Securityholders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof. Promptly after the execution by the Issuer and the Trustee of any supplemental indenture pursuant to the provisions of this Section, the Issuer shall mail a notice thereof by first class mail to the Holders of Securities of each series affected thereby at their addresses as they shall appear on the registry books of the Issuer, setting forth in general terms the substance of such supplemental indenture. Any failure of the Issuer to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. SECTION 8.3 EFFECT OF SUPPLEMENTAL INDENTURE. Upon the execution of any supplemental indenture pursuant to the provisions hereof, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Trustee, the Issuer and the Holders of Securities of each series and Holders of Coupons affected thereby shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes. SECTION 8.4 DOCUMENTS TO BE GIVEN TO TRUSTEE. The Trustee, subject to the provisions of Sections 6.1 and 6.2, may receive an Officers' Certificate from the Issuer and an Opinion of Counsel -40- as conclusive evidence that any supplemental indenture executed pursuant to this Article Eight complies with the applicable provisions of this Indenture. SECTION 8.5 NOTATION ON SECURITIES IN RESPECT OF SUPPLEMENTAL INDENTURES. Securities of any series authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article may bear, upon the direction of the Issuer, a notation in form satisfactory to the Trustee for such series as to any matter provided for by such supplemental indenture or as to any action taken at any such meeting. If the Issuer or the Trustee shall so determine, new Securities of any series so modified as to conform, in the opinion of the Trustee and the Boards of Directors of the Issuer, to any modification of this Indenture contained in any such supplemental indenture may be prepared by the Issuer, authenticated by the Trustee and delivered in exchange for the Securities of such series then outstanding. ARTICLE NINE CONSOLIDATION, MERGER, SALE OR CONVEYANCE SECTION 9.1 ISSUER MAY CONSOLIDATE, ETC., ON CERTAIN TERMS. The Issuer covenants that it will not merge or consolidate with any other Person or sell or convey all or substantially all of its assets to any Person, unless (i) either the Issuer shall be the continuing corporation, or the successor Person or the Person which acquires by sale or conveyance substantially all the assets of the Issuer (if other than the Issuer) shall be a Person organized under the laws of the United States of America or any State thereof and shall expressly assume the due and punctual payment of the principal of and interest on all the Securities, according to their tenor, and the due and punctual performance and observance of all of the covenants and conditions of this Indenture to be performed or observed by the Issuer, by supplemental indenture satisfactory to the Trustee, executed and delivered to the Trustee by such Person, and (ii) the Issuer or such successor corporation, as the case may be, shall not, immediately after such merger or consolidation, or such sale or conveyance, be in default in the performance of any such covenant or condition. SECTION 9.2 SUCCESSOR SUBSTITUTED. In case of any such consolidation, merger, sale or conveyance, and following such an assumption by the successor, such successor ^ shall succeed to and be substituted for the Issuer, with the same effect as if it had been named herein. Such successor may cause to be signed, and may issue either in its own name or in the name of the Issuer prior to such succession any or all of the Securities issuable hereunder which theretofore shall not have been signed by the Issuer and delivered to the Trustee; and, upon the order of such successor instead of the Issuer and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall deliver any Securities of the Issuer which previously shall have been signed and delivered by the officers of the Issuer to the Trustee for authentication, and any Securities which such successor thereafter shall cause to be signed and delivered to the Trustee for that purpose. All of the Securities so issued shall in all respects have the same legal rank and benefit under this Indenture as the Securities theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Securities had been issued at the date of the execution hereof. In case of any such consolidation, merger, sale, lease or conveyance such changes in phraseology and form (but not in substance) may be made in the Securities thereafter to be issued as may be appropriate. In the event of any such sale or conveyance (other than a conveyance by way of lease) the Issuer or any successor which shall theretofore have become such in the manner described in this Article shall be discharged from all obligations and covenants under this Indenture and the Securities and may be liquidated and dissolved. -41- SECTION 9.3 OPINION OF COUNSEL TO TRUSTEE. The Trustee, subject to the provisions of Sections 6.1 and 6.2, may receive an Opinion of Counsel, prepared in accordance with Section 11.5, as conclusive evidence that any such consolidation, merger, sale, lease or conveyance, and any such assumption, and any such liquidation or dissolution, complies with the applicable provisions of this Indenture. ARTICLE TEN DEFEASANCE AND COVENANT DEFEASANCE; UNCLAIMED MONEYS SECTION 10.1 ISSUER'S OPTION TO EFFECT DEFEASANCE OR COVENANT DEFEASANCE. The Issuer may elect, at its option at any time, to have Section 10.2 or Section 10.3 applied to any Securities or any series of Securities, as the case may be, designated pursuant to Section 2.3 as being defeasible pursuant to such Section 10.2 or 10.3, in accordance with any applicable requirements provided pursuant to Section 2.3 and upon compliance with the conditions set forth below in this Article. Any such election shall be established by or made pursuant to a resolution of the Board of Directors. SECTION 10.2. DEFEASANCE AND DISCHARGE. Upon the Issuer's exercise of its option (if any) to have this Section applied to any Securities or any series of Securities, as the case may be, the Issuer shall be deemed to have been discharged from its obligations with respect to such Securities as provided in this Section on and after the date the conditions set forth in Section 10.4 are satisfied (hereinafter called "Defeasance"). For this purpose, such Defeasance means that the Issuer shall be deemed to have paid and discharged the entire indebtedness represented by such Securities and to have satisfied all its other obligations under such Securities and this Indenture insofar as such Securities are concerned (and the Trustee, at the expense of the Issuer, shall execute proper instruments acknowledging the same), subject to the following, which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of such Securities to receive, solely from the trust fund described in Section 10.4 and as more fully set forth in such Section, payments in respect of the principal of and any premium and interest on such Securities when payments are due, (b) the Issuer's obligations with respect to such Securities under Sections 2.8, 2.9, 2.11, 3.2 and 3.4, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder; and (d) this Article; and (e) any payment obligations in respect of Securities of such series and any related coupons which are deemed not to be Outstanding under clause (c) of the definition thereof if such obligations continue to be valid obligations of the Company under applicable law. Subject to compliance with this Article, the Issuer may exercise its option (if any) to have this Section applied to any Securities notwithstanding the prior exercise of its option (if any) to have Section 10.3 applied to such Securities. SECTION 10.3. COVENANT DEFEASANCE. Upon the Issuer's exercise of its option (if any) to have this Section applied to any Securities or any series of Securities, as the case may be, (a) the Issuer shall be released from its obligations under Section 3.6, 3.7, 3.9 and 3.10, and any covenants provided pursuant to Section 2.3(12), 8.1(c) or 8.1(e), for the benefit of the Holders of such Securities and (b) the occurrence of any event specified in Section 5.1(d) (with respect to any of Sections 3.6, 3.7, 3.9 and 3.10 inclusive, and any such covenants provided pursuant to Section 2.3(12), 8.1(c) or 8.1(e) and 5.1(h) shall be deemed not to be or result in an Event of Default, in each case with respect to such Securities as provided in this Section on and after the date the conditions set forth in Section 10.4 are satisfied (hereinafter called "Covenant Defeasance"). For this purpose, such Covenant Defeasance means that, with respect to such Securities, the Issuer may omit to comply with and shall have no liability in respect of any term, condition or limitation set froth in any such specified Section (to the extent so specified in the case of Section 5.1(d)), whether directly or indirectly by reason of any reference elsewhere herein to any such Section or by reason of any reference in any such Section to any other provision herein or in any other document, but the remainder of this Indenture and such Securities shall be unaffected thereby. -42- SECTION 10.4. CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE. The following shall be the conditions to the application of Section 10.2 or Section 10.3 to any Securities or any series of Securities, as the case may be: (a) The Company shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee which satisfies the requirements contemplated by Section 6.9 and agrees to comply with the provisions of this Article applicable to it) as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefits of the Holders of such Securities, (A) money in an amount, or (B) U.S. Government Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment, money in an amount, or (C) a combination thereof, in each case sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, and which shall be applied by the Trustee (or any such other qualifying trustee) to pay and discharge, the principal of and any premium and interest on such Securities on the respective Stated Maturities, in accordance with the terms of this Indenture and such Securities. As used herein, "U.S. Government Obligation" means (x) any security which is (i) a direct obligation of the United States of America for the payment of which the full faith and credit of the United States of America is pledged or (ii) an obligation of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case (i) or (ii), is not callable or redeemable at the option of the issuer thereof, and (y) any depositary receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act of 1933) as custodian with respect to any U.S. Government Obligation which is specified in Clause (x) above and held by such bank for the account of the holder of such depositary receipt, or with respect to any specific payment of principal of or interest on any U.S. Government Obligation which is so specified and held, PROVIDED that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depositary receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal or interest evidenced by such depositary receipt. (b) In the event of an election to have Section 10.2 apply to any Securities or any series of Securities, as the case may be, the Issuer shall have delivered to the Trustee an Opinion of Counsel stating that (A) the Issuer has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date of this instrument, there has been a change in the applicable Federal income tax law, in either case (A) or (B) to the effect that, and based thereon such opinion shall confirm that, the Holders of such Securities will not recognize gain or loss for Federal income tax purposes as a result of the deposit, Defeasance and discharge to be effected with respect to such Securities and will be subject to Federal income tax on the same amount, in the same manner and at the same times as would be the case if such deposit, Defeasance and discharge were not to occur. (c) In the event of an election to have Section 10.3 apply to any Securities or any series of Securities, as the case may be, the Issuer shall have delivered to the Trustee an Opinion of Counsel or a ruling published by the Internal Revenue Service to the effect that the Holders of such Securities will not recognize gain or loss for Federal income tax purposes as a result of the deposit and Covenant Defeasance to be effected with respect to such Securities and will be subject to Federal income tax on the same amount, in the same manner and at the same times as would be the case if such deposit and Covenant Defeasance were not to occur. -43- (d) The Issuer shall have delivered to the Trustee an Opinion of Counsel or letter or other document from an applicable securities exchange to the effect that neither such Securities nor any other Securities of the same series, if then listed on any securities exchange, will be deleted as a result of such deposit. (e) No event which is, or after notice or lapse of time or both would become, an Event of Default with respect to such Securities or any other Securities shall have occurred and be continuing at the time of such deposit or, with regard to any such event specified in Sections 5.1(e) and (f) at any time on or prior to the 90th day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until after such 90th day). (f) Such Defeasance or Covenant Defeasance shall not cause the Trustee to have a conflicting interest within the meaning of the Trust Indenture Act (assuming all Securities are in default within the meaning of such Act). (g) Such Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, any other agreement or instrument to which the Issuer is a party or by which it is bound. (h) Such Defeasance or Covenant Defeasance shall not result in the trust arising from such deposit constituting an investment company within the meaning of the Investment Company Act unless such trust shall be registered under such Act or exempt from registration thereunder. (i) The Issuer shall have delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that all conditions precedent with respect to such Defeasance or Covenant Defeasance have been complied with. SECTION 10.5. DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE HELD IN TRUST; MISCELLANEOUS PROVISIONS. Subject to Section 10.7, all money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee or other qualifying trustee (solely for purposes of this Section and Section 10.6, the Trustee and any such other trustee are referred to collectively as the "Trustee") pursuant to Section 10.4 in respect of any Securities shall be held in trust and applied by the Trustee, in accordance with the provisions of such Securities and this Indenture, to the payment, either directly or through any such Paying Agent (including the Issuer acting as its own Paying Agent) as the Trustee may determine, to the Holders of such Securities, of all sums due and to become due thereon in respect of principal and any premium and interest, but money so held in trust need not be segregated from other funds except to the extent required by law. The Issuer shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to Section 10.4 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of Outstanding Securities. Anything in this Article to the contrary notwithstanding, the Trustee shall deliver or pay to the Issuer from time to time upon Issuer Request any money or U.S. Government Obligations held by it as provided in Section 10.4 with respect to any Securities which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof, which would then be required to be deposited to effect the Defeasance or Covenant Defeasance, as the case may be, with respect to such Securities. SECTION 10.6. REINSTATEMENT. If the Trustee or the Paying Agent is unable to apply any money in accordance with this Article with respect to any Securities by reason of any order or -44- judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the obligations under this Indenture and such Securities from which the Issuer has been discharged or released pursuant to Section 10.2 or 10.3 shall be revived and reinstated as though no deposit had occurred pursuant to this Article with respect to such Securities, until such time as the Trustee or Paying Agent is permitted to apply all money held in trust pursuant to Section 10.5 with respect to such Securities in accordance with this Article; PROVIDED, HOWEVER, that if the Issuer makes any payment of principal of or any premium or interest on any such Security following such reinstatement of its obligations, the Issuer shall be subrogated to the rights (if any) of the Holders of such Securities to receive such payment from the money so held in trust. SECTION 10.7 RETURN OF MONEYS HELD BY TRUSTEE AND PAYING AGENT UNCLAIMED FOR TWO YEARS. Any moneys deposited with or paid to the Trustee or any Paying Agent for the payment of the principal of or interest on any Security of any series or Coupons and not applied but remaining unclaimed for two years after the date upon which such principal or interest shall have become due and payable, shall, upon the written request of the Issuer and unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property law, be repaid to the Issuer by the Trustee for such series or such Paying Agent, and the Holder of the Security of such series or Holders of Coupons appertaining thereto shall, unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property laws, thereafter look only to the Issuer for any payment which such Holder may be entitled to collect, and all liability of the Trustee or any Paying Agent with respect to such moneys shall thereupon cease. ARTICLE ELEVEN MISCELLANEOUS PROVISIONS SECTION 11.1 INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS OF ISSUER EXEMPT FROM INDIVIDUAL LIABILITY. No recourse under or upon any obligation, covenant or agreement contained in this Indenture, in any Security or Coupon appertaining thereto, or because of any Indebtedness evidenced thereby, shall be had against any incorporator, as such or against any past, present or future stockholder, officer or director, as such, of the Issuer or of any successor, either directly or through the Issuer or any successor, under any rule of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, all such liability being expressly waived and released by the acceptance of the Securities by the Holders thereof and as part of the consideration for the issue of the Securities. SECTION 11.2 PROVISIONS OF INDENTURE FOR THE SOLE BENEFIT OF PARTIES AND SECURITYHOLDERS. Nothing in this Indenture or in the Securities, expressed or implied, shall give or be construed to give to any Person, firm or corporation, other than the parties hereto, any Paying Agent and their successors hereunder and the Holders of the Securities and Coupons, if any, any legal or equitable right, remedy or claim under this Indenture or under any covenant or provision herein contained, all such covenants and provisions being for the sole benefit of the parties hereto and their successors and of the Holders of the Securities. SECTION 11.3 SUCCESSORS AND ASSIGNS OF ISSUER BOUND BY INDENTURE. All the covenants, stipulations, promises and agreements in this Indenture contained by or on behalf of the Issuer shall bind its successors and assigns, whether so expressed or not. SECTION 11.4 NOTICES AND DEMANDS ON ISSUER, TRUSTEE AND SECURITYHOLDERS. Any notice or demand which by any provision of this Indenture is required or permitted to be given or served by the Trustee, by the Holders of Securities, or by the Holders of Coupons to or on the Issuer may be given or served by being deposited postage prepaid, first-class mail (except as otherwise specifically -45- provided herein) addressed (until another address of the Issuer is filed by the Issuer with the Trustee) to Ralcorp Holdings, Inc., P. O. Box 618, St. Louis, Missouri 63188-0618. Any notice, direction, request or demand by the Issuer or any Securityholder to or upon the Trustee shall be deemed to have been sufficiently given or made, for all purposes, if given or made at the Corporate Trust Office. Where this Indenture provides for notice to Holders of any event, (I) if any of the Securities affected by such event are Registered Securities, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed by first-class mail, postage prepaid to such Registered Holders as their names and addresses appear in the Security register within the time prescribed and (2) if any of the Securities affected by such event are Unregistered Securities, such notice shall be sufficiently given (unless otherwise herein expressly provided) if published once in a newspaper of general circulation in New York, New York and London, England within the time prescribed. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed to any particular Holder shall affect the sufficiency of such notice with respect to other Holders, and any notice which is mailed in the manner herein provided shall be conclusively presumed to have been duly given. In case, by reason of the suspension of or irregularities in regular mail service, it shall be impracticable to mail notice to the Issuer and Securityholders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Trustee shall be deemed to be a sufficient giving of such notice. SECTION 11.5 OFFICERS' CERTIFICATES AND OPINIONS OF COUNSEL; STATEMENTS TO BE CONTAINED THEREIN. Upon any application or demand by the Issuer to the Trustee to take any action under any of the provisions of this Indenture, the Issuer shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent have been complied with, except that in the case of any such application or demand as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or demand, no additional certificate or opinion need be furnished. Each certificate or opinion provided for in this Indenture and delivered to the Trustee with respect to compliance with a condition or covenant provided for in this Indenture shall include (a) a statement that the person making such certificate or opinion has read such covenant or condition, (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based, (c) a statement that, in the opinion of such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with and (d) a statement as to whether or not, in the opinion of such person, such condition or covenant has been complied with. Any certificate, statement or opinion of an officer of the Issuer may be based, insofar as it relates to legal matters, upon a certificate or opinion of or representations by counsel, unless such officer knows that the certificate or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or opinion of counsel may be based, insofar as it relates to factual matters, information with respect to which is in the possession of the Issuer, upon the certificate, statement or opinion of or -46- representations by an officer or officers of the Issuer; unless such counsel knows that the certificate, statement or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or opinion of an officer of the Issuer or of counsel may be based, insofar as it relates to accounting matters, upon a certificate or opinion of or representations by an accountant or firm of accountants in the employ of the Issuer, unless such officer or counsel, as the case may be, knows that the certificate or opinion or representations with respect to the accounting matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate or opinion of any independent firm of public accountants filed with the Trustee shall contain a statement that such firm is independent. SECTION 11.6 PAYMENTS DUE ON SATURDAYS, SUNDAYS AND HOLIDAYS. If the date of maturity of interest on or principal of the Securities of any series or Coupons appertaining thereto or the date fixed for redemption or repayment of any such Security or Coupon shall not be a Business Day, then payment of interest, premium, if any, or principal need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the date of maturity or the date fixed for redemption, and no interest shall accrue for the period after such date. SECTION 11.7 CONFLICT OF ANY PROVISION OF INDENTURE WITH TRUST INDENTURE ACT OF 1939. If and to the extent that any provision of this Indenture limits, qualifies or conflicts with another provision included in this Indenture by operation of Sections 310 to 317, inclusive, of the Trust Indenture Act of 1939 (an "incorporated provision"), such incorporated provision shall control. SECTION 11.8 NEW YORK LAW TO GOVERN. This Indenture and each Security shall be deemed to be a contract under the laws of the State of New York, and for all purposes shall be construed in accordance with the laws of such State. SECTION 11.9 COUNTERPARTS. This Indenture may be executed in any number of counterparts, each of which shall be an original; but such counterparts shall together constitute but one and the same instrument. SECTION 11.10 EFFECT OF HEADINGS. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. ARTICLE TWELVE REDEMPTION OF SECURITIES AND SINKING FUNDS SECTION 12.1 APPLICABILITY OF ARTICLE. The provisions of this Article shall be applicable to the Securities of any series which are redeemable before their maturity or to any sinking fund for the retirement of Securities of a series except as otherwise specified as contemplated by Section 2.3 for Securities of such series. SECTION 12.2 NOTICE OF REDEMPTION; PARTIAL REDEMPTIONS. Notice of redemption to the Holders of Securities of any series to be redeemed as a whole or in part at the option of the Issuer shall be given by mailing notice of such redemption by first-class mail, postage prepaid, at least 30 days and not more than 60 days prior to the date fixed for redemption to such Holders of Securities of such series at their last addresses as they shall appear upon the registry books. Any notice which is mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the Holder receives the notice. Failure to give notice by mail, or any defect in the -47- notice to the Holder of any Security of a series designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Security of such series. The notice of redemption to each such Holder shall specify the principal amount of each Security of such series held by such Holder to be redeemed, the date fixed for redemption, the redemption price, the place or places of payment, that payment will be made upon presentation and surrender of such Securities, and that, unless otherwise specified in such notice, Unregistered Coupon Securities, if any, surrendered for payment must be accompanied by all Coupons maturing subsequent to the redemption date, failing which the amount of any such missing Coupon or Coupons will be deducted from the sum due for payment, that such redemption is pursuant to the mandatory or optional sinking fund, or both, if such be the case, that interest accrued to the date fixed for redemption will be paid as specified in such notice and that on and after said date interest thereon or on the portions thereof to be redeemed will cease to accrue. In case any Security of a series is to be redeemed in part, the notice of redemption shall state the portion of the principal amount thereof to be redeemed and shall state that on and after the date fixed for redemption, upon surrender of such Security, a new Security or Securities of such series in principal amount equal to the unredeemed portion thereof will be issued. The notice of redemption of Securities of any series to be redeemed at the option of the Issuer shall be given by the Issuer or, at the Issuer's request, by the Trustee in the name and at the expense of the Issuer. At least one Business Day prior to the redemption date specified in the notice of redemption given as provided in this Section, the Issuer will deposit with the Trustee or with one or more paying agents (or, if the Issuer is acting as its own paying agent, set aside, segregate and hold in trust as provided in Section 3.4) an amount of money sufficient to redeem on the redemption date all the Securities of such series so called for redemption at the appropriate redemption price, together with accrued interest to the date fixed for redemption. If less than all the Outstanding Securities of a series are to be redeemed, the Issuer will deliver to the Trustee at least 60 days prior to the date fixed for redemption an Officers' Certificate stating the aggregate principal amount of Securities to be redeemed. If less than all the Securities of a series are to be redeemed, the Trustee shall select, in such manner as it shall deem appropriate and fair, Securities of such series to be redeemed in whole or in part. Securities may be redeemed in part in multiples equal to the minimum authorized denomination for Securities of such series or any multiple thereof. The Trustee shall promptly notify the Issuer in writing of the Securities of such series selected for redemption and, in the case of any Securities of such series selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities of any series shall relate, in the case of any Security redeemed or to be redeemed only in part, to the portion of the principal amount of such Security which has been or is to be redeemed. SECTION 12.3 PAYMENT OF SECURITIES CALLED FOR REDEMPTION. If notice of redemption has been given as above provided, the Securities or portions of Securities specified in such notice shall become due and payable on the date and at the place stated in such notice at the applicable redemption price, together with interest accrued to the date fixed for redemption, and on and after said date (unless the Issuer shall default in the payment of such Securities at the redemption price, together with interest accrued to said date) interest on the Securities or portions of Securities so called for redemption shall cease to accrue and, except as provided in Sections 6.5 and 10.4, such Securities shall cease from and after the date fixed for redemption to be entitled to any benefit or security under this Indenture, and the Holders thereof shall have no right in respect of such Securities except the right to receive the redemption price thereof and unpaid interest to the date fixed for redemption. On presentation and surrender of such Securities at a place of payment specified in said -48- notice, said Securities or the specified portions thereof shall be paid and redeemed by the Issuer at the applicable redemption price, together with interest accrued thereon to the date fixed for redemption; provided that any semiannual payment of interest becoming due on the date fixed for redemption shall be payable to the Holders of such Securities registered as such on the relevant record date subject to the terms and provisions of Section 2.4 hereof. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal shall, until paid or duly provided for, bear interest from the date fixed for redemption at the rate of interest borne by the Security. Upon presentation of any Security redeemed in part only and the Coupons appertaining thereto, the Company shall execute and the Trustee shall authenticate and deliver to or on the order of the Holder thereof, at the expense of the Company, a new Security or Securities and the Coupons appertaining thereto, of authorized denominations, in principal amount equal to the unredeemed portion of the Security so presented. SECTION 12.4 EXCLUSION OF CERTAIN SECURITIES FROM ELIGIBILITY FOR SELECTION FOR REDEMPTION. Securities shall be excluded from eligibility for selection for redemption if they are identified by registration and certificate number in a written statement signed by an authorized officer of the Issuer and delivered to the Trustee at least 40 days prior to the last date on which notice of redemption may be given as being owned of record and beneficially by, and not pledged or hypothecated by, either (a) the Issuer, or (b) an entity specifically identified in such written statement directly or indirectly controlling or controlled by or under direct or indirect common control with the Issuer. SECTION 12.5 MANDATORY AND OPTIONAL SINKING FUNDS. The minimum amount of any sinking fund payment provided for by the terms of Securities of any series is herein referred to as a "mandatory sinking fund payment", and any payment in excess of such minimum amount provided for by the terms of Securities of any series is herein referred to as an "optional sinking fund payment". The date on which a sinking fund payment is to be made is herein referred to as the "sinking fund payment date". In lieu of making all or any part of any mandatory sinking fund payment with respect to any series of Securities in cash, the Issuer may at its option (a) deliver to the Trustee Securities of such series theretofore purchased or otherwise acquired (except upon redemption pursuant to the mandatory sinking fund) by the Issuer or receive credit for Securities of such series (not previously so credited) theretofore purchased or otherwise acquired (except as aforesaid) by the Issuer and delivered to the Trustee for cancellation pursuant to Section 2.7, (b) receive credit for optional sinking fund payments (not previously so credited) made pursuant to this Section, or (c) receive credit for Securities of such series (not previously so credited) redeemed by the Issuer through any optional redemption provision contained in the terms of such series. Securities so delivered or credited shall be received or credited by the Trustee at the sinking fund redemption price specified in such Securities. On or before the sixtieth day next preceding each sinking fund payment date for any series, the Issuer will deliver to the Trustee a written statement (which need not contain the statements required by Section 11.5) signed by an authorized officer of the Issuer (a) specifying the portion of the mandatory sinking fund payment to be satisfied by payment of cash and the portion to be satisfied by credit of Securities of such series, (b) stating that none of the Securities of such series has theretofore been so credited, (c) stating that no defaults in the payment of interest or Events of Default with respect to such series have occurred (which have not been waived or cured) and are continuing, (d) stating whether or not the Issuer intends to exercise its right to make an optional sinking fund payment with respect to such series and, if so, specifying the amount of such optional sinking fund payment which the Issuer intends to pay on or before the next succeeding sinking fund payment date and (e) specifying such sinking fund payment date. Any Securities of such series to be -49- credited and required to be delivered to the Trustee in order for the Issuer to be entitled to credit therefor as aforesaid which have not theretofore been delivered to the Trustee shall be delivered for cancellation pursuant to Section 2.10 to the Trustee with such written statement (or reasonably promptly thereafter if acceptable to the Trustee). Such written statement shall be irrevocable and upon its receipt by the Trustee the Issuer shall become unconditionally obligated to make all the cash payments or payments therein referred to, if any, on or before the next succeeding sinking fund payment date. Failure of the Issuer, on or before any such sixtieth day, to deliver such written statement and Securities specified in this paragraph, if any, shall not constitute a default but shall constitute, on and as of such date, the irrevocable election of the Issuer (i) that the mandatory sinking fund payment for such series due on the next succeeding sinking fund payment date shall be paid entirely in cash without the option to deliver or credit Securities of such series in respect thereof and (ii) that the Issuer will make no optional sinking fund payment with respect to such series as provided in this Section. If the sinking fund payment or payments (mandatory or optional or both) to be made in cash on the next succeeding sinking fund payment date plus any unused balance of any preceding sinking fund payments made in cash shall exceed $50,000 (or a lesser sum if the Issuer shall so request) with respect to the Securities of any particular series, such cash shall be applied on the next succeeding sinking fund payment date to the redemption of Securities of such series at the sinking fund redemption price together with accrued interest to the date fixed for redemption. If such amount shall be $50,000 or less and the Issuer makes no such request then it shall be carried over until a sum in excess of $50,000 is available. The Trustee shall select, in the manner provided in Section 12.2, for redemption on such sinking fund payment date a sufficient principal amount of Securities of such series to absorb said cash, as nearly as may be possible, and shall (if requested in writing by the Issuer) inform the Issuer of the serial numbers of the Securities of such series (or portions thereof) so selected. Securities of any series which are (a) owned by the Issuer or an entity known by the Trustee to be directly or indirectly controlling or controlled by or under direct or indirect common control with the Issuer, as shown by the Security register, and not known to the Trustee to have been pledged or hypothecated by the Issuer or any such entity or (b) identified in an Officers' Certificate at least 60 days prior to the sinking fund payment date as being beneficially owned by, and not pledged or hypothecated by, the Issuer or an entity directly or indirectly controlling or controlled by or under direct or indirect common control with the Issuer shall be excluded from Securities of such series eligible for selection for redemption. The Trustee, in the name and at the expense of the Issuer (or the Issuer, if it shall so request the Trustee in writing) shall cause notice of redemption of the Securities of such series to be given in substantially the manner provided in Section 12.2 (and with the effect provided in Section 12.3) for the redemption of Securities of such series in part at the option of the Issuer. The amount of any sinking fund payments not so applied or allocated to the redemption of Securities of such series shall be added to the next cash sinking fund payment for such series and, together with such payment, shall be applied in accordance with the provisions of this Section. Any and all sinking fund moneys held on the stated maturity date of the Securities of any particular series (or earlier, if such maturity is accelerated), which are not held for the payment or redemption of particular Securities of such series shall be applied, together with other moneys, if necessary, sufficient for the purpose, to the payment of the principal of, and interest on, the Securities of such series at maturity. At least one Business Day before each sinking fund payment date, the Issuer shall pay to the Trustee in cash or shall otherwise provide for the payment of all interest accrued to the date fixed for redemption on Securities to be redeemed on the next following sinking fund payment date. The Trustee shall not redeem or cause to be redeemed any Securities of a series with sinking fund moneys or mail any notice of redemption of Securities for such series by operation of the sinking fund during the continuance of a default in payment of interest on such Securities or of any Event of Default except that, where the mailing of notice of redemption of any Securities shall theretofore have been made, the Trustee shall redeem or cause to be redeemed such Securities, provided that it shall -50- have received from the Issuer a sum sufficient for such redemption. Except as aforesaid, any moneys in the sinking fund for such series at the time when any such default or Event of Default shall occur, and any moneys thereafter paid into the sinking fund, shall, during the continuance of such default or Event of Default, be deemed to have been collected under Article Five and held for the payment of all such Securities. In case such Event of Default shall have been waived as provided in Section 5.10 or the default cured on or before the sixtieth day preceding the sinking fund payment date in any year, such moneys shall thereafter be applied on the next succeeding sinking fund payment date in accordance with this Section to the redemption of such Securities. SECTION 12.6 REPAYMENT AT THE OPTION OF THE HOLDERS. Securities of any series which are repayable at the option of the Holders thereof before their stated maturity shall be repaid in accordance with the terms of the Securities of such series. The repayment of any principal amount of Securities pursuant to such option of the Holder to require repayment of Securities before their stated maturity, for purposes of Section 10.1, shall not operate as a payment, redemption or satisfaction of the indebtedness represented by such Securities unless and until the Issuer, at its option, shall deliver or surrender the same to the Trustee with a directive that such Securities be canceled. ARTICLE THIRTEEN GUARANTEE SECTION 13.1 ISSUER'S OPTION TO HAVE SECURITIES GUARANTEED. The Issuer may elect, at its option at any time, to have Article Thirteen applied to any Securities or any series of Securities, as the case may be, designated pursuant to Section 2.3 as being guaranteed pursuant to Article Thirteen, in accordance with any applicable requirements provided pursuant to Section 2.3 and upon compliance with the conditions set forth in Article Thirteen. Any such election shall be established by or made pursuant to a resolution of the Board of Directors. SECTION 13.2 SUBSIDIARY GUARANTORS. Upon the Issuer's option (if any) to have this Article applied to any Securities or series of Securities, as the case may be, the Issuer shall cause its Subsidiaries executing this Indenture to guarantee such Securities and (a) cause all of its Subsidiaries, direct or indirect, which after the date of this Indenture constitute in the aggregate at least 99% of the Company's Consolidated Total Assets, Consolidated Net Earnings, Consolidated Revenues, and Consolidated Equity to execute a Guarantee of the Securities in the form set forth in this Article Thirteen hereof and Exhibit A hereto, PROVIDED that no Subsidiary organized outside of the United States of America shall be required to be a Guarantor, and (b) deliver to the Trustee an Opinion of Counsel, in form reasonably satisfactory to the Trustee, that any Guarantee executed after the date of this Indenture is a valid, binding and enforceable obligation of the applicable Subsidiary, subject to customary exceptions for bankruptcy, fraudulent conveyance and equitable principles and the implied covenant of good faith and fair dealing. SECTION 13.3 SUBSIDIARY GUARANTEE. Upon the Issuer's exercise of its option (if any) to have this Article applied to any Securities or any series of Securities, as the case may be, each of the Guarantors hereby jointly, severally and unconditionally guarantee to each Holder of a Security authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, the Securities or the obligations of the Issuer hereunder or thereunder, that: (a) the principal of, and premium, if any, and interest on the Securities will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of, premium, if any, and interest on the Securities, if any, if lawful, and all other obligations of the Issuer to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (b) in case of any extension of time of payment or renewal of any Securities or any of such other obligations, the same will be promptly paid in full when due or performed in accordance -51- with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise; PROVIDED, HOWEVER, that it is the intention of the parties hereto that in no event shall any Guarantor's obligations under its Guarantee constitute or result in a violation of any applicable fraudulent conveyance or similar law of any relevant jurisdiction. Therefore, in the event that any Guarantee would, but for this sentence, constitute or result in such a violation, then the liability of a Guarantor under such Guarantee shall be reduced to the maximum amount permissible under the applicable fraudulent conveyance or similar law. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors will be jointly and severally obligated to pay the same immediately. The Guarantors hereby agree that their obligations hereunder shall be absolute and unconditional, irrespective of the validity, regularity or enforceability of the Securities or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Securities with respect to any provisions hereof or thereof, the recovery of any judgment against the Issuer any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Guarantor other than the defense that payment has been made or that the other relevant obligations have been paid or performed. Each Guarantor hereby waives diligence, presentment, demand of payment, claim of fraud, filing of claims with a court in the event of insolvency or bankruptcy of the Issuer, any right to require a proceeding first against the Issuer, protest, notice and all demands whatsoever and covenant that this Guarantee will not be discharged except by complete performance of the obligations contained in the Securities and this Indenture. If any Holder or the Trustee is required by any court or otherwise to return to the Issuer or Guarantors, or any custodian, trustee, liquidator or other similar official acting in relation to either the Issuer or Guarantors, any amount paid by either to the Trustee or such Holder, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Guarantor further agrees that, as between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article Five for the purposes of this Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article Five such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Guarantee. The Guarantors shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Guarantee. The foregoing Guarantee shall rank PARI PASSU with the guaranties for the benefit of the lenders under the Credit Agreement. Each Guarantor shall be subrogated to all rights of each Holder of any Securities against the Issuer in respect of any amounts paid to the Holders by such Guarantor pursuant to the provisions of this Guarantee; provided that the Guarantors shall not be entitled to enforce, or to receive, any payments arising out of or based upon, such right of subrogation until the principal of, premium, if any, and interest on all the Securities shall have been paid in full and nothing remains owed to the Trustee pursuant to this Indenture. The Guarantee set forth in this Section 13.3 shall not be valid or become obligatory for any purpose with respect to a Security until the certificate of authentication on such Security shall have been signed by or on behalf of the Trustee. Unless determined otherwise by the Issuer pursuant to Section 2.3, the Guarantee set forth in this Section 13.3 shall be effective with respect to any Guarantor only so long as any Indebtedness of the Issuer is guaranteed by such Guarantor. SECTION 13.4 EXECUTION AND DELIVERY OF GUARANTEE. Upon the Issuer's exercise of its option (if any) to have this Article applied to any Securities or any series of Securities, as the case -52- may be, to evidence its Guarantee set forth in Section 13.3 hereof, each Guarantor hereby agrees that a notation of such Guarantee substantially in the form of Exhibit A shall be endorsed by an officer of such Guarantor on each Security authenticated and delivered by the Trustee and that this Indenture shall be executed on behalf of such Guarantor by its President or one of its Vice Chairmen, Treasurer or Vice Presidents and attested to by its Secretary of Assistant Secretary. Each Guarantor hereby agrees that its Guarantee set forth in Section 13.3 shall remain in full force and effect notwithstanding any failure to endorse on each Security a notation of such Guarantee. If a Person whose signature is on this Indenture or on the Guarantee no longer holds the office under which the Person signed the Guarantee at the time the Trustee authenticates the Security on which a Guarantee is endorsed, the Guarantee shall be valid, binding and enforceable nevertheless. The delivery of any Security by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Guarantee set forth in this Indenture on behalf of Guarantors. SECTION 13.5 GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS. (a) Except as set forth in Articles Three and Nine hereof, nothing contained in this Indenture or in any of the Securities shall prevent any consolidation or merger of a Guarantor with or into the Issuer or another Guarantor or shall prevent any sale or conveyance of all or substantially all of the assets of a Guarantor, to the Issuer or another Guarantor. Upon any such consolidation, merger, sale or conveyance, the Guarantee given by such Guarantor shall no longer have any force or effect. (b) Except as set forth in Articles Three and Nine hereof, nothing contained in this Indenture or in any of the Securities shall prevent the sale or other disposition by the Issuer or any Subsidiary of any Guarantor (by sale of capital stock, merger, consolidation or otherwise) or of all or substantially all of the assets of any Guarantor to any Person other than the Issuer or any Subsidiary, PROVIDED the Issuer's Subsidiaries constituting in the aggregate not less than 99% of the Issuer's Consolidated Total Assets, Consolidated Net Earnings, Consolidated Revenues, and Consolidated Equity determined after giving effect to such sale or disposition execute and deliver to the Trustee a Guarantee and, PROVIDED, FURTHER, that the foregoing proviso shall not apply to the sale or disposition of a Guarantor in a foreclosure proceeding to the extent that such proviso would be inconsistent with the Uniform Commercial Code. Upon delivery by the Issuer to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such sale or other disposition was made in accordance with the provisions of this Indenture, such Guarantor (in the event of a sale or other disposition of all of the capital stock of such Guarantor) or the successor corporation or the corporation acquiring the property and such Guarantor (in the event of a consolidation or merger or sale or other disposition of all or substantially all of the assets of a Guarantor) shall automatically be released and relieved of its obligations under this Article Thirteen, and the Trustee shall execute any documents reasonably required in order to evidence the release of any Guarantor from its obligations under its Guarantee. Any Guarantor not released from its obligations under its Guarantee shall remain liable for the full amount of principal of and interest on the Securities and for the other obligations of any Guarantor under the Indenture as provided in this Article Thirteen. SECTION 13.6 "TRUSTEE" TO INCLUDE PAYING AGENT. In case at any time any Paying Agent other than the Trustee shall have been appointed by the Issuer and be then acting hereunder, the term "Trustee" as used in this Article Thirteen shall in such case (unless the context shall otherwise require) be construed as extending to and including such Paying Agent within its meaning as fully and for all intends and purposes as if such Paying Agent were named in this Article Thirteen in place of the Trustee. -53- IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. ATTEST: RALCORP HOLDINGS, INC. By: /s/ R. W. Lockwood By: /s/ J. R. Micheletto ----------------------------- ------------------------ Secretary J. R. Micheletto Chief Financial Officer [CORPORATE SEAL] ATTEST: THE FIRST NATIONAL BANK OF CHICAGO, as Trustee By /s/ Janice Ott Rotunno By: /s/ R. D. Manella ------------------------------ ------------------------------ Assistant Vice President Name: R. D. Manella Vice President [CORPORATE SEAL] ATTEST: BEECH-NUT NUTRITION CORPORATION /s/ R. W. Lockwood By: /s/ J. R. Micheletto ------------------------------ ------------------------------ Secretary J. R. Micheletto Title: Chief Financial Officer [CORPORATE SEAL] ATTEST: BREMNER, INC. /s/ R. W. Lockwood By: /s/ J. R. Micheletto ------------------------------ ------------------------------ Secretary J. R. Micheletto Title: Chief Financial Officer [CORPORATE SEAL] ATTEST: KEYSTONE RESORTS MANAGEMENT, INC. /s/ R. W. Lockwood By: /s/ J. R. Micheletto ------------------------------ ------------------------------ Assistant Secretary J. R. Micheletto Title: Chief Financial Officer [CORPORATE SEAL] ATTEST: RALSTON FOODS, INC. /s/ R. W. Lockwood By: /s/ J. R. Micheletto ------------------------------ ------------------------------ Secretary J. R. Micheletto Title: Chief Financial Officer [CORPORATE SEAL] -54- STATE OF MISSOURI ) ) ss. COUNTY OF CITY OF ST. LOUIS) On this 23rd day of September, 1994, before me personally came J. R. Micheletto, to me personally known, who, being by me duly sworn, did depose and say that he resides at Edwardsville, Missouri, and that he is Chief Financial Officer of Ralcorp Holdings, Inc., Beech-Nut Nutrition Corporation, Bremner, Inc., Keystone Resorts Management, Inc. and Ralston Foods, Inc., the corporations described in and which executed the above instrument; that he knows the corporate seals of said corporations; that the seals affixed to said instrument are such corporate seals; that they were so affixed by authority of the Board of Directors of said corporations; and that he signed his name thereto by like authority. [NOTARIAL SEAL] /s/ Julie E. Bolte Neiger ----------------------------------- Notary Public Notary Public, State of Missouri City of St. Louis My Commission Expires Feb. 21, 1997 STATE OF ILLINOIS ) ) ss. COUNTY OF COOK ) On this 26th day of September, 1994, before me personally came R. D. Manella, to me personally known, who, being by me duly sworn, did depose and say that he resides at Buffalo Grove, Illinois; that he is a Vice President of The First National Bank of Chicago, one of the corporations described in and which executed the above instrument; that he knows the corporate seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority. [NOTARIAL SEAL] /s/ Ann Longino ----------------------------------- Notary Public Notary Public, State of Illinois My Commission Exp: 05/17/98 -55- EXHIBIT A [FORM OF NOTATION ON NOTE RELATING TO GUARANTEE] GUARANTEE Each of the Persons listed below (hereinafter referred to as the "Guarantors," which term includes any successor or additional Guarantor under the Indenture (the "Indenture") referred to in the Security upon which this notation is endorsed) (i) has jointly and severally, unconditionally guaranteed that (a) the principal of, and premium, if any, and interest on the Securities will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of, premium, if any, and interest on the Securities, if any, if lawful, and all other obligations of the Issuer to the Holders or the Trustee will be promptly paid in full or performed, all in accordance with the terms hereof and as set forth in the Indenture; and (b) in case of any extension of time of payment or renewal of any Securities or any of such other obligations, the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration, or otherwise; PROVIDED, HOWEVER, that in no event shall any Guarantor's obligations under its Guarantee constitute or result in a violation of any applicable fraudulent conveyance or similar law of any relevant jurisdiction. Therefore, in the event that any Guarantee would, but for this sentence, constitute or result in such a violation, then the liability of a Guarantor under such Guarantee shall be reduced to the maximum amount permissible under the applicable fraudulent conveyance or similar law. Capitalized terms used herein have the meanings assigned to them in the Indenture unless otherwise indicated. No stockholder, officer, director, employer or incorporator, past, present or future, of the Guarantors, as such, shall have any personal liability under this Guarantee by reason of his or its status as such stockholder, officer, director, employer or incorporator. This Guarantee shall be binding upon each Guarantor and its successors and assigns and shall inure to the benefit of the successors and assigns of the Trustee and the Holders and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges herein conferred upon that party shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions hereof. This Guarantee shall not be valid or obligatory for any purpose with respect to a Security until the certificate of authentication on the Security upon which this Guarantee is noted shall have been executed by or on behalf of the Trustee under the Indenture by the manual signature of one of its authorized signatories. This Guarantee shall be effective with respect to any Guarantor only so long as any Indebtedness of the Issuer is guaranteed by such Guarantor. Beech-Nut Nutrition Corporation Bremner, Inc. Keystone Resorts Management, Inc. Ralston Foods, Inc. By:_______________________________ J. R. Micheletto Authorized Signatory -56- ================================================================================ FIRST SUPPLEMENTAL INDENTURE DATED AS OF JANUARY 31, 1997 AMONG RALCORP HOLDINGS, INC. GENERAL MILLS, INC. AND THE FIRST NATIONAL BANK OF CHICAGO, as Trustee TO INDENTURE DATED AS OF SEPTEMBER 23, 1994 AMONG RALCORP HOLDINGS, INC. Issuer BEECH-NUT NUTRITION CORPORATION BREMMER, INC. KEYSTONE RESORTS MANAGEMENT, INC. RALSTON FOODS, INC. Guarantors AND THE FIRST NATIONAL BANK OF CHICAGO, as Trustee ================================================================================ FIRST SUPPLEMENTAL INDENTURE, DATED AS OF January 31, 1997, by and among Ralcorp Holdings, Inc., a Missouri corporation (the "Company"), General Mills, Inc., a Delaware corporation ("General Mills"), and The First National Bank of Chicago, a national banking association, as trustee (the "Trustee"). RECITALS WHEREAS, the Company and Beech-Nut Nutrition Corporation, Bremner, Inc., Keystone Resorts Management, Inc., Ralston Foods Inc. (the "Guarantors"), and the Trustee, entered into an Indenture, dated as of September 23, 1994 (the "Indenture"), pursuant to the provisions of which the Company has heretofore issued $150,000,000 in aggregate principal amount of the Securities (such term and all other defined terms used herein and not otherwise defined herein shall have the meaning set forth in the Indenture); and WHEREAS, pursuant to the terms of the Indenture, on March 12, 1996, the Guarantors were released from their obligation to guarantee the due and punctual payment of principal of and interest on the Securities and all other obligations of the Company under the Indenture; and WHEREAS, pursuant to the Agreement and Plan of Merger, dated as of August 13, 1996, among the Company, General Mills and General Mills Missouri, Inc., a General Mills subsidiary created for the purpose of completing the Merger (as defined below) ("Merger Sub"), General Mills agreed to acquire certain businesses of the Company through a merger (the "Merger") of the Company and Merger Sub to be effective at the close of business on January 31, 1997 (the "Effective Date") subject to approval by the shareholders of the Company; and WHEREAS, General Mills, by due corporate action, has determined to assume by this First Supplemental Indenture the due and punctual payment of the principal of and interest on all of the Securities and the performance of every covenant of the Indenture on the part of the Company to be performed or observed; and WHEREAS, Section 9.1 of the Indenture provides, among other things, that the Company will not merge or consolidate with any other Person unless (i) either the Company shall be the continuing corporation, or the successor Person shall be a Person organized under the laws of the United States of America or any State thereof and shall expressly assume the due and punctual payment of the principal of and interest on all the Securities, according to their tenor, and the due and punctual performance and observance of all of the covenants and conditions of the Indenture, by supplemental indenture, and (ii) there shall be no default immediately after the merger; and WHEREAS, Section 9.2 of the Indenture provides that in case of any such merger in accordance with Section 9.1, and following such assumption by the successor, such successor shall succeed to and be substituted for the Company, with the same effect as if it had been named in Indenture, and the Company shall be discharged from all obligations and covenants under the Indenture; and WHEREAS, Section 8.1 of the Indenture provides, among other things, that without the consent of the Holders of any of the Securities, the Company, when authorized by a resolution of its Board of Directors and the Trustee may from time to time and at any time enter into an indenture or supplemental indenture to, among other things, evidence the succession of another corporation to the Company and the assumption by the successor corporation of the covenants, agreements and obligations of the Company under the Indenture; and WHEREAS, the Company and General Mills, by due corporate actions have determined to execute a supplemental indenture in substantially the form of this First Supplemental Indenture, and all things necessary to make this First Supplemental Indenture a valid, binding and legal agreement have been done and performed; NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH: For and in consideration of the premises, and of other valuable consideration the receipt whereof is hereby acknowledged, the Company and General Mills covenant and agree with the Trustee, for the equal and proportionate benefit of all Holders of the Securities, as follows: ARTICLE I ASSUMPTION OF THE INDENTURE AND THE SECURITIES Section 1.1 ASSUMPTION AS TO COMPANY. On the Effective Date, contemporaneous with the Merger, General Mills shall assume the due and punctual payment of the principal of and interest on all of the Securities and the performance of every covenant of the Indenture on the part of the Company to be performed or observed. ARTICLE II CLOSING DOCUMENTS Section 2.1. DOCUMENTS TO BE GIVEN TO TRUSTEE. In accordance with the provisions of Section 8.4 of the Indenture, the Trustee shall receive from the Company prior to the Effective Date an Officer's Certificate, certifying that immediately prior to the Merger there exists no Event of Default under the Indenture, and an Opinion of Counsel, each satisfying the provisions of Section 11.5 of the Indenture. ARTICLE III MISCELLANEOUS Section 3.1. TRUSTEE'S ACCEPTANCE. The Trustee accepts the provisions of this First Supplemental Indenture upon the terms and conditions set forth in the Indenture; provided, however, that the foregoing acceptance shall not make the Trustee responsible in any manner whatsoever for the correctness of recitals or statements by other parties herein. Section 3.2. INDENTURE TO REMAIN IN FULL FORCE AND EFFECT. Except as hereby expressly provided, the Indenture, as supplemented and amended by this First Supplemental Indenture, is in all respects ratified and confirmed and all its terms, provisions and conditions shall be and remain in full force and effect. Section 3.3. RIGHTS, ETC. OF TRUSTEE. All recitals in this First Supplemental Indenture are made by the Company and General Mills only and not by the Trustee. All of the provisions contained in the Indenture in respect of the rights, privileges, immunities, powers and duties of the Trustee shall be applicable in respect hereof as fully and with like effect as if set forth herein in full. Section 3.4. SUCCESSORS AND ASSIGNS. All covenants and agreements in this First Supplemental Indenture made by the Company and General Mills shall bind their respective successors and assigns, whether so expressed or not. Section 3.5. NOTICES AND DEMANDS ON ISSUER. Any notice or demand which by any provision of this First Supplemental Indenture or the Indenture is required or permitted to be given or served by the Trustee, by the Holders of Securities, or by the Holders of Coupons to or on the Issuer may be given or served by being deposited postage prepaid, first-class mail (except as otherwise specifically provided herein or in the Indenture) addressed (until another address of the Issuer is filed by the Issuer with the Trustee) to General Mills, Inc., Number One General Mills Blvd., P.O. Box 1113, Minneapolis, MN 55440, Attention: Corporate Secretary. Section 3.6. CONFLICT WITH TRUST INDENTURE ACT. If any provision of this First Supplemental Indenture limits, qualifies or conflicts with the duties imposed by operation of Trust Indenture Act Section 318(c), the imposed duties shall control. Section 3.7. GOVERNING LAW. This First Supplemental Indenture shall be governed by and construed in accordance with the internal laws, but not the laws as to conflicts or choice of law, of the State of New York. Section 3.8. TITLES, HEADINGS, ETC. The Article and Section headings of this First Supplemental Indenture are for convenience only and shall not affect the construction hereof. Section 3.9. SEPARABILITY CLAUSE. In case any provision in this First Supplemental Indenture shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 3.10. EXECUTION IN COUNTERPARTS. This First Supplemental Indenture may be executed in any number of counterparts, each of which shall be deemed an original, but such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the date and year first above written. [Corporate Seal] RALCORP HOLDINGS, INC. Attest: By: /s/ J. R. Micheletto ------------------------------ Name: J. R. Micheletto /s/ R. W. Lockwood Title: Chief Executive Officer - ---------------------- and President R. W. Lockwood Secretary STATE OF MISSOURI ) ) SS CITY OF ST. LOUIS ) On this 31st day of January, 1997, before me personally appeared J. R. Micheletto to me known to be the person described in and who executed the foregoing instrument; that he or she knows the corporate seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he or she signed their name thereto by like authority. /s/ Julie E. Neiger ------------------------------ Notary Public [Corporate Seal] GENERAL MILLS, INC. Attest: By: /s/ T. J. Brown ------------------------------ Name: T. J. Brown /s/ Ivy Bernhardson Title: Vice President - ----------------------- Secretary STATE OF MISSOURI ) ) SS CITY OF ST. LOUIS ) On this 31st day of January, 1997, before me personally appeared T. J. Brown, to me known to be the person described in and who executed the foregoing instrument; that he or she knows the corporate seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he or she signed their name thereto by like authority. /s/ Donna L. Bulback ------------------------------ Notary Public [Corporate Seal] THE FIRST NATIONAL BANK OF CHICAGO as Trustee Attest: By: /s/ T. Marshall ------------------------------ Name: T. Marshall /s/ Barbara G. Grosse Title: Trust Officer - ----------------------- STATE OF ILLINOIS ) ) SS COUNTY OF COOK ) On this 29th day of January, 1997, before me personally appeared T. Marshall, to me known to be the person described in and who executed the foregoing instrument; that he or she knows the corporate seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he or she signed their name thereto by like authority. /s/ N. Sierra ------------------------------ Notary Public EX-10.3 8 genmills023880_ex10-3.txt 1998 EMPLOYEE STOCK PLAN EXHIBIT 10.3 GENERAL MILLS, INC. 1998 EMPLOYEE STOCK PLAN As Amended Through May 17, 2002 GENERAL MILLS, INC. 1998 EMPLOYEE STOCK PLAN 1. PURPOSE OF THE PLAN The purpose of the General Mills, Inc. 1998 Employee Stock Plan (the "Plan") is to attract and retain able employees by rewarding employees of General Mills, Inc., its subsidiaries and affiliates (defined as entities in which General Mills, Inc. has a significant equity or other interest) (collectively, the "Company") and to align the interests of employees with those of the stockholders of the Company through compensation that is based on the Company's stock. Grants may be made to employees under the Plan in lieu of salary increases and certain other compensation and benefits. 2. EFFECTIVE DATE AND DURATION OF PLAN This Plan shall become effective as of September 28, 1998. 3. ELIGIBLE PERSONS Only persons who are employees of the Company shall be eligible to receive grants of Stock Options, Restricted Stock or Restricted Stock Units (each defined below) and become "Participants" under the Plan. 4. AWARD TYPE Under this Plan, the Compensation Committee of the Company's Board of Directors (the "Committee") may award Participants options ("Stock Options") to purchase common stock of the Company ($.10 par value) ("Common Stock"). The grant of a Stock Option entitles the Participant to purchase shares of Common Stock at an "Exercise Price" established by the Committee. The Exercise Price for each share of Common Stock issuable under a Stock Option shall not be less than 100% of the Fair Market Value of the Common Stock on the date of grant. "Fair Market Value" shall equal the mean of the high and low price of the Common Stock on the New York Stock Exchange on the date of grant. The Committee may also grant Participants shares of Common Stock or the right to receive shares of Common Stock subject to certain restrictions ("Restricted Stock" or "Restricted Stock Units") (Stock Options, Restricted Stock and Restricted Stock Units are sometimes referred to as "Awards"). 5. STOCK OPTION TERM AND TYPE Stock Options granted under the Plan shall be Non-Qualified Stock Options governed by Section 83 of the Internal Revenue Code of 1986, as amended (the "Code"). The term of any Stock Option granted under the Plan shall be determined by the Committee, provided that the term of a Stock Option shall not exceed 10 years and one month. 1 6. COMMON STOCK SUBJECT TO THE PLAN a) Maximum Shares Available for Delivery. Subject to Section 6(b), the maximum number of shares of Common Stock available for issuance to Participants under the Plan shall be 28,000,000. In addition, any Common Stock covered by a Stock Option granted under the Plan, which is forfeited, cancelled or expires in whole or in part shall be deemed not to be delivered for purposes of determining the maximum number of shares of Common Stock available for grants under the Plan. If any Stock Option is exercised by tendering Common Stock, either actually or by attestation, to the Company as full or partial payment in connection with the exercise of the Stock Option under the Plan, only the number of shares of Common Stock issued net of the Common Stock tendered shall be deemed delivered for purposes of determining the maximum number of shares available for grants under the Plan. Upon forfeiture or termination of Restricted Stock or Restricted Stock Units prior to vesting, the shares of Common Stock subject thereto shall again be available for Awards under the Plan. b) Adjustments for Corporate Transactions. The Committee may determine that a corporate transaction has occurred affecting the Common Stock such that an adjustment or adjustments to outstanding Awards is required to preserve (or prevent enlargement of) the benefits or potential benefits intended at the time of grant. For this purpose a corporate transaction includes, but is not limited to, any dividend or other distribution (whether in the form of cash, Common Stock, securities of a subsidiary of the Company, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Common Stock or other securities of the Company, issuance of warrants or other rights to purchase Common Stock or other securities of the Company, or other similar corporate transaction. In the event of such a corporate transaction, the Committee may, in such manner as the Committee deems equitable, adjust (i) the number and kind of shares which may be awarded under the Plan; (ii) the number and kind of shares subject to outstanding Awards; and (iii) the exercise price of outstanding Stock Options. c) Limits on Distribution. Distribution of shares of Common Stock or other amounts under the Plan shall be subject to the following: (i) The total number of shares of Common Stock that shall be available for Restricted Stock and Restricted Stock Unit Awards under the Plan shall be limited to 15% of the total shares authorized for Awards hereunder. (ii) Notwithstanding any other provision of the Plan, the Company shall have no liability to deliver any shares of Common Stock under the Plan or make any other distribution of benefits under the Plan unless such delivery or distribution would comply with all applicable laws (including, without limitation, the requirements of the Securities Act of 2 1933), and the applicable requirements of any securities exchange or similar entity. (iii) To the extent that the Plan provides for issuance of stock certificates to reflect the issuance of shares of Common Stock or Restricted Stock, the issuance may be effected on a non-certificated basis, to the extent not prohibited by applicable law or the applicable rules of any stock exchange. d) The Committee, in its discretion, may require as a condition to the grant of Awards, the deposit of Common Stock owned by the Participant receiving such grant, and the forfeiture of such grants, if such deposit is not made or maintained during the required holding period. Such shares of deposited Common Stock may not be otherwise sold or disposed of during the applicable holding period or restricted period. The Committee may also determine whether any shares issued upon exercise of a Stock Option shall be restricted in any manner. 7. EXERCISE OF STOCK OPTIONS a) Exercise. Except as provided in Sections 11 and 12 (Change of Control and Termination of Employment), each Stock Option may be exercised only in accordance with the terms and conditions of the Stock Option grant and during the periods as may be established by the Committee. Twenty percent of each Stock Option granted under the Plan in lieu of salary increases and certain other compensation and benefits may be exercised immediately upon granting and, subject to the Participant's continued employment with the Company, additional 20% portions of such Stock Option shall become exercisable each year thereafter. All other Stock Options granted hereunder may be exercised only after three years of the Participant's continued employment with the Company following the date of the Stock Option grant. A Participant exercising a Stock Option shall give notice to the Company of such exercise and of the number of shares elected to be purchased prior to 4:30 P.M. CST/CDT on the day of exercise, which must be a business day at the executive offices of the Company. b) Payment. The Exercise Price shall be paid to the Company at the time of such exercise, subject to any applicable rule or regulation adopted by the Committee: (i) in cash (including check, draft, money order or wire transfer made payable to the order of the Company); (ii) through the tender of shares of Common Stock owned by the Participant (by either actual delivery or attestation); or (iii) by a combination of (i) and (ii) above. For determining the amount of the payment, Common Stock delivered pursuant to (ii) or (iii) shall have a value equal to the Fair Market Value of the Common Stock on the date of exercise. 3 c) Deferrals. The Committee may permit or require Participants to defer receipt of any Common Stock issuable upon exercise of a Stock Option, subject to such rules and procedures as it may establish, which may include provisions for the payment or crediting of interest, or dividend equivalents, including converting such credits into deferred Common Stock equivalents. 8. RESTRICTED STOCK AND RESTRICTED STOCK UNITS With respect to Awards of Restricted Stock and Restricted Stock Units, the Committee shall: a) select Participants to whom Awards will be made, provided that Restricted Stock Units may only be awarded to those employees of the Company who are employed in a country other than the United States; b) determine the number of shares of Restricted Stock or the number of Restricted Stock Units to be awarded; c) determine the length of the restricted period, which shall be no less than one year; d) determine the purchase price, if any, to be paid by the Participant for Restricted Stock or Restricted Stock Units; and e) determine any restrictions other than those set forth in this Section 8. Subject to the restrictions set forth in this Section 8, each Participant who receives Restricted Stock shall have all rights as a stockholder with respect to such shares, including the right to vote the shares and receive dividends and other distributions. Each Participant who receives Restricted Stock Units shall be eligible to receive, at the expiration of the applicable restricted period, one share of Common Stock for each Restricted Stock Unit awarded, and the Company shall issue to each such Participant that number of shares of Common Stock. Participants who receive Restricted Stock Units shall have no rights as stockholders with respect to such Restricted Stock Units until such time as share certificates for Common Stock are issued to the Participants; provided, however, that quarterly during the applicable restricted period for all Restricted Stock Units awarded hereunder, the Company shall pay to each such Participant an amount equal to the sum of all dividends and other distributions paid by the Company during the prior quarter on that equivalent number of shares of Common Stock. 9. TRANSFERABILITY OF STOCK OPTIONS Except as otherwise provided by rules of the Committee, no Stock Options shall be transferable by a Participant otherwise than (i) by the Participant's last will and testament or (ii) by the applicable laws of descent and distribution, and such Stock Options shall be exercised during the Participant's lifetime only by the Participant or his or her guardian or legal representative. Except as otherwise provided in Section 8, no shares of 4 Restricted Stock and no Restricted Stock Units shall be sold, exchanged, transferred, pledged or otherwise disposed of during the restricted period. 10. TAXES Whenever the Company issues Common Stock under the Plan, the Company may require the recipient to remit to the Company an amount sufficient to satisfy any Federal, state or local tax withholding requirements prior to the delivery of such Common Stock, or, in the discretion of the Committee, upon the election of the Participant, the Company may withhold from the shares to be delivered shares sufficient to satisfy all or a portion of such tax withholding requirements. 11. CHANGE OF CONTROL Each outstanding Stock Option shall become immediately and fully exercisable for a period of one (1) year following the date of the following occurrences, each constituting a "Change of Control": a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the 1934 Act), (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the 1934 Act) of voting securities of the Company where such acquisition causes such Person to own 20% or more of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not be deemed to result in a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (iv) any acquisition by any corporation pursuant to a transaction that complies with clauses (i), (ii) and (iii) of subsection (c) below; and provided, further, that if any Person's beneficial ownership of the Outstanding Voting Securities reaches or exceeds 20% as a result of a transaction described in clause (i) or (ii) above, and such Person subsequently acquires beneficial ownership of additional voting securities of the Company, such subsequent acquisition shall be treated as an acquisition that causes such Person to own 20% or more of the Outstanding Voting Securities; or b) Individuals who, as of the date hereof, constitute the Board of Directors (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least of a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or 5 c) The approval by the shareholders of the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company ("Business Combination") or, if consummation of such Business Combination is subject, at the time of such approval by stockholders, to the consent of any government or governmental agency, the obtaining of such consent (either explicitly or implicitly by consummation); excluding, however, such a Business Combination pursuant to which (i) all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation that as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Voting Securities, (ii) no Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or d) approval by the stockholders of the Company of a complete liquidation or dissolution of the Company. After such one (1) year period the normal Stock Option exercise provisions of the Plan shall govern. Notwithstanding any other provision of the Plan, but subject to Section 5, in the event a Participant's employment with the Company is terminated within two (2) years of any of the events specified in (a), (b), (c) or (d), all outstanding Stock Options of such Participant at that date of termination shall be exercisable for a period of six (6) months beginning on the date of termination. With respect to Stock Option grants outstanding as of the date of any such Change of Control which require the deposit of owned Common Stock as a condition to obtaining rights, the deposit requirement shall be terminated as of the date of the Change of Control and any such deposited stock shall be promptly returned to the Participant. In the event of a Change of Control, a Participant shall vest in all shares of Restricted Stock and Restricted Stock Units, effective as of the date of such Change of Control, and any deposited shares of Common Stock shall be promptly returned to the Participant. 6 12. TERMINATION OF EMPLOYMENT a) Resignation or Termination for Cause. If the Participant's employment by the Company is terminated by either (i) the voluntary resignation of the Participant, or (ii) a Company discharge due to Participant's illegal activities, poor work performance, misconduct or violation of the Company's policies or practices, then Participant's Stock Options shall terminate three months after such termination (but in no event beyond the original full term of the Stock Options) and no Stock Options shall become exercisable after such termination, and all shares of Restricted Stock and Restricted Stock Units which are subject to restriction on the date of termination shall be forfeited. b) Other Termination. If the Participant's employment by the Company terminates for any reason other than specified in Sections 11, 12 (a), (c), (d) or (e), the following rules shall apply: (i) In the event that, at the time of such termination, the sum of the Participant's age and service with the Company equals or exceeds 70, the Participant's outstanding Stock Options shall continue to become exercisable, and shares of Restricted Stock and Restricted Stock Units subject to share deposit requirements shall continue to vest, each according to the schedule established at the time of grant, unless otherwise provided in the applicable Award agreement. Shares of Restricted Stock and Restricted Stock Units not subject to share deposit requirements shall fully vest as of the date of termination. Stock Options shall remain exercisable for the remaining full term of such Stock Options. (ii) In the event that, at the time of such termination, the sum of Participant's age and service with the Company is less than 70, Participant's outstanding unexercisable Stock Options and unvested Restricted Stock and Restricted Stock Units shall become exercisable or vest, as the case may be, as of the date of termination, in a pro-rata amount based on the full months of employment completed during the full vesting period from the date of grant to the date of termination with such newly-vested Stock Options and Stock Options exercisable on the date of termination remaining exercisable for the lesser of one year from the date of termination and the original full term of the Stock Option. All other Stock Options, shares of Restricted Stock and Restricted Stock Units shall be forfeited as of the date of termination. Provided, however, 7 that if the Participant is an executive officer of the Company, the Participant's outstanding Stock Options which, as of the date of termination are not yet exercisable, shall become exercisable effective as of the date of such termination and, with all outstanding Stock Options already exercisable on the date of termination, shall remain exercisable for the lesser of one year following the date of termination and the original full term of the Stock Option, and all shares of Restricted Stock and Restricted Stock Units shall vest as of the date of termination. c) Death. If a Participant dies while employed by the Company, any Stock Option previously granted under this Plan may be exercised by the person designated in such Participant's last will and testament or, in the absence of such designation, by the Participant's estate, to the full extent that such Stock Option could have been exercised by such Participant immediately prior to death. Any outstanding Stock Options granted on or after June 1, 2002, which, as of the date of death, are not yet exercisable, shall fully vest and become exercisable upon death. Outstanding Stock Options granted prior to June 1, 2002, which, as of the date of death, are not yet exercisable, shall fully vest and become exercisable in a pro-rata amount, based on the full months of employment completed during the full vesting period of the Stock Option from the date of grant to the date of death. With respect to Stock Options which require the deposit of owned Common Stock as a condition to obtaining exercise rights, in the event a Participant dies while employed by the Company, such Stock Options may be exercised as provided in the first paragraph of this Section 12(c) and any owned Common Stock deposited by the Participant pursuant to such grant shall be promptly returned to the person designated in such Participant's last will and testament or, in the absence of such designation, to the Participant's estate, and all requirements regarding deposit by the Participant shall be terminated. A Participant who dies during any applicable restricted period, for Restricted Stock or Restricted Stock Units granted on or after June 1, 2002, shall fully vest in such shares of Restricted Stock or Restricted Stock Units, effective as the date of death. A Participant who dies during any applicable restricted period, for any Restricted Stock or Restricted Stock Units granted prior to June 1, 2002, shall vest in a proportionate number of such shares of Restricted Stock or Restricted Stock Units, effective as of the date of death. Such proportionate vesting shall be pro-rata, based on the number of full months of employment completed during the restricted period prior to the date of death, as a percentage of the applicable restricted period. d) Retirement. The Committee shall determine, at the time of grant, the treatment of the Stock Options, Restricted Stock and Restricted Stock Units upon the retirement of the Participant. Unless other terms are specified in the original Grant, if the termination of employment is due to a Participant's retirement on or after age 55, the Participant may exercise a Stock Option, subject to the original terms and conditions of the Stock Option and shall fully vest in all shares of Restricted Stock or Restricted Stock Units effective as of the date of retirement (unless any such Award specifically provides otherwise). 8 e) Spin-offs. If the termination of employment is due to the cessation, transfer, or spin-off of a complete line of business of the Company, the Committee, in its sole discretion, shall determine the treatment of all outstanding Awards under the Plan. 13. ADMINISTRATION OF THE PLAN a) Administration. The authority to control and manage the operations and administration of the Plan shall be vested in Committee in accordance with this Section 13. b) Selection of Committee. The Committee shall be selected by the Board, and shall consist of two or more members of the Board. c) Powers of Committee. The authority to manage and control the operations and administration of the Plan shall be vested in the Committee, subject to the following: (i) Subject to the provisions of the Plan, the Committee will have the authority and discretion to select from among the eligible Company employees those persons who shall receive Awards, to determine the time or times of receipt, to determine the types of Awards and the number of shares covered by the Awards, to establish the terms, conditions, performance criteria, restrictions, and other provisions of such Awards, and (subject to the restrictions imposed by Section 14) to cancel or suspend Awards. In making such determinations, the Committee may take into account the nature of services rendered by the individual, the individual's present and potential contribution to the Company's success and such other factors as the Committee deems relevant. (ii) The Committee will have the authority and discretion to establish terms and conditions of Awards as the Committee determines to be necessary or appropriate to conform to applicable requirements or practices of jurisdictions outside of the United States. (iii) The Committee will have the authority and discretion to interpret the Plan, to establish, amend, and rescind any rules and regulations relating to the Plan, to determine the terms and provisions of any agreements made pursuant to the Plan, and to make all other determinations that may be necessary or advisable for the administration of the Plan. (iv) Any interpretation of the Plan by the Committee and any decision made by it under the Plan is final and binding. d) Delegation by Committee. Except to the extent prohibited by applicable law or the applicable rules of a stock exchange, the Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any person or persons selected by it. Any such allocation or delegation may be revoked by the Committee at any time. 9 14. AMENDMENTS OF THE PLAN The Committee may from time to time prescribe, amend and rescind rules and regulations relating to the Plan. Subject to the approval of the Board of Directors, where required, the Committee may at any time terminate, amend, or suspend the operation of the Plan, provided that no action shall be taken by the Committee to: a) permit granting of Stock Options at less than Fair Market Value; and b) except as provided in Section 6, permit the repricing of outstanding Stock Options. No termination, modification, suspension, or amendment of the Plan shall alter or impair the rights of any Participant pursuant to an outstanding Award without the consent of the Participant. There is no obligation for uniformity of treatment of Participants under the Plan. 15. FOREIGN JURISDICTIONS The Committee may adopt, amend, and terminate such arrangements, not inconsistent with the intent of the Plan, as it may deem necessary or desirable to make available tax or other benefits of the laws of any foreign jurisdiction, to employees of the Company who are subject to such laws and who receive Awards under the Plan. 16. NOTICES All notices to the Company regarding the Plan shall be in writing, effective as of actual receipt by the Company, and shall be sent to: General Mills, Inc. Number One General Mills Boulevard Minneapolis, Minnesota 55426 Attention: Corporate Compensation Effective September 28, 1998 As Amended December 13, 1999 As Amended July 1, 2000 As Amended December 17, 2001 As Amended May 17, 2002 10 EX-12 9 genmills023880_ex12.txt STATEMENT RE: COMPUTATION OF RATIOS EXHIBIT 12 GENERAL MILLS, INC. RATIO OF EARNINGS TO FIXED CHARGES
FISCAL YEAR ENDED ------------------------------------------------------------- May 26, May 27, May 28, May 30, May 31, 2002 2001 2000 1999 1998 ---- ---- ---- ---- ---- Ratio of Earnings to Fixed Charges 2.50 5.29 6.25 6.67 5.63
For purposes of computing the ratio of earnings to fixed charges, earnings represent pretax income from operations, plus pretax earnings or losses of joint ventures, plus fixed charges, less adjustment for capitalized interest. Fixed charges represent gross interest expense plus one-third (the proportion deemed representative of the interest factor) of rents of continuing operations. EX-13 10 genmills023880_ex13.txt 2002 ANNUAL REPORT TO STOCKHOLDERS EXHIBIT 13 MANAGEMENT'S DISCUSSION AND ANALYSIS ................................................................................. General Mills is a global consumer foods company. We compete in markets around the world by developing differentiated food products that consumers recognize as superior to alternative offerings. We market our value-added products under unique brand names, and build the equity of those brands with strong consumer-directed advertising and innovative merchandising. We believe this brand-building strategy is the key to winning and sustaining market share leadership. With the addition of the Pillsbury businesses, we have expanded our portfolio of leading consumer brands. We believe that this portfolio will generate superior financial returns for our share holders over the long term. Our financial performance is determined by how well we execute the key elements of our business model. These business drivers are: unit volume growth, which is the single most critical element; productivity initiatives, to mitigate the effects of cost inflation; efficient utilization of capital; and prudent management of risk. This section of the annual report discusses our critical accounting policies, the results of our operations, our liquidity and financial condition, and our risk management practices. CRITICAL ACCOUNTING POLICIES For a complete description of our significant accounting policies, please see Note One on page 24 of this report. Our critical accounting policies are those that have meaningful impact on the reporting of our financial condition and results, and that require significant management judgment and estimates. These policies include our accounting for (a) trade and consumer promotion activities; (b) asset impairments; and (c) income taxes. The amount and timing of expense recognition for trade and consumer promotion activities involve management judgment related to estimated participation and performance levels. The vast majority of year-end liabilities associated with these activities are resolved within the following fiscal year and therefore do not require highly uncertain long-term estimates. Evaluating the impairment of long-lived assets, including goodwill, involves management judgment in estimating the fair values and future cash flows related to these assets. Although the predictability of long-term cash flows may be somewhat uncertain, our evaluations indicate fair values of assets significantly in excess of stated book values. Therefore, we believe the risk of unrecognized impairment is low. Income tax expense involves management judgment as to the ultimate resolution of any tax issues. Historically, our assessments of the ultimate resolution of tax issues have been reasonably accurate. The current open issues are not dissimilar from historical items. NEW ACCOUNTING RULES ADOPTED In fiscal 2002, we adopted four new accounting policies, all required by new accounting standards. Each of these new rules is discussed in more detail in Note One (N) to the consolidated financial statements. At the beginning of the year, we adopted Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities," which requires all derivatives to be recorded at fair value on the balance sheet and establishes new accounting rules for hedging. The cumulative effect of adopting this accounting change was a $3 million after-tax charge to earnings and a $158 million after-tax charge to Accumulated Other Comprehensive Income, recorded in the first quarter of fiscal 2002. SFAS No. 141, "Business Combinations," requires all business combinations to be accounted for using the purchase method. The Pillsbury transaction was accounted for as a purchase. Under SFAS No. 142, "Goodwill and Other Intangible Assets," the amortization of goodwill is eliminated and goodwill is tested for impairment. We completed our assessment of goodwill in the second quarter of 2002 and found no impairment. In the fourth quarter of 2002, we adopted Emerging Issues Task Force (EITF) Issue 01-09, which resulted in the reclassification of certain coupon and trade promotion expenses from selling, general and administrative expenses to a reduction of net sales. All sales and selling, general and administrative expenses throughout this report and our consolidated financial statements reflect the adoption of Issue 01-09. 12 ................................................................................. RESULTS OF OPERATIONS - 2002 VS. 2001 The acquisition of The Pillsbury Company, on Oct. 31, 2001, significantly affected fiscal 2002 comparisons for our results of operations. Annual net sales rose 46 percent, to $7.95 billion, including seven months of Pillsbury results. Worldwide unit volume for fiscal 2002 was 49 percent above last year's. However, on a comparable basis, as if General Mills had owned Pillsbury for all of fiscal 2001 and 2002, worldwide unit volume grew only slightly. This performance, caused by the initial disruption of combining General Mills' and Pillsbury's organizations, was significantly below General Mills' historical trends and reduced our earnings in fiscal 2002. The Pillsbury acquisition also materially altered our business structure. Our Bakeries and Foodservice and International business segments, which now represent larger portions of our sales and earnings, have lower gross margins than General Mills' historical margin. These businesses also are generally supported with lower marketing spending as a percent of sales. Cost of goods sold as a percent of sales rose from 52 percent in fiscal 2001 to 60 percent in 2002. The increase was due to our new business structure, along with weak unit volume trends that greatly reduced operating leverage. Selling, general and administrative costs declined as a percent of sales, from 26 percent in fiscal 2001 to 24 percent in fiscal 2002. This reflects lower marketing spending levels in Bakeries and Foodservice and International, and the benefit of administrative cost synergies achieved in the second half of the year. Earnings before interest, taxes and unusual items (EBIT) grew 9 percent to $1.27 billion. Earnings after tax declined 10 percent before unusual items, reflecting the impact of additional interest expense associated with the Pillsbury acquisition. Average diluted shares outstanding were 342 million in 2002, up 17 percent from 292 million in fiscal 2001 due to the additional shares issued to Diageo. Diluted earnings per share excluding unusual items and the effect of adopting SFAS No. 133 discussed earlier were $1.70, 25 percent lower than the $2.28 earned in 2001 (comparable for the elimination of goodwill amortization). Our fiscal 2002 net results included unusual items expense of $190 million pretax, $120 million after tax, or 35 cents per diluted share. After unusual items and the accounting change, our net diluted EPS was $1.34 compared to $2.28 in fiscal 2001. These unusual expenses primarily were related to Pillsbury transaction and integration costs, and costs for reconfiguring General Mills' cereal manufacturing necessitated by the sale of our Toledo, Ohio, plant as required to obtain regulatory clearance for the acquisition of Pillsbury. Other fiscal 2002 unusual items included expenses related to our decision in fiscal 2001 to exit the Squeezit beverage business, flour mill restructuring/closing charges and expenses net of insurance recovery associated with a flash flood in July 2001 at our Cincinnati, Ohio, cereal plant. These expenses were partially offset by insurance settlement proceeds related to a 1994 oats handling incident. We anticipate additional unusual expense related to Pillsbury transaction and integration activities in fiscal 2003. Our current estimate of this unusual expense is approximately $100 million pretax. FISCAL 2002 OPERATING PROFIT BY SEGMENT (before unusual items) [PIE CHART] U.S. Retail 85% Bakeries and Foodservice 12% International 3% U.S. RETAIL SEGMENT Our U.S. Retail segment includes Big G cereals, Meals, Pillsbury USA, Baking Products, Snacks, Yoplait-Colombo and Small Planet Foods. Net sales for these operations totaled $6.14 billion in fiscal 2002, compared to $4.79 billion in fiscal 2001. Operating profits before unusual items totaled $1.07 billion, up 1 percent from the prior year. Comparable unit volume was 1 percent below the prior year, primarily due to the disruption caused by our sales force integration, as well as a reduced level of new products and promotional activity during the integration period. Volume gains in Yoplait-Colombo, Snacks and Pillsbury USA were more than offset by declines in Big G cereals, Meals and Baking Products. BAKERIES AND FOODSERVICE SEGMENT Our Bakeries and Foodservice business includes sales to wholesale and retail bakeries, foodservice distributors, convenience stores, vending and foodservice operators. Net sales for our Bakeries and Foodservice operations reached $1.03 billion in fiscal 2002 compared to $397 million in fiscal 2001, and operating profits before unusual items rose 60 percent to $146 million, reflecting the incremental contribution from Pillsbury's operations and good growth in General Mills' foodservice business. Comparable unit volume was essentially unchanged, reflecting overall weak foodservice industry trends and lower results for our in-store retail bakery segment. 13 INTERNATIONAL SEGMENT Our International operations include our business in Canada, as well as our consolidated operations in Europe, Asia and Latin America. With the addition of Pillsbury's international businesses, net sales for our International operations totaled $778 million in fiscal 2002 compared to $263 million in 2001. Operating profits before unusual items grew to $45 million, more than double last year's $17 million total. Comparable unit volume rose 4 percent for the year, driven by good growth in Canada, Europe and Asia. CORPORATE ITEMS Interest expense roughly doubled in fiscal 2002 to $416 million, as we incurred additional debt related to our Pillsbury acquisition and our repurchase of 55 million shares from Diageo. We have entered into interest rate swap contracts to lock in our interest rate on floating-rate debt. These contracts total a net $3.5 billion in notional amount and convert floating-rate debt to an average fixed rate of approximately 6 percent with maturities averaging three years. Taking into account the effect of these interest rate swaps, the average interest rate on our total debt is approximately 6 1/2 percent. For fiscal 2003, we estimate our interest expense will be approximately $600 million. Our effective tax rate in fiscal 2002 was 36 percent. We expect our tax rate for fiscal 2003 to be a maximum of 35 1/2 percent, and we may be able to reduce it further during the year. JOINT VENTURE EARNINGS (after tax, dollars in millions) [BAR CHART] 98 -9 99 -15 00 3 01 17 02 33 JOINT VENTURES General Mills' proportionate share of joint venture net sales grew to $777 million, compared to $666 million in fiscal 2001. Total after-tax earnings from joint venture operations reached $33 million in fiscal 2002, compared with $17 million reported a year earlier. Profits for Cereal Partners Worldwide (CPW), our joint venture with Nestle, and Snack Ventures Europe (SVE), our joint venture with PepsiCo, together grew to $31 million. In addition, Haagen-Dazs joint ventures established by Pillsbury in Asia contributed profits for the six months included in our results. These profit gains were partially offset by introductory marketing expense of 8th Continent, the Company's soymilk joint venture with DuPont. FISCAL 2001 RESULTS VS. 2000 In fiscal 2001, net sales grew 5 percent to $5.45 billion. Operating profits grew 6 percent to $1.17 billion before an unusual gain from a partial insurance settlement related to a 1994 oats handling incident. Earnings after tax excluding unusual items grew 5 percent to $643 million. Excluding unusual items, diluted earnings per share comparable for goodwill grew 10 percent to $2.28, up from $2.07 in fiscal 2000. Net earnings after tax were $665 million in fiscal 2001 compared to $614 million in fiscal 2000. Net earnings per diluted share comparable for goodwill were $2.35 compared to $2.07 in fiscal 2000. Net earnings per diluted share as reported were $2.28 vs. $2.00 in fiscal 2000. Total U.S. Retail unit volume grew 4 percent in fiscal 2001, led by gains in Big G cereals, Yoplait-Colombo and Snacks. Net sales grew 5 percent to $4.79 billion. Operating profits grew 4 percent to $1.06 billion. Foodservice results in 2001 included 9 percent unit volume growth. Net sales and operating profit each grew 12 percent, to $397 million and $91 million, respectively. International unit volume grew 10 percent with gains across our business. Net sales were up 2 percent to $263 million and operating profit was essentially flat at $17 million. Fiscal 2000 earnings before unusual items grew 8 percent to $614 million. Diluted earnings per share before unusual items and comparable for goodwill grew 12 percent to $2.07 from $1.85. Net earnings after tax grew to $614 million compared to $535 million for fiscal 1999. Net earnings per diluted share comparable for goodwill grew to $2.07 from $1.75. Net earnings per diluted share as reported increased to $2.00 from $1.70 in fiscal 1999. Net sales grew 7 percent to reach $5.2 billion. It is our view that changes in the general rate of inflation have not had a significant effect on profitability over the three most recent years. We attempt to minimize the effects of inflation through appropriate planning and operating practices. Our market risk management practices are discussed later in this section. CASH FLOWS Sources and uses of cash in the past three years are shown in the following table. Over the most recent three-year period, General Mills' operations have generated $2.4 billion in cash. In 2002, cash flow from operations totaled $916 million. That was up from the previous year due to higher operating earnings before depreciation, amortization and unusual items, as well as decreased use of working capital, partially offset by components of our earnings which did not generate operating cash flows: pension income and joint venture earnings. CASH FLOW FROM OPERATIONS (dollars in millions) [BAR CHART] 98 805 99 713 00 725 01 740 02 916 14 CASH SOURCES (USES)
In Millions, Fiscal Year 2002 2001 2000 - --------------------------------------------------------------------------------------------- From continuing operations $ 916 $ 740 $ 725 From discontinued operations (3) (3) (3) Fixed assets, net (485) (306) (262) Investments in businesses, intangibles and affiliates, net (3,688) (96) (295) Change in marketable securities 24 (28) (6) Proceeds from disposition of businesses 939 -- -- Other investments, net (61) (30) (1) Increase in outstanding debt, net 5,746 183 956 Proceeds from minority investors 150 -- -- Common stock issued 139 107 76 Treasury stock purchases (2,436) (226) (820) Dividends paid (358) (312) (329) Other 28 10 (20) - --------------------------------------------------------------------------------------------- Increase in Cash and Cash Equivalents $ 911 $ 39 $ 21 =============================================================================================
In fiscal 2002, capital investment for fixed assets grew to $540 million, including seven months of Pillsbury fixed asset spending. We expect capital expenditures to increase in fiscal 2003, to approximately $750 million. Regular capital investment will grow as we support a full year of Pillsbury-related fixed asset spending. We also plan to add capacity for fast-growing businesses such as YOPLAIT yogurt. In addition, we have two acquisition-related projects requiring capital expenditures in 2003. We have construction costs to expand our headquarters so that we can consolidate at one location. We also are integrating Pillsbury into General Mills' information systems. In order to obtain regulatory clearance for the acquisition of Pillsbury, we arranged to divest certain businesses as described more fully in Note Two on page 26 of this report. In addition, Nestle USAexercised its right, triggered by the change of ownership of Pillsbury, to purchase our stake in a joint venture. Net cash proceeds from these dispositions of $939 million were used to reduce our debt level. Dividends in 2002 totaled $1.10 per share, a payout of 65 percent of diluted earnings per share before unusual items. We intend to maintain the prevailing $1.10 annual dividend rate per share in fiscal 2003. We currently estimate that average diluted shares outstanding in fiscal 2003 will increase to 382 million. Cash used for share repurchases in 2002 totaled $2.44 billion. Of that, $2.32 billion was used to repurchase 55 million shares from Diageo at a price of $42.14 per share. The company repurchased an additional 3.2 million shares on the open market at an average price of approximately $28, net of put and call option premiums. We do not expect to repurchase any significant number of shares in fiscal 2003. FINANCIAL CONDITION Our balance sheet changed significantly with the acquisition of Pillsbury. As shown in the table below, our adjusted debt plus minority interest grew to over $9 billion, and our stockholders' equity grew to $3.6 billion due to the net 79 million shares issued to Diageo. The market value of General Mills stockholders' equity increased as well, due to price appreciation and the increase in shares outstanding. As of May 26, 2002, our equity market capitalization was $16.6 billion, based on a price of $45.10 per share with 367 million basic shares outstanding. Our total market capitalization, including debt, minority interest and equity capital, is shown in the chart at right. TOTAL CAPITALIZATION (at fiscal year-end, dollars in billions) [BAR CHART] ADJUSTED DEBT MARKET VALUE OF EQUITY PLUS MINORITY INTEREST 00 11.7 3.5 01 12.0 3.6 02 16.6 9.1 CAPITAL STRUCTURE
In Millions MAY 26, 2002 May 27, 2001 - ------------------------------------------------------------------------------------ Notes payable $ 3,600 $ 858 Current portion of long-term debt 248 349 Long-term debt 5,591 2,221 Deferred income taxes - tax leases 71 74 - ------------------------------------------------------------------------------------ Total debt 9,510 3,502 Debt adjustments: Leases - debt equivalent 423 266 Certain cash and cash equivalents (894) -- Marketable investments, at cost (135) (143) - ------------------------------------------------------------------------------------ Adjusted debt 8,904 3,625 Minority interest 153 -- - ------------------------------------------------------------------------------------ Adjusted debt plus minority interest 9,057 3,625 Stockholders' equity 3,576 52 - ------------------------------------------------------------------------------------ Total Capital $ 12,633 $ 3,677 ====================================================================================
On Oct. 31, 2001, when we acquired Pillsbury, the associated debt we took on was primarily short term. In February 2002, we issued $3.5 billion in five- and 10-year bonds, replacing a portion of that short-term debt. As discussed earlier, we have entered into interest rate swap contracts to lock in our interest rate on our floating-rate debt. Combined, nearly 90 percent of our debt is now fixed rate. We consider our leases and deferred income taxes related to tax leases as part of our debt structure, and both are fixed-rate obligations. The next table, when reviewed in conjunction with the capital structure table, shows the composition of our debt structure including the impact of using derivative instruments. 15 DEBT STRUCTURE
In Millions MAY 26, 2002 May 27, 2001 - ------------------------------------------------------------------------------------ Floating-rate $ 602 7% $1,974 55% Fixed-rate 7,961 88% 1,311 36% Leases - debt equivalent 423 4% 266 7% Deferred income taxes - tax leases 71 1% 74 2% - ------------------------------------------------------------------------------------ Adjusted Debt plus Minority Interest $9,057 100% $3,625 100% ====================================================================================
At the end of fiscal 2002, approximately half of our debt was long term, 41 percent was short term (excluding the impact of reclassification from our long-term credit facility), and the balance was leases and tax-benefit leases. We plan to refinance the majority of our short-term debt with long-term debt in fiscal 2003. Commercial paper is a continuing source of short-term financing. We can issue commercial paper in the United States and Canada, as well as in Europe through a program established in fiscal 1999. The table below details the fee-paid credit lines we had available as of May 26, 2002. We have $4 billion in committed credit lines available to us, $2.1 billion as part of our core facilities and $1.9 billion as part of a bridge facility we set up at the time of the acquisition. Additionally, we have $45 million in uncommitted credit lines available. COMMITTED CREDIT FACILITIES
Amount Expiration - -------------------------------------------------------------------------------------- Core Facilities $1.05 billion January 2003 $1.05 billion January 2006 Bridge Facility $1.90 billion October 2002 - -------------------------------------------------------------------------------------- Total Credit Lines $4.00 billion ======================================================================================
We believe that two important measures of financial strength are the ratios of fixed charge coverage and cash flow to debt. With the increased debt associated with our acquisition, our fixed charge coverage in fiscal 2002 was 2.9 times before unusual items, and cash flow to debt was 10 percent. We do not expect to pay down any significant amount of debt in 2003. However, given the cash generating nature of our business, we expect that stronger cash flow over the following years will allow us to reduce our debt and significantly strengthen our ratios. Our goal is to return to a mid single-A rating for our long-term debt, and to the top tier short-term rating, where we were prior to our announcement of the Pillsbury acquisition. Currently, Standard and Poor's Corporation has ratings of "BBB+" on our publicly held long-term debt and "A-2" on our commercial paper. Moody's Investors Services, Inc. has ratings of "Baa1" for our long-term debt and "P-2" for our commercial paper. Fitch Ratings, Inc. rates our long-term debt "BBB+" and our commercial paper "F-2." Dominion Bond Rating Service in Canada currently rates General Mills as "A-low." In fiscal 2002, we established a minority interest structure, which provides some attractive opportunities for us to refinance some of our short-term debt. In May, we sold a minority interest in a subsidiary to a third-party investor for $150 million. This subsidiary holds some of our manufacturing assets and trademarks. All assets, liabilities and results of operations of the subsidiary are reflected in our financial statements, and the third party's investment is reflected as minority interest on our balance sheet. We did not have any preferred distribution obligations to the third-party investor in fiscal 2002. We may sell additional minority interests, as this structure may provide favorable financing terms, be viewed more positively by the rating agencies and generate tax efficiencies. Subsequent to fiscal year end, we sold a minority interest in another subsidiary for $150 million. For more information on these minority interests, refer to Note Nine on page 32 of this report. CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS LONG-TERM FINANCIAL OBLIGATIONS
Less Than In Millions, Payments Due by Period Total 1 Year 1-3 Years 4-5 Years After 5 Years - --------------------------------------------------------------------------------------------------- Long-term debt, including current maturities $5,839 $ 248 $ 329 $1,590 $3,672 Operating leases 287 59 79 53 96 - --------------------------------------------------------------------------------------------------- Total $6,126 $ 307 $ 408 $1,643 $3,768 ===================================================================================================
Our other commercial commitments as of May 26, 2002, include: * Guarantees of approximately $212 million of debt and other obligations of unconsolidated affiliates, primarily CPW and SVE. * Commitments for the purchase of goods, services and equipment to be used in the production of our products for approximately $500 million with terms up to three years. These commitments do not exceed projected requirements over the related terms and are in the normal course of business. We are contingently liable for the payment of up to $395 million to Diageo, depending on the General Mills stock price during the 20-day period preceding April 30, 2003. EURO CONVERSION Twelve of the 15 member countries of the European Economic and Monetary Union adopted the euro as a common legal currency in January 2002. General Mills' operating subsidiaries affected have addressed the systems and business issues raised by the euro currency conversion. These issues included, among others (1) the need to adapt computer and other business systems and equipment to accommodate euro-denominated transactions; and (2) the competitive impact of cross-border price transparency. The euro conversion has not had material impact on General Mills' operations or financial results. 16 MARKET RISK MANAGEMENT Our Company is exposed to market risk stemming from changes in interest rates, foreign exchange rates and commodity prices. Changes in these factors could cause fluctuations in our earnings and cash flows. In the normal course of business, we actively manage our exposure to these market risks by entering into various hedging transactions, authorized under company policies that place clear controls on these activities. The counterparties in these transactions are highly rated financial institutions. Our hedging transactions include (but are not limited to) the use of a variety of derivative financial instruments. We use derivatives only where there is an underlying exposure; we do not use them for trading or speculative purposes. Additional information regarding our use of financial instruments is included in Note Seven to the consolidated financial statements. INTEREST RATES - We manage our debt structure and our interest rate risk through the use of fixed- and floating-rate debt, and through the use of derivatives. We use interest rate swaps to hedge our exposure to interest rate changes, and also to lower our financing costs. Generally under these swaps, we agree with a counterparty to exchange the difference between fixed-rate and floating-rate interest amounts based on an agreed notional principal amount. Our primary exposure is to U.S. interest rates. FOREIGN CURRENCY RATES - Foreign currency fluctuations can affect our net investments and earnings denominated in foreign currencies. We primarily use foreign currency forward contracts and option contracts to selectively hedge our cash flow exposure to changes in exchange rates. These contracts function as hedges, since they change in value inversely to the change created in the underlying exposure as foreign exchange rates fluctuate. Our primary exchange rate exposure is with the Canadian dollar, the euro, the Japanese yen and the British pound against the U.S. dollar. COMMODITIES - Certain ingredients used in our products are exposed to commodity price changes. We manage this risk through an integrated set of financial instruments, including purchase orders, noncancelable contracts, futures contracts, futures options and swaps. Our primary commodity price exposures are to cereal grains, sugar, vegetables, fruits, other agricultural products, vegetable oils, packaging materials and energy costs. VALUE AT RISK - These estimates are intended to measure the maximum potential fair value General Mills could lose in one day from adverse changes in market interest rates, foreign exchange rates or commodity prices, under normal market conditions. A Monte Carlo (VAR) methodology was used to quantify the market risk for our exposures. The models assumed normal market conditions and used a 95 percent confidence level. The VAR calculation used historical interest rates, foreign exchange rates and commodity prices from the past year to estimate the potential volatility and correlation of these rates in the future. The market data were drawn from the RiskMetrics(TM) data set. The calculations are not intended to represent actual losses in fair value that we expect to incur. Further, since the hedging instrument (the derivative) inversely correlates with the underlying exposure, we would expect that any loss or gain in the fair value of our derivatives would be generally offset by an increase or decrease in the fair value of the underlying exposures. The positions included in the calculations were: debt; investments; interest rate swaps; foreign exchange forwards and options; and commodity swaps, futures and options. The calculations do not include the underlying foreign exchange and commodities-related positions that are hedged by these market-risk-sensitive instruments. The table below presents the estimated maximum potential one-day loss in fair value for our interest rate, foreign currency and commodity market-risk-sensitive instruments outstanding on May 26, 2002. The amounts were calculated using the VAR methodology described earlier.
Fair Value Impact - ------------------------------------------------------------------------------------------ In Millions AT MAY 26, 2002 Average during 2002 At May 27, 2001 - ------------------------------------------------------------------------------------------ Interest rate instruments $39 $36 $28 Foreign currency instruments 1 1 1 Commodity instruments 1 1 1 ==========================================================================================
FORWARD-LOOKING STATEMENTS Throughout this report to shareholders, we discuss some of our expectations regarding the Company's future performance. All of these forward-looking statements are based on our current expectations and assumptions. Such statements are subject to certain risk and uncertainties that could cause actual results to differ. In particular, our predictions about future volume and earnings could be affected by difficulties resulting from the Pillsbury acquisition, such as integration problems; failure to achieve synergies; unanticipated liabilities; inexperience in new business lines; and changes in the competitive environment. Our future results also could be affected by a variety of additional factors such as: competitive dynamics in the U.S. ready-to-eat cereal market, including pricing and promotional spending levels by competitors; the impact of competitive products and pricing; product development; actions of competitors other than as described above; acquisitions or disposals of business assets; changes in capital structure; changes in laws and regulations, including changes in accounting standards; customer demand; effectiveness of advertising and marketing spending or programs; consumer perception of health-related issues; and economic conditions including currency rate fluctuations. The Company undertakes no obligation to publicly revise any forward-looking statements to reflect future events or circumstances. 17 SIX-YEAR FINANCIAL SUMMARY General Mills, Inc. 2002
In Millions, Except per Share Data MAY 26, 2002 May 27, 2001 May 28, 2000 May 30, 1999 May 31, 1998 - --------------------------------------------------------------------------------------------------------------------- FINANCIAL RESULTS Earnings per share - basic $ 1.38 $ 2.34 $ 2.05 $ 1.74 $ 1.33 Earnings per share - diluted 1.34 2.28 2.00 1.70 1.30 Dividends per share 1.10 1.10 1.10 1.08 1.06 Return on average total capital 9.1% 23.6% 24.4% 23.7% 20.0% Net sales 7,949 5,450 5,173 4,834 4,736 Costs and expenses: Cost of sales 4,767 2,841 2,698 2,593 2,538 Selling, general and administrative 1,909 1,440 1,376 1,223 1,248 Interest, net 416 206 152 119 117 Unusual expenses (income) 190 (35) -- 41 156 Earnings before taxes and earnings (losses) of joint ventures 667 998 947 858 677 Income taxes 239 350 336 308 246 Earnings (losses) of joint ventures 33 17 3 (15) (9) Earnings before accounting changes 461 665 614 535 422 Accounting changes (3) -- -- -- -- Earnings including accounting changes 458 665 614 535 422 Earnings before interest, taxes and unusual items 1,273 1,169 1,099 1,018 950 Earnings before interest, taxes and unusual items as a % of sales 16.0% 21.4% 21.2% 21.1% 20.1% Earnings before interest, taxes, depreciation, amortization and unusual items 1,569 1,392 1,308 1,212 1,145 Earnings as a % of sales 5.8% 12.2% 11.9% 11.1% 8.9% Average common shares: Basic 331 284 299 306 316 Diluted 342 292 307 315 325 - --------------------------------------------------------------------------------------------------------------------- FINANCIAL POSITION Total assets 16,540 5,091 4,574 4,141 3,861 Land, buildings and equipment, net 2,764 1,501 1,405 1,295 1,186 Working capital at year-end (2,310) (801) (1,339) (598) (408) Long-term debt, excluding current portion 5,591 2,221 1,760 1,702 1,640 Stockholders' equity 3,576 52 (289) 164 190 - --------------------------------------------------------------------------------------------------------------------- OTHER STATISTICS Total dividends 358 312 329 331 336 Purchases of land, buildings and equipment 506 307 268 281 184 Research and development 131 83 77 70 66 Advertising media expenditures 489 358 361 348 366 Wages, salaries and employee benefits 1,105 666 644 636 608 Number of employees (actual) 29,859 11,001 11,077 10,664 10,228 - --------------------------------------------------------------------------------------------------------------------- Common stock price: High for year 52.86 46.35 43.94 42.34 39.13 Low for year 41.61 31.38 29.38 29.59 30.00 Year-end 45.10 42.20 41.00 40.19 34.13 =====================================================================================================================
ALL SHARE AND PER SHARE DATA HAVE BEEN ADJUSTED FOR THE TWO-FOR-ONE STOCK SPLIT IN NOVEMBER 1999. ALL SALES-RELATED AND SELLING, GENERAL AND ADMINISTRATIVE INFORMATION PRIOR TO FISCAL 2002 HAS BEEN RESTATED FOR THE ADOPTION OF EITF ISSUE 01-09. 18 INDEPENDENT AUDITORS' REPORT The Stockholders and the Board of Directors of General Mills, Inc.: We have audited the accompanying consolidated balance sheets of General Mills, Inc. and subsidiaries as of May 26, 2002 and May 27, 2001, and the related consolidated statements of earnings, stockholders' equity and cash flows for each of the fiscal years in the three-year period ended May 26, 2002. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of General Mills, Inc. and subsidiaries as of May 26, 2002 and May 27, 2001, and the results of their operations and their cash flows for each of the fiscal years in the three-year period ended May 26, 2002 in conformity with accounting principles generally accepted in the United States of America. /s/ KPMG LLP Minneapolis, Minnesota June 24, 2002 19 CONSOLIDATED STATEMENTS OF EARNINGS General Mills, Inc. 2002
In Millions, Except per Share Data, Fiscal Year Ended MAY 26, 2002 May 27, 2001 May 28, 2000 - --------------------------------------------------------------------------------------------------------------------- Net Sales $ 7,949 $ 5,450 $ 5,173 Costs and Expenses: Cost of sales 4,767 2,841 2,698 Selling, general and administrative 1,909 1,440 1,376 Interest, net 416 206 152 Unusual items - expense (income) 190 (35) -- - --------------------------------------------------------------------------------------------------------------------- Total Costs and Expenses 7,282 4,452 4,226 - --------------------------------------------------------------------------------------------------------------------- Earnings before Taxes and Earnings from Joint Ventures 667 998 947 Income Taxes 239 350 336 Earnings from Joint Ventures 33 17 3 - --------------------------------------------------------------------------------------------------------------------- Earnings before Cumulative Effect of Change in Accounting Principle 461 665 614 Cumulative Effect of Change in Accounting Principle (3) -- -- - --------------------------------------------------------------------------------------------------------------------- Net Earnings $ 458 $ 665 $ 614 ===================================================================================================================== Earnings per Share - Basic: Earnings before cumulative effect of change in accounting principle $ 1.39 $ 2.34 $ 2.05 Cumulative effect of change in accounting principle (.01) -- -- - --------------------------------------------------------------------------------------------------------------------- Net Earnings per Share - Basic $ 1.38 $ 2.34 $ 2.05 ===================================================================================================================== Average Number of Common Shares 331 284 299 ===================================================================================================================== Earnings per Share - Diluted: Earnings before cumulative effect of change in accounting principle $ 1.35 $ 2.28 $ 2.00 Cumulative effect of change in accounting principle (.01) -- -- - --------------------------------------------------------------------------------------------------------------------- Net Earnings per Share - Diluted $ 1.34 $ 2.28 $ 2.00 ===================================================================================================================== Average Number of Common Shares - Assuming Dilution 342 292 307 =====================================================================================================================
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 20 CONSOLIDATED BALANCE SHEETS General Mills, Inc. 2002
In Millions MAY 26, 2002 May 27, 2001 - --------------------------------------------------------------------------------------------------------------------- ASSETS Current Assets: Cash and cash equivalents $ 975 $ 64 Receivables, less allowance for doubtful accounts of $21 in 2002 and $6 in 2001 1,010 664 Inventories 1,055 519 Prepaid expenses and other current assets 156 99 Deferred income taxes 241 62 - --------------------------------------------------------------------------------------------------------------------- Total Current Assets 3,437 1,408 Land, Buildings and Equipment at cost, net 2,764 1,501 Goodwill 8,473 804 Other Intangible Assets 90 66 Other Assets 1,776 1,312 - --------------------------------------------------------------------------------------------------------------------- Total Assets $ 16,540 $ 5,091 ===================================================================================================================== LIABILITIES AND EQUITY Current Liabilities: Accounts payable $ 1,217 $ 619 Current portion of long-term debt 248 349 Notes payable 3,600 858 Other current liabilities 682 383 - --------------------------------------------------------------------------------------------------------------------- Total Current Liabilities 5,747 2,209 Long-term Debt 5,591 2,221 Deferred Income Taxes 336 349 Deferred Income Taxes - Tax Leases 71 74 Other Liabilities 1,066 186 - --------------------------------------------------------------------------------------------------------------------- Total Liabilities 12,811 5,039 - --------------------------------------------------------------------------------------------------------------------- Minority Interest 153 -- Stockholders' Equity: Cumulative preference stock, none issued -- -- Common stock, 502 shares issued in 2002 and 408 shares issued in 2001 5,733 745 Retained earnings 2,568 2,468 Less common stock in treasury, at cost, 135 shares in 2002 and 123 shares in 2001 (4,292) (3,014) Unearned compensation (57) (54) Accumulated other comprehensive income (376) (93) - --------------------------------------------------------------------------------------------------------------------- Total Stockholders' Equity 3,576 52 - --------------------------------------------------------------------------------------------------------------------- Total Liabilities and Equity $ 16,540 $ 5,091 =====================================================================================================================
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 21 CONSOLIDATED STATEMENTS OF CASH FLOWS General Mills, Inc. 2002
In Millions, Fiscal Year Ended MAY 26, 2002 May 27, 2001 May 28, 2000 - ---------------------------------------------------------------------------------------------------------------------------------- Cash Flows - Operating Activities: Net earnings $ 458 $ 665 $ 614 Adjustments to reconcile net earnings to cash flow: Depreciation and amortization 296 223 209 Deferred income taxes 93 49 44 Changes in current assets and liabilities, excluding effects from businesses acquired 37 (73) (126) Tax benefit on exercised options 46 33 34 Cumulative effect of change in accounting principle 3 -- -- Unusual items expense (income) 190 (35) -- Other, net (207) (122) (50) - ---------------------------------------------------------------------------------------------------------------------------------- Cash provided by continuing operations 916 740 725 Cash used by discontinued operations (3) (3) (3) - ---------------------------------------------------------------------------------------------------------------------------------- Net Cash Provided by Operating Activities 913 737 722 - ---------------------------------------------------------------------------------------------------------------------------------- Cash Flows - Investment Activities: Purchases of land, buildings and equipment (506) (307) (268) Investments in businesses, intangibles and affiliates, net of investment returns and dividends (3,688) (96) (295) Purchases of marketable securities (46) (98) (18) Proceeds from sale of marketable securities 70 70 12 Proceeds from disposal of land, buildings and equipment 21 1 6 Proceeds from disposition of businesses 939 -- -- Other, net (61) (30) (1) - ---------------------------------------------------------------------------------------------------------------------------------- Net Cash Used by Investment Activities (3,271) (460) (564) - ---------------------------------------------------------------------------------------------------------------------------------- Cash Flows - Financing Activities: Change in notes payable 2,688 295 566 Issuance of long-term debt 3,485 296 501 Payment of long-term debt (427) (408) (111) Proceeds from minority investors 150 -- -- Common stock issued 139 107 76 Purchases of common stock for treasury (2,436) (226) (820) Dividends paid (358) (312) (329) Other, net 28 10 (20) - ---------------------------------------------------------------------------------------------------------------------------------- Net Cash Provided (Used) by Financing Activities 3,269 (238) (137) - ---------------------------------------------------------------------------------------------------------------------------------- Increase in Cash and Cash Equivalents 911 39 21 Cash and Cash Equivalents - Beginning of Year 64 25 4 - ---------------------------------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents - End of Year $ 975 $ 64 $ 25 ================================================================================================================================== Cash Flows from Changes in Current Assets and Liabilities, Excluding Effects from Businesses Acquired: Receivables $ 265 $ (94) $ 11 Inventories (12) (9) (51) Prepaid expenses and other current assets 12 (17) (5) Accounts payable (90) 7 (50) Other current liabilities (138) 40 (31) - ---------------------------------------------------------------------------------------------------------------------------------- Changes in Current Assets and Liabilities $ 37 $ (73) $ (126) ==================================================================================================================================
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 22 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY General Mills, Inc. 2002
$.10 Par Value Common Stock (One Billion Shares Authorized) ----------------------------------- Accumulated Issued Treasury Other ----------------------------------- Retained Unearned Comprehensive In Millions, Except per Share Data Shares Amount Shares Amount Earnings Compensation Income Total - ----------------------------------------------------------------------------------------------------------------------------------- BALANCE AT MAY 30, 1999 408 $ 658 (104) $(2,195) $ 1,828 $ (69) $ (57) $ 165 =================================================================================================================================== Comprehensive Income: Net earnings 614 614 Other comprehensive income, net of tax: Unrealized losses on securities (8) (8) Foreign currency translation (22) (22) Minimum pension liability adjustment 1 1 - ----------------------------------------------------------------------------------------------------------------------------------- Other comprehensive income (29) (29) ------------------ Total comprehensive income 585 - ----------------------------------------------------------------------------------------------------------------------------------- Cash dividends declared ($1.10 per share), net of income taxes of $1 (328) (328) Stock compensation plans (includes income tax benefits of $39) -- 25 4 101 126 Shares purchased (23) (848) (848) Put and call option premiums/settlements, net -- (2) -- 7 5 Unearned compensation related to restricted stock awards (13) (13) Earned compensation and other 19 19 - ----------------------------------------------------------------------------------------------------------------------------------- BALANCE AT MAY 28, 2000 408 $ 681 (123) $(2,935) $ 2,114 $ (63) $ (86) $ (289) =================================================================================================================================== Comprehensive Income: Net earnings 665 665 Other comprehensive income, net of tax: Unrealized losses on securities 5 5 Foreign currency translation (7) (7) Minimum pension liability adjustment (5) (5) - ----------------------------------------------------------------------------------------------------------------------------------- Other comprehensive income (7) (7) ------------------ Total comprehensive income 658 - ----------------------------------------------------------------------------------------------------------------------------------- Cash dividends declared ($1.10 per share), net of income taxes of $1 (311) (311) Stock compensation plans (includes income tax benefits of $38) -- 34 5 124 158 Shares purchased (5) (198) (198) Put and call option premiums/settlements, net -- 30 -- (5) 25 Unearned compensation related to restricted stock awards (13) (13) Earned compensation and other 22 22 - ----------------------------------------------------------------------------------------------------------------------------------- BALANCE AT MAY 27, 2001 408 $ 745 (123) $(3,014) $ 2,468 $ (54) $ (93) $ 52 =================================================================================================================================== Comprehensive Income: Net earnings 458 458 Other comprehensive income, net of tax: Cumulative effect of adopting SFAS No. 133 (158) (158) Unrealized losses on hedge derivatives (114) (114) Unrealized losses on securities (11) (11) Foreign currency translation (4) (4) Minimum pension liability adjustment 4 4 - ----------------------------------------------------------------------------------------------------------------------------------- Other comprehensive income (283) (283) ------------------ Total comprehensive income 175 - ----------------------------------------------------------------------------------------------------------------------------------- Cash dividends declared ($1.10 per share), net of income taxes of $1 (358) (358) Shares issued for acquisition 94 4,902 40 992 5,894 Shares repurchased from Diageo (55) (2,318) (2,318) Stock compensation plans (includes income tax benefits of $53) -- 46 6 176 222 Shares purchased (3) (119) (119) Put and call option premiums/settlements, net -- 40 -- (9) 31 Unearned compensation related to restricted stock awards (29) (29) Earned compensation and other 26 26 - ----------------------------------------------------------------------------------------------------------------------------------- BALANCE AT MAY 26, 2002 502 $5,733 (135) $(4,292) $ 2,568 $ (57) $ (376) $ 3,576 ===================================================================================================================================
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 23 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Preparing our consolidated financial statements in conformity with generally accepted U.S. accounting principles requires us to make estimates and assumptions that affect reported amounts of assets, liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from our estimates. Certain prior years' amounts have been reclassified to conform with the current year presentation. (A) PRINCIPLES OF CONSOLIDATION - Our consolidated financial statements include parent company operations and majority-owned subsidiaries as well as General Mills' investment in and share of net earnings or losses of 20- to 50-percent-owned companies, which are recorded on an equity basis. Our fiscal year ends on the last Sunday in May. Years 2002, 2001 and 2000 each consisted of 52 weeks. Our wholly owned international operations, with the exception of Canada and our export operations, are reported for the 12 calendar months ending April 30. The results of the acquired Pillsbury operations are reflected in our financial results from Nov. 1, 2001. (B) LAND, BUILDINGS, EQUIPMENT AND DEPRECIATION - Buildings and equipment are depreciated over estimated useful lives, primarily using the straight-line method. Buildings are usually depreciated over 40 to 50 years, and equipment is depreciated over three to 15 years. Depreciation charges for 2002, 2001 and 2000 were $283 million, $194 million and $183 million, respectively. Accelerated depreciation methods generally are used for income tax purposes. When an item is sold or retired, the accounts are relieved of its cost and related accumulated depreciation; the resulting gains and losses, if any, are recognized. (C) INVENTORIES - Inventories are valued at the lower of cost or market. We generally use the LIFO method of valuing inventory because we believe that it is a better match with current revenues. However, FIFO is used for most foreign operations, where LIFO is not recognized for income tax purposes and the operations often lack the staff to handle LIFO complexities accurately. (D) INTANGIBLE ASSETS - Goodwill represents the difference between the purchase prices of acquired companies and the related fair values of net assets acquired and accounted for by the purchase method of accounting. On May 28, 2001, we adopted Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Intangible Assets." This Statement eliminates the amortization of goodwill and instead requires that goodwill be tested annually for impairment. See Note One (N) for the effects of this adoption. The costs of patents, copyrights and other amortizable intangible assets are amortized evenly over their estimated useful lives. (E) RECOVERABILITY OF LONG-LIVED ASSETS - We review long-lived assets, including identifiable intangibles and goodwill, for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An asset is deemed impaired and written down to its fair value if estimated related future cash flows are less than its carrying amount. (F) FOREIGN CURRENCY TRANSLATION - For most of our foreign operations, local currencies are considered the functional currency. Assets and liabilities are translated using exchange rates in effect at the balance sheet date. Results of operations are translated using the average exchange rates prevailing throughout the period. Translation effects are classified within Accumulated Other Comprehensive Income in Stockholders' Equity. (G) FINANCIAL INSTRUMENTS - See Note One (N) for a description of our adoption of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." See Note Seven for a description of our accounting policies related to financial instruments. (H) REVENUE RECOGNITION - We recognize sales upon shipment to our customers. (I) RESEARCH AND DEVELOPMENT - All expenditures for research and development are charged against earnings in the year incurred. The charges for 2002, 2001 and 2000 were $131 million, $83 million and $77 million, respectively. (J) ADVERTISING COSTS - Advertising expenses (including production and communication costs) for 2002, 2001 and 2000 were $489 million, $358 million and $361 million, respectively. Prepaid advertising costs (including syndication properties) of $36 million and $34 million were reported as assets at May 26, 2002, and May 27, 2001, respectively. We expense the production costs of advertising the first time that the advertising takes place. (K) STOCK-BASED COMPENSATION - We use the intrinsic value method for measuring the cost of compensation paid in Company common stock. This method defines our cost as the excess of the stock's market value at the time of the grant over the amount that the employee is required to pay. Our stock option plans require that the employee's payment (i.e., exercise price) be the market value as of the grant date. (L) EARNINGS PER SHARE - Basic Earnings per Share (EPS) is computed by dividing net earnings by the weighted average number of common shares outstanding. Diluted EPS includes the effect of all dilutive potential common shares (primarily related to outstanding in-the-money stock options). (M) CASH AND CASH EQUIVALENTS - We consider all investments purchased with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents totaling $77 million are designated as collateral for certain derivative liabilities. 24 (N) ACCOUNTING RULES ADOPTED - On the first day of fiscal 2002, we adopted three new accounting rules. SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," requires all derivatives to be recorded at fair value on the balance sheet and establishes new accounting rules for hedging. We recorded the cumulative effect of adopting this accounting change, as follows:
Included in Accumulated Included Other in Comprehensive In Millions, Except per Share Data Earnings Income - ------------------------------------------------------------------------------------------ Pretax $ (5) $(251) Income tax effects 2 93 - ------------------------------------------------------------------------------------------ Total $ (3) (158) ========================================================================================== Per Diluted Share Net Earnings Effect $(.01) ==========================================================================================
This cumulative effect was primarily associated with the impact of lower interest rates on the fair-value calculation for delayed-starting interest rate swaps we entered into in anticipation of our Pillsbury acquisition and other financing requirements. Refer to Note Seven and Note Ten for more information. We also adopted SFAS No. 141, "Business Combinations," which requires use of the purchase method of accounting for all business combinations initiated after June 30, 2001. The third Statement we adopted at the start of the year was SFAS No. 142, "Goodwill and Intangible Assets." This Statement eliminates the amortization of goodwill and instead requires that goodwill be tested annually for impairment. Goodwill amortization expense in fiscal 2001 totaled $23 million pretax, $22 million after tax. Transitional impairment tests of our goodwill did not require adjustment to any of our goodwill carrying values. The following table adjusts earnings and earnings per share for the adoption of SFAS No. 142.
In Millions, Except per Share Data, Fiscal Year Ended MAY 26, 2002 May 27, 2001 May 28, 2000 - ---------------------------------------------------------------------------------------------------- Reported Net Earnings: $ 458 $ 665 $ 614 Addback goodwill amortization -- 22 21 - ---------------------------------------------------------------------------------------------------- Adjusted Net Earnings $ 458 $ 687 $ 635 ==================================================================================================== Basic Earnings per Share: Reported EPS - basic $ 1.38 $ 2.34 $ 2.05 Addback goodwill amortization -- .08 .07 - ---------------------------------------------------------------------------------------------------- Adjusted Basic EPS $ 1.38 $ 2.42 $ 2.12 ==================================================================================================== Diluted Earnings per Share: Reported EPS - diluted $ 1.34 $ 2.28 $ 2.00 Addback goodwill amortization -- .07 .07 - ---------------------------------------------------------------------------------------------------- Adjusted Diluted EPS $ 1.34 $ 2.35 $ 2.07 ====================================================================================================
The Financial Accounting Standard Board's (FASB's) Emerging Issues Task Force (EITF) Issue 01-09, "Accounting for Consideration Given by a Vendor to a Customer or a Reseller of the Vendor's Products," requires recording certain coupon and trade promotion expenses as reductions of revenues and was effective for us in our fourth quarter 2002. Since adopting this requirement resulted only in the reclassification of certain expenses from selling, general and administrative expense to a reduction of net sales, it did not affect our financial position or net earnings. The impact was a reduction of net sales, and a corresponding reduction in selling, general and administrative expense, of $2,246 million, $1,628 million and $1,527 million in 2002, 2001 and 2000, respectively. (O) NEW ACCOUNTING RULES - In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 requires that a single accounting model be used for long-lived assets to be disposed of by sale, and broadens the presentation of discontinued operations to include more disposal transactions. SFAS No. 144 is effective for us with the beginning of fiscal 2003. We do not expect the adoption of SFAS No. 144 to have a material impact on the Company's financial statements. 2. ACQUISITIONS On Oct. 31, 2001, we acquired the worldwide Pillsbury operations from Diageo plc (Diageo). Pillsbury, based in Minneapolis, Minn., has built a portfolio of leading food brands, such as PILLSBURY refrigerated dough, GREEN GIANT, OLD EL PASO, PROGRESSO and TOTINO'S. Pillsbury had sales of $6.1 billion (before EITF Issue 01-09 reclassification) in its fiscal year ended June 30, 2001, including businesses subsequently divested. We believe the addition of Pillsbury's businesses will enhance our future growth and generate significant cost synergies. The transaction was accounted for as a purchase. Under terms of the agreement between General Mills and Diageo, we acquired Pillsbury in a stock and cash transaction. Consideration to Diageo included 134 million General Mills common shares. Under a stockholders' agreement, Diageo had a put option to sell directly to us 55 million shares of General Mills common stock at a price of $42.14 per share, which Diageo exercised on Nov. 1, 2001. Therefore, those 55 million shares were valued at a total of $2,318 million. The 79 million shares of General Mills common stock retained by Diageo were valued at $3,576 million based on the three-day average trading price prior to the closing of $45.27 per share. Therefore, the total stock consideration was $5,894 million. The cash paid to Diageo and assumed debt of Pillsbury totaled $3,830 million. As a result, the total acquisition consideration (exclusive of direct acquisition costs) was approximately $9,724 million. 25 Under terms of the agreement, Diageo holds contingent value rights that may require payment to Diageo on April 30, 2003, of up to $395 million, depending on the General Mills stock price and the number of General Mills shares that Diageo continues to hold on that date. If the General Mills stock price averages less than $49 per share for the 20 trading days prior to that date, Diageo will receive an amount per share equal to the difference between $49 and the General Mills stock trading price, up to a maximum of $5 per share. The stockholders' agreement between General Mills and Diageo includes a standstill provision, under which Diageo is precluded from buying additional shares in General Mills for a 20-year period following the close of the transaction, or for three years following the date on which Diageo owns less than 5 percent of General Mills' outstanding shares, whichever is earlier. The agreement also generally requires pass-through voting by Diageo, so its shares will be voted in the same proportion as the other General Mills shares are voted. So long as Diageo owns at least 50 percent of the 134 million shares it originally received in this transaction, Diageo may designate two individuals to the General Mills Board of Directors. The excess of the purchase price over the estimated fair value of the net assets purchased was approximately $8 billion. The allocation of the purchase price is based on preliminary estimates, subject to revisions when appraisals and integration plans have been finalized. Revisions to the allocation, which may be significant, will be reported as changes to various assets and liabilities, including goodwill, other intangible assets, and deferred income taxes. As of May 26, 2002, the goodwill balance includes all of the excess purchase price of the Pillsbury acquisition, as the valuation of specific intangible assets has not yet been completed. We expect the valuation to result in a significant value for nonamortizable brands. We do not anticipate significant amounts to be allocated to amortizable intangible assets and, therefore, the amount of intangibles amortization is not expected to be material to the results of operations in future periods. In order to obtain regulatory clearance for the acquisition of Pillsbury, we arranged to divest certain businesses. On Nov. 13, 2001, International Multifoods Corporation (IMC) purchased the Pillsbury dessert and specialty products businesses as well as certain General Mills brands and the General Mills Toledo production facilities for $316 million. After-tax cash proceeds from this transaction were used to reduce General Mills debt. Under the agreement with IMC, General Mills expects to spend approximately $70 million for the purchase and installation of certain production assets at the Toledo plant, of which $47 million has been expended through May 26, 2002. As part of the transaction, IMC received an exclusive royalty-free license to use the DOUGHBOY trademark and PILLSBURY brand in the desserts and baking mix categories. The licenses are renewable without cost in 20-year increments at IMC's discretion. Since the sale of the assets to IMC was integral to the Pillsbury acquisition, and because the assets sold were adjusted to fair market value as part of the purchase of Pillsbury, there was no gain or loss recorded on the sale in the Company's consolidated statement of earnings. Pillsbury had a 50 percent equity interest in Ice Cream Partners USA LLC (ICP), a joint venture Pillsbury formed with Nestle USA during fiscal 2000 for the manufacture, marketing and distribution of HAAGEN-DAZS and Nestle ice cream products in the United States. On Dec. 26, 2001, Nestle USA exercised its right, triggered by the change of ownership of Pillsbury, to buy the 50 percent stake of ICP that it did not already own. Nestle paid us $641 million for our 50 percent of the joint venture and a long-term, paid-in-full license for the HAAGEN-DAZS brand in the United States. Net proceeds from this transaction also were used to reduce our debt level. We are reconfiguring our cereal production as a result of selling our Toledo, Ohio, plant to IMC. We also incurred a number of one-time costs associated with the acquisition of Pillsbury, and the associated divestiture of certain businesses and assets to IMC. (See Note Three.) In February 2002, we decided to close two Pillsbury facilities in order to utilize the operating capacity of the newly combined companies more fully. We closed the Geneva, Ill., plant, which produced frozen breakfast products; and the Anthony, Texas, production facility, which produced various Mexican food products. Our exit liabilities connected to these plant closures amount to $22 million and have been included in the purchase price allocation of Pillsbury. Approximately 370 employees were affected by these two plant closures. We continue to evaluate plans to consolidate manufacturing, warehouse and distribution activities into fewer locations. The closure of additional Pillsbury facilities could result in additional severance and other exit liabilities, which would increase the excess purchase price. These amounts will be recorded on our consolidated balance sheet as adjustments to the excess purchase price when plans have been finalized and announced. The integration of Pillsbury into General Mills' operations also may result in the restructuring of certain General Mills activities. These actions could result in additional unusual charges, which will be recorded as expense in our consolidated statements of earnings in the period during which plans are finalized. Actual results of acquired business operations are included in the consolidated statement of earnings for the period from Nov. 1, 2001 through May 26, 2002. The following unaudited pro forma information presents a summary of our consolidated 26 results of operations and the acquired Pillsbury operations as if the acquisition had occurred on May 29, 2000.
In Millions, Except per Share Data, Fiscal Year Ended MAY 26, 2002 May 27, 2001 - ------------------------------------------------------------------------------------------------- Net sales $ 9,936 $10,089 Earnings before cumulative effect of change in accounting principle 495 849 Net earnings 492 849 Earnings per Share - Basic EPS before cumulative effect of change in accounting principle 1.36 2.34 Net EPS - Basic 1.35 2.34 Earnings per Share - Diluted EPS before cumulative effect of change in accounting principle 1.32 2.29 Net EPS - Diluted 1.31 2.29 =================================================================================================
These unaudited pro forma results have been prepared for comparative purposes only and include certain adjustments, such as increased interest expense on acquisition debt. They do not reflect the effect of synergies that would have been expected to result from the integration of the Pillsbury businesses. The pro forma information does not purport to be indicative of the results of operations that actually would have resulted had the combination occurred on May 29, 2000, or of future results of the consolidated entities. On Jan. 13, 2000, we acquired Small Planet Foods of Sedro-Woolley, Wash. Small Planet Foods is a leading producer of branded organic food products marketed under the CASCADIAN FARM and MUIR GLEN trademarks. On Aug. 12, 1999, we acquired Gardetto's Bakery, Inc. of Milwaukee, Wis. GARDETTO'S is a leading national brand of baked snack mixes and flavored pretzels. On June 30, 1999, we acquired certain grain elevators and related assets from Koch Agriculture Company. The aggregate purchase price of these acquisitions, which were accounted for using the purchase method, was approximately $227 million, and associated goodwill was $153 million. The results of the acquired businesses have been included in the consolidated financial statements since their respective acquisition dates. Our fiscal 2000 financial results would not have been materially different if we had made these acquisitions at the beginning of the fiscal year. Through fiscal 2001, the goodwill associated with the acquisitions made in fiscal 2000 was amortized over 40 years on a straight-line basis. As described in Note One (N), we adopted SFAS No. 142, which eliminated goodwill amortization at the beginning of fiscal 2002. 3. UNUSUAL ITEMS In fiscal 2002, we recorded unusual items totaling $190 million pretax expense, $120 million after tax ($.35 per diluted share), consisting of $91 million pretax of Pillsbury transaction and integration costs; $87 million pretax of cereal reconfiguration charges; a $30 million pretax charge for a special contribution to the General Mills Foundation to increase its post-acquisition net assets to a level consistent with the guidelines of the Foundation; $9 million pretax of two flour mill and SQUEEZIT beverage restructuring/closing charges; and $3 million, net of insurance recovery, associated with a flash flood at our Cincinnati, Ohio, cereal plant. These expenses were partially offset by insurance settlement proceeds of $30 million pretax stemming from a 1994 oats handling incident. In 2001, we reached a partial settlement with a group of global insurance companies that participated in the reinsurance of a property policy covering the oats handling incident. We recorded this partial settlement, totaling $55 million pretax income net of associated costs, in the fourth quarter of 2001. We also expensed certain transaction costs associated with our pending acquisition of Pillsbury totaling $8 million pretax. Finally, in the fourth quarter of 2001, we made the decision to exit the Squeezit beverage business. The charge associated with this action, primarily noncash write-downs associated with asset disposals, totaled $12 million pretax. At May 26, 2002, there was no remaining reserve balance related to the exit of the Squeezit beverage business. The net of these unusual items totaled income of $35 million pretax, $22 million after tax ($.08 per diluted share). Analysis of our restructuring and integration reserve activity is as follows:
Supply Chain ---------------------------------------------- Asset Transaction/ In Millions Severance Write-off Other Total Integration Other Total - -------------------------------------------------------------------------------------------------------------------- Reserve balance at May 30, 1999 $ 3 $ 14 $ 14 $ 31 $ -- $ 13 $ 44 - -------------------------------------------------------------------------------------------------------------------- 1998 Amounts utilized -- -- (9) (9) -- (2) (11) 1999 Amounts utilized (2) (14) -- (16) -- (7) (23) - -------------------------------------------------------------------------------------------------------------------- Reserve balance at May 28, 2000 1 -- 5 6 -- 4 10 2001 Charges -- -- -- -- -- 12 12 1998 Amounts utilized -- -- -- -- -- (2) (2) 1999 Amounts utilized -- -- (2) (2) -- (1) (3) 2001 Amounts utilized -- -- -- -- -- (8) (8) - -------------------------------------------------------------------------------------------------------------------- Reserve balance at May 27, 2001 1 -- 3 4 -- 5 9 2002 Charges 26 58 12 96 90 4 190 1998 Amounts utilized -- (2) (1) (3) -- -- (3) 1999 Amounts utilized -- -- (1) (1) -- -- (1) 2001 Amounts utilized -- -- -- -- -- (4) (4) 2002 Amounts utilized (3) (5) (12) (20) (51) (4) (75) - -------------------------------------------------------------------------------------------------------------------- RESERVE BALANCE AT MAY 26, 2002 $ 24 $ 51 $ 1 $ 76 $ 39 $ 1 $ 116 ====================================================================================================================
4. INVESTMENTS IN JOINT VENTURES We have a 50 percent equity interest in Cereal Partners Worldwide (CPW), a joint venture with Nestle that manufactures and markets ready-to-eat cereals outside the United States and Canada. We have a 40.5 percent equity interest in Snack Ventures Europe (SVE), our joint venture with PepsiCo that manufactures and markets snack foods in continental Europe. We have a 50 percent equity interest in 8th Continent, LLC, a domestic joint venture formed in 2001 with DuPont to develop and market soy 27 foods and beverages. As a result of the Pillsbury acquisition, we have 50 percent interests in the following joint ventures for the manufacture, distribution and marketing of HAAGEN-DAZS frozen ice cream products and novelties: Haagen-Dazs Japan K.K., Haagen-Dazs Korea Company Limited, Haagen-Dazs Taiwan Limited, Haagen-Dazs Distributors (Thailand) Company Limited, and Haagen-Dazs Marketing & Distribution (Philippines) Inc. We also have a 50 percent interest in Seretram, a joint venture with Co-op de Pau for the production of GREEN GIANT canned corn in France. The joint ventures are reflected in our financial statements on an equity accounting basis. We record our share of the earnings or losses of these joint ventures. (The table that follows reflects the joint ventures on a 100 percent basis.) We also receive royalty income from certain of these joint ventures, incur various expenses (primarily research and development) and record the tax impact of certain of the joint venture operations that are structured as partnerships. Our cumulative investment in these joint ventures (including our share of earnings and losses) was $326 million, $218 million and $198 million at the end of 2002, 2001 and 2000, respectively. We made aggregate investments in the joint ventures of $38 million, $25 million and $29 million (net of a $6 million loan repayment) in 2002, 2001 and 2000, respectively. We received aggregate dividends from the joint ventures of $17 million, $3 million and $5 million in 2002, 2001 and 2000, respectively. Summary combined financial information for the joint ventures on a 100 percent basis follows. Since we record our share of CPW results on a two-month lag, CPW information is included as of and for the 12 months ended March 31. The Haagen-Dazs and Seretram joint ventures are reported as of and for the six months ended April 30, 2002. The SVE and 8th Continent information is consistent with our May year-end. COMBINED FINANCIAL INFORMATION - JOINT VENTURES - 100% BASIS
In Millions, Fiscal Year 2002 2001 2000 - --------------------------------------------------------------------------------------- Net Sales $1,693 $1,468 $1,429 Gross Profit 755 664 619 Earnings (losses) before Taxes 94 61 (4) Earnings (losses) after Taxes 78 48 (22) ======================================================================================= In Millions MAY 26, 2002 May 27, 2001 - --------------------------------------------------------------------------------------- Current Assets $587 $476 Noncurrent Assets 712 614 Current Liabilities 630 585 Noncurrent Liabilities 9 2 =======================================================================================
Our proportionate share of joint venture sales was $777 million, $666 million and $652 million for 2002, 2001 and 2000, respectively. 5. BALANCE SHEET INFORMATION The components of certain balance sheet accounts are as follows:
In Millions MAY 26, 2002 May 27, 2001 - ------------------------------------------------------------------------------------------------------ Land, Buildings and Equipment: Land $ 54 $ 25 Buildings 1,151 636 Equipment 2,916 2,226 Construction in progress 497 292 - ------------------------------------------------------------------------------------------------------ Total land, buildings and equipment 4,618 3,179 Less accumulated depreciation (1,854) (1,678) - ------------------------------------------------------------------------------------------------------ Net land, buildings and equipment $ 2,764 $ 1,501 ====================================================================================================== Goodwill: Total goodwill $ 8,559 $ 892 Less accumulated amortization (86) (88) - ------------------------------------------------------------------------------------------------------ Goodwill $ 8,473 $ 804 ====================================================================================================== Intangible Assets: Intangible assets, primarily capitalized software $ 129 $ 93 Less accumulated amortization (39) (27) - ------------------------------------------------------------------------------------------------------ Intangible assets $ 90 $ 66 ====================================================================================================== Other Assets: Prepaid pension $ 1,001 $ 677 Marketable securities, at market 160 187 Investments in and advances to affiliates 320 214 Miscellaneous 295 234 - ------------------------------------------------------------------------------------------------------ Total other assets $ 1,776 $ 1,312 ======================================================================================================
The changes in the carrying amount of goodwill for the fiscal year ended May 26, 2002, are as follows:
Pillsbury Unallocated Excess Bakeries and Purchase In Millions U.S. Retail Foodservice International Corporate Price Total - ------------------------------------------------------------------------------------------------------ Balance at May 27, 2001 $ 745 $ 59 $ -- $ -- $ -- $ 804 Pillsbury transaction -- -- -- -- 7,669 7,669 - ------------------------------------------------------------------------------------------------------ BALANCE AT MAY 26, 2002 $ 745 $ 59 $ -- $ -- $7,669 $8,473 ======================================================================================================
The Pillsbury acquisition valuation and purchase price allocation has not yet been completed. (See Note Two.) Therefore, all the excess purchase price is currently accounted for in goodwill. When the purchase price allocation is completed, the amount allocated to goodwill will change and the remaining goodwill will be allocated to our operating segments. Intangible asset amortization expense was $13 million, $6 million and $5 million for fiscal 2002, 2001 and 2000, respectively. Excluding amortization for intangible assets acquired as part of the Pillsbury acquisition, estimated amortization expense for the next 28 five fiscal years (in millions) is as follows: $15 in 2003, $12 in 2004, $11 in 2005, $9 in 2006 and $8 in 2007. As of May 26, 2002, a comparison of cost and market values of our marketable securities (which are debt and equity securities) was as follows:
Market Gross Gross In Millions Cost Value Gain Loss - ----------------------------------------------------------------------------------------------- Held to maturity: Debt securities $ 3 $ 3 $ -- $ -- Equity securities 2 2 -- -- - ----------------------------------------------------------------------------------------------- Total $ 5 $ 5 $ -- $ -- =============================================================================================== Available for sale: Debt securities $130 $155 $ 25 $ -- Equity securities -- -- -- -- - ----------------------------------------------------------------------------------------------- Total $130 $155 $ 25 $ -- ===============================================================================================
Realized gains from sales of marketable securities were $15 million, $4 million and $3 million in 2002, 2001 and 2000, respectively. The aggregate unrealized gains and losses on available-for-sale securities, net of tax effects, are classified in Accumulated Other Comprehensive Income within Stockholders' Equity. Scheduled maturities of our marketable securities are as follows:
Held to maturity Available for sale - ----------------------------------------------------------------------------------------------- Market Market In Millions Cost Value Cost Value - ----------------------------------------------------------------------------------------------- Under one year (current) $ -- $ -- $ -- $ -- From 1 to 3 years -- -- 45 52 From 4 to 7 years -- -- 5 5 Over 7 years 3 3 80 98 Equity securities 2 2 -- -- - ----------------------------------------------------------------------------------------------- Totals $ 5 $ 5 $130 $155 ===============================================================================================
6. INVENTORIES The components of inventories are as follows:
In Millions MAY 26, 2002 May 27, 2001 - ----------------------------------------------------------------------------------------------- Raw materials, work in process and supplies $ 234 $129 Finished goods 753 326 Grain 99 94 Reserve for LIFO valuation method (31) (30) - ----------------------------------------------------------------------------------------------- Total inventories $1,055 $519 ===============================================================================================
At May 26, 2002, and May 27, 2001, respectively, inventories of $720 million and $282 million were valued at LIFO. LIFO accounting had negligible impact on 2002, 2001 and 2000 earnings. Results of operations were not materially affected by a liquidation of LIFO inventory. The difference between replacement cost and the stated LIFO inventory value is not materially different from the reserve for LIFO valuation method. 7. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT The carrying amounts and fair values of our financial instruments (based on market quotes and interest rates at the balance sheet dates) were as follows:
MAY 26, 2002 May 27, 2001 - ----------------------------------------------------------------------------------------------- CARRYING FAIR Carrying Fair In Millions AMOUNT VALUE Amount Value - ----------------------------------------------------------------------------------------------- Assets: Cash and cash equivalents $ 975 $ 975 $ 64 $ 64 Receivables 1,010 1,010 664 664 Marketable securities 160 160 187 187 Liabilities: Accounts payable 1,217 1,217 619 619 Debt 9,439 9,507 3,428 3,500 Derivatives relating to: Debt (435) (435) -- (250) Commodities 9 9 -- (3) Foreign currencies (6) (6) -- 4 ===============================================================================================
The Company is exposed to certain market risks as a part of its ongoing business operations and uses derivative financial and commodity instruments, where appropriate, to manage these risks. Derivatives are financial instruments whose value is derived from one or more underlying financial instruments. Examples of underlying instruments are currencies, equities, commodities and interest rates. In general, instruments used as hedges must be effective at reducing the risk associated with the exposure being hedged, and must be designated as a hedge at the inception of the contract. With the adoption of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as of May 28, 2001, we record the fair value of all outstanding derivatives in receivables or other liabilities. Gains and losses related to the ineffective portion of any hedge are recorded in various costs and expenses, depending on the nature of the derivative. Each derivative transaction we enter into is designated at inception as a hedge of risks associated with specific assets, liabilities or future commitments, and is monitored to determine if it remains an effective hedge. Effectiveness is based on changes in the derivative's market value or cash flows being highly correlated with changes in market value or cash flows of the underlying hedged item. We do not enter into or hold derivatives for trading or speculative purposes. We use derivative instruments to reduce financial risk in three areas: interest rates, foreign currency and commodities. The notional amounts of derivatives do not represent actual amounts exchanged by the parties and, thus, are not a measure of the Company's exposure through its use of derivatives. We enter into interest rate swap, foreign exchange, and commodity swap agreements with a diversified group of highly rated counterparties. We enter into commodity futures transactions through various regulated 29 exchanges. These transactions may expose the Company to credit risk to the extent that the instruments have a positive fair value, but we have not experienced any material losses nor do we anticipate any losses. The Company does not have a significant concentration of risk with any single party or group of parties in any of its financial instruments. Qualifying derivatives are reported as part of hedge arrangements as follows: CASH FLOW HEDGES - Gains and losses on these instruments are recorded in Other Comprehensive Income until the underlying transaction is recorded in earnings. When the hedged item is realized, gains or losses are reclassified from Accumulated Other Comprehensive Income to the Consolidated Statements of Earnings on the same line item as the underlying transaction risk. FOREIGN EXCHANGE TRANSACTION RISK - The Company is exposed to fluctuations in foreign currency cash flows related primarily to third-party purchases, intercompany product shipments, and intercompany loans. Forward contracts of generally less than 12 months duration are used to hedge some of these risks. Effective ness is assessed based on changes in forward rates. INTEREST RATE RISK - The Company is exposed to interest rate volatility with regard to existing variable-rate debt and planned future issuances of fixed-rate debt. The Company uses interest rate swaps, including forward-starting swaps, to reduce interest rate volatility, and to achieve a desired proportion of variable vs. fixed-rate debt, based on current and projected market conditions. Variable-to-fixed interest rate swaps are accounted for as cash flow hedges, with effectiveness assessed based on either the hypothetical derivative method or changes in the present value of interest payments on the underlying debt. PRICE RISK - The Company is exposed to price fluctuations primarily as a result of anticipated purchases of ingredient and packaging materials. The Company uses a combination of long cash positions with suppliers, exchange-traded futures and option contracts and over-the-counter hedging mechanisms to reduce price fluctuations in a desired percentage of forecasted purchases over a period of generally less than one year. Commodity contracts are accounted for as cash flow hedges, with effectiveness assessed based on changes in futures prices. We use a grain merchandising operation to provide us efficient access to and more informed knowledge of various commodities markets. This operation uses futures and options to hedge its net inventory position to minimize market exposure. As of May 26, 2002, our grain merchandising operation had futures and options contracts that essentially hedged its net inventory position. None of the contracts extended beyond May 2003. All futures contracts and futures options are exchange-based instruments with ready liquidity and determinable market values. Neither results of operations nor the year-end positions from our grain merchandising operation were material to the Company's overall results. Unrealized losses from cash flow hedges recorded in Accumulated Other Comprehensive Income as of May 26, 2002, totaled $432 million pretax, primarily related to interest rate swaps we entered into in contemplation of future borrowings and other financing requirements (primarily related to the Pillsbury acquisition), which are being reclassified into interest expense over the life of the interest rate hedge. (See Note Eight regarding swaps settled or neutralized.) Other insignificant amounts related to foreign currency and commodity price cash flow hedges will be reclassified, as appropriate, into earnings during the next 12 months. FAIR VALUE HEDGES - Fair value hedges involve recognized assets, liabilities or firm commitments as the hedged risks. FOREIGN EXCHANGE TRANSLATION RISK - The Company is exposed to fluctuations in the value of foreign currency investments in subsidiaries and cash flows related primarily to repatriation of these investments. Forward contracts, generally less than 12 months duration, are used to hedge some of these risks. Effectiveness is assessed based on changes in forward rates. Effective gains and losses on these instruments are recorded as a foreign currency translation adjustment in Other Comprehensive Income. The Company enters into foreign currency forward contracts to reduce volatility in the translation of foreign currency earnings to U.S. dollars. Gains and losses on these instruments are recorded in selling, general and administrative expense, generally reducing the exposure to translation volatility during a full-year period. Our net balance sheet exposure consists of the net investment in foreign operations, translated using the exchange rates in effect at the balance sheet date. The components of our net balance sheet exposure by geographic region are as follows:
In Millions MAY 26, 2002 May 27, 2001 - ------------------------------------------------------------------------------------------ Europe $363 $181 North/South America 248 37 Asia/Other 101 16 - ------------------------------------------------------------------------------------------ Net Balance Sheet Exposure $712 $234 ==========================================================================================
INTEREST RATE RISK - The Company currently uses interest rate swaps to reduce funding costs associated with certain debt issues and to achieve a desired proportion of variable vs. fixed-rate debt, based on current and projected market conditions. Fixed-to-variable interest rate swaps are accounted for as fair value hedges with effectiveness assessed based on changes in the fair value of the underlying debt, using 30 incremental borrowing rates currently available on loans with similar terms and maturities. Effective gains and losses on these derivatives and the underlying hedged items are recorded as interest expense. The following table indicates the types of swaps used to hedge various assets and liabilities, and their weighted average interest rates. Average variable rates are based on rates as of the end of the reporting period. The swap contracts mature during time periods ranging from 2003 to 2014.
MAY 26, 2002 May 27, 2001 - --------------------------------------------------------------------------------------------- In Millions ASSET LIABILITY Asset Liability - --------------------------------------------------------------------------------------------- Pay floating swaps - notional amount -- $ 2,692 -- $ 340 Average receive rate -- 5.4% -- 7.1% Average pay rate -- 1.8% -- 4.0% Pay fixed swaps - notional amount -- $ 6,814 -- $ 5,766 Average receive rate -- 1.8% -- 4.1% Average pay rate -- 6.4% -- 6.6% =============================================================================================
The interest rate differential on interest rate swaps used to hedge existing assets and liabilities is recognized as an adjustment of interest expense or income over the term of the agreement. 8. DEBT NOTES PAYABLE - The components of notes payable and their respective weighted average interest rates at the end of the periods are as follows:
MAY 26, 2002 May 27, 2001 - --------------------------------------------------------------------------------------------- WEIGHTED Weighted AVERAGE Average NOTES INTEREST Notes Interest In Millions PAYABLE RATE Payable Rate - --------------------------------------------------------------------------------------------- U.S. commercial paper $ 3,288 2.1% $ 733 4.4% Canadian commercial paper 34 2.3 27 4.6 Euro commercial paper 809 2.2 768 4.9 Financial institutions 519 2.1 330 4.4 Amounts reclassified to long-term debt (1,050) -- (1,000) -- - --------------------------------------------------------------------------------------------- Total Notes Payable $ 3,600 $ 858 =============================================================================================
SEE NOTE SEVEN FOR A DESCRIPTION OF RELATED INTEREST-RATE DERIVATIVE INSTRUMENTS. To ensure availability of funds, we maintain bank credit lines sufficient to cover our outstanding short-term borrowings. As of May 26, 2002, we had $4.0 billion in committed lines and $45 million in uncommitted lines. We have revolving credit agreements expiring in January 2006 covering the fee-paid credit lines that provide us with the ability to refinance short-term borrowings on a long-term basis; accordingly, a portion of our notes payable has been reclassified to long-term debt. The revolving credit agreements provide for borrowings of up to $1.05 billion. LONG-TERM DEBT - During fiscal 2002, General Mills filed a Registration Statement with the Securities and Exchange Commission covering the sale of up to $8.0 billion in debt securities. In February 2002, we issued $3.5 billion of notes: $2.0 billion of 6 percent notes due 2012 with an effective interest rate of 7.75 percent; and $1.5 billion of 5 1/8 percent notes due 2007 with an effective interest rate of 5.90 percent. Interest is payable semiannually on Feb. 15 and Aug. 15, beginning Aug. 15, 2002. Proceeds from the notes were used to repay short-term debt incurred in connection with the Pillsbury acquisition. Following the February offering, $4.5 billion remains available under the Registration Statement for future use. In anticipation of the Pillsbury acquisition and other financing needs, we entered into interest rate swap contracts during fiscal 2001 and fiscal 2002 totaling $7.1 billion to attempt to lock in our interest rate on associated debt. In connection with the February notes offering, we closed out $3.5 billion of these swaps. A portion was settled for cash, and the remainder was neutralized with offsetting swaps. These swaps had been designated as cash flow hedges. Therefore, the mark-to-market value for these swaps has been recorded in Other Comprehensive Income. The amount currently recorded in Accumulated Other Comprehensive Income ($242 million pretax) will be reclassified to interest expense over the lives of the swap contracts (primarily five to 10 years).
In Millions MAY 26, 2002 May 27, 2001 - --------------------------------------------------------------------------------------------- 6% notes due 2012 $ 2,000 $ -- 5 1/8% notes due 2007 1,500 -- Medium-term notes, 4.8% to 9.1%, due 2003 to 2078 922 1,274 7.0% notes due Sept. 15, 2004 150 157 Zero coupon notes, yield 11.1%, $261 due Aug. 15, 2013 78 70 Zero coupon notes, yield 11.7%, $54 due Aug. 15, 2004 42 38 8.2% ESOP loan guaranty, due through June 30, 2007 21 30 Notes payable, reclassified 1,050 1,000 Other 76 1 - --------------------------------------------------------------------------------------------- 5,839 2,570 Less amounts due within one year (248) (349) - --------------------------------------------------------------------------------------------- Total Long-term Debt $ 5,591 $ 2,221 =============================================================================================
SEE NOTE SEVEN FOR A DESCRIPTION OF RELATED INTEREST-RATE DERIVATIVE INSTRUMENTS. 31 In 2001, we issued $284 million of debt under our medium-term note program with maturities up to two years and interest rates varying from 7.0 to 7.4 percent. The Company has guaranteed the debt of the Employee Stock Ownership Plan; therefore, the loan is reflected on our consolidated balance sheets as long-term debt with a related offset in Unearned Compensation in Stockholders' Equity. The sinking fund and principal payments due on long-term debt are (in millions) $248, $104, $225, $54 and $1,536 in 2003, 2004, 2005, 2006 and 2007, respectively. The 2005 and 2006 amounts are exclusive of $12 million and $5 million, respectively, of interest yet to be accreted on zero coupon notes. The notes payable that are reclassified under our revolving credit agreement are not included in these principal payments. Our marketable securities (see Note Five) include zero coupon U.S. Treasury and other top-rated securities. These investments are intended to provide funds for the payment of principal and interest for the zero coupon notes due Aug. 15, 2004, and Aug. 15, 2013. 9. MINORITY INTEREST In April 2002, the Company and certain of its wholly owned subsidiaries contributed assets with an aggregate fair market value of approximately $4 billion to another subsidiary (GMC), a limited liability company. GMC is a separate and distinct legal entity from the Company and its subsidiaries, and has separate assets, liabilities, businesses and operations. The contributed assets consist primarily of manufacturing assets and intellectual property associated with the production and retail sale of Big G ready-to-eat cereals, PROGRESSO soups and OLD EL PASO products. In exchange for the contribution of these assets, GMC issued the managing membership interest and Class A and Class B preferred membership interests to wholly owned subsidiaries of the Company. The managing member directs the business activities and operations of GMC and has fiduciary responsibilities to GMC and its members. Other than rights to vote on certain matters, holders of the Class A and Class B interests have no right to direct the management of GMC. In May 2002, GMC sold approximately 30 percent of the Class A interests to an unrelated third-party investor in exchange for $150 million. The Class A interests receive quarterly preferred distributions at a floating rate equal to the three-month LIBOR plus 90 basis points. The GMC limited liability company agreement requires that the rate of the preferred distributions for the Class A interests be reset by agreement between the third-party investors and GMC every five years, beginning in May 2007. If GMC and the investors fail to mutually agree on a new rate of preferred distributions, GMC must remarket the securities. Upon a failed remarketing, the rate over LIBOR will be increased by 75 basis points (up to a maximum total of 300 basis points following a scheduled reset date). In the event of four consecutive failed remarketings, the third-party investors can force a liquidation and winding up of GMC. GMC has a scheduled duration of 20 years. However, GMC, through the managing member, may elect to redeem all of the Class A interests held by third-party investors at any time for an amount equal to the investors' capital accounts, plus an optional retirement premium if such retirement occurs prior to June 2007. Under certain circumstances, GMC also may be dissolved and liquidated earlier. Events requiring liquidation include, without limitation, the bankruptcy of GMC or its subsidiaries, failure to deliver the preferred quarterly return, failure to comply with portfolio requirements, breaches of certain covenants, and four consecutive failed attempts to remarket the Class A interests. In the event of a liquidation of GMC, the third-party investors that hold the Class A interests would be entitled to repayment from the proceeds of liquidation prior to the subsidiaries of the Company that are members of GMC. The managing member may avoid liquidation in most circumstances by exercising an option to purchase the preferred interests. An election to redeem the preferred membership interests could impact the Company's liquidity by requiring the Company to refinance the redemption price or liquidate a portion of GMC assets. Currently, all of the Class B interests are held by a subsidiary of the Company. The Company may offer the Class B interests and the remaining, unsold Class A interests to third-party investors on terms and conditions to be determined. For financial reporting purposes, the assets, liabilities, results of operations, and cash flows of GMC are included in the Company's consolidated financial statements. The third-party investor's Class A interest in GMC is reflected as a minority interest on the consolidated balance sheet of the Company. Subsequent to fiscal year end, General Mills Capital, Inc. (GM Capital), a wholly owned subsidiary, sold $150 million of its Series A preferred stock to an unrelated third-party investor. GM Capital regularly enters into transactions with the Company to purchase receivables of the Company. These receivables are included in the consolidated balance sheet and the $150 million purchase price for the Series A preferred stock will be reflected as additional minority interest on the balance sheet. The proceeds from the issuance of the preferred stock were used to pay down commercial paper. 32 10. STOCKHOLDERS' EQUITY Cumulative preference stock of 5 million shares, without par value, is authorized but unissued. We have a shareholder rights plan that entitles each outstanding share of common stock to one right. Each right entitles the holder to purchase one two-hundredths of a share of cumulative preference stock (or, in certain circumstances, common stock or other securities), exercisable upon the occurrence of certain events. The rights are not transferable apart from the common stock until a person or group has acquired 20 percent or more, or makes a tender offer for 20 percent or more, of the common stock. Then each right will entitle the holder (other than the acquirer) to receive, upon exercise, common stock of either the Company or the acquiring company having a market value equal to two times the exercise price of the right. The initial exercise price is $120 per right. The rights are redeemable by the Board of Directors at any time prior to the acquisition of 20 percent or more of the outstanding common stock. The shareholder rights plan has been specifically amended so that the Pillsbury transaction described in Note Two does not trigger the exercisability of the rights. The rights expire on Feb. 1, 2006. At May 26, 2002, there were 367 million rights issued and outstanding. The Board of Directors has authorized the repurchase, from time to time, of common stock for our treasury, provided that the number of treasury shares shall not exceed 170 million. Through private transactions in fiscal 2002 and 2001 that were a part of our stock repurchase program, we issued put options and purchased call options related to our common stock. In 2002 and 2001, we issued put options for 7 million and 17 million shares for $17 million and $36 million in premiums paid to the Company, respectively. As of May 26, 2002, put options for 10 million shares remained outstanding at exercise prices ranging from $37.00 to $47.00 per share with exercise dates from June 14, 2002, to May 20, 2003. In 2002 and 2001, we purchased call options for 4 million and 8 million shares for $16 million and $34 million in premiums paid by the Company, respectively. As of May 26, 2002, call options for 9 million shares remained outstanding at exercise prices ranging from $34.00 to $54.84 per share with exercise dates from June 17, 2002, to Nov. 20, 2003. The following table provides details of Other Comprehensive Income:
Other Tax Compre- Pretax (Expense) hensive In Millions Change Benefit Income - -------------------------------------------------------------------------------------- Fiscal year ended May 28, 2000 Foreign currency translation $ (25) $ 3 $ (22) Minimum pension liability 1 -- 1 Other fair value changes: Securities (13) 5 (8) - -------------------------------------------------------------------------------------- Other Comprehensive Income $ (37) $ 8 $ (29) ====================================================================================== Fiscal year ended May 27, 2001 Foreign currency translation $ (8) $ 1 $ (7) Minimum pension liability (8) 3 (5) Other fair value changes: Securities 8 (3) 5 - -------------------------------------------------------------------------------------- Other Comprehensive Income $ (8) $ 1 $ (7) ====================================================================================== Fiscal year ended May 26, 2002 Foreign currency translation $ (4) $ -- $ (4) Minimum pension liability 7 (3) 4 Other fair value changes: Securities (3) 1 (2) Hedge derivatives (343) 127 (216) Reclassification to earnings: Securities (15) 6 (9) Hedge derivatives 163 (61) 102 Cumulative effect of adopting SFAS No. 133 (251) 93 (158) - -------------------------------------------------------------------------------------- OTHER COMPREHENSIVE INCOME $(446) $ 163 $(283) ======================================================================================
Except for reclassification to earnings, changes in Other Comprehensive Income are primarily noncash items. Accumulated Other Comprehensive Income balances were as follows:
In Millions MAY 26, 2002 May 27, 2001 - -------------------------------------------------------------------------------------- Foreign currency translation adjustments $(113) $(109) Unrealized gain (loss) from: Securities 16 27 Hedge derivatives (272) -- Pension plan minimum liability (7) (11) - -------------------------------------------------------------------------------------- Accumulated Other Comprehensive Income $(376) $ (93) ======================================================================================
33 11. STOCK PLANS The Company uses broad-based stock plans to help ensure alignment with stockholders' interests. A total of 8,984,631 shares are available for grant under the 1998 senior management plan through Oct. 1, 2005, the 1998 employee plan (which has no specified duration) and the 2001 director plan through Sept. 30, 2006. Shares available for grant are reduced by shares issued, net of shares surrendered to the Company in stock-for-stock exercises. Options may be priced only at 100 percent of the fair market value at the date of grant. No options now outstanding have been re-priced since the original date of grant. Options now outstanding include some granted under the 1988, 1990, 1993 and 1995 option plans, under which no further rights may be granted. All options expire within 10 years and one month after the date of grant. The stock plans provide for full vesting of options upon completion of specified service periods, or in the event there is a change of control. Stock subject to a restricted period and a purchase price, if any (as determined by the Compensation Committee of the Board of Directors), may be granted to key employees under the 1998 employee plan. Restricted stock, up to 50 percent of the value of an individual's cash incentive award, may be granted through the Executive Incentive Plan. Certain restricted stock awards require the employee to deposit personally owned shares (on a one-for-one basis) with the Company during the restricted period. The 2001 director plan allows each nonemployee director to annually receive 1,000 restricted stock units convertible to common stock at a date of the director's choosing following his or her one-year term. In 2002, 2001 and 2000, grants of 691,115, 353,500 and 330,229 shares of restricted stock or units were made to employees and directors with weighted average values at grant of $46.93, $37.61 and $38.49 per share, respectively. On May 26, 2002, a total of 1,634,158 restricted shares and units were outstanding under all plans. The 1988 plan permitted the granting of performance units corresponding to stock options granted. The value of performance units was determined by return on equity and growth in earnings per share measured against preset goals over three-year performance periods. For seven years after a performance period, holders may elect to receive the value of performance units (with interest) as an alternative to exercising corresponding stock options. On May 26, 2002, there were 48,614 options outstanding with corresponding performance unit accounts. The value of these options exceeded the value of the performance unit accounts. The following table contains information on stock option activity. Approximately 33 percent of the options outstanding at May 26, 2002, were granted under the Salary Replacement Option and Deposit Stock OptionPlans, both of which have been discontinued.
Weighted Weighted Average Average Options Exercise Options Exercise Exercisable Price per Outstanding Price per (Thousands) Share (Thousands) Share - ------------------------------------------------------------------------------------------- Balance at May 30, 1999 24,232 $25.05 53,076 $28.17 Granted 11,445 37.49 Exercised (5,679) 21.82 Expired (552) 33.42 - ------------------------------------------------------------------------------------------- Balance at May 28, 2000 25,412 26.40 58,290 30.57 Granted 11,600 38.07 Exercised (5,651) 24.60 Expired (741) 35.98 - ------------------------------------------------------------------------------------------- Balance at May 27, 2001 27,724 27.79 63,498 32.40 Granted 14,567 48.17 Exercised (6,569) 27.64 Expired (421) 39.44 - ------------------------------------------------------------------------------------------- BALANCE AT MAY 26, 2002 30,149 $29.18 71,075 $36.03 ===========================================================================================
The following table provides information regarding options exercisable and outstanding as of May 26, 2002:
Weighted Weighted Weighted Range of Average Average Average Exercise Options Exercise Options Exercise Remaining Price Exercisable Price per Outstanding Price per Contractual per Share (Thousands) Share (Thousands) Share Life (Years) - ------------------------------------------------------------------------------------------- Under $25 4,976 $22.61 4,982 $22.61 2.26 $25-$30 12,392 26.46 12,401 26.47 2.53 $30-$35 9,822 32.24 19,836 33.28 6.65 $35-$40 173 36.96 8,464 37.43 6.25 Over $40 2,786 41.77 25,392 45.02 8.91 - ------------------------------------------------------------------------------------------- 30,149 $29.18 71,075 $36.03 6.38 ===========================================================================================
Stock-based compensation expense related to restricted stock for 2002, 2001 and 2000 was $16 million, $11 million and $9 million, respectively, using the intrinsic value-based method of accounting for stock-based compensation plans. Effective with 1997, we adopted the disclosure requirements of SFAS No. 123, "Accounting for Stock-Based Compensation." SFAS No. 123 allows either a fair value-based method or an intrinsic value-based method of accounting for such compensation plans. Had compensation expense for our stock option plan grants been determined using the fair value-based method, net earnings, basic earnings per share and diluted earnings per share would have been approximately $384 million, $1.16 and $1.13, respectively, for 2002; $621 million, $2.19 and $2.15, respectively, for 2001; and, $575 million, $1.92 and $1.89, respectively, for 2000. The weighted average fair values at grant date of the options granted in 2002, 2001 and 2000 were estimated as $11.77, $8.78 and 34 $8.89, respectively, using the Black-Scholes option-pricing model with the following weighted average assumptions:
2002 2001 2000 - ----------------------------------------------------------------------------------------- Risk-free interest rate 5.1% 5.6% 6.3% Expected life 7 YEARS 7 years 7 years Expected volatility 20% 20% 18% Expected dividend growth rate 8% 8% 8% =========================================================================================
The Black-Scholes model requires the input of highly subjective assumptions and may not provide a reliable measure of fair value. 12. EARNINGS PER SHARE Basic and diluted earnings per share (EPS) were calculated using the following:
In Millions, Fiscal Year 2002 2001 2000 - ----------------------------------------------------------------------------------------- Net earnings $458 $665 $614 - ----------------------------------------------------------------------------------------- Average number of common shares - basic EPS 331 284 299 - ----------------------------------------------------------------------------------------- Incremental share effect from: Stock options 11 8 8 Restricted stock, stock rights and puts -- -- -- - ----------------------------------------------------------------------------------------- Average number of common shares - diluted EPS 342 292 307 =========================================================================================
The diluted EPS calculation does not include 4 million, 8 million and 9 million average anti-dilutive stock options, nor does it include 13 million, 15 million and 8 million average anti-dilutive put options in 2002, 2001 and 2000, respectively. 13. INTEREST EXPENSE The components of net interest expense are as follows:
In Millions, Fiscal Year 2002 2001 2000 - ----------------------------------------------------------------------------------------- Interest expense $445 $223 $168 Capitalized interest (3) (2) (2) Interest income (26) (15) (14) - ----------------------------------------------------------------------------------------- Interest, net $416 $206 $152 =========================================================================================
During 2002, 2001 and 2000, we paid interest (net of amount capitalized) of $346 million, $215 million and $167 million, respectively. 14. RETIREMENT AND OTHER POSTRETIREMENT BENEFIT PLANS We have defined-benefit retirement plans covering most employees. Benefits for salaried employees are based on length of service and final average compensation. The hourly plans include various monthly amounts for each year of credited service. Our funding policy is consistent with the requirements of federal law. Our principal retirement plan covering salaried employees has a provision that any excess pension assets would vest in plan participants if the plan is terminated within five years of a change in control. We sponsor plans that provide health-care benefits to the majority of our retirees. The salaried health-care benefit plan is contributory, with retiree contributions based on years of service. We fund related trusts for certain employees and retirees on an annual basis. Trust assets related to the above plans consist principally of listed equity securities, corporate obligations and U.S. government securities. Reconciliation of the funded status of the plans and the amounts included in the balance sheet are as follows:
Postretirement Pension Plans Benefit Plans - ------------------------------------------------------------------------------------------------ In Millions 2002 2001 2002 2001 - ------------------------------------------------------------------------------------------------ Fair Value of Plan Assets Beginning fair value $ 1,606 $ 1,578 $ 237 $ 230 Actual return on assets (2) 83 (10) (2) Acquisition 1,167 -- -- -- Company contributions 7 11 29 28 Plan participant contributions -- -- 5 2 Benefits paid from plan assets (107) (66) (28) (21) - ------------------------------------------------------------------------------------------------ Ending Fair Value $ 2,671 $ 1,606 $ 233 $ 237 ================================================================================================ Projected Benefit Obligation Beginning obligations $ 1,077 $ 958 $ 286 $ 231 Service cost 34 18 11 6 Interest cost 122 79 33 21 Plan amendment 21 1 (13) -- Curtailment 5 -- 2 -- Plan participant contributions -- -- 5 2 Actuarial loss (gain) (15) 87 72 42 Acquisition 963 -- 248 -- Actual benefits paid (107) (66) (33) (16) - ------------------------------------------------------------------------------------------------ Ending Obligations $ 2,100 $ 1,077 $ 611 $ 286 ================================================================================================ Funded Status of Plans $ 571 $ 529 $ (378) $ (49) - ------------------------------------------------------------------------------------------------ Unrecognized actuarial loss 334 106 154 59 Unrecognized prior service costs (credits) 49 36 (17) (5) Unrecognized transition asset (3) (18) -- -- - ------------------------------------------------------------------------------------------------ Net Amount Recognized $ 951 $ 653 $ (241) $ 5 ================================================================================================ Amounts Recognized on Balance Sheets - ------------------------------------------------------------------------------------------------ Prepaid asset $ 1,001 $ 677 $ 82 $ 75 Accrued liability (62) (44) (323) (70) Intangible asset -- 1 -- -- Minimum liability adjustment in equity 12 19 - ------------------------------------------------------------------------------------------------ Net Amount Recognized $ 951 $ 653 $ (241) $ 5 ================================================================================================
35 Plans with obligations in excess of plan assets:
Postretirement Pension Plans Benefit Plans - -------------------------------------------------------------------------------------------------------------- In Millions 2002 2001 2002 2001 - -------------------------------------------------------------------------------------------------------------- Accumulated benefit obligation $ 71 $ 44 $466 $166 Plan assets at fair value 9 -- 45 41 ==============================================================================================================
Assumptions as of year-end are:
Postretirement Pension Plans Benefit Plans - -------------------------------------------------------------------------------------------------------------- 2002 2001 2002 2001 - -------------------------------------------------------------------------------------------------------------- Discount rate 7.50% 7.75% 7.50% 7.75% Rate of return on plan assets 10.4 10.4 10.0 10.0 Salary increases 4.4 4.4 -- -- Annual increase in cost of benefits -- -- 8.3 6.6 ==============================================================================================================
The annual increase in cost of postretirement benefits is assumed to decrease gradually in future years, reaching an ultimate rate of 5.2 percent in the year 2007. Components of net benefit (income) or expense each year are as follows:
Postretirement Pension Plans Benefit Plans - -------------------------------------------------------------------------------------------------------------- In Millions 2002 2001 2000 2002 2001 2000 - -------------------------------------------------------------------------------------------------------------- Service cost $ 34 $ 18 $ 20 $ 11 $ 6 $ 6 Interest cost 122 79 69 33 21 17 Expected return on plan assets (241) (159) (142) (23) (23) (22) Amortization of transition asset (15) (15) (14) -- -- -- Amortization of (gains) losses 2 2 1 3 1 1 Amortization of prior service costs (credits) 8 6 6 (1) (2) (2) Settlement or curtailment losses 5 -- -- 2 -- -- - -------------------------------------------------------------------------------------------------------------- Net (income) expense $ (85) $ (69) $ (60) $ 25 $ 3 $ -- ==============================================================================================================
Assumed trend rates for health-care costs have an important effect on the amounts reported for the postretirement benefit plans. If the health-care cost trend rate increased by 1 percentage point in each future year, the aggregate of the service and interest cost components of postretirement expense would increase for 2002 by $5 million, and the postretirement accumulated benefit obligation as of May 26, 2002, would increase by $51 million. If the health-care cost trend rate decreased by 1 percentage point in each future year, the aggregate of the service and interest cost components of postretirement expense would decrease for 2002 by $4 million, and the postretirement accumulated benefit obligation as of May 26, 2002, would decrease by $44 million. The General Mills Savings Plan is a defined contribution plan that covers our salaried and nonunion employees. It had net assets of $1,666 million at May 26, 2002, and $1,071 million at May 27, 2001. This plan is a 401(k) savings plan that includes a number of investment funds and an Employee Stock Ownership Plan (ESOP). The ESOP's only assets are Company common stock and temporary cash balances. Company expense recognized in 2002, 2001 and 2000 was $9 million, $8 million and $8 million, respectively. The ESOP's share of this expense was $3 million, $7 million and $7 million, respectively. The ESOP's expense is calculated by the "shares allocated" method. The ESOP uses Company common stock to convey benefits to employees and, through increased stock ownership, to further align employee interests with those of shareholders. The Company matches a percentage of employee contributions to the ESOP with a base match plus a variable year-end match that depends on annual results. Employees receive the Company match in the form of common stock. The ESOP originally purchased Company common stock principally with funds borrowed from third parties (and guaranteed by the Company). The ESOP shares are included in net shares outstanding for the purposes of calculating earnings per share. The ESOP's third-party debt is described in Note Eight. The Company treats cash dividends paid to the ESOP the same as other dividends. Dividends received on leveraged shares (i.e., all shares originally purchased with the debt proceeds) are used for debt service, while dividends received on unleveraged shares are passed through to participants. The Company's cash contribution to the ESOP is calculated so as to pay off enough debt to release sufficient shares to make the Company match. The ESOP uses the Company's cash contributions to the plan, plus the dividends received on the ESOP's leveraged shares, to make principal and interest payments on the ESOP's debt. As loan payments are made, shares become unencumbered by debt and are committed to be allocated. The ESOP allocates shares to individual employee accounts on the basis of the match of employee payroll savings (contributions), plus reinvested dividends received on previously allocated shares. In 2002, 2001 and 2000, the ESOP incurred interest expense of $2 million, $3 million and $4 million, respectively. The ESOP used dividends of $8 million, $7 million and $9 million, along with Company contributions of $3 million, $6 million and $6 million to make interest and principal payments in the respective years. The number of shares of Company common stock in the ESOP is summarized as follows:
Number of Shares, in Thousands MAY 26, 2002 May 27, 2001 - -------------------------------------------------------------------------------------------- Unreleased shares 1,170 1,652 Committed to be allocated 15 24 Allocated to participants 5,500 5,680 - -------------------------------------------------------------------------------------------- Total shares 6,685 7,356 ============================================================================================
36 15. PROFIT-SHARING PLAN The Executive Incentive Plan provides incentives to key employees who have the greatest potential to contribute to current earnings and successful future operations. These awards are approved by the Compensation Committee of the Board of Directors, which consists solely of independent, outside directors. Awards are based on performance against pre-established goals approved by the Committee. Profit-sharing expense was $11 million, $12 million and $10 million in 2002, 2001 and 2000, respectively. 16. INCOME TAXES The components of earnings before income taxes and earnings of joint ventures and the corresponding income taxes thereon are as follows:
In Millions, Fiscal Year 2002 2001 2000 - ----------------------------------------------------------------------------------------------- Earnings before income taxes: U.S $ 653 $ 991 $ 919 Foreign 14 7 28 - ----------------------------------------------------------------------------------------------- Total earnings before income taxes $ 667 $ 998 $ 947 - ----------------------------------------------------------------------------------------------- Income taxes: Current: Federal $ 127 $ 283 $ 280 State and local 8 20 14 Foreign 11 (2) (2) - ----------------------------------------------------------------------------------------------- Total current 146 301 292 - ----------------------------------------------------------------------------------------------- Deferred: Federal 84 42 44 State and local 15 5 (5) Foreign (6) 2 5 - ----------------------------------------------------------------------------------------------- Total deferred 93 49 44 - ----------------------------------------------------------------------------------------------- Total Income Taxes $ 239 $ 350 $ 336 ===============================================================================================
During 2002, 2001 and 2000, we paid income taxes of $196 million, $231 million and $284 million, respectively. In fiscal 1982 and 1983 we purchased certain income tax items from other companies through tax lease transactions. Total current income taxes charged to earnings reflect the amounts attributable to operations and have not been materially affected by these tax leases. Actual current taxes payable relating to 2002, 2001 and 2000 operations were increased by approximately $3 million, $16 million and $22 million, respectively, due to the current effect of tax leases. These tax payments do not affect taxes for statement of earnings purposes since they repay tax benefits realized in prior years. The repayment liability is classified as Deferred Income Taxes - Tax Leases. The following table reconciles the U.S. statutory income tax rate with the effective income tax rate:
Fiscal Year 2002 2001 2000 - ----------------------------------------------------------------------------------------------- U.S. statutory rate 35.0% 35.0% 35.0% - ----------------------------------------------------------------------------------------------- State and local income taxes, net of federal tax benefits 2.3 1.6 1.3 Other, net (1.5) (1.6) (.8) - ----------------------------------------------------------------------------------------------- Effective Income Tax Rate 35.8% 35.0% 35.5% ===============================================================================================
The tax effects of temporary differences that give rise to deferred tax assets and liabilities are as follows:
In Millions MAY 26, 2002 May 27, 2001 - ----------------------------------------------------------------------------------------------- Accrued liabilities $106 $ 65 Unusual charges 104 9 Compensation and employee benefits 111 73 Unrealized hedge losses 163 -- Tax credit carryforwards 51 8 Other 23 14 - ----------------------------------------------------------------------------------------------- Gross deferred tax assets 558 169 - ----------------------------------------------------------------------------------------------- Depreciation 281 134 Prepaid pension asset 289 255 Intangible assets 22 10 Other 51 54 - ----------------------------------------------------------------------------------------------- Gross deferred tax liabilities 643 453 - ----------------------------------------------------------------------------------------------- Valuation allowance 10 3 - ----------------------------------------------------------------------------------------------- Net Deferred Tax Liability $ 95 $287 ===============================================================================================
We have not recognized a deferred tax liability for unremitted earnings of $87 million from our foreign operations because we do not expect those earnings to become taxable to us in the foreseeable future and because a determination of the potential liability is not practicable. If a portion were to be remitted, we believe income tax credits would substantially offset any resulting tax liability. 17. LEASES AND OTHER COMMITMENTS An analysis of rent expense by property leased follows:
In Millions, Fiscal Year 2002 2001 2000 - ----------------------------------------------------------------------------------------------- Warehouse space $26 $25 $24 Equipment 23 11 8 Other 19 7 7 - ----------------------------------------------------------------------------------------------- Total Rent Expense $68 $43 $39 ===============================================================================================
Some leases require payment of property taxes, insurance and maintenance costs in addition to the rent payments. Contingent and escalation rent in excess of minimum rent payments and sublease income netted in rent expense were insignificant. 37 Noncancelable future lease commitments (in millions) are: $59 in 2003, $44 in 2004, $35 in 2005, $31 in 2006, $22 in 2007 and $96 after 2007, with a cumulative total of $287. These future lease commitments will be partially offset by future sublease receipts of $46 million. We are contingently liable under guaranties and comfort letters for $212 million. The guaranties and comfort letters are principally issued to support borrowing arrangements, primarily for our joint ventures. We remain the guarantor on certain leases and other obligations of Darden Restaurants, Inc. (Darden), an entity we spun off as of May 28, 1995. However, Darden has indemnified us against any related loss. The Company is involved in various claims, including environmental matters, arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters, either individually or in aggregate, will not have a material adverse effect on the Company's financial position or results of operations. 18. BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION We operate exclusively in the consumer foods industry, with multiple operating segments organized generally by product categories. Following the acquisition of Pillsbury, we restructured our management organization. Consistent with our new organization and SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," we have aggregated our operating segments into three reportable segments: 1) U.S. Retail; 2) Bakeries and Foodservice; and 3) International. U.S. Retail consists of cereals, meals, refrigerated and frozen dough products, baking products, snacks, yogurt and other. Our Bakeries and Foodservice segment consists of products marketed to bakeries and offered to the commercial and noncommercial foodservice sectors throughout the United States and Canada. The International segment includes our retail business outside the United States and our foodservice business outside of the United States and Canada. During 2002, there was one individual customer that generated 12 percent of our net sales. There were no individual customers that generated more than 10 percent of our net sales during 2001 and 2000. Management reviews operating results to evaluate segment performance. Operating profit for the reportable segments excludes general corporate expenses. Interest expense and income taxes are centrally managed at the corporate level and, therefore, are not allocated to segments since they are excluded from the measure of segment profitability reviewed by the Company's management. Under our supply chain organization, our manufacturing, warehouse, distribution and sales activities are substantially integrated across our operations in order to maximize efficiency and productivity. As a result, fixed assets, capital expenditures for long-lived assets, and depreciation and amortization expenses are not maintained nor available by operating segment. The measurement of operating segment results is generally consistent with the presentation of the consolidated statements of earnings. Intercompany transactions between reportable operating segments were not material in the periods presented.
In Millions, Fiscal Year 2002 2001 2000 - -------------------------------------------------------------------------------------------- Net Sales: U.S. Retail $ 6,143 $ 4,790 $ 4,560 Bakeries and Foodservice 1,028 397 355 International 778 263 258 - -------------------------------------------------------------------------------------------- Total 7,949 5,450 5,173 - -------------------------------------------------------------------------------------------- Operating Profit Before Unusual Items: U.S. Retail $ 1,066 $ 1,057 $ 1,013 Bakeries and Foodservice 146 91 81 International 45 17 18 Unallocated Corporate Items 16 4 (13) - -------------------------------------------------------------------------------------------- Total 1,273 1,169 1,099 - -------------------------------------------------------------------------------------------- Operating Profit Including Unusual Items: U.S. Retail $ 999 $ 1,100 $ 1,013 Bakeries and Foodservice 144 91 81 International 45 17 18 Unallocated Corporate Items (105) (4) (13) - -------------------------------------------------------------------------------------------- Total 1,083 1,204 1,099 Interest, net 416 206 152 Income Taxes 239 350 336 Earnings from Joint Ventures 33 17 3 - -------------------------------------------------------------------------------------------- Earnings before cumulative effect of change in accounting principle 461 665 614 Cumulative effect of change in accounting principle (3) -- -- - -------------------------------------------------------------------------------------------- Net Earnings $ 458 $ 665 $ 614 ============================================================================================
The following table provides net sales information for our primary product categories:
In Millions, Fiscal Year 2002 2001 2000 - -------------------------------------------------------------------------------------------- Product Categories: U.S. Retail: Big G Cereals $ 1,866 $ 1,963 $ 1,986 Meals 1,161 580 555 Pillsbury USA 793 -- -- Baking Products 786 824 804 Snacks 722 711 630 Yogurt/Health Ventures/Other 815 712 585 - -------------------------------------------------------------------------------------------- Total U.S. Retail 6,143 4,790 4,560 - -------------------------------------------------------------------------------------------- Bakeries and Foodservice 1,028 397 355 - -------------------------------------------------------------------------------------------- International: Canada 283 177 178 Rest of World 495 86 80 - -------------------------------------------------------------------------------------------- Total International 778 263 258 - -------------------------------------------------------------------------------------------- Consolidated Total $ 7,949 $ 5,450 $ 5,173 ============================================================================================
38 The following table provides earnings information for our joint venture activities by operating segment:
In Millions, Fiscal Year 2002 2001 2000 - -------------------------------------------------------------------------------------------- Earnings (Loss) After Tax: U.S. Retail $ (6) $ -- $ -- International 39 17 3 - -------------------------------------------------------------------------------------------- Total $ 33 $ 17 $ 3 ============================================================================================
The following table provides financial information by geographic area:
In Millions, Fiscal Year 2002 2001 2000 - -------------------------------------------------------------------------------------------- Net sales: U.S $ 7,139 $ 5,187 $ 4,915 Non-U.S 810 263 258 - -------------------------------------------------------------------------------------------- Consolidated Total $ 7,949 $ 5,450 $ 5,173 ============================================================================================ Long-lived assets: U.S $ 2,549 $ 1,488 $ 1,395 Non-U.S 215 13 10 - -------------------------------------------------------------------------------------------- Consolidated Total $ 2,764 $ 1,501 $ 1,405 ============================================================================================
19. QUARTERLY DATA (UNAUDITED) Summarized quarterly data for 2002 and 2001 follows:
First Quarter Second Quarter Third Quarter Fourth Quarter - ---------------------------------------------------------------------------------------------------------------------------------- In Millions, Except per Share and Market Price Amounts 2002 2001 2002 2001 2002 2001 2002 2001 - ---------------------------------------------------------------------------------------------------------------------------------- Net sales $1,404 $1,306 $1,842 $1,500 $2,379 $1,323 $2,324 $1,321 Gross profit 683 653 802 747 881 615 816 594 Earnings before cumulative effect of change in accounting principle 191 159 130 203 83 157 57 146 Net earnings 188 159 130 203 83 157 57 146 Earnings per share before cumulative effect of change in accounting principle: Basic .67 .56 .43 .72 .23 .55 .16 .51 Diluted .65 .55 .41 .70 .22 .54 .15 .50 Net earnings per share: Basic .66 .56 .43 .72 .23 .55 .16 .51 Diluted .64 .55 .41 .70 .22 .54 .15 .50 Dividends per share .275 .275 .275 .275 .275 .275 .275 .275 Market price of common stock: High 45.36 41.75 51.16 43.44 52.86 45.40 50.39 46.35 Low 42.05 32.13 42.50 31.38 43.22 38.75 41.61 37.26 ==================================================================================================================================
See Note Three for a description of unusual items. In fiscal 2002, the net earnings impact was $9 million income, $68 million expense, $24 million expense, and $37 million expense in quarters one, two, three, and four, respectively. The net impact per diluted share in fiscal 2002 was $.03 income, $.22 expense, $.06 expense and $.10 expense in quarters one, two, three, and four, respectively. In fiscal 2001, the net earnings impact was under $1 million expense, $1 million expense, and $1 million expense in quarters one, two and three, respectively. There was no impact to diluted EPS in these quarters. The net earnings impact in the fourth quarter of 2001 was $24 million income ($.08 per diluted share). 39 EX-21 11 genmills023880_ex21.txt SUBSIDIARIES OF THE REGISTRANT Exhibit 21 SUBSIDIARIES OF THE COMPANY Certain active subsidiaries of the Company and their subsidiaries as of May 26, 2002, are listed below. The names of certain subsidiaries, which considered in the aggregate would not constitute a significant subsidiary, have been omitted. Name State or Country of Organization - ---- -------------------------------- Gardetto's Bakery, Inc. Wisconsin General Mills Canada Corporation Canada General Mills Canada, L.P. Canada General Mills Capital, Inc. Nevada General Mills Cereals, LLC Delaware General Mills Cereals Properties, LLC Delaware General Mills Continental, Inc. Delaware General Mills Direct Marketing, Inc. Delaware General Mills Factoring LLC Delaware General Mills Finance, Inc. Delaware General Mills International Business Two, Inc. Delaware General Mills International Limited Delaware General Mills International Businesses, Inc. Delaware General Mills International Holdings, LLC Delaware General Mills IP Holdings I, LLC Delaware General Mills IP Holdings II, LLC Delaware General Mills Marketing, Inc. Delaware General Mills Missouri, Inc. Missouri General Mills Operations, Inc. Delaware General Mills Products Corp. Delaware General Mills Properties, Inc. New York General Mills Sales, Inc. Delaware General Mills Services, Inc. Delaware GM Cereals Holdings, Inc. Delaware GM Cereals Operations, Inc. Delaware HDIP, Inc. Delaware Lloyd's Barbecue Company Minnesota Pet Incorporated Delaware The Pillsbury Company Delaware Popcorn Distributors, Inc. Delaware Progresso Quality Foods Company Delaware Small Planet Foods, Inc. Washington EX-23 12 genmills023880_ex23.txt CONSENT OF KPMG LLP EXHIBIT 23 CONSENT OF KPMG LLP The Board of Directors General Mills, Inc.: We consent to incorporation by reference in the Registration Statements (No. 2-49637 and 333-75808) on Form S-3 and Registration Statements (Nos. 2-13460, 2-53523, 2-95574, 33-24504, 33-27628, 33-32059, 33-36892, 33-36893, 33-50337, 33-62729, 333-13089, 333-32509, 333-65311, 333-65313, 333-90010, and 333-90012) on Form S-8 of General Mills, Inc. of our report dated June 24, 2002, relating to the consolidated balance sheets of General Mills, Inc. and subsidiaries as of May 26, 2002 and May 27, 2001 and the related consolidated statements of earnings, stockholders' equity, cash flows and our report dated June 24, 2002 on the related financial statement schedule for each of the fiscal years in the three-year period ended May 26, 2002, which reports are included or incorporated by reference in the May 26, 2002 annual report on Form 10-K of General Mills, Inc. /s/ KPMG LLP Minneapolis, Minnesota August 13, 2002 -----END PRIVACY-ENHANCED MESSAGE-----