Plan Of Merger

AGREEMENT AND PLAN OF MERGER
BY AND AMONG RALCORP HOLDINGS, INC.,
GENERAL MILLS, INC. AND GENERAL MILLS MISSOURI, INC.


This Agreement and Plan of Merger is dated as of August 13, 1996 (as amended, supplemented or otherwise modified from time to time, this "AGREEMENT"), by and among Ralcorp Holdings, Inc., a Missouri corporation (the "COMPANY"), General Mills, Inc., a Delaware corporation (the "ACQUIROR"), and General Mills Missouri, Inc., a Missouri corporation and a wholly owned subsidiary of Acquiror ("MERGER SUB").


WHEREAS, the Board of Directors of the Company has approved a plan of distribution and reorganization as described in the Reorganization Agreement attached hereto as Exhibit A (the "REORGANIZATION AGREEMENT"), which will be entered into prior to the Effective Time (as defined in Section 1.3), subject to the issuance of a private letter ruling from the Internal Revenue Service (the "SERVICE") as described in Section 6.1(d) hereof in response to a ruling request to be made by the Company (the "RULING REQUEST") or, alternatively, the issuance of an opinion or opinions of counsel as described in Section 6.1(e) hereof, pursuant to which (a) certain of the assets and liabilities of the branded cereals and branded snacks business (the "BRANDED BUSINESS") currently operated by the Company's wholly-owned subsidiary, Ralston Foods, Inc. ("FOODS"), will be contributed by Foods to a newly-formed subsidiary (the "BRANDED SUBSIDIARY") as provided in the Reorganization Agreement, (b) all the stock of the Branded Subsidiary will be distributed by Foods to the Company pursuant to the Reorganization Agreement (the "INTERNAL SPINOFF"), and (c) all of the shares of capital stock of a Missouri corporation to be formed as a wholly-owned subsidiary of the Company and the parent of Foods ("NEW HOLDINGS") will be distributed on a pro rata basis to the Company's stockholders as provided in the Reorganization Agreement (the "DISTRIBUTION");


WHEREAS, the respective Boards of Directors of Acquiror, Merger Sub and the Company have determined that, following the Distribution, the merger of Merger Sub with and into the Company (the "MERGER") with the Company as the surviving corporation (the "SURVIVING CORPORATION") would be advantageous and beneficial to their respective corporations and stockholders; and


WHEREAS, for Federal income tax purposes, it is intended that (a) the Distribution and the Internal Spinoff shall each qualify as tax-free distributions within the meaning of Section 355 of the Internal Revenue Code of 1986, as amended (the "CODE"), and (b) the Merger shall qualify as a reorganization under Section 368(a)(1)(B) of the Code, and this Agreement is intended to be and is adopted as a plan of reorganization.


A-1 2


NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained in this Agreement, the parties hereto agree as follows:


ARTICLE I


THE MERGER


SECTION 1.1 THE MERGER. Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the General and Business Corporation Law of Missouri (the "GBCL"), Merger Sub shall be merged with and into the Company at the Effective Time. Following the Merger, the separate corporate existence of Merger Sub shall cease and the Company shall continue as the Surviving Corporation and shall succeed to and assume all the rights and obligations of Merger Sub in accordance with the GBCL.


SECTION 1.2 CLOSING. Subject to the next sentence, the closing of the Merger (the "CLOSING") will take place as promptly as practicable after the satisfaction or waiver of the conditions set forth in Article VI (other than, but subject to, those conditions to be performed at the Closing), at the offices of Bryan Cave LLP, 211 No. Broadway, Suite 3600, St. Louis, Missouri, or on such other date or at such other place is agreed to in writing by the parties hereto. The parties agree to use reasonable efforts to cause the Closing to occur at the end of a month. The date of the Closing is referred to herein as the "CLOSING DATE."


SECTION 1.3 EFFECTIVE TIME. As soon as practicable following the satisfaction or waiver of the conditions set forth in Article VI, the parties shall file articles of merger or other appropriate documents (in any such case, the "CERTIFICATE OF MERGER") executed in accordance with the relevant provisions of the GBCL, and shall make all other filings or recordings required under the GBCL. The Merger shall become effective immediately following the Distribution upon the filing of the Certificate of Merger with the Missouri Secretary of State or at such other time as the Company and Acquiror shall agree should be specified in the Certificate of Merger (the time the Merger becomes effective being the "EFFECTIVE TIME").


SECTION 1.4 EFFECTS OF THE MERGER. The Merger shall have the effects set forth in Section 351.450 of the GBCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the properties, rights, privileges, powers and franchises of Merger Sub and the Company shall vest in the Surviving Corporation, and all debts, liabilities, obligations and duties of Merger Sub and the Company shall become the debts, liabilities and duties of the Surviving Corporation.


SECTION 1.5 CERTIFICATE OF INCORPORATION AND BY-LAWS.


(a) The certificate of incorporation of Merger Sub as in effect at the Effective Time shall be the certificate of incorporation of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable law.


(b) The by-laws of Merger Sub as in effect at the Effective Time shall be the by-laws of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable law.


SECTION 1.6 DIRECTORS. The directors of Merger Sub at the Effective Time shall be the directors of the Surviving Corporation, until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be.


SECTION 1.7 OFFICERS. The officers of Merger Sub at the Effective Time shall be the officers of the Surviving Corporation, until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be.


A-2 3


ARTICLE II


EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES


SECTION 2.1 EFFECT ON CAPITAL STOCK. As of the Effective Time, by virtue of the Merger and without any action on the part of the holder of any shares of Common Stock, par value $.01 per share, of the Company ("COMPANY COMMON STOCK"):


(a) Cancellation of Treasury Stock and Acquiror-Owned Stock. Each share of Company Common Stock that is owned by the Company or by any wholly owned subsidiary of the Company (but not any Benefit Plan (as defined in Section 3.2(m)) of the Company or any of its subsidiaries) and each share of Company Common Stock that is owned by Acquiror, Merger Sub or any other wholly owned subsidiary of Acquiror, excluding, in each case, any such share held by the Company, Acquiror or any of their wholly owned subsidiaries in a fiduciary, custodial or similar capacity, shall automatically be canceled and retired and shall cease to exist, and no common stock, par value $.10 per share, of Acquiror ("ACQUIROR COMMON STOCK") or other consideration shall be delivered in exchange therefor.


(b) Conversion of Company Common Stock. Subject to Section 2.2(e), each issued and outstanding share of Company Common Stock, other than (i) shares to be canceled in accordance with Section 2.1(a) and (ii) as set forth in paragraph (c) below, shares that have not been voted in favor of the approval of this Agreement and with respect to which dissenters' rights shall have been perfected in accordance with Section 351.455 of the GBCL ("DISSENTERS' SHARES"), shall be converted into the right to receive a fraction of a fully paid and nonassessable share of Acquiror Common Stock equal to the Conversion Number (the "MERGER CONSIDERATION"). The term "CONVERSION NUMBER" shall mean a number, expressed to three decimal places, equal to the fraction of (i) $570,000,000 less (A) the amount of any Funded Debt of the Company and the Branded Subsidiary as of the Effective Time and (B) the amount required to be paid by the Company to the holders of the Rights to redeem the Rights, to the extent such amount remains unpaid at the Effective Time (the "RIGHTS PAYMENT"), divided by (ii) the product of (A) the Average Value of Acquiror Common Stock multiplied by (B) the number of shares of Company Common Stock outstanding immediately before the Effective Time. The term "FUNDED DEBT OF THE COMPANY" shall mean, without duplication, (i) the Company's 8 3/4% Notes due September 15, 2004 (the "NOTES") (which shall be valued at their face value, plus any accrued and unpaid interest thereon as of the Closing Date), (ii) any amounts outstanding under any bank credit facility of the Company or the Branded Subsidiary, (iii) all other indebtedness of the Company or the Branded Subsidiary for borrowed money, and (iv) any other indebtedness of the Company or the Branded Subsidiary that is evidenced by a note, bond or similar security. The amount of any Funded Debt of the Company referred to in the foregoing clauses (ii), (iii) and (iv) shall be the face value thereof, plus any accrued and unpaid interest thereon as of the Closing Date, plus an amount, if any, on an after-tax basis, equal to (i) the face value thereof, multiplied by (ii)(A) the number of days, if any, following the Effective Time during which such Funded Debt of the Company is not payable or prepayable without premium or penalty divided by (B) 365, multiplied by (iii)(A) the applicable annual interest rate of such Funded Debt minus (B) the annual interest rate applicable to debt of Acquiror having a maturity equal to the number of days referred to in clause (ii)(A) of this sentence (such rate to be reasonably agreed upon by Lehman Brothers Inc. and Dillon Read & Co., Inc.). The term "AVERAGE VALUE OF ACQUIROR COMMON STOCK" shall mean the volume-weighted average of the prices per share of Acquiror Common Stock for all trades reported on the New York Stock Exchange Inc. ("NYSE") during the 10 trading days immediately preceding the last business day before the date of the Effective Time; provided, however, that if, on any such day, there has been any suspension of trading, the imposition of any NYSE market circuit breakers or any delay in the opening of trading, in any such case affecting the trading of the Acquiror Common Stock on the NYSE, such day shall be excluded and the measurement period for the determination of the Average Value of Acquiror Common Stock shall be the 10 trading days immediately preceding the last business day before the date of the Effective Time on which no such event shall have occurred. As of the Effective Time, all such shares of Company Common Stock shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of a certificate formerly representing any such shares of Company Common Stock shall cease to have any


A-3 4


rights with respect thereto, except the right to receive the shares of Acquiror Common Stock and any cash in lieu of fractional shares of Acquiror Common Stock to be issued or paid in consideration therefor upon surrender of such certificate in accordance with Section 2.2, without interest thereon.


(c) Shares of Dissenting Stockholders. Notwithstanding anything in this Agreement to the contrary, no Dissenters' Shares shall be converted as described in Section 2.1(b) but shall become the right to receive such consideration from the Surviving Corporation as may be determined to be due in respect of such Dissenters' Shares pursuant to the laws of the State of Missouri; provided, however, that any Dissenters' Shares outstanding immediately prior to the Effective Time and held by a stockholder who shall, after the Effective Time, lose or withdraw his or her dissenter's rights pursuant to the GBCL, shall be deemed to be converted as of the Effective Time into the right to receive the Merger Consideration.


SECTION 2.2 EXCHANGE OF CERTIFICATES.


(a) Exchange Agent. As of the Effective Time, Acquiror shall deposit with Norwest Bank Minnesota, N.A. (the "EXCHANGE AGENT"), for the benefit of the holders of shares of Company Common Stock, for exchange through the Exchange Agent in accordance with this Article II, certificates representing the shares of Acquiror Common Stock (such shares of Acquiror Common Stock, together with any dividends or distributions with respect thereto, being hereinafter referred to as the "EXCHANGE FUND") issuable pursuant to Section 2.1 in exchange for certificates formerly representing outstanding shares of Company Common Stock. Acquiror shall or shall cause the Surviving Corporation to provide to the Exchange Agent, on a timely basis, funds necessary to pay any cash payable in lieu of fractional shares of Acquiror Common Stock in accordance with Section 2.2(e).


(b) Exchange Procedures. As soon as reasonably practicable after the Effective Time, the Surviving Corporation shall cause the Exchange Agent to mail to each holder of record of a certificate or certificates which immediately prior to the Effective Time represented outstanding shares of Company Common Stock (the "CERTIFICATES") whose shares were converted into the right to receive shares of Acquiror Common Stock pursuant to Section 2.1, (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Exchange Agent and shall be in such form and have such other provisions as Acquiror may reasonably specify) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for certificates representing shares of Acquiror Common Stock and cash in lieu of any fractional share. Upon surrender of a Certificate for cancellation to the Exchange Agent or to such other agent or agents as may be appointed by Acquiror, together with such letter of transmittal, duly executed, and such other documents as may reasonably be required by the Exchange Agent, the holder of such Certificate shall be entitled to receive in exchange therefor a certificate representing that number of whole shares of Acquiror Common Stock, and cash in lieu of any fractional share, which such holder has the right to receive pursuant to the provisions of this Article II, and the Certificate so surrendered shall forthwith be canceled. In the event of a transfer of ownership of Company Common Stock which is not registered in the transfer records of the Company, a certificate representing the proper number of shares of Acquiror Common Stock and cash in lieu of any fractional share may be issued to a person other than the person in whose name the Certificate so surrendered is registered, if such Certificate shall be properly endorsed or otherwise be in proper form for transfer and the person requesting such issuance and payment shall pay any transfer or other taxes required by reason of the issuance of shares of Acquiror Common Stock and payment of cash in lieu of any fractional share to a person other than the registered holder of such Certificate or establish to the satisfaction of Acquiror that such tax has been paid or is not applicable. Until surrendered as contemplated by this Section 2.2, each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the certificate representing shares of Acquiror Common Stock and cash in lieu of any fractional shares of Acquiror Common Stock as contemplated by this Section 2.2. No interest will be paid or will accrue on any shares of Acquiror Common Stock or cash payable in lieu of any fractional shares of Acquiror Common Stock.


(c) Distributions with Respect to Unexchanged Shares. No dividends or other distributions with respect to Acquiror Common Stock with a record date after the Effective Time shall be paid to the holder of any unsurrendered Certificate with respect to the shares of Acquiror Common Stock represented thereby and no


A-4 5


cash payment in lieu of fractional shares shall be paid to any such holder pursuant to Section 2.2(e) until the surrender of such Certificate in accordance with this Article II. Subject to the effect of applicable laws, following surrender of any such Certificate, there shall be paid to the holder of the certificate representing whole shares of Acquiror Common Stock issued in exchange therefor, without interest, (i) at the time of such surrender, the amount of any cash payable in lieu of a fractional share of Acquiror Common Stock to which such holder is entitled pursuant to Section 2.2(e) and the amount of dividends or other distributions with a record date after the Effective Time theretofore paid with respect to such whole shares of Acquiror Common Stock and (ii) at the appropriate payment date, the amount of dividends or other distributions with a record date after the Effective Time but prior to such surrender and a payment date subsequent to such surrender payable with respect to such whole shares of Acquiror Common Stock.


(d) No Further Ownership Rights in Company Common Stock. All shares of Acquiror Common Stock issued upon the surrender for exchange of Certificates in accordance with the terms of this Article II and any cash paid pursuant to Section 2.2(c) or 2.2(e) shall be deemed to have been issued and paid in full satisfaction of all rights pertaining to the shares of Company Common Stock theretofore represented by such Certificates, and there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the shares of Company Common Stock which were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation or the Exchange Agent for any reason, they shall be canceled and exchanged as provided in this Article II.


(e) No Fractional Shares.


(i) No certificates or scrip representing fractional shares of
Acquiror Common Stock shall be issued upon the surrender for exchange of
Certificates, and such fractional share interests will not entitle the
owner thereof to vote or to any other rights as a stockholder of Acquiror.


(ii) Notwithstanding any other provision of this Agreement, each
holder of shares of Company Common Stock exchanged pursuant to the Merger
who would otherwise have been entitled to receive a fraction of a share of
Acquiror Common Stock (after taking into account all Certificates
registered to such holder) shall receive, in lieu thereof, cash (without
interest) in an amount equal to such fractional part of a share of Acquiror
Common Stock multiplied by the Average Value of Acquiror Common Stock.


(f) Termination of Exchange Fund. Any portion of the Exchange Fund which remains undistributed to the holders of the Certificates for six months after the Effective Time shall be delivered to Acquiror, upon demand, and any holders of the Certificates who have not theretofore complied with this Article II shall thereafter look only to the Surviving Corporation or Acquiror for payment of their claim for Acquiror Common Stock, any cash in lieu of fractional shares of Acquiror Common Stock and any dividends or distributions with respect to Acquiror Common Stock.


(g) No Liability. None of Acquiror, Merger Sub, the Company, the Surviving Corporation or the Exchange Agent shall be liable to any person in respect of any shares of Acquiror Common Stock (or dividends or distributions with respect thereto) or cash from the Exchange Fund delivered to a public official pursuant to any applicable abandoned property, escheat or similar law.


SECTION 2.3 NET ASSETS ADJUSTMENT.


(a) If the value of the combined total assets minus the total liabilities of the Company and the Branded Subsidiary on the Closing Date, as calculated in the manner set forth on Schedule 2.3 ("CLOSING DATE NET ASSET VALUE"), is less than $41,900,000, then Foods shall pay to the Surviving Corporation an amount equal to such shortfall in the manner as provided on Schedule 2.3.


(b) If the Closing Date Net Asset Value is more than $41,900,000, then the Surviving Corporation shall pay to Foods an amount equal to such excess in the manner as provided on Schedule 2.3.


(c) Schedule 2.3 sets forth (i) the manner in which the Closing Date Net Asset Value shall be calculated and (ii) the manner in which any payment required by Sections 2.3(a) or 2.3(b) shall be made. The payments made under this Section 2.3 shall not be deemed to be an adjustment of the consideration paid for the Company Common Stock.


A-5 6


ARTICLE III


REPRESENTATIONS AND WARRANTIES


SECTION 3.1 CERTAIN DEFINITIONS. As used in Section 3.2, unless specifically provided otherwise, any reference to the Company shall be a reference to the Company and the Branded Subsidiary, assuming that the contribution of the Branded Business to the Branded Subsidiary, the Internal Spinoff and the Distribution had occurred immediately prior to the date hereof on the terms and conditions set forth in the Reorganization Agreement. As used in this Agreement, any reference to any event, change or effect having a material adverse effect on or with respect to an entity (or group of entities taken as a whole) means such event, change or effect is reasonably expected to be materially adverse to the business, properties, assets, results of operations or consolidated financial condition of such entity (or, if with respect thereto, of such group of entities taken as a whole) or on the ability of such entity or group of entities to consummate the transactions contemplated hereby, including the Distribution and the Merger. As used in this Agreement, any reference to the knowledge of the Company or the best knowledge of the Company means the actual knowledge after reasonable inquiry of the relevant facts and circumstances of the individuals listed on Schedule 3.1, and not any other person or entity.


SECTION 3.2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to Acquiror and Merger Sub as follows:


(a) Organization, Standing, Corporate Power and Subsidiaries. The Company is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. The Company is duly qualified or licensed to do business and in good standing in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification or licensing necessary, except where the failure to be so duly qualified or licensed and in good standing would not have a material adverse effect on the Company. True, accurate and complete copies of the Articles of Incorporation and Bylaws of the Company, as in effect on the date hereof, including all amendments thereto, have heretofore been delivered to Acquiror. The Company has made available to legal counsel for Acquiror true, accurate and complete copies of the minute books of the Company as maintained by the Company, and such minute books contain minutes of all meetings of the boards of directors and stockholders of the Company. At the Effective Time, except for the Branded Subsidiary, the Company will not, directly or indirectly, own or have the right to acquire any capital stock or other equity interest in any other corporation, partnership, joint venture or other entity. At the Effective Time, the Company will own all right, title and interest in and to all capital stock and all rights with respect to all capital stock of the Branded Subsidiary. The capitalization and the state, country or other jurisdiction of incorporation of the Branded Subsidiary is accurately described and identified on Schedule 3.2(a).


(b) Capital Structure. The authorized capital stock of the Company consists of 300,000,000 shares of Company Common Stock and 10,000,000 shares of preferred stock, par value $0.01 per share ("COMPANY PREFERRED STOCK"). At the close of business on July 31, 1996, (i) 32,924,347 shares of Company Common Stock and no shares of Company Preferred Stock were issued and outstanding, (ii) 1,000,501 shares of Company Common Stock were held by the Company in its treasury, (iii) 2,610,086 shares of Company Common Stock were reserved for issuance pursuant to the Benefit Plans and (iv) 35,534,433 shares of Company Common Stock were reserved for issuance in connection with the rights (the "RIGHTS") issued pursuant to the Rights Agreement dated as of March 24, 1994 (as amended from time to time, the "RIGHTS AGREEMENT"), between the Company and Boatmen's Trust Company, as Rights Agent. Except as set forth above, at the close of business on July 31, 1996, no shares of capital stock or other voting securities of the Company were issued, reserved for issuance or outstanding. All outstanding shares of capital stock of the Company are, and all shares which may be issued pursuant to the Benefit Plans will be, when issued, duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights. There are not any bonds, debentures, notes or other indebtedness of the Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which stockholders of the Company may vote. Except as set forth above, there are not, and immediately prior to the Effective Time there will not


A-6 7


be, any securities, options, warrants, calls, rights, commitments, agreements, arrangements or undertakings of any kind to which the Company is a party or by which it is bound obligating the Company to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other voting securities of the Company or of the Branded Subsidiary or obligating the Company or the Branded Subsidiary to issue, grant, extend or enter into any such security, option, warrant, call, right, commitment, agreement, arrangement or undertaking. There are not any outstanding contractual obligations of the Company to repurchase, redeem or otherwise acquire any shares of capital stock of the Company. The Company has delivered to Acquiror a complete and correct copy of the Rights Agreement as amended and supplemented to the date of this Agreement.


(c) Authority; Noncontravention. The Company has, and, in the case of any Ancillary Agreements (as defined in the Reorganization Agreement) executed at a later time, the Company will have, the requisite corporate power and authority (subject to the approvals described in the next sentence) to enter into this Agreement and the Ancillary Agreements and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Ancillary Agreements and the consummation by the Company of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action on the part of the Company, other than, with respect to the Merger, the approval and adoption of this Agreement by the affirmative vote of the holders of Company Common Stock representing two-thirds of the shares entitled to vote (such holders of two-thirds of such shares, the "REQUISITE STOCKHOLDERS"), and formal declaration of the Distribution by the Company's Board of Directors (which will occur prior to the Closing Date). This Agreement has been duly executed and delivered by the Company (excluding the Branded Subsidiary) and, assuming this Agreement constitutes a valid and binding obligation of Acquiror, constitutes a valid and binding obligation of the Company (excluding the Branded Subsidiary), enforceable against the Company (excluding the Branded Subsidiary) in accordance with its terms. Each of the Ancillary Agreements has been, or prior to the Merger and the other transactions contemplated thereby will be, ...