-----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, OHzQSkdWh0HDpqcU+r8f5BCjhEjyctr9AvFGn3lCXq5X3/WcuMNmi9h4iTTAdrLF KJtk5Nz5xNg85ApMu/dfsw== 0000040704-99-000025.txt : 19990824 0000040704-99-000025.hdr.sgml : 19990824 ACCESSION NUMBER: 0000040704-99-000025 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 19990530 FILED AS OF DATE: 19990823 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-K405 SEC ACT: SEC FILE NUMBER: 001-01185 FILM NUMBER: 99697861 BUSINESS ADDRESS: STREET 1: NUMBER ONE GENERAL MILLS BLVD CITY: MINNEAPOLIS STATE: MN ZIP: 55426 BUSINESS PHONE: 6125402311 MAIL ADDRESS: STREET 1: P O BOX 1113 CITY: MINNEAPOLIS STATE: MN ZIP: 55440 10-K405 1 1999 ANNUAL REPORT ON FORM 10-K - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996]. For the fiscal year ended May 30, 1999 / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]. For the transition period from .............. to ............. 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) (612) 764-2311 (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 Chicago 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 $84.125 per share as reported on the New York Stock Exchange on July 29, 1999: $12,827.8 million. Number of shares of Common Stock outstanding as of July 29, 1999: 152,485,214 (including 25,848 shares set aside for the exchange of shares of Ralcorp Holdings, Inc. and excluding 51,668,118 shares held in the treasury). DOCUMENTS INCORPORATED BY REFERENCE Portions of Registrant's Proxy Statement dated August 14, 1999 are incorporated by reference into Part III, and portions of Registrant's 1999 Annual Report to Stockholders are incorporated by reference into Parts I, II and IV. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART I ITEM 1. BUSINESS. General Mills, Inc. was incorporated in Delaware in 1928. The Company is engaged in the manufacture and marketing of consumer foods products. 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 markets its products primarily through its own sales organizations, supported by advertising and other promotional activities. Such products are primarily distributed directly to retail food chains, cooperatives, membership stores and wholesalers. Certain food products, such as yogurt and some foodservice and refrigerated products, are sold through distributors and brokers. The packaged consumer foods market is highly competitive, with numerous competitors of varying sizes. The principal methods of competition include product quality, advertising, promotion and price. In most of its consumer food lines, described below, General Mills competes not only with other widely advertised branded products, but also with generic products and private label products, which are generally sold at lower prices. 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, HONEY FROSTED WHEATIES, CRISPY WHEATIES 'N RAISINS, LUCKY CHARMS, TOTAL CORN FLAKES, WHOLE GRAIN TOTAL, TOTAL RAISIN BRAN, TRIX, GOLDEN GRAHAMS, WHEAT CHEX, CORN CHEX, RICE CHEX, MULTI-BRAN CHEX, KIX, BERRY BERRY KIX, FIBER ONE, REESE'S PEANUT BUTTER PUFFS, COCOA PUFFS, COOKIE CRISP, CINNAMON TOAST CRUNCH, FRENCH TOAST CRUNCH, CLUSTERS, RAISIN NUT BRAN, OATMEAL CRISP, TRIPLES and BASIC 4. In fiscal 1999 the Company introduced an organic cereal called Sunrise, Honey Nut Chex and NesQuik, a chocolate-flavored cereal. DESSERTS, FLOUR AND BAKING MIXES. General Mills makes and sells a line of dessert mixes under the BETTY CROCKER trademark, including SUPERMOIST layer cakes, RICH & CREAMY and SOFT WHIPPED ready-to-spread frostings, SUPREME brownie and dessert bar mixes, muffin mixes, STIR 'N BAKE mixes and SWEET REWARDS fat-free and reduced-fat mixes. 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, and regional brands such as LA PINA, ROBIN HOOD and RED BAND. The Company also engages in grain merchandising, produces flour for internal ingredient requirements and sells flour to bakery, foodservice and manufacturing markets. DINNER AND SIDE DISH PRODUCTS. General Mills manufactures a line of 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, seasoned rice and pasta side dishes, SUDDENLY SALAD and BAC*O'S salad topping. The Company also manufactures and markets seasoned rice and pasta side dish mixes under the FARMHOUSE name. SNACK PRODUCTS AND BEVERAGES. General Mills markets POP*SECRET microwave popcorn; a line of grain snacks including NATURE VALLEY granola bars, DUNKAROOS and GOLDEN GRAHAMS TREATS; a line of fruit snacks including FRUIT ROLL-UPS, FRUIT BY THE FOOT, GUSHERS, FRUIT STRING THING, LUCKY CHARMS and TRIX shapes, a line of salty snack products called CHEX Mix and savory snacks marketed under the name BUGLES. The Company also produces and sells a line of single-serving fruit juice drinks marketed under the SQUEEZIT trademark and SQUEEZIT 100, a 100% juice beverage. YOGURT PRODUCTS. General Mills manufactures and sells yogurt products, including YOPLAIT ORIGINAL, YOPLAIT LIGHT, CUSTARD STYLE and TRIX, a layered yogurt for children. GO-GURT, yogurt packaged in a portable tube, was introduced in fiscal 1999 and is expanding nationally. The Company also manufactures and sells a variety of refrigerated cup yogurt products under the COLOMBO brand name. FOODSERVICE. General Mills markets branded baking mixes, cereals, snacks, dinner and side dish products, refrigerated and soft-serve frozen yogurt and custom products to the commercial and non-commercial foodservice sectors, including schools, colleges, hotels, restaurants, healthcare facilities, convenience stores and vending. INTERNATIONAL FOODS OPERATIONS. The International Foods organization of the Company exports packaged food products and snack pellets throughout the world and licenses food products for manufacture in Europe and the Asia/Pacific region. General Mills Canada, Inc. sells BIG G ready-to-eat cereals, BETTY CROCKER side dishes, baking and packaged dinner mixes and fruit, grain and salty snacks in Canada. During fiscal 1999 the Company engaged in four international joint ventures. See Note Four to Consolidated Financial Statements appearing on page 28 of the Company's 1999 Annual Report to Stockholders, incorporated herein by reference. Cereal Partners Worldwide (CPW), the Company's joint venture with Nestle, S.A., competes in more than 70 countries and republics. The following cereal products were marketed under the umbrella Nestle trademark in fiscal 1999: TRIO, CLUSTERS, NESQUIK, MULTI-CHEERIOS, HONEY NUT CHEERIOS, GOLDEN GRAHAMS, CINI MINIS, CHOCAPIC, TRIX, ESTRELITAS, GOLD, KIX, MILO, FIBRE 1, KANGUS, SPORTIES, FITNESS, SHREDDED WHEAT, SHREDDIES, COUNTRY CORN FLAKES, HONEY STARS, KOKO KRUNCH, SNOW FLAKES, ZUCOSOS, FRUTINA and APPLE MINIS. CPW also manufactures private label cereals for customers in the United Kingdom. The Company has a 50% equity interest in CPW. Snack Ventures Europe (SVE), the Company's joint venture with PepsiCo, Inc., manufactures and sells snack foods in Holland, France, Belgium, Spain, Portugal, Greece, Estonia, Hungary, Russia and Slovakia. The Company has a 40.5% equity interest in SVE. In fiscal 1999, decisions were made to end the Company's International Dessert Partners joint venture with Bestfoods for baking mixes and desserts in Latin America, and the Tong Want snack joint venture with Want Want Holdings Ltd., which had not yet begun operating. These decisions will not have a material impact on our financial position, results of operations, or cash flows. 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 contained in the business discussions above. The Company considers that, taken as a whole, the rights under its various patents, which expire from time to time, are a valuable asset, but the Company does not believe that its businesses are materially dependent upon any single patent or group of related patents. Outside 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, fruits, other agricultural products, vegetable oils, and plastic and paper for packaging materials. Although General Mills has some long-term contracts, the majority of such raw materials are purchased on the open market. Prices of most raw materials will probably increase over the long term. Nonetheless, 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 hedging 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 1999 Annual Report to Stockholders, incorporated herein by reference and the "Market Risk Management" section of the Report's "Management's Discussion and Analysis" appearing on page 19 of the Company's 1999 Annual Report to Stockholders, incorporated herein by reference. CAPITAL EXPENDITURES. During the three fiscal years ended May 30, 1999, General Mills expended $627 million for capital expenditures, not including the cost of acquired companies. The Company expects to spend approximately $250 million for such purposes in fiscal 2000. RESEARCH AND DEVELOPMENT. The Company's main research and development facilities are located at the James Ford Bell Technical Center in Minneapolis, Minnesota. With a staff of approximately 880, the Center is responsible for most of the food research for the Company. Approximately one-half of the staff hold degrees in various chemical, biological and engineering sciences. Research and development expenditures (all Company-sponsored) amounted to $70.0 million in fiscal 1999, $66.3 million in fiscal 1998 and $61.4 million in fiscal 1997. 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. EMPLOYEES. At May 30, 1999, General Mills had approximately 10,660 employees. ENVIRONMENTAL MATTERS. As of June 30, 1999, the Company has received notices advising that there have been releases or threatened releases of hazardous substances or wastes at 11 sites, and alleging that the Company and other named parties are potentially responsible for cleaning up those sites and/or paying certain costs in connection with those sites. 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. SEGMENT INFORMATION. See Note Eighteen to Consolidated Financial Statements appearing on page 38 of the Company's 1999 Annual Report to Stockholders, incorporated herein by reference, for Business Segment and Geographic Information. EXECUTIVE OFFICERS OF THE REGISTRANT The executive officers of the Company, together with their ages and business experience, are set forth below. Y. Marc Belton, age 40, is Senior Vice President; President, Big G. Mr. Belton joined the Company in 1983 and served in various food marketing management positions. He was appointed a Vice President of the Company in 1991, named President, Snacks in 1994, elected Senior Vice President, President, New Ventures in 1997 and named to his present position in July 1999. Peter J. Capell, age 42, is Vice President; President, Snacks. Mr. Capell joined the Company in 1985 and served in various marketing and general management positions. He was appointed a Vice President of the Company in 1996, named Marketing Director, Cheerios business unit in 1996 and named to his present position in 1997. Randy G. Darcy, age 48, is Senior Vice President, Operations. 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. Stephen R. Demeritt, age 55, will become Vice Chairman of the Company on October 1, 1999, with responsibility for worldwide cereal businesses, General Mills Canada, Consumer Insights and Advertising. Mr. Demeritt joined General Mills in 1969 and has served in a variety of consumer food marketing positions. He was president of International Foods from 1991 to 1993 and for the past five years has been Chief Executive Officer of Cereal Partners Worldwide, the Company's global cereal joint venture with Nestle. Jon L. Finley, age 45, is Senior Vice President, Global Convenience Foods, which includes Yoplait-Colombo yogurt and domestic and international snack foods. Mr. Finley joined the Company in 1983 and was named President, Yoplait USA in 1991, appointed a Vice President of the Company in 1991, elected Senior Vice President in 1994, named Senior Vice President, New Business in 1995 and named Senior Vice President, Gold Medal in 1996. He was named to his present position in 1998. Ian R. Friendly, age 38, is Vice President; President, Yoplait-Colombo. Mr. Friendly joined the Company in 1983 and served in various food marketing management positions. He was appointed a Vice President of the Company in 1990 with responsibility for the New Enterprise Business Unit of Big G and was subsequently appointed to lead the Child Cereals Business Unit of Big G in 1993 and the Asia/Pacific, Middle East and Latin America Business Development of CPW, S.A. in 1994. He was named to his present position in 1998. Charles W. Gaillard, age 58, has been President of General Mills since 1995, and will retire from the Company on October 1, 1999. Mr. Gaillard joined General Mills in 1966 and advanced through various food marketing management positions, becoming Executive Vice President in 1989 and Vice Chairman in 1993. From 1989 to 1993 he was Chief Executive Officer of Cereal Partners Worldwide. Eric J. Larson, age 43, is Senior Vice President, Investor Relations. Mr. Larson joined the Company in this position in June 1996 from Morgan Stanley & Co., where he had been a partner and senior analyst covering packaged food, agri-business, foodservice, tobacco and selected beverage companies since 1992. He previously worked as an analyst covering consumer products companies at First Boston Corporation and PaineWebber. James A. Lawrence, age 46, is Executive Vice President, Chief Financial Officer. 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 their operations in Asia, the Middle East and Africa. John T. Machuzick, age 42, is Senior Vice President, Sales-Strategic Channels. Mr. Machuzick joined the Company in 1978 and served in a variety of sales management positions. He was appointed Vice President, Trade Marketing and Promotions in 1997, named Vice President of Sales for the Western Zone in 1998 and named to his present position in July 1999. Siri S. Marshall, age 51, is Senior Vice President, Corporate Affairs and General Counsel. 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. Christopher D. O'Leary, age 40, is Senior Vice President; President, Betty Crocker. Mr. O'Leary joined the Company in 1997 in the position of Vice President, Corporate Growth. Prior to joining General Mills he spent 17 years at PepsiCo, Inc., last serving as President and Chief Executive Officer of the Hostess Frito-Lay business in Canada. He was named to his present position in July 1999. Michael A. Peel, age 49, is Senior Vice President, Human Resources. Mr. Peel joined the Company in this position in 1991 from PepsiCo, Inc. where he spent 14 years, last serving as Senior Vice President, Personnel, responsible for PepsiCo Worldwide Foods. Kendall J. Powell, age 45, is Senior Vice President of General Mills and has been elected Chief Executive Officer of Cereal Partners Worldwide, effective September 14, 1999. Mr. Powell joined the Company in 1979 and was appointed a Vice President of General Mills and named Marketing Director of Cereal Partners U.K. in 1990. He was named President, Yoplait USA in 1995, and was elected Senior Vice President, President, Big G in 1998. Jeffrey J. Rotsch, age 49, is Senior Vice President, with overall responsibility for Sales, Foodservice and Channel Development. Mr. Rotsch joined the Company in 1974 and served as the president of several divisions, including Betty Crocker and Big G. He was elected Senior Vice President in 1993 and named to his present position in July 1999. Stephen W. Sanger, age 53, has been Chairman and Chief Executive Officer of General Mills, Inc. since 1995. Mr. Sanger joined the Company in 1974 and served as the president of several business units, including Yoplait USA and Big G. He was elected a Senior Vice President in 1989, an Executive Vice President in 1991, Vice Chairman in 1992 and President in 1993. Christina L. Shea, age 46, is Senior Vice President; President, New Ventures. Ms. Shea joined the Company in 1976 and was appointed a Vice President in 1987. She was appointed Vice President, New Business Development for Yoplait USA in 1991, and Vice President, General Manager, Betty Crocker Main Meals and Side Dishes in 1992, and served as President of Betty Crocker from 1994 to July 1999. She was elected a Senior Vice President in 1998. Robert L. Stretmater, age 55, is Vice President; President, Foodservice. Mr. Stretmater joined the Company in 1967 and was appointed a Vice President in 1987. He was appointed Vice President, Director of Marketing for the Gold Medal Division in 1989, Vice President, Director of Marketing for Foodservice in 1996 and named to his present position in 1997. Danny L. Strickland, age 50, 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. Austin P. Sullivan, Jr., age 59, is Senior Vice President, Corporate Relations. Mr. Sullivan joined the company in 1976, was named a Vice President in 1978, named Director of Public Affairs in 1979 and assumed responsibility for corporate communications in 1993. He was named to his present position in 1994. Kenneth L. Thome, age 51, 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 55, is Vice Chairman of the Company, with overall responsibility for Global Convenience Foods, Betty Crocker, New Ventures and Snack Ventures Europe. Mr. Viault joined the Company in January 1996 from Philip Morris, where he had been based in Zurich, Switzerland, serving since 1990 as President of Kraft Jacobs Suchard. Mr. Viault had been with Kraft General Foods a total of 20 years, serving in a variety of major marketing and general management positions. AVAILABLE INFORMATION General Mills is a reporting company under the Securities Exchange Act of 1934, as amended, and files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). The 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 our web site (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 The Company and its representatives may from time to time make written or oral forward-looking statements with respect to annual or long-term goals of the Company, 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. Our future results could be affected by a variety of factors such as competitive dynamics in the U.S. ready-to-eat cereal market, including pricing and promotional spending levels by premium branded manufacturers and by lower-priced bagged cereal and private label competitors. Results could also be affected by other external factors such as: economic conditions; the impact of competitive products and pricing; product development; actions of competitors other than as described above; 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; fluctuations in the cost and availability of supply-chain resources; and foreign economic conditions, including currency rate fluctuations. 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. The Company specifically declines to undertake any obligation to publicly revise any forward-looking statements that have been made to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. ITEM 2. PROPERTIES. The Company's principal executive offices and main research laboratory are Company-owned and located in the Minneapolis, Minnesota metropolitan area. General Mills operates numerous manufacturing facilities and maintains many sales and administrative offices and warehouses, mainly in the United States. Other facilities are operated in Canada. General Mills operates nine major consumer foods plants for the production of cereal products, prepared mixes, convenience foods and other food products. These facilities are located at Albuquerque, New Mexico; Buffalo, New York; Cedar Rapids, Iowa; Chicago, Illinois area (2); Cincinnati, Ohio; Covington, Georgia; Lodi, California; and Toledo, Ohio. The Company owns seven flour mills located at Avon, Iowa; Buffalo, New York; Great Falls, Montana; Johnson City, Tennessee; Kansas City, Missouri; Vallejo, California; and Vernon, California. The Company operates seven terminal grain elevators and has country grain elevators in 29 locations, primarily in Idaho and Montana. General Mills also has nine other food and beverage production facilities with total floor space of approximately 575,000 square feet, including 64,000 square feet of leased space. General Mills also owns or leases warehouse space aggregating approximately 8,200,000 square feet, of which approximately 5,800,000 square feet are leased. A number of sales and administrative offices are maintained in the United States and Canada, totaling 1,900,000 square feet. ITEM 3. LEGAL PROCEEDINGS. In management's opinion, there were no claims or litigation pending at May 30, 1999, 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," supra, for a discussion of environmental matters in which the Company is involved. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. -- Not applicable. 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 Nineteen to Consolidated Financial Statements and in the Eleven-Year Financial Summary appearing on pages 38 and 39 of Registrant's 1999 Annual Report to Stockholders is incorporated herein by reference. As of July 29, 1999, the number of record holders of common stock was 40,551. The Company's common stock ($.10 par value) is listed on the New York and Chicago Stock Exchanges. ITEM 6. SELECTED FINANCIAL DATA. The information for fiscal years 1995 through 1999 contained in the Eleven-Year Financial Summary on page 39 of Registrant's 1999 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 set forth in the section entitled "Management's Discussion and Analysis" on pages 16 through 20 of Registrant's 1999 Annual Report to Stockholders is incorporated herein by reference. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The information set forth in the "Market Risk Management" subsection of the section entitled "Management's Discussion and Analysis" on page 19 of Registrant's 1999 Annual Report to Stockholders is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The information on pages 21 through 38 of Registrant's 1999 Annual Report to Stockholders is incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. --Not applicable. 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 materials dated August 14, 1999 is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION. The information contained on pages 18 through 21 of Registrant's definitive proxy materials dated August 14, 1999 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. The information contained in the section entitled "Stock Ownership of General Mills Directors and Officers" contained in Registrant's definitive proxy materials dated August 14, 1999 is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. -- Not applicable. - ------------------ The Company's Annual Report on Form 10-K for the fiscal year ended May 30, 1999, 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. INDEPENDENT AUDITORS' REPORT The Stockholders and the Board of Directors General Mills, Inc.: Under date of June 28, 1999, we reported on the consolidated balance sheets of General Mills, Inc. and subsidiaries as of May 30, 1999 and May 31, 1998 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 30, 1999, as contained in the 1999 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 30, 1999. 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. Our report covering the basic consolidated financial statements refers to changes in the method of accounting in fiscal 1997 for impairment of long-lived assets and for long-lived assets to be disposed of. /s/ KPMG LLP Minneapolis, Minnesota June 28, 1999 CONSENT OF KPMG LLP The Board of Directors General Mills, Inc.: We consent to incorporation by reference in the Registration Statements (Nos. 2-49637 and 333-76741) 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 and 333-32509, 333-65311 and 333-65313) on Form S-8 of General Mills, Inc. of our reports dated June 28, 1999, relating to the consolidated balance sheets of General Mills, Inc. and subsidiaries as of May 30, 1999 and May 31, 1998 and the related consolidated statements of earnings, stockholders' equity, cash flows and related financial statement schedule for each of the fiscal years in the three-year period ended May 30, 1999, which reports are included or incorporated by reference in the May 30, 1999 annual report on Form 10-K of General Mills, Inc. Our report covering the basic consolidated financial statements refers to changes in the method of accounting in fiscal 1997 for impairment of long-lived assets and for long-lived assets to be disposed of. /s/ KPMG LLP Minneapolis, Minnesota August 23, 1999 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 30, 1999, May 31, 1998 and May 25, 1997 (incorporated herein by reference to page 22 of the Registrant's 1999 Annual Report to Stockholders). Consolidated Balance Sheets at May 30, 1999 and May 31, 1998 (incorporated herein by reference to page 23 of the Registrant's 1999 Annual Report to Stockholders). Consolidated Statements of Cash Flows for the Fiscal Years Ended May 30, 1999, May 31, 1998 and May 25, 1997 (incorporated herein by reference to page 24 of the Registrant's 1999 Annual Report to Stockholders). Consolidated Statements of Stockholders' Equity for the Fiscal Years Ended May 30 1999, May 31, 1998 and May 25, 1997 (incorporated herein by reference to page 25 of the Registrant's 1999 Annual Report to Stockholders). Notes to Consolidated Financial Statements (incorporated herein by reference to pages 26 through 38 of the Registrant's 1999 Annual Report to Stockholders). 2. Financial Statement Schedules: For the Fiscal Years Ended May 30, 1999, May 31, 1998 and May 25, 1997: II- Valuation and Qualifying Accounts 3. Exhibits: Exhibit No. Description 3.1 Registrant's Restated Certificate of Incorporation, as amended to date (incorporated herein by reference to Exhibit 3(i) to Registrant's Quarterly Report on Form 10-Q for the period ended August 24, 1997). 3.2 Registrant's By-Laws, 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 (incorporated herein by reference to Exhibit 4.1 to Registrant's Annual Report on Form 10-K for the fiscal year ended May 25, 1997). 4.2 Rights Agreement dated as of December 11, 1995 between Registrant and Norwest Bank Minnesota, N.A. (incorporated herein by reference to Exhibit 1 to Registrant's Report on Form 8-K dated December 11, 1995). 4.3 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). 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 (incorporated herein by reference to Exhibit 4.1 to Registrant's Report on Form 8-K dated January 31, 1997). Exhibit No. Description *10.1 Stock Option and Long-Term Incentive Plan of 1988, as amended to date. 10.2 Addendum No. 3 effective as of March 15, 1993 to Protocol of Cereal Partners Worldwide (incorporated herein by reference to Exhibit 10(b) to Registrant's Quarterly Report on Form 10-Q for the period ended February 26, 1995). *10.3 1998 Employee Stock Plan, as amended to date (incorporated herein by reference to Exhibit 4 to Registrant's Registration Statement No. 333-65311 on Form S-8 effective October 5, 1998). *10.4 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 25, 1997). *10.5 Management Continuity Agreement (incorporated herein by reference to Exhibit 4 to Registrant's Report on Form 8-K dated December 11, 1995). *10.6 Supplemental Retirement Plan, as amended to date. *10.7 Executive Survivor Income Plan, as amended to date. *10.8 Executive Health Plan, as amended to date (incorporated herein by reference to Exhibit 10.8 to Registrant's Annual Report on Form 10-K for the fiscal year ended May 26, 1996). *10.9 Supplemental Savings Plan, as amended to date. *10.10 1996 Compensation Plan for Non-Employee Directors, as amended to date. *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 31, 1998). *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 31, 1998). *10.13 Supplemental Benefits Trust Agreement dated February 9, 1987, as amended and restated as of September 26, 1988. *10.14 Supplemental Benefits Trust Agreement dated September 26, 1988. 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, 1995). 10.16 Protocol and Addendum No. 1 to Protocol of Cereal Partners Worldwide (incorporated herein by reference to Exhibit 10.16 to Registrant's Annual Report on Form 10-K for the fiscal year ended May 26, 1996). *10.17 1990 Salary Replacement Stock Option Plan, as amended to date. 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). *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 25, 1997). 10.21 Standstill Agreement with CPC International, Inc. dated October 17, 1994 (incorporated herein by reference to Exhibit 10(a) to Registrant's Quarterly Report on Form 10-Q for the period ended February 26, 1995). *10.22 1998 Senior Management Stock Plan, as amended to date (incorporated herein by reference to Exhibit 4 to Registrant's Registration Statement No. 333-65313 on Form S-8 effective October 5, 1998). * Items that are management contracts or compensatory plans or arrangements required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K. Exhibit No. Description 12 Statement of Ratio of Earnings to Fixed Charges (contained on page 15 of this Report). 13 1999 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 8 of this Report). (B) REPORTS ON FORM 8-K. -- Not applicable. 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 23, 1999 By: /s/ S. S. MARSHALL S. S. Marshall SENIOR VICE PRESIDENT, CORPORATE AFFAIRS AND GENERAL COUNSEL 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/ R.M. BRESSLER Director 7/27/99 (Richard M. Bressler) /s/ L. DE SIMONE Director 7/25/99 (Livio D. DeSimone) /s/ W.T. ESREY Director 7/28/99 (William T. Esrey) /s/ C.W. GAILLARD Director, 7/28/99 (Charles W. Gaillard) President /s/ R.V. GILMARTIN Director 7/29/99 (Raymond V. Gilmartin) /s/ JUDITH RICHARDS HOPE Director 7/30/99 (Judith R. Hope) /s/ ROBERT L. JOHNSON Director 7/28/99 (Robert L. Johnson) /s/ KENNETH MACKE Director 7/29/99 (Kenneth A. Macke) /s/ M.D. ROSE Director 7/28/99 (Michael D. Rose) Signature Title Date /s/ S.W. SANGER Chairman of the Board and 8/04/99 (Stephen W. Sanger) Chief Executive Officer /s/ A. MICHAEL SPENCE Director 7/30/99 (A. Michael Spence) /s/ DOROTHY A. TERRELL Director 7/29/99 (Dorothy A. Terrell) /s/ R.G. VIAULT Director 8/06/99 (Raymond G. Viault) Vice Chairman /s/ C. ANGUS WURTELE Director 7/28/99 (C. Angus Wurtele) /s/ KENNETH L. THOME Senior Vice President, 8/03/99 (Kenneth L. Thome) Financial Operations (Principal Accounting Officer) GENERAL MILLS, INC. AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (in millions) COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E - --------------------------- -------- -------- -------- -------- ADDITIONS BALANCE AT CHARGED TO DEDUCTIONS BALANCE BEGINNING COSTS AND FROM AT END OF DESCRIPTION OF PERIOD EXPENSES RESERVES PERIOD - -------------------------------------------------------------------------------- ALLOWANCE FOR POSSIBLE LOSSES ON ACCOUNTS RECEIVABLE: Year ended May 30, 1999 $4.2 $ .6 $.6 (a) $4.7 (.5)(b) ---- ---- ---- ---- Total............. $4.2 $ .6 $ .1 $4.7 ==== ==== ==== ==== Year ended May 31, 1998 $4.1 $ .7 $1.6 (a) $4.2 (1.0)(b) ---- ---- ---- ---- Total............. $4.1 $ .7 $ .6 $4.2 ==== ==== ==== ==== Year ended May 25, 1997 $4.1 $ .6 $1.1 (a) $4.1 (.5)(b) ---- ---- ---- ---- Total............. $4.1 $ .6 $ .6 $4.1 ==== ==== ==== ==== VALUATION ALLOWANCE FOR DEFERRED TAX ASSETS: Year ended May 30, 1999 10.3 - 5.3 5.0 Year ended May 31, 1998 11.2 - .9 10.3 Year ended May 25, 1997 11.2 - - 11.2 RESTRUCTURING CHARGES: Year ended May 30, 1999 30.5 51.6 37.5(c) 44.6 Year ended May 31, 1998 9.1 166.4 145.0(c) 30.5 Year ended May 25, 1997 27.3 - 18.2(c) 9.1 - ------------------------- Notes: (a) Bad debt write-offs. (b) Other adjustments and reclassifications. (c) Net Amounts utilized for restructuring activities. EXHIBIT 12 GENERAL MILLS, INC. RATIO OF EARNINGS TO FIXED CHARGES Fiscal Year Ended ----------------------------------------------- May 30, May 31, May 25, May 26, May 28, 1999 1998 1997 1996 1995 ------ ------ ------ ------ ------ Ratio of Earnings to Fixed Charges........... 6.67 5.63 6.54 6.94 4.10 For purposes of computing the ratio of earnings to fixed charges, earnings represent pretax income from continuing operations, plus pretax earnings or losses of joint ventures, plus fixed charges (net of capitalized interest). Fixed charges represent interest (whether expensed or capitalized) and one-third (the proportion deemed representative of the interest factor) of rents of continuing operations. EXHIBIT INDEX 3.2 Registrant's By-Laws, as amended to date. 10.1 Stock Option and Long-Term Incentive Plan of 1988, as amended to date. 10.6 Supplemental Retirement Plan, as amended to date. 10.7 Executive Survivor Income Plan, as amended to date. 10.9 Supplemental Savings Plan, as amended to date. 10.10 1996 Compensation Plan for Non-Employee Directors, as amended to date. 10.13 Supplemental Benefits Trust Agreement dated February 9, 1987, as amended and restated as of September 26, 1988. 10.14 Supplemental Benefits Trust Agreement dated September 26, 1988. 10.17 1990 Salary Replacement Stock Option Plan, as amended to date. 12 Statement of Ratio of Earnings to Fixed Charges. 13 1999 Annual Report to Stockholders (only portions). 21 List of Subsidiaries of General Mills, Inc. 23 Consent of KPMG LLP. 27 Financial Data Schedule. EX-3.(II) 2 BY-LAWS, AS AMENDED THROUGH JUNE 28, 1999 EXHIBIT 3.2 BY-LAWS of GENERAL MILLS, INC. as amended through June 28, 1999 INDEX OF BY-LAWS Page ARTICLE I. STOCKHOLDERS.............................................1 Section 1. Place of Holding Meeting.................................1 Section 2. Quorum...................................................1 Section 3. Adjournment of Meetings..................................1 Section 4. Annual Election of Directors.............................1 Section 5. Special Meetings: How Called.............................2 Section 6. Voting at Stockholders' Meetings.........................2 Section 7. Notice of Stockholders' Meetings.........................2 Section 8. Notice of Stockholder Business and Nominations...........3 ARTICLE II. DIRECTORS................................................5 Section 1. Organization.............................................5 Section 2. Election of Officers.....................................5 Section 3. Regular Meetings.........................................5 Section 4. Special Meetings: How Called: Notice....................5 Section 5. Number: Qualifications: Quorum: Term....................6 Section 6. Place of Meetings........................................6 Section 7. Powers of Directors......................................6 Section 8. Vacancies................................................6 Section 9. Resignation of Directors.................................6 Section 10. Compensation of Directors................................6 Section 11. Executive Committee......................................7 Section 12. Executive Committee: Powers..............................7 Section 13. Executive Committee: Organization: Meetings, Etc.........7 Section 14. Resignation and Removal of Member of Executive Committee.............................................8 Section 15. Vacancies in the Executive Committee.....................8 Section 16. Other Committees.........................................8 ARTICLE III. OFFICERS.................................................9 Section 1. Titles...................................................9 Section 2. Chairman.................................................9 Section 3. Vice Chairman............................................9 Section 4. President................................................9 Section 5. Vice President(s)........................................9 Section 6. Secretary................................................9 Section 7. Assistant Secretary.....................................10 Section 8. Treasurer...............................................10 Section 9. Assistant Treasurer.....................................10 Section 10. Senior Vice President, Financial Operations.............11 Section 11. Resignation and Removal of Officers.....................11 Section 12. Salaries................................................11 Page ARTICLE IV. CAPITAL STOCK...........................................11 Section 1. Issue of Certificates of Stock..........................11 Section 2. Transfer of Shares......................................12 Section 3. Dividends...............................................12 Section 4. Lost Certificates.......................................12 Section 5. Rules as to Issue of Certificates.......................12 Section 6. Holder of Record Deemed Holder in Fact..................12 Section 7. Closing of Transfer Books or Fixing Record Date.........12 ARTICLE V. CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC...................................13 Section 1. Contracts, Etc.: How Executed...........................13 Section 2. Loans...................................................13 Section 3. Deposits................................................13 Section 4. Checks, Drafts, Etc.....................................14 Section 5. Transaction of Business.................................14 ARTICLE VI. MISCELLANEOUS PROVISIONS................................14 Section 1(a) Fiscal Year.............................................14 Section 1(b) Staff and Divisional Titles.............................14 Section 2. Notice and Waiver of Notice.............................14 Section 3. Inspection of Books.....................................15 Section 4. Construction............................................15 Section 5. Adjournment of Meetings.................................15 Section 6. Indemnification.........................................15 Section 7. Resolution of Board of Directors Providing for Issuance of Cumulative Preference Stock...............17 ARTICLE VII. AMENDMENTS..............................................18 Section 1. Amendment of By-Laws....................................18 BY-LAWS of GENERAL MILLS, INC. ARTICLE I STOCKHOLDERS SECTION 1. Place of Holding Meeting: Meetings of stockholders may be held within or without the State of Delaware, and, unless otherwise determined by the board of directors or the stockholders, all meetings of the stockholders shall be held at the principal office of the corporation in the City of Minneapolis in the State of Minnesota. SECTION 2. Quorum: Any number of stockholders together holding one-half (1/2) in amount of the stock issued and outstanding entitled to vote, who shall be present in person or represented by proxy at any meeting duly called, shall constitute a quorum for the transaction of business, except as may be otherwise provided by law, by the certificate of incorporation, or by these by-laws. At any meeting of stockholders for the election of directors at which any class or classes of stock or any one or more series of any class or classes of stock shall have a separate vote as such class or series for the election of directors by such class or series, the absence of a quorum of any other class of stock or of any other series of any class of stock shall not prevent the election of the directors to be elected by such class or series. SECTION 3. Adjournment of Meetings: If less than a quorum shall be in attendance at the time for which the meeting shall have been called, the meeting may be adjourned from time to time by the chairman of the meeting or by a majority vote of the stockholders present or represented, without any notice other than by announcement at the meeting, until a quorum shall attend. Any meeting at which a quorum is present may also be adjourned, in like manner, for such time, or upon such call, as may be determined by the chairman of the meeting or by a majority vote of the stockholders. At any such adjourned meeting at which a quorum may be present any business may be transacted which might have been transacted at the meeting as originally called. In the absence of a quorum of any class or classes of stock or any one or more series of any class or classes of stock at any meeting of stockholders at which more than one class or series of stock shall be entitled to vote separately as a class or series for the election of directors, a majority in interest of the stockholders present in person or by proxy of the class or classes or one or more series of stock which lack a quorum shall also have the power to adjourn the meeting for the election of directors which they are entitled to elect, from time to time, without notice other than by announcement at the meeting, until a quorum of such class or classes or one or more series of stock shall be present. SECTION 4. Annual Election of Directors: The annual meeting of stockholders for the election of directors and the transaction of other business shall be held on such date and at such time as may be fixed by resolution of the board of directors. After the first election of directors no stock shall be voted on at any election which shall have been transferred on the books of the corporation within twenty (20) days next preceding such election, except where the transfer books of the corporation shall have been closed or a date shall have been fixed as a record date for the determination of the stockholders entitled to vote, as hereinafter in article IV, section 7 of these by-laws provided. The directors elected annually shall hold office until the next annual election and until their successors are respectively elected and qualified; provided, however, in the event that the holders of any class or classes of stock or any one or more series of any class or classes of stock have the right to elect directors separately as a class or series and such right shall have vested, such right may be exercised as provided in the certificate of incorporation of the corporation. The secretary shall prepare, or cause to be prepared, at least ten (10) days before every election, a complete list of stockholders entitled to vote, arranged in alphabetical order, and such list shall be open at the place where the election is to be held, for such ten (10) days, to the examination of any stockholder, and shall be produced and kept at the time and place of election during the whole time thereof, subject to the inspection of any stockholder who may be present. SECTION 5. Special Meetings: How Called: Special meetings of the stockholders for any purpose or purposes may be called by the chairman of the board of directors or by resolution of the board of directors. Special meetings of the holders of any class or classes of stock or any one or more series of any class or classes of stock for the purpose of electing directors in accordance with a special right as a class or series shall be called as provided in the certificate of incorporation of the corporation. SECTION 6. Voting at Stockholders' Meetings: The board of directors shall determine the voting power of any cumulative preference stock in accordance with article IV of the certificate of incorporation. At all meetings of stockholders all questions, except as otherwise provided by law or the certificate of incorporation, shall be determined by a majority vote in interest of the stockholders entitled to vote present in person or represented by proxy; provided, however, that any qualified voter may demand a stock vote, and in that case, such stock vote shall immediately be taken. A stock vote shall be by ballot and each ballot shall be signed by the stockholder voting, or by his proxy, if there be such proxy, and shall state the number of shares voted. Shares of its own capital stock belonging to the corporation shall not be voted upon directly or indirectly. The vote on stock of the corporation may be given by the stockholder entitled thereto in person or by his proxy appointed by an instrument in writing, subscribed by such stockholder or by his attorney thereunto authorized, and delivered to the secretary of the meeting. No proxy shall be voted on after three (3) years from its date, unless said proxy provides for a longer period. In determining the number of votes cast for or against a proposal, shares abstaining from voting on a matter (including elections) will not be treated as a vote for or against the proposal. A non-vote by a broker will be treated as if the broker never voted. SECTION 7. Notice of Stockholders' Meetings: Written notice, stating the time and place of the meeting and, in case of a special meeting, stating also the general nature of the business to be considered, shall be given by the secretary by mailing, or causing to be mailed, such notice, postage prepaid, to each stockholder entitled to vote, at his post office address as the same appears on the stock books of the corporation, or by delivering such notice to him personally, at least ten (10) days before the meeting. SECTION 8. Notice of Stockholder Business and Nominations: (a) Annual Meetings of Stockholders. (1) Nominations of persons for election to the board of directors of the corporation and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders (A) pursuant to the corporation's notice of meeting, (B) by or at the direction of the board of directors or (C) by any stockholder of the corporation who was a stockholder of record at the time of giving of notice provided for in this section 8, who is entitled to vote at the meeting and who complies with the notice procedures set forth in this section 8. (2) For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (C) of paragraph (a)(1) of this section 8, the stockholder must have given timely notice thereof in writing to the secretary of the corporation and such other business must otherwise be a proper matter for stockholder action. To be timely, a stockholder's notice shall be delivered to the secretary at the principal executive offices of the corporation not later than the close of business on the 90th day nor earlier than the close of business on the 120th day prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made by the corporation. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a stockholder's notice as described above. Such stockholder's notice shall set forth (A) as to each person whom the stockholder proposes to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14a-11 thereunder (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (B) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (C) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, as they appear on the corporation's books, and of such beneficial owner and (ii) the class and number of shares of the corporation which are owned beneficially and of record by such stockholder and such beneficial owner. (3) Notwithstanding anything in the second sentence of paragraph (a)(2) of this section 8 to the contrary, in the event that the number of directors to be elected to the board of directors of the corporation is increased and there is no public announcement by the corporation naming all of the nominees for director or specifying the size of the increased board of directors at least 100 days prior to the first anniversary of the preceding year's annual meeting, a stockholder's notice required by this section 8 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the secretary at the principal executive offices of the corporation not later than the close of business on the 10th day following the day on which such public announcement is first made by the corporation. (b) Special Meetings of Stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the corporation's notice of meeting. Nominations of persons for election to the board of directors may be made at a special meeting of stockholders at which directors are to be elected pursuant to the corporation's notice of meeting (A) by or at the direction of the board of directors or (B) provided that the board of directors has determined that directors shall be elected at such meeting, by any stockholder of the corporation who is a stockholder of record at the time of giving of notice provided for in this section 8, who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in this section 8. In the event the corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the board of directors, any such stockholder may nominate a person or persons (as the case may be), for election to such position(s) as specified in the corporation's notice of meeting, if the stockholder's notice required by paragraph (a)(2) of this section 8 shall be delivered to the secretary at the principal executive offices of the corporation not earlier than the close of business on the 120th day prior to such special meeting and not later than the close of business on the later of the 90th day prior to such special meeting or the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the board of directors to be elected at such meeting. In no event shall the public announcement of an adjournment of a special meeting commence a new time period for the giving of a stockholder's notice as described above. (c) General. (1) Only such persons who are nominated in accordance with the procedures set forth in this section 8 shall be eligible to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this section 8. Except as otherwise provided by law, the chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this section 8 and, if any proposed nomination or business is not in compliance with this section 8, to declare that such defective proposal or nomination shall be disregarded. (2) For purposes of this section 8, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act. (3) Notwithstanding the foregoing provisions of this section 8, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this section 8. Nothing in this section 8 shall be deemed to affect any rights (i) of stockholders to request inclusion of proposals in the corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act or any successor rule regarding shareholder proposals or (ii) of the holders of any series of cumulative preference stock to elect directors under specified circumstances pursuant to the terms of such preference stock. ARTICLE II DIRECTORS SECTION 1. Organization: The board of directors may hold a meeting for the purpose of organization and the transaction of other business, if a quorum be present, immediately before or after the annual meeting of the stockholders and immediately before or after any special meeting at which directors are elected. Notice of such meeting need not be given. Such organizational meeting may be held at any other time or place, which shall be specified in a notice given as hereinafter provided for special meetings of the board of directors, or in a consent and waiver of notice thereof signed by all the directors. SECTION 2. Election of Officers: At such meeting the board of directors may elect from among its number a chairman of the board of directors, one or more persons to serve as a vice chairman; a president and one or more corporate and company vice presidents, a secretary, a treasurer, a senior vice president, financial operations, one or more assistant secretaries, and one or more assistant treasurers who need not be members of the Board of Directors. Such officers shall hold office until the next annual election of officers and until their successors are respectively elected and qualified, unless removed by the board of directors as provided in section 11 of article III. SECTION 3. Regular Meetings: Regular meetings of the board of directors shall be held on such dates as are designated, from time to time, by resolutions of the board, and shall be held at the principal office of the corporation, or at such other location as the board selects. Each regular meeting shall commence at the time designated by the Chairman of the Board on at least five (5) days' written notice to each director when sent by mail and on at least three (3) days' notice when sent by private express carrier or transmitted by telex, facsimile or similar means. SECTION 4. Special Meetings: How Called: Notice: Special meetings of the board of directors may be called by the chairman of the board, a vice chairman of the board, the president or by any three (3) directors who are not salaried officers or salaried employees of the corporation. Written notice of the time, place and purposes of each special meeting shall be sent by private express carrier or transmitted by telex, facsimile or similar means to each director at least twenty-four (24) hours prior to such meeting. Notwithstanding the preceding, any meeting of the board of directors shall be a legal meeting without any notice thereof if all the members of the board shall be present, or if all absent members waive notice thereof. SECTION 5. Number: Qualifications: Quorum: Term: (a) The Board of Directors shall determine the number of directors on the board, which shall be at least twelve (12). (b) No person shall be eligible to become or to remain a director of the corporation unless the person is a stockholder in the corporation. Not more than six (6) of the members of the board of directors shall be officers or employees of the corporation, but the chairman of the board shall not be deemed such an officer or employee. (c) Subject to the provisions of the certificate of incorporation, as amended, one-third (1/3) of the total number of the directors (but in no event less than two (2)) shall constitute a quorum for the transaction of business. The affirmative vote of the majority of the directors present at a meeting at which a quorum is constituted shall be the act of the board of directors, unless the certificate of incorporation shall require a vote of a greater number. (d) Except as otherwise provided in these by-laws, directors shall hold office until the next succeeding annual stockholders' meeting and thereafter until their successors are respectively elected and qualified. SECTION 6. Place of Meetings: The board of directors may hold its meetings and keep the books of the corporation outside of the State of Delaware, at any office or offices of the corporation, or at any other place, as it may from time to time by resolution determine. SECTION 7. Powers of Directors: The board of directors shall have the management of the business of the corporation, and, subject to the restrictions imposed by law, by the certificate of incorporation or by these by-laws, may exercise all the powers of the corporation. SECTION 8. Vacancies: Except as otherwise provided in the certificate of incorporation, any vacancy in the board of directors because of death, resignation, disqualification, increase in number of directors, or any other cause may be filled by a majority of the remaining directors, though less than a quorum, at any regular or special meeting of the directors; or any such vacancy resulting from any cause whatsoever may be filled by the stockholders at the first annual meeting held after such vacancy shall occur or at a special meeting thereof called for the purpose. SECTION 9. Resignation of Directors: Any director of the corporation may resign at any time by giving written notice to the chairman of the board or to the secretary of the corporation. Such resignation shall take effect at the time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 10. Compensation of Directors: The board of directors shall have the authority to fix the compensation of directors. In addition, each director shall be entitled to be reimbursed by the corporation for expenses incurred in attending meetings of the board of directors or of any committee of which he or she is a member. Nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity and receiving compensation for such services from the corporation; provided, however, that any person who is receiving a stated compensation as an officer of the corporation for services as such officer shall not receive any additional compensation for services as a director during such period. A director entitled to receive stated compensation for services as director, who shall serve for only a portion of a year, shall be entitled to receive only that portion of the annual stated compensation on which the period of service during the year bears to the entire year. The annual compensation of directors shall be paid at such times and in such installments as the board of directors may determine. SECTION 11. Executive Committee: (a) The board of directors may appoint from its number an executive committee of not less than eight (8) members. (b) Not more than four (4) members shall be officers or employees of the corporation but the chairman of the board shall not be deemed such an officer or employee. (c) A majority shall constitute a quorum, and in every case the affirmative vote of a majority of all the members of the committee shall be necessary for the adoption of any motion, provided that in order to procure and maintain a quorum at any meeting of the executive committee in the absence or disqualification of any member of such committee, the member or members thereof present at such meeting and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another member of the board of directors (subject always to the limitations of subsection (b) above) to act at the meeting in the place of any such absent or disqualified member. (d) Each member of the executive committee, if appointed, shall hold office until the election at the next succeeding annual meeting of the stockholders of the corporation of a new board of directors; subject to the provisions of section 14 of this article. SECTION 12. Executive Committee: Powers: During the intervals between the meetings of the board of directors, the executive committee shall have and may exercise all the powers of the board of directors in the management of the business and affairs of the corporation, including power to authorize the execution of any papers and to authorize the seal of the corporation to be affixed to all papers which may require it, in such manner as such committee shall deem best for the interests of the corporation, in all cases in which specific directions shall not have been given by the board of directors. SECTION 13. Executive Committee: Organization: Meetings, Etc.: The chairman of the executive committee shall preside at all meetings of the executive committee and the secretary of the corporation shall act as secretary of the executive committee. In the absence of the chairman of the executive committee the committee shall appoint another member thereof to act as chairman of the meeting, and in the absence of the secretary, an assistant secretary of the corporation shall act as secretary of the meeting. In the absence of all of such persons, the committee shall appoint a chairman or a secretary of the meeting, as the case may be. If an executive committee shall be appointed it shall hold regular meetings on such dates and at such times and places as the chairman or a majority of the members of the executive committee shall determine, unless the board of directors shall otherwise provide. A special meeting of the executive committee may be called by the chairman of the board, the chairman of the executive committee or the secretary of the corporation upon such notice as may be given for special meetings of the board of directors. Any meeting of the executive committee shall be a legal meeting without notice thereof if all the members of the committee shall be present or if all absent members waive notice thereof. The committee shall keep a record of its acts and proceedings and report thereon to the board of directors at the regular meeting thereof held next after they shall have been taken. SECTION 14. Resignation and Removal of Member of Executive Committee: Any member of the executive committee may resign at any time or may be removed at any time either with or without cause by resolution adopted by a majority of the whole board of directors at any meeting of the board of directors at which a quorum is present. SECTION 15. Vacancies in the Executive Committee: Any vacancy in the executive committee shall be filled in the manner prescribed by these by-laws for the original appointment of such committee. SECTION 16. Other Committees: The board of directors may by resolution designate one or more other committees, in addition to the executive committee, each of which shall consist of two or more directors of the corporation. The board of directors may designate one or more directors as alternate members of any such other committee, who may replace any absent or disqualified member at any meeting of such committee. Any such other committee may, to the extent permitted by law, exercise such powers and shall have such responsibilities as shall be specified in the designating resolution. In the absence or disqualification of any member of such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not constituting a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of any such absent or disqualified member. Each such committee shall keep written minutes of its proceedings and shall report such proceedings to the board of directors when required. The chairman or a majority of the members of any such other committee may fix the time and place of its meetings, unless the board of directors shall otherwise provide. Notice of such meetings shall be given to each member of the committee in the manner provided for in sections 3 and 4 of this article II with respect to meetings of the board of directors. The board of directors shall have power at any time to fill vacancies in, to change the membership of, or to dissolve any such committee. Nothing herein shall be deemed to prevent the board of directors from appointing one or more committees consisting in whole or in part of persons who are not directors of the corporation; provided, however, that no such committee shall have or may exercise any authority limited by law to the board of directors or a committee thereof. ARTICLE III OFFICERS SECTION 1. Titles: The corporate and company officers to be elected by the board of directors shall be a chairman of the board of directors and one or more persons to serve as a vice chairman, and a president, who shall be directors, and one or more corporate or company vice presidents, a secretary, a treasurer, a senior vice president, financial operations, one or more assistant secretaries, and one or more assistant treasurers who need not be directors. The board shall designate one of the corporate officers to serve as chief executive officer. SECTION 2. Chairman: The chairman of the board of directors shall preside at all meetings of the board, all meetings of the stockholders, as well as all meetings of the executive committee. The chairman, upon being designated the chief executive officer, shall have supervisory authority over the policies of the corporation as well as the management and control of the business and affairs of the corporation. He or she shall also exercise such other powers as the board of directors may from time to time direct or which may be required by law. SECTION 3. Vice Chairman: The officer or officers serving as vice chairman shall have such duties and responsibilities relating to the management of the corporation as may be defined and designated by the chief executive officer or the board of directors. SECTION 4. President: The president shall have responsibility for the management of the operating businesses of the corporation and shall do and perform all acts incident to the office of president or which are authorized by the chief executive officer, the board of directors or as may be required by law. SECTION 5. Vice President(s): Each corporate vice president shall have such designations and such powers and shall perform such duties as may be assigned by the board of directors or the chief executive officer. The board of directors may designate one or more corporate vice presidents to be a senior executive vice president, executive vice president, senior vice president, or group vice president. Each company vice president shall have such designations and such powers, and shall perform such duties as may be assigned by the board of directors, the chief executive officer or by a corporate vice president. SECTION 6. Secretary: The secretary shall: (a) keep the minutes of the meetings of the stockholders, of the board of directors and of the executive committee in books provided for the purpose; (b) see that all notices are duly given in accordance with the provisions of these by-laws or as required by law; (c) be custodian of the records and have charge of the seal of the corporation and see that it is affixed to all stock certificates prior to their issuance and to all documents the execution of which on behalf of the corporation under its seal is duly authorized in accordance with the provisions of these by-laws; (d) have charge of the stock books of the corporation and keep or cause to be kept the stock and transfer books in such manner as to show at any time the amount of the stock of the corporation issued and outstanding, the manner in which and the time when such stock was paid for, the names, alphabetically arranged, and the addresses of the holders of record thereof, the number of shares held by each, and the time when each became such holder of record; exhibit or cause to be exhibited at all reasonable times to any director, upon application, the original or duplicate stock ledger; (e) see that the books, reports, statements, certificates and all other documents and records required by law are properly kept, executed and filed; and (f) in general, perform all duties incident to the office of secretary, and such other duties as from time to time may be assigned by the board of directors. SECTION 7. Assistant Secretary: The board of directors may elect an assistant secretary or more than one assistant secretary. At the request of the secretary, or in his or her absence or disability, an assistant secretary may perform all the duties of the secretary, and, when so acting, shall have all the powers of, and be subject to all the restrictions upon, the secretary. Each assistant secretary shall have such other powers and shall perform such other duties as may be assigned by the board of directors. SECTION 8. Treasurer: The treasurer, if required so to do by the board of directors, shall give a bond for the faithful discharge of his or her duties in such sum, and with such sureties, as the board of directors shall require. The treasurer shall: (a) have charge and custody of, and be responsible for, all funds and securities of the corporation (until deposited to the credit or account of the corporation with an authorized depositary) and deposit all such funds in the name of the corporation in such banks, banking firms, trust companies or other depositaries as shall be selected in accordance with the provisions of article V of these by-laws; (b) exhibit at all reasonable times the books of account and records to any of the directors of the corporation upon application during business hours at the office of the corporation where such books and records are kept; (c) receive, and give receipt for, moneys due and payable to the corporation from any source whatsoever; and (d) in general, perform all the duties incident to the office of treasurer and such other duties as from time to time may be assigned by the board of directors. The Chief Executive Officer may designate another title for a corporate officer fulfilling the duties described herein. SECTION 9. Assistant Treasurer: The board of directors may elect an assistant treasurer or more than one assistant treasurer. At the request of the treasurer, or in his or her absence or disability, an assistant treasurer may perform all the duties of the treasurer and, when so acting, shall have all the powers of, and be subject to all the restrictions upon, the treasurer. Each assistant treasurer shall have such other powers and shall perform such other duties as may be assigned by the board of directors. SECTION 10. Senior Vice President, Financial Operations: The senior vice president, financial operations shall perform all of the duties incident to the office of senior vice president, financial operations, as such duties may from time to time be designated or approved by the board of directors. Included in such duties shall be the establishment and maintenance of sound accounting and auditing policies and practices, in respect to which duties he or she shall be responsible directly to the board of directors through its chairman. The Chief Executive Officer may designate another title for a corporate officer fulfilling the duties described herein. SECTION 11. Resignation and Removal of Officers: Any officer of the corporation may resign at any time by giving written notice to the chairman of the board or to the secretary. Such resignation shall take effect at the time specified therein, and unless otherwise specified therein the acceptance of such resignation shall not be necessary to make it effective. Any officer may be removed for cause at any time by a majority of the board of directors and any officer may be removed summarily without cause by such vote. SECTION 12. Salaries: The salaries of officers shall be fixed from time to time by the board of directors or the executive committee or other committee appointed by the board. The board of directors or the executive committee of the board may authorize and empower the chief executive officer, the president, any vice chairman, or any vice president of the corporation designated by the board of directors or by the executive committee to fix the salaries of all officers of the corporation who are not directors of the corporation. No officer shall be prevented from receiving a salary by reason of the fact that he or she is also a director of the corporation. ARTICLE IV CAPITAL STOCK SECTION 1. Issue of Certificates of Stock: Certificates for the shares of the capital stock of the corporation shall be in such forms as shall be approved by the board of directors. Each stockholder shall be entitled to a certificate for shares of stock under the seal of the corporation, signed by the chairman, the president, a vice chairman or a vice president and also by the secretary or an assistant secretary or by the treasurer or an assistant treasurer; provided, however, that where a certificate is countersigned by a transfer agent, other than the corporation or its employee, or by a registrar, other than the corporation or its employee, the corporate seal and any other signature on such certificate may be a facsimile, engraved, stamped or printed. In case any officer, transfer agent or registrar of the corporation who shall have signed, or whose facsimile signature shall have been used on any such certificate, shall cease to be such officer, transfer agent or registrar, whether because of death, resignation, or otherwise, before such certificate shall have been delivered by the corporation, such certificate shall nevertheless be deemed to have been adopted by the corporation and may be issued and delivered as though the person who signed such certificate or whose facsimile signature shall have been used thereon had not ceased to be such officer, transfer agent or registrar. SECTION 2. Transfer of Shares: The shares of stock of the corporation shall be transferable upon its books by the holders thereof in person or by their duly authorized attorneys or legal representatives, and upon such transfer the old certificates shall be surrendered to the corporation by the delivery thereof to the person in charge of the stock and transfer books and ledgers, or to such other person as the board of directors may designate, by whom they shall be cancelled, and new certificates shall thereupon be issued for the shares so transferred to the person entitled thereto. A record shall be made of each transfer and whenever a transfer shall be made for collateral security, and not absolutely, it shall be so expressed in the entry of the transfer. SECTION 3. Dividends: The board of directors may declare lawful dividends as and when it deems expedient. Before declaring any dividend, there may be reserved out of the accumulated profits such sum or sums as the board of directors from time to time, in its discretion, thinks proper for working capital or as a reserve fund to meet contingencies or for equalizing dividends, or for such other purposes as the board of directors shall think conducive to the interests of the corporation. SECTION 4. Lost Certificates: Any person claiming a certificate of stock to be lost or destroyed shall make an affidavit or affirmation of that fact, and if requested to do so by the board of directors of the corporation shall advertise such fact in such manner as the board of directors may require, and shall give to the corporation, its transfer agent and registrar, if any, a bond of indemnity in such sum as the board of directors may direct, but not less than double the value of stock represented by such certificate, in form satisfactory to the board of directors and to the transfer agent and registrar of the corporation, if any, and with or without sureties as the board of directors with the approval of the transfer agent and registrar, if any, may prescribe; whereupon the chairman, the president, a vice chairman or a vice president and the treasurer or an assistant treasurer or the secretary or an assistant secretary may cause to be issued a new certificate of the same tenor and for the same number of shares as the one alleged to have been lost or destroyed. The issuance of such new certificates shall be under the control of the board of directors. SECTION 5. Rules as to Issue of Certificates: The board of directors may make such rules and regulations as it may deem expedient concerning the issue, transfer and registration of certificates of stock of the corporation. It may appoint one or more transfer agents and/or registrars of transfers, and may require all certificates of stock to bear the signature of either or both. Each and every person accepting from the corporation certificates of stock therein shall furnish the corporation with a written statement of his or her residence or post office address, and in the event of changing such residence shall advise the corporation of such new address. SECTION 6. Holder of Record Deemed Holder in Fact: The board of directors shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof, and accordingly shall not be bound to recognize any equitable or other claim to, or interest in, such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by law. SECTION 7. Closing of Transfer Books or Fixing Record Date: The board of directors shall have the power to close the stock transfer books of the corporation for a period not exceeding sixty (60) days preceding the date of any meeting of stockholders or the date for payment of any dividend or the date for the allotment of rights or the date when any change or conversion or exchange of capital stock shall go into effect; provided, however, that in lieu of closing the stock transfer books as aforesaid, the board of directors may fix in advance a date, not exceeding sixty (60) days preceding the date of any meeting of stockholders or the date for the payment of any dividend, or the date for the allotment of rights, or the date when any change or conversion or exchange of capital stock shall go into effect, as a record date for the determination of the stockholders entitled to notice of, and to vote at, any such meeting, or entitled to receive payment of any such dividend, or to any such allotment of rights, or to exercise the rights in respect of any such change, conversion or exchange of capital stock, and in such case only such stockholders as shall be stockholders of record on the date so fixed shall be entitled to such notice of, and to vote at, such meeting, or to receive payment of such dividend, or to receive such allotment of rights, or to exercise such rights, as the case may be, notwithstanding any transfer of any stock on the books of the corporation after any such record date fixed as aforesaid. ARTICLE V CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC. SECTION 1. Contracts, Etc.: How Executed: The board of directors or such officer or person to whom such power shall be delegated by the board of directors by resolution, except as in these by-laws otherwise provided, may authorize any officer or officers, agent or agents, either by name or by designation of their respective offices, positions or class, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances; and, unless so authorized, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement, or to pledge its credit or to render it liable pecuniarily for any purpose or in any amount. SECTION 2. Loans: No loans shall be contracted on behalf of the corporation and no negotiable paper shall be issued in its name, unless and except as authorized by the vote of the board of directors or by such officer or person to whom such power shall be delegated by the board of directors by resolution. When so authorized by the board of directors or by such officer or person to whom such power shall be delegated by the board of directors by resolution, any officer or agent of the corporation may obtain loans and advances at any time for the corporation from any bank, banking firm, trust company or other institution, or from any firm, corporation or individual, and for such loans and advances may make, execute and deliver promissory notes, bonds or other evidences of indebtedness of the corporation, and, when authorized as aforesaid to give security for the payment of any loan, advance, indebtedness or liability of the corporation, may pledge, hypothecate or transfer any and all stocks, securities and other personal property at any time held by the corporation, and to that end endorse, assign and deliver the same, but only to the extent and in the manner authorized by the board of directors. Such authority may be general or confined to specific instances. SECTION 3. Deposits: All funds of the corporation shall be deposited from time to time to the credit of the corporation with such banks, banking firms, trust companies or other depositaries as the board of directors may select or as may be selected by any officer or officers, agent or agents of the corporation to whom such power may be delegated from time to time by the board of directors. SECTION 4. Checks, Drafts, Etc.: All checks, drafts or other orders for the payment of money, notes, acceptances, or other evidences of indebtedness issued in the name of the corporation, shall be signed by such officer or officers, agent or agents of the corporation and in such manner as shall be determined from time to time by resolution of the board of directors or by such officer or person to whom such power of determination shall be delegated by the board of directors by resolution. Endorsements for deposit to the credit of the corporation in any of its authorized depositaries may be made, without any countersignature, by the chairman of the board, the president, a vice chairman, or any vice president, or the treasurer or any assistant treasurer, or by any other officer or agent of the corporation appointed by any officer of the corporation to whom the board of directors, by resolution, shall have delegated such power of appointment, or by hand-stamped impression in the name of the corporation. SECTION 5. Transaction of Business: The corporation, or any division or department into which any of the business or operations of the corporation may have been divided, may transact business and execute contracts under its own corporate name, its division or department name, a trademark or a trade name. ARTICLE VI MISCELLANEOUS PROVISIONS SECTION 1. (a) Fiscal Year: The fiscal year of the corporation shall end with the last Sunday of May of each year. (b) Staff and Divisional Titles: The chief executive officer may appoint at his or her discretion such persons to hold the title of staff vice president, divisional president or divisional vice president or other similar designation. Such persons shall not be officers of the corporation and shall retain such title at the sole discretion of the chief executive officer who may from time to time make or revoke such designation. SECTION 2. Notice and Waiver of Notice: Whenever any notice is required by these by-laws to be given, personal notice to the person is not meant unless expressly so stated; and any notice so required shall be deemed to be sufficient if given by depositing the same in a post office or post box in a sealed postpaid wrapper, addressed to the person entitled thereto at the post office address as shown on the stock books of the corporation, in case of a stockholder, and at the last known post office address in case of an officer or director who is not a stockholder; and such notice shall be deemed to have been given on the day of such deposit. In the case of notice by private express carrier, telex, facsimile or similar means, notice shall be deemed to be sufficient if transmitted or sent to the person entitled to notice or to any person at the residence or usual place of business of the person entitled to notice who it is reasonably believed will convey such notice to the person entitled thereto; and notice shall be deemed to have been given at the time of receipt at such residence or place of business. Any notice required by these by-laws may be given to the person entitled thereto personally and attendance of a person at a meeting shall constitute a waiver of notice of such meeting. Whenever notice is required to be given under these by-laws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. SECTION 3. Inspection of Books: The board of directors shall determine from time to time whether and, if allowed, when and under what conditions and regulations the accounts, records and books of the corporation (except such as may, by statute, be specifically open to inspection), or any of them, shall be open to the inspection of the stockholders, and the stockholders' rights in this respect are and shall be restricted and limited accordingly. SECTION 4. Construction: All references herein (i) in the plural shall be construed to include the singular, (ii) in the singular shall be construed to include the plural and (iii) in the masculine gender shall be construed to include the feminine gender, if the context so requires. SECTION 5. Adjournment of Meetings: If less than a quorum shall be present at any meeting of the board of directors of the corporation, or of the executive committee of the board, or other committee, the meeting may be adjourned from time to time by a majority vote of members present, without any notice other than by announcement at the meeting, until a quorum shall attend. Any meeting at which a quorum is present may also be adjourned in like manner, for such time or upon such call, as may be determined by vote. At any such adjourned meeting at which a quorum may be present, any business may be transacted which might have been transacted at the meeting originally held if a quorum had been present thereat. SECTION 6. Indemnification: (a) The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he or she is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that such conduct was unlawful. (b) The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by the person in connection with the defense or settlement of such action or suit if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. (c) To the extent that a director, officer, employee or agent of the corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (a) and (b), or in defense of any claim, issue or matter therein, the person shall be indemnified or reimbursed against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection therewith. (d) Any indemnification under sub-sections (a) and (b) (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because the person has met the applicable standard of conduct set forth in sub-sections (a) and (b) of this section. Such determination shall be made (1) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (2) by a committee of such directors designated by a majority vote of such directors, even though less than a quorum, or (3) if there are no such directors, or, if such directors so direct, by independent legal counsel in a written opinion, or (4) by the stockholders, or (5) in the case of a determination with respect to employees or agents (who are not then directors or officers of the corporation), by the Chief Executive Officer, the President, a Vice Chairman or the General Counsel. (e) Expenses (including attorneys' fees) incurred by an officer or director in defending a civil, criminal, administrative or investigative action, suit or proceeding shall be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the corporation as authorized in this section. Such expenses incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the corporation deems appropriate. (f) The indemnification and advancement of expenses provided by, or granted pursuant to, the other subsections of this section shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any by-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. (g) The corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against any such person and incurred by any such person in any such capacity, or arising out of his or her status as such, whether or not the corporation would have the power to indemnify such person against such liability under the provisions of this section. (h) For purposes of this section, references to "the corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this section with respect to the resulting or surviving corporation as the person would have with respect to such constituent corporation if its separate existence had continued. (i) For purposes of this section, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the corporation" shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he or she reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the corporation" as referred to in this section. (j) The indemnification and advancement of expenses provided by, or granted pursuant to, this section shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. SECTION 7. Resolution of Board of Directors Providing for Issuance of Cumulative Preference Stock: For purposes of these by-laws the certificate of incorporation shall be deemed to include any certificate filed and recorded in accordance with section 151(g) of the Delaware Corporation Law which, in accordance with said section, sets forth the resolution or resolutions adopted by the board of directors providing for the issuance of cumulative preference stock or any series thereof. ARTICLE VII AMENDMENTS SECTION 1. Amendment of By-Laws: All by-laws of the corporation shall be subject to alteration or repeal, and new by-laws may be made, either by the stockholders at an annual meeting or at any special meeting, provided notice of the proposed alteration or repeal or of the proposed new by-laws be included in the notice of any such special meeting, or by the affirmative vote of a majority of the whole board of directors of the corporation at any regular meeting or at any special meeting of the board of directors, provided that notice of the proposed alteration or repeal or of the proposed new by-laws be included in the notice of any such special meeting; and provided further that no by-law shall be adopted which shall be in conflict with the provisions of the certificate of incorporation or any amendment thereto. By-laws made or altered by the stockholders or by the board of directors shall be subject to alteration or repeal either by the stockholders or by the board of directors; provided, however, that the board of directors shall have no power or authority to alter or repeal sub-section (b) of section 5 or sub-section (b) of section 11 of article II of these by-laws respecting eligibility of officers or employees of the corporation as members of the board of directors and of the executive committee of the board, or to make any alteration in sub-section (a) of section 5 or in sub-section (a) of section 11 of said article II which would reduce the number composing the board of directors below twelve (12) or the number composing the executive committee below eight (8); the sole right to make any such change being reserved to the stockholders. So long as any class or classes of stock or any one or more series of any class or classes of stock which have a separate vote as such class or series for the election of directors by such class or series shall be outstanding, no alteration, amendment, or repeal of the provisions of sections 2, 3, 4, 5 and 6 of article I, sections 1, 5, 8 and 9 of article II, section 7 of article VI, and article VII of these by-laws which affects adversely the rights or preferences of any such outstanding class or series of stock shall be made without the consent or affirmative vote of the holders of at least two-thirds (2/3) of each such class or series entitled to vote; provided, however, that any increase or decrease in the number of directors set forth in the first sentence of sub-section (a) of section 5 of article II shall not be deemed adversely to affect such rights or preferences. EX-10.1 3 STOCK OPTION & LONG-TERM INCENTIVE PLAN OF 1988 EXHIBIT 10.1 GENERAL MILLS, INC. STOCK OPTION AND LONG-TERM INCENTIVE PLAN OF 1988 As Amended Through June 27, 1994 GENERAL MILLS, INC. STOCK OPTION AND LONG-TERM INCENTIVE PLAN OF 1988 1. PURPOSE OF THE PLAN The purpose of the General Mills, Inc. Stock Option and Long-Term Incentive Plan of 1988 (the "Plan") is to attract and retain strong management employees by rewarding certain officers and key employees of General Mills, Inc. (the "Corporation") and its subsidiaries who are primarily responsible for the management, growth and sound development of the business of the Corporation. 2. EFFECTIVE DATE OF PLAN This Plan shall become effective as of September 26, 1988, subject to the approval of the stockholders of the Corporation at the Annual Meeting on September 26, 1988. 3. ADMINISTRATION OF THE PLAN The Plan shall be administered by the Compensation Committee (the "Committee"). The Committee shall be made up of non-management members of the Board of Directors (the "Board") appointed in accordance with the Corporation's Certificate of Incorporation. The Committee shall have authority to adopt rules and regulations for carrying out the purpose of the Plan, select the employees to whom grants will be made, the number of shares to be optioned or awarded and interpret, construe and implement the provisions of the Plan; provided that if at any time Rule 16b-3 or any successor rule ("Rule 16b-3") under the Securities Exchange Act of 1934, as amended (the "1934 Act"), so permits without adversely affecting the ability of the Plan to comply with the conditions for exemption from Section 16 of the 1934 Act (or any successor provisions) provided by Rule 16b-3, the Committee may delegate the administration of the Plan in whole or in part, on such terms and conditions, and to such person or persons as it may determine in its discretion, as it relates to persons not subject to Section 16 of the 1934 Act, or any successor provision. Decisions of the Committee (or its delegate as permitted herein) shall be final, conclusive and binding upon all parties, including the Corporation, stockholders and optionees. 4. COMMON STOCK SUBJECT TO THE PLAN The shares of Common Stock of the Corporation ($.10 par value) to be issued upon exercise of a Stock Option, as Restricted Stock, or upon expiration of the restricted period for Restricted Stock Units, may be made available from the authorized but unissued Common Stock, shares of Common Stock held in the treasury, or Common Stock purchased on the open market or otherwise. Approval of the Plan by the stockholders of the Corporation shall constitute authorization to use such shares for the Plan, subject to the discretion of the Board or as such discretion may be delegated to the Committee. The Committee, in its discretion, may require as a condition to the grant of Stock Options, Restricted Stock or Restricted Stock Units, the deposit of Common Stock ("Deposit Shares") by the person receiving such grant, and the forfeiture of such Stock Options, Restricted Stock or Restricted Stock Units, if such deposit is not made or maintained during the option period or the applicable restricted period. Such shares of deposited Common Stock may not be otherwise sold, exchanged, transferred, pledged or disposed of during the applicable option period or restricted period. The Committee may also determine whether any shares issued in respect of a Stock Option shall be restricted in any manner. Subject to the provisions of the next succeeding paragraph, the maximum aggregate number of shares originally authorized under the Plan for which Stock Options, Restricted Stock and Restricted Stock Units could be granted under the Plan was 6,000,000 shares. As of September 20, 1993, and subject to the provisions of the next succeeding paragraph, there remain 798,050 shares authorized to be issued under the Plan (as adjusted for stock splits). If a Stock Option granted under the Plan is terminated without having been exercised in full, the unpurchased shares shall become available for grant to other employees, except when a Non-Qualified Stock Option is terminated as a result of a withdrawal from an optionee's Performance Unit Account. The number of shares subject to the Plan, the outstanding options, the outstanding Restricted Stock, the outstanding Restricted Stock Units and the exercise price per share of outstanding options may be appropriately adjusted by the Committee in the event that: (i) the number of outstanding shares of Common Stock of the Corporation shall be changed by reason of split-ups, combinations or reclassifications of shares; (ii) any stock dividends are distributed to the holders of Common Stock of the Corporation; or (iii) the Common Stock of the Corporation is converted into or exchanged for other shares as a result of any merger or consolidation (including a sale of assets) or other recapitalization. 5. ELIGIBLE PERSONS Only persons who are officers or key employees of the Corporation or a subsidiary shall be eligible to receive grants under the Plan. No grant shall be made to any member of the Committee or any other non-employee Director. 6. PURCHASE PRICE OF STOCK OPTIONS The purchase 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 shares of Common Stock of the Corporation subject to such option on the date of grant. "Fair Market Value" as used in the Plan shall equal the mean of the high and low price of shares of the Common Stock on the New York Stock Exchange on the applicable date. 7. STOCK OPTION TERM The term of any Stock Option grant as determined by the Committee shall not exceed 10 years and 1 month from the date of that grant and shall expire as of the last day of the designated term, unless terminated earlier under the provisions of the Plan. 8. STOCK OPTION TYPE The Committee shall determine whether stock option grants will be Non-Qualified Stock Options governed by section 83 of the Internal Revenue Code of 1986, as amended (the "Code") or Incentive Stock Options governed by section 422A of the Code or stock options governed by any other newly enacted provision of the Code. 9. INCENTIVE STOCK OPTIONS No optionee may be granted an Incentive Stock Option, under this or any other stock option plan of the Corporation, with respect to which the Fair Market Value of shares subject to such Incentive Stock Option and which first become exercisable in a specified calendar year exceed $100,000. For purposes of this Section, the Fair Market Value of such shares shall be determined on the date of the grant. 10. PERFORMANCE UNITS At the time of the granting of Non-Qualified Stock Options, the Corporation may grant corresponding Performance Units to the optionee, less than or equal in number to the shares covered by the option grant. In each fiscal year of the Corporation in which Performance Units may be granted, the Committee shall establish goals for (i) the compound growth in earnings per share ("EPS") for the Corporation over 3 fiscal years (the "Performance Period"); and (ii) the after-tax return on average stockholder equity ("ROE") for the Corporation for the final fiscal year of the Performance Period. The Committee shall specify the Performance Unit values to be earned at various actual rates of EPS growth and ROE. "EPS" means the Corporation's earnings from continuing operations per common share and common share equivalent (before extraordinary items) as reported in the Corporation's financial statements included in the Corporation's annual report for the final fiscal year of the Performance Period. The compound growth rate in EPS shall be calculated by comparing the EPS for the final fiscal year of the Performance Period and the EPS for the fiscal year immediately preceding the Performance Period. "ROE" means the Corporation's after-tax earnings, divided by its average equity, which is the sum of beginning and ending total stockholders' equity for such fiscal year divided by 2. EPS and ROE shall be subject to such adjustments as may be determined by the Committee. An optionee shall have no vested right to the value of a Performance Unit until the end of the Performance Period, except as set forth below. A Performance Unit Account shall be established for each optionee for each fiscal year in which Performance Unit grants are made under the Plan. The value of the Performance Units when determined shall be credited to the optionee's Performance Unit Account, and such amount shall thereafter earn interest at an annual rate determined by the Committee; provided, that no such interest rate shall exceed two-thirds of the Corporation's "return on average capital structure," defined as earnings after-tax plus after-tax interest expense, divided by average capital structure. "Average capital structure" is the sum of beginning and ending stockholders' equity and interest bearing obligations, both current and long-term, divided by 2. The optionee's Performance Unit Account shall be credited with such interest on such Performance Units at the end of each fiscal quarter of the Corporation until: (i) such Performance Units are withdrawn from the Account by the optionee; or (ii) the corresponding Non-Qualified Stock Options have been exercised, provided that no interest shall be paid beyond the term of the corresponding Non-Qualified Stock Option. In the event of a Change of Control as described in Section 15, Performance Units which have not been valued shall be immediately valued at the maximum amount specified by the Committee for the pro-rata portion of the Performance Period completed to the date of the Change of Control, and credited to each optionee's Performance Unit Account. Performance Units may be granted commencing in fiscal year 1989, and each fiscal year thereafter until the termination of the Plan. Accruals of the Performance Units (but not the accumulating interest) shall be charged annually against the Corporation's profit sharing fund established in accordance with the resolution approved by the stockholders in 1933, as amended in 1953 and 1968. 11. RESTRICTED STOCK AND RESTRICTED STOCK UNITS A. Grant of Awards With respect to awards of Restricted Stock and Restricted Stock Units, the Committee shall: (i) select those employees to whom awards will be made ("the Participants"), provided that Restricted Stock Units may only be awarded to those officers or key employees of the Corporation or a subsidiary who are employed in a country other than the United States; (ii) determine the number of shares of Restricted Stock or the number of Restricted Stock Units to be awarded; (iii) determine the length of the restricted period; (iv) determine the purchase price, if any, to be paid by the Participant for (a) shares of Restricted Stock at the time of the award, or (b) Restricted Stock Units at the expiration of the applicable restricted period; and (v) determine any restrictions other than those set forth in this Section 11. Each Participant who receives shares of Restricted Stock shall deliver to the Corporation a stock power endorsed in blank relating to the Restricted Stock prior to issuance of Restricted Stock. A certificate for the shares of Restricted Stock shall be issued and registered in the name of the Participant and shall bear an appropriate restrictive legend. Such certificates shall be held in the custody of the Corporation until the restricted period expires or until all restrictions thereon otherwise lapse. Subject to the restrictions set forth in this Section 11, each Participant who receives Restricted Stock shall have all rights as a shareholder 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 pursuant thereto, and the Corporation shall issue to and register in the name of each such Participant a certificate for that number of shares of Common Stock. Participants who receive Restricted Stock Units shall have no rights as shareholders 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 Corporation shall pay to each such Participant an amount equal to the sum of all dividends and other distributions paid by the Corporation on that number of shares of Common Stock during the prior quarter. B. Termination of Employment Except when specified otherwise in this Section 11, if a Participant's employment by the Corporation or a subsidiary terminates before the expiration of the applicable restricted period for Restricted Stock or Restricted Stock Units for any reason other than disability, retirement, death, "Change of Control" (as defined in Section 15), or termination for the convenience of the Corporation, all shares of Restricted Stock and all Restricted Stock Units which are subject to restriction as of said termination date shall be forfeited by the Participant to the Corporation. For those shares of Restricted Stock or Restricted Stock Units which have a deposit requirement, subject to the provisions of this Section 11, a Participant will be eligible to vest only in those shares of Restricted Stock or Restricted Stock Units for which Deposit Shares are on deposit with the Corporation as of the date the Participant's employment with the Corporation terminates. (i) Early Retirement A Participant who takes early retirement (after age 55, but prior to age 65) during any applicable restricted period may elect either of the following alternatives with respect to Restricted Stock or Restricted Stock Units (unless any award provides otherwise): (a) Leave Deposit Shares on deposit with the Corporation and vest in all shares of Restricted Stock or Restricted Stock Units, effective as of the earlier of the date the participant attains age 65 or the termination date of the applicable restricted period; (b) Withdraw Deposit Shares and vest in a proportionate number of shares of Restricted Stock or Restricted Stock Units, effective as of the date the Deposit Shares are withdrawn. 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 early retirement, as a percentage of the applicable restricted period. (ii) Retirement A Participant who retires on or after the date he or she attains age 65 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). (iii) Disability A Participant who becomes permanently disabled and unable to work (as determined by the Corporation's Director of Health and Human Services) during any applicable restricted period shall vest in a proportionate number of shares of Restricted Stock or Restricted Stock Units, effective as of the date of disability. 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 disability, as a percentage of the applicable restricted period. (iv) Death A Participant who dies during any applicable restricted period shall vest in a proportionate number of 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. (v) Change of Control 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. (vi) Termination for Convenience of the Corporation In the event a Participant's employment with the Corporation is terminated for the convenience of the Corporation during any applicable restricted period, the Committee, in its sole discretion, may vest such Participant in all or any portion of shares of Restricted Stock or Restricted Stock Units, effective as of the date of such termination. C. Non-Transferability Except as otherwise provided in Section 11, no shares of Restricted Stock and no Restricted Stock Units shall be sold, exchanged, transferred, pledged, or otherwise disposed of during the restricted period. D. Withholding Taxes Upon the vesting of Restricted Stock or Restricted Stock Units, the Participant shall deliver to the Corporation (or foreign subsidiary) cash in an amount equal to all federal, state, and local or foreign withholding taxes required to be collected by the Corporation (or foreign subsidiary), and the Corporation (or foreign subsidiary) may, in its discretion, retain all or a portion of the shares to be delivered until such payment is made. Notwithstanding the foregoing, in the event the number of shares to be issued equals or exceeds 500 and to the extent permitted by law and pursuant to such rules as the Committee may adopt, a Participant may authorize the Corporation to satisfy any such withholding requirement by directing the Corporation to withhold from any shares to be issued, such number of shares as shall be sufficient to satisfy the withholding obligation. 12. NON-TRANSFERABILITY OF STOCK OPTIONS AND PERFORMANCE UNITS No Stock Option or Performance Unit granted under this Plan shall be transferable by the optionee otherwise than by the optionee's Last Will and Testament or by the laws of descent and distribution, and such Stock Option shall be exercised and Performance Units withdrawn during the optionee's lifetime only by the optionee or his or her guardian or legal representative. 13. EXERCISE OF STOCK OPTIONS Except as provided in Sections 15, 18 and 19 (Change of Control, termination or death), each Stock Option may be exercised only: (i) after 1 year of continued employment with the Corporation or a subsidiary (as defined in section 425(f) of the Code) immediately following the date the Stock Option is granted; (ii) during the optionee's employment with the Corporation or such subsidiary; and (iii) in such cumulative annual installments as determined by the Committee at the time of grant. Subject to the provisions of this Section 13, each Non-Qualified Stock Option may be exercised in whole or, from time to time, in part with respect to the number of then exercisable shares in any sequence desired by the optionee without regard to the date of grant of other Stock Options. An optionee exercising a Stock Option shall give notice to the Corporation 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 Corporation. At the time of purchase, the optionee shall tender the full purchase price of the shares purchased. Until such payment has been made and a certificate or certificates for the shares purchased has been issued in the optionee's name, the optionee shall possess no stockholder rights with respect to such shares. Payment of such purchase price shall be made to the Corporation, 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 Corporation); (ii) through the delivery of shares of Common Stock owned by the optionee; or (iii) by a combination of (i) and (ii) above. For determining 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. 14. WITHHOLDING TAXES ON STOCK OPTION EXERCISE Each optionee shall deliver to the Corporation cash in an amount equal to all federal, state and local withholding taxes required to be collected by the Corporation in respect of the exercise of a Stock Option, and until such payment is made, the Corporation may, in its discretion, retain all or a portion of the shares to be issued. Notwithstanding the foregoing, to the extent permitted by law and pursuant to such rules as the Committee may adopt, an optionee may authorize the Corporation to satisfy any such withholding requirement by directing the Corporation to withhold from any shares to be issued, such number of shares as shall be sufficient to satisfy the withholding obligation. 15. EXERCISE OF STOCK OPTIONS IN EVENT OF CERTAIN CHANGES OF CONTROL Each outstanding Stock Option shall become immediately and fully exercisable for a period of 6 months following the date of the following occurrences, each constituting a "Change of Control": (i) if any person (including a group as defined in Section 13(d)(3) of the Securities Exchange Act of 1934) becomes, directly or indirectly, the beneficial owner of 20% or more of the shares of the Corporation entitled to vote for the election of directors; (ii) as a result of or in connection with any cash tender offer, exchange offer, merger or other business combination, sale of assets or contested election, or combination of the foregoing, the persons who were Directors of the Corporation just prior to such event cease to constitute a majority of the Corporation's Board of Directors; or (iii) the stockholders of the Corporation approve an agreement providing for a transaction in which the Corporation will cease to be an independent publicly-owned corporation or a sale or other disposition of all or substantially all of the assets of the Corporation occurs. After such 6 month period the normal option exercise provisions of the Plan shall govern. In the event an optionee is terminated as an employee of the Corporation or a subsidiary within 2 years of any of the events specified in (i), (ii) or (iii), all outstanding Stock Options at that date of termination shall become immediately exercisable for a period of 3 months. With respect to Stock Option grants outstanding as of the date of any such Change of Control which require the deposit of optionee-owned Common Stock as a condition to obtaining rights: (a) said 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 optionee; and (b) any restrictions on the sale of shares issued in respect of any such Stock Option shall lapse. 16. WITHDRAWAL OF PERFORMANCE UNITS Performance Units (plus accrued interest) may be withdrawn only after the completion of the Performance Period, except as described in Section 10, and provided the optionee has remained in the employment of the Corporation during said Performance Period, except as provided in Sections 18 and 19 (termination or death). An optionee may subsequently withdraw Performance Units, without regard to the date of the grant of the Performance Units. Withdrawals must be made in whole units, including accrued interest. To withdraw Performance Units, the optionee shall give notice to the Corporation. Upon receipt of such notice, the Committee shall determine whether the withdrawal is to be paid in cash or by the delivery of Common Stock with a Fair Market Value on the date of withdrawal equal to the amount being withdrawn. 17. RELATIONSHIP OF PERFORMANCE UNITS AND NON-QUALIFIED STOCK OPTIONS Upon a withdrawal of Performance Units (including accrued interest), the corresponding Non-Qualified Stock Options shall terminate on a "one-for-one" basis. Upon the exercise of Non-Qualified Stock Options, the optionee's corresponding Performance Unit Account shall be decreased on a "one-for-one" basis by the value of the Performance Units, including accrued interest, on the date of such exercise. In the event Non-Qualified Stock Options are exercised prior to the completion of the Performance Period, the corresponding Performance Units shall not be valued and shall lapse on a "one-for-one" basis as of the date of such exercise. 18. TERMINATION OF EMPLOYMENT OR LEAVE OF ABSENCE OF AN OPTIONEE A. Normal Termination If the optionee's employment by the Corporation or a subsidiary terminates for any reason other than as specified in subsections B, C, D or E, the optionee's Stock Options and right to withdraw Performance Units shall terminate 3 months after such termination, and all Performance Units granted but not valued at the termination of employment shall expire on that date. If the employment by the Corporation or a subsidiary of an optionee, other than an optionee subject to Section 16 of the 1934 Act, is terminated for the convenience of the Corporation, as determined by the Committee, and, at the time of termination the sum of the optionee's age and service with the Corporation equals or exceeds 70, the Committee, in its sole discretion, may permit any stock option previously granted to the optionee under the Plan to be exercised to the full extent that such stock option could have been exercised by such optionee immediately prior to the optionee's termination and may permit such Stock Option to remain exercisable until the earlier of (i) 5 years after the date of termination, or (ii) the expiration of the Stock Option in accordance with its original term. B. Death If the termination of employment is due to the optionee's death, the Stock Options may be exercised or Performance Units withdrawn as provided in Section 19. C. Retirement If the termination of employment is due to the optionee's retirement, the optionee may exercise a Stock Option, subject to the original term of the Stock Option, within 5 years after the date of retirement, including any Stock Option granted under the Plan within the 12 months preceding such retirement and, provided further, with respect to Stock Option grants which require the deposit by the optionee of optionee-owned Common Stock as a condition to obtaining rights, any restrictions on the sale of shares issued in respect of any such Stock Option shall lapse. Performance Units granted but not valued at the date of retirement shall be valued at the end of the Performance Period as provided in Section 10 with such value being reduced by the percentage of the Performance Period not completed at the date of such retirement. In the event of such retirement, the optionee may withdraw Performance Units within such time period as the corresponding Non-Qualified Stock Option could have been exercised after the optionee's retirement. D. Spin-offs If the termination of employment is due to the cessation, transfer, or spin-off of a complete line of business of the Corporation, the Committee, in its sole discretion, may determine that all outstanding Stock Options granted more than 1 year prior to the date of such termination shall immediately become exercisable for a period of 2 years after the date of such termination, subject to the provisions of Section 7. E. Leave of Absence Unless the Committee shall otherwise determine, if an optionee is placed on an unpaid leave of absence, such optionee's Stock Options and right to withdraw Performance Units shall terminate at the expiration of 3 months from the inception of said leave of absence and all Performance Units granted, but not valued, at the inception of said leave of absence shall expire on such date. If an optionee is placed on an unpaid leave of absence, retires during such leave, and the Committee had decided not to terminate the optionee's right to exercise a Stock Option, right to withdraw Performance Units or the right to Performance Units granted, but not valued, at the date of the inception of said leave of absence, then such optionee may exercise a Stock Option or withdraw Performance Units in accordance with subsection C. Performance Units granted but not valued at the date of such retirement shall be valued at the end of the Performance Period as provided in Section 10 with such value being reduced by the percentage of the Performance Period not completed at the date the optionee was placed on the unpaid leave of absence. 19. DEATH OF OPTIONEE If an optionee should die while employed by the Corporation or a subsidiary, any Stock Option previously granted to the optionee under this Plan may be exercised or Performance Units withdrawn by the person designated in such optionee's Last Will and Testament or, in the absence of such designation, by the optionee's estate, to the full extent that such Stock Option could have been exercised or Performance Units withdrawn by such optionee immediately prior to the optionee's death, provided that the Stock Option is exercised or corresponding Performance Units which have been valued are withdrawn within 2 years of the optionee's death. Performance Units granted but not valued at the date of the optionee's death shall be valued at the end of the applicable Performance Period with such value being reduced by the percentage of the Performance Period not completed at the date of death. Such amounts must be withdrawn within the later of (i) 2 years of the optionee's death or (ii) 3 months of such valuation. With respect to Stock Option grants which require the deposit by the optionee of optionee-owned Common Stock as a condition to obtaining rights, in the event an optionee should die while in the employment of the Corporation or a subsidiary, said Stock Options may be exercised as provided in the first paragraph of this Section, subject to the following special conditions: (i) any restrictions on the sale of shares issued in respect of any such Stock Option shall cease; (ii) any optionee-owned Common Stock deposited by the optionee pursuant to said grant shall be promptly returned to the person designated in such optionee's Last Will and Testament or, in the absence of such designation, to the optionee's estate, and all requirements regarding deposit by the optionee shall be terminated; and (iii) the amount of the Stock Options deemed to be exercisable immediately prior to the optionee's death shall be as follows: (a) None, if the date of death is less than 1 year after the date of the grant; (b) 1/3, if the date of death is 1 year after the date of the grant; (c) 2/3, if the date of death is 2 years after the date of the grant; and (d) total amount, if the date of death is 3 years after the date of the grant. 20. AMENDMENTS OF THE PLAN The Plan may be terminated, modified, or amended by the Board of Directors of the Corporation. 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, the Committee may at any time terminate, modify, or suspend the operation of the Plan, provided that no action shall be taken by the Board of Directors or Committee without the approval of the stockholders of the Corporation which would: (i) materially increase the number of shares which may be issued under the Plan; (ii) materially increase the benefits accruing to optionees and Participants under the Plan; or (iii) materially modify the requirements as to eligibility for participating in the Plan. The Board of Directors shall have authority to cause the Corporation to take any action related to the Plan which may be required to comply with the provisions of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the rules and regulations prescribed by the Securities and Exchange Commission. Any such action shall be at the expense of the Corporation. No termination, modification, suspension, or amendment of the Plan shall alter or impair the rights of any optionee or Participant pursuant to a prior grant, without the consent of the optionee or Participant. 21. 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 laws of any foreign jurisdiction, to key employees of the Corporation who are subject to such laws and who receive grants under the Plan. 22. DURATION OF THE PLAN Grants may be made under the Plan until July 1, 1994. 23. NOTICE All notices to the Corporation shall be in writing, effective as of actual receipt by the Corporation, and shall be sent to: General Mills, Inc. Number One General Mills Boulevard Minneapolis, Minnesota 55426 Attention: Corporate Compensation If by Telex: 170360 Gen Mills If by Facsimile: (612) 540-4925 24. SECTION 16 OFFICERS With respect to persons subject to Section 16 of the 1934 Act, transactions under the Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the 1934 Act. To the extent any provision of the Plan or action by the Committee fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee. Adopted by the Board of Directors on July 25, 1988 Adopted by the Shareholders on September 26, 1988 Effective as of September 26, 1988 As amended effective March 1, 1989 As amended effective April 23, 1990 As amended effective April 22, 1991 As amended effective June 1, 1992 As amended effective September 20, 1993 As amended effective June 27, 1994 PLANS.STKOP'88 6-'94 EX-10.6 4 SUPPLEMENTAL RETIREMENT PLAN EXHIBIT 10.6 SUPPLEMENTAL RETIREMENT PLAN OF GENERAL MILLS, INC. As Amended Effective January, 1991, November, 1991, December, 1992 and May, 1994 SUPPLEMENTAL RETIREMENT PLAN OF GENERAL MILLS, INC. Effective as of January 1, 1991, General Mills, Inc. hereby amends and restates the Supplemental Retirement Plan of General Mills, Inc. for the exclusive benefit of its employees, pursuant to authorization of the Board of Directors of General Mills, Inc. Additional amendments have been made since the date of the last restatement. ARTICLE I INTRODUCTION Section 1.1 NAME OF PLAN. The name of the Plan is the "Supplemental Retirement Plan of General Mills, Inc." It is also referred to as the "Supplemental Plan" or the "Plan." Section 1.2 EFFECTIVE DATE. The effective date of the Plan is January 1, 1976. This Plan, except as may otherwise be specifically provided herein, shall not apply to Participants who separated from active service prior to January 1, 1991. ARTICLE II DEFINITIONS Section 2.1 BASE PLAN shall mean a defined benefit pension plan sponsored by the Company, which is qualified under the provisions of Code Section 401. With respect to any Participant in this Plan where, as of June 1, 1991, the sum of such individual's age and length of Company service equals or exceeds 65, Base Plan shall mean the provisions of such plan as were in effect on December 31, 1988, and benefits under this Plan shall be determined as if such provisions had continued in effect until the date of the Participant's termination or retirement from the Company. With respect to any Participant in this Plan where, as of June 1, 1991, the sum of such individual's age and Company service is less than 65, Base Plan shall mean the provisions of such Plan as are in effect on the date of such Participant's termination or retirement from the Company. Section 2.2 BOARD shall mean the Board of Directors of General Mills, Inc. Section 2.3 CHANGE IN CONTROL shall mean the occurrence of any of the following events: (a) any person (including a group as defined in Section 13(d)(3) of the Securities Exchange Act of 1934) becoming, directly or indirectly, the beneficial owner of twenty percent (20%) or more of the shares of stock of General Mills, Inc. entitled to vote for the election of directors. (b) as a result of or in connection with any cash tender offer, exchange offer, merger or other business combination, sale of assets or contested election, or combination of the foregoing, the persons who were directors of the Company just prior to such event shall cease to constitute a majority of the Company's Board of Directors; or (c) the stockholders of the Company approve an agreement providing for a transaction in which the Company will cease to be an independent publicly-owned corporation or a sale or other disposition of all or substantially all of the assets of the Company occurs. Section 2.4 CODE shall mean the Internal Revenue Code of 1986, as it may be amended from time to time. Section 2.5 COMPANY shall mean General Mills, Inc. and any of its subsidiaries or affiliated business entities as shall be authorized to participate in the Plan by the Board, or its delegate. Section 2.6 COMPENSATION COMMITTEE shall mean the Compensation Committee of the Board. Section 2.7 DEFERRED CASH AWARD shall mean the cash amount deferred by an individual under any formal plan of deferred compensation sponsored by the Company. A Deferred Cash Award shall not include: (a) any base salary which was deferred during calendar year 1986; (b) any interest or investment increment applied to the amount of the cash award which is deferred; or (c) any cash amount deferred by any person under any individual contract or arrangement with the Company or any of its subsidiaries or affiliated business entities. Section 2.8 ERISA shall mean the Employee Retirement Income Security Act of 1974, as it may be amended from time to time. Section 2.9 MINOR AMENDMENT COMMITTEE shall mean the Minor Amendment Committee appointed by the Compensation Committee. Section 2.10 "MAXIMUM BENEFIT" shall mean the maximum annual benefit payable in dollars permitted to be either accrued or paid to a participant of any Base Plan, as determined under all applicable provisions of the Code and ERISA, specifically taking into account the limitations of Code Sections 401(a)17 and 415, and any applicable regulations thereunder. It is specifically intended that the Maximum Benefit, as defined herein, shall take into account changes in the dollar limits under Code Sections 401(a)17 and 415, and benefits payable from this Plan and the Base Plan shall be adjusted accordingly. In addition, if a Base Plan limits the accrued benefits of any Participant by restricting the application of future changes in such dollar limits with respect to such Participant, benefits payable under this Plan shall nevertheless be determined on the full amount that would have been permissible absent such restrictions under the Base Plan. Section 2.11 PARTICIPANT shall mean an individual who is a participant in the Company's Executive Incentive Plan or who is eligible to defer compensation under a formal deferred compensation program maintained by the Company, and who is: (a) an active participant in one or more Base Plans on and after January 1, 1976 and whose accrued benefits, determined on the basis of the provisions of such Base Plans without regard to the Maximum Benefit, would exceed the Maximum Benefit; (b) An individual with a Deferred Cash Award, which, if included as compensation under any Base Plans in which such individual is a participant, would result in a greater accrued benefit under the provisions of such Base Plans; (c) An active participant of the General Mills, Inc. Executive Incentive Plan who is entitled to a vested Pension under a Base Plan and who is involuntarily terminated prior to attainment of age 55, if the sum of such individual's age and length of company service at the date of termination equals or exceeds 75; or (d) An individual who participates in the Retirement Income Plan of General Mills, Inc., where the sum of such individual's age and length of Company service as of June 1, 1991 equals or exceeds 65, and who would have been entitled to a greater benefit under the provisions of the RIP at the time of his or her retirement from the Company had he or she not been considered a "highly compensated employee" for any period on or after January 1, 1989. An eligible individual shall remain a Participant under this Supplemental Plan until all amounts payable on his or her behalf from this Plan have been paid. Section 2.12 DEFINED TERMS. Capitalized terms which are not defined herein shall have the meaning ascribed to them in the relevant Base Plan. ARTICLE III BENEFITS Section 3.1 EFFECT OF RETIREMENT. Upon the Normal, Early, Late or Disability Retirement of a Participant, as provided under a Base Plan, such Participant shall be entitled to a benefit equal to the amount determined in accordance with the provisions of the Base Plan without regard to the limitations of the Maximum Benefit, including as compensation for purposes of such calculation any Deferred Cash Award (as if actually paid at the time of the award), reduced by the lesser of the Participant's actual accrued benefit under such Base Plan or the Maximum Benefit. In the event a Participant has accrued benefits under more than one Base Plan, the provisions of the Base Plan from which the Participant retires as an Active Participant shall be used to determine the total benefits payable without regard to the Maximum Benefit. If the Participant received a partial prepayment as described in Section 3.10, benefits payable under this Section shall be adjusted as provided in Section 3.11. Section 3.2 SPOUSE'S PENSION. Upon the death of a Participant whose surviving spouse is eligible for a Spouse's Pension under a Base Plan, such surviving spouse shall be entitled to a benefit under this Supplemental Plan, determined in accordance with the provisions of the Base Plan without regard to the limitations of the Maximum Benefit, and including as compensation for purposes of such calculation any Deferred Cash Award (as if actually paid at the time of the award), reduced by the lesser of the actual Spouse's Pension payable under such Base Plan or the Maximum Benefit. In the event a Participant had accrued benefits under more than one Base Plan, the provisions of the Base Plan under which the Participant was accruing benefits as an Active Participant shall be used to determine the total benefits payable without regard to the Maximum Benefit. If the Participant received a partial prepayment as described in Section 3.10, benefits payable under this Section shall be adjusted as provided in Section 3.11. Section 3.3 EFFECT OF TERMINATION PRIOR TO RETIREMENT ELIGIBILITY. If a Participant terminates employment with the Company and is entitled to a Vested Deferred Pension under a Base Plan, such Participant shall be entitled to a benefit equal to the amount determined in accordance with the provisions of the Base Plan without regard to the limitations of the Maximum Benefit, including as compensation for purposes of such calculation any Deferred Cash Award (as if actually paid at the time of the award), reduced by the lesser of the Participant's actual accrued benefit under such Base Plan or the Maximum Benefit. In the event a Participant has participated in more than one Base Plan, the provisions of the Base Plan under which the Participant was accruing benefits as an Active Participant at the time of such separation from service shall be used to determined the total amount of benefit payable without regard to the Maximum Benefit. If the Participant received a partial prepayment as described in Section 3.10, benefits payable under this Section shall be adjusted as provided in Section 3.11. Section 3.4 BENEFITS PRIOR TO SEPARATION FROM SERVICE. Prior to a Participant's separation from service due to Retirement, termination or death, benefits shall accrue under this Supplemental Plan, based on the Participant's actual accrued benefit under a Base Plan or Plans, the Maximum Benefit and Deferred Cash Awards, if any. A Participant's benefit under this Supplemental Plan may increase or decrease, before or after Retirement or termination, as a result of changes in the formula under any Base Plan, the Maximum Benefit, or changes in the earnings used to calculate benefits under a Base Plan formula. Any benefit accrued under this Supplemental Plan as a result of a Participant's Deferred Cash Award shall be payable only if, and to the extent that on the date of his or her termination of employment, both of the following conditions are satisfied: (a) The Participant has a vested accrued benefit under the applicable Base Plan; and (b) A Deferred Cash Award was made during a year which is used in the calculation of Final Average Earnings under this Supplemental Plan on the date of termination. If the Participant received a partial prepayment as described in Section 3.10, benefits payable under this Section shall be adjusted as provided in Section 3.11. Section 3.5 EFFECT OF INVOLUNTARY TERMINATION OF EIP PARTICIPANTS PRIOR TO RETIREMENT ELIGIBILITY. In the event of the involuntary termination of an active Participant of the General Mills, Inc. Executive Incentive Plan, where the sum of such Participant's age and years of service with the Company equals or exceeds 75 at the date of termination, and who is entitled to a Vested Deferred Pension under a Base Plan, the provisions of this Section shall apply. Subject to the aggregate limits of Section 4.4, such Participant shall be entitled to receive benefits determined under this Section, in addition to any benefit provided under Section 3.3. Such additional benefits shall be in the form of a retirement supplement, calculated as the difference between an Early Retirement Pension under the provisions of such Base Plan and a Vested Deferred Pension under such Base Plan. If the Participant received a partial prepayment as described in Section 3.10, benefits payable under this Section shall be adjusted as provided in Section 3.11. Section 3.6 EFFECT OF TERMINATION OF THE RETIREMENT INCOME PLAN OF GENERAL MILLS, INC. In the event of the termination of the Retirement Income Plan of General Mills, Inc. (RIP) within five years after a Change in Control each Participant of the RIP whose benefits would then exceed the Maximum Benefit as a result of the changes required under Section 12.4 of the RIP shall be entitled to receive such excess benefits under the Supplemental Plan. Section 3.7 FORM OF PAYMENT. Any benefit amount payable under the Supplemental Plan to a married Participant shall be adjusted and paid in the form of a joint and 100% to survivor annuity. Any benefit amount payable under the Supplemental Plan to an unmarried Participant shall be paid in the form of a single life annuity. Notwithstanding the above, a married Participant may request, subject to the approval of the Minor Amendment Committee, to have such benefit amounts adjusted and paid as a joint and 50% to survivor annuity or as a single life annuity. Further, any Participant may request, subject to the approval of the Minor Amendment Committee, that any benefit amount be paid in a single sum payment in cash, effective as of the first day monthly benefits would otherwise begin. Any request for an alternate form of benefit that is granted may be made at any time before benefits would otherwise begin. The Minor Amendment Committee may approve or reject any such request in its sole discretion. Any joint and survivor annuity shall be the actuarial equivalent of a single life annuity based on the following factors, determined using the ages of the Participant and spouse on the effective date of the payment: (a) For benefits commencing after January 1, 1989. The formula for the joint and 100% to survivor factor is: .868 + .005 (65 - X) + .005 (Y - X), where X is equal to the Participant's age and Y is equal to the age of the spouse. The formula for the joint and 50% to survivor factor is: .928 + .003 (65 - X) + .003 (Y - X), where X is equal to the Participant's age and Y is equal to the age of the spouse. (b) For benefits commencing on or before January 1, 1989. The formula for the joint and 100% to survivor factor is: .815 + .007 (63 - X) + .007 (Y - X), where X is equal to the Participant's age and Y is equal to the age of the spouse. The formula for the joint and 50% to survivor factor is: .898 + .004 (63 - X) + .004 (Y - X), where X is equal to the Participant's age and Y is equal to the age of the spouse. For the purpose of calculating any lump sum payment, the interest rate used shall be the immediate annuity interest rate determined by the Pension Benefit Guaranty Corporation as in effect on the first day of the year in which a distribution is to be made. Section 3.8 TIME OF PAYMENT. The payment of benefits determined under the provisions of the Supplemental Plan shall commence on the first day of the month coincident with or next following the date upon which a Participant (or surviving spouse) first becomes eligible to commence receiving benefits under the Base Plan or Plans, regardless of the time benefits actually commence under the Base Plan. Notwithstanding any other provisions of the Supplemental Plan to the contrary, the Minor Amendment Committee may, in its sole discretion, direct that payments be made before such payments are otherwise due, if, for any reason (including but not limited to, a change in the tax or revenue laws of the United States of America, a published ruling or similar announcement issued by the Internal Revenue Service, a regulation issued by the Secretary of the Treasury or his delegate, or a decision by a court of competent jurisdiction involving a Participant or Beneficiary), it believes that a Participant or Beneficiary has recognized or will recognize income for federal income tax purposes with respect to amounts that are or will be payable under the Supplemental Plan before they are to be paid. In making this determination, the Minor Amendment Committee shall take into account the hardship that would be imposed on the Participant or Beneficiary by the payment of federal income taxes under such circumstances. Section 3.9 EFFECT OF CHANGES IN THE MAXIMUM BENEFIT. In the event the dollar amount of the Maximum Benefit increases as a result of federal legislation, the benefits of any Participant payable under the Supplemental Plan, whether or not in pay status, shall be recalculated to take into account the higher Maximum Benefit payable from the applicable Base Plan. If payments have already commenced under the provisions of the applicable Base Plan and the Supplemental Plan, benefit amounts under both Plans shall be adjusted to reflect the higher Maximum Benefit, by increasing the amount paid under the Base Plan and decreasing the amount paid under the Supplemental Plan, as soon as administratively possible after such a change. Notwithstanding the above, if a Base Plan is terminated, no adjustments shall be made to benefits payable under the Supplemental Plan with respect to changes in the Maximum Benefit after the date of termination of the Base Plan. Section 3.10 PARTIAL PREPAYMENT. Notwithstanding any other provisions of this Supplemental Plan, partial prepayment of benefits due under this Supplemental Plan may be made from time to time, pursuant to amendments to this Section. Prepayments so authorized are described as follows: (a) (1) The first prepayment was authorized to be made in January, 1988 to those active Participants who, on December 31, 1987, had earned vested accrued benefits under one or more Base Plans equal to the Maximum Benefit then in effect, payable at December 31, 1987, or age 55, if later. (2) The second prepayment was authorized to be made on or after October, 1988 and before December 31, 1988, to those active Participants who had earned vested accrued benefits under one or more Base Plans, when projected to December 31, 1988, equal to the Maximum Benefit then if effect, payable at December 31, 1988, or age 55, if later. (3) The third prepayment was authorized to be made in December, 1989, to those active Participants who, if the Base Plans had continued in effect through December 31, 1989 as in effect on December 31, 1988, would have earned vested accrued benefits under such Base Plans equal to the Maximum Benefit then in effect, payable at January 1, 1990, or at age 55 if later. (4) The fourth prepayment was authorized to be made in October, 1990, to those active Participants who, if the Base Plans had continued in effect through December 31, 1990, as in effect on December 31, 1988, would have earned vested accrued benefits under such Base Plans equal to the Maximum Benefit then if effect, payable at January 1, 1991, or at age 55 if later. (5) The fifth prepayment was authorized to be made in December, 1991, to those active Participants who had earned vested accrued benefits under one or more Base Plans, when projected to December 31, 1991, equal to the Maximum Benefit then in effect, payable at December 31, 1991, or age 55, if later, but only to the extent that, when estimated benefits payable at each Participant's normal retirement age were projected, the Participant's additional benefits payable from this Plan at such normal retirement date were equal to or greater than zero. (6) The sixth prepayment was authorized to be made in December, 1992, to those active Participants who had earned vested accrued benefits under one or more Base Plans, when projected to December 31, 1992, equal to the Maximum Benefit then in effect, payable at December 31, 1992, but only to the extent that, when estimated benefits payable at each Participant's normal retirement age (or announced early retirement age, if earlier) were projected, the Participant's additional benefits payable from this Plan at such retirement date were equal to or greater than zero. (b) For such Participants identified in (a) above, who were eligible for a Normal or Early Retirement under the applicable Base Plans as of the stated dates, a monthly benefit payable under this Supplemental Plan is calculated as if (i) retirement actually occurred on the stated date, and (ii) the benefits payable under the applicable Base Plans were paid under the normal form of payment provided in such Base Plans. The resulting benefit payable under the provisions of this Supplemental Plan shall be calculated as if payable in the form of an annuity for the life of such Participant. (c) For such Participants who are participating in the Company's Executive Incentive Plan but are not eligible for a Normal or Early Retirement under the applicable Base Plans as of the stated date, a monthly benefit payable under this Supplemental Plan is calculated under the provisions of Section 3.5 as if (i) such a Participant's involuntary termination occurred as of the stated date, and (ii) the benefit payable under the applicable Base Plans is paid under the normal form of payment provided in such Base Plans. The resulting benefit payable under the provisions of this Supplemental Plan shall be calculated as if payable in the form of an annuity payable for the life of such Participant. (d) The present value of the monthly benefits payable under this Supplemental Plan as calculated above shall be based on the immediate annuity interest rates determined by the Pension Benefit Guaranty Corporation as in effect on the January 1 of the year of any such authorized prepayment. (e) In the event the Compensation Committee, or its delegate, believes that payment of the entire present value of any amounts calculated pursuant to this Section may result in an overpayment of amounts that would have been payable under this Supplemental Plan upon the actual retirement or separation from service of any of such Participants, without regard to the provisions of this Section, the Compensation Committee, or its delegate, shall reduce the amount of the single sum payment as the Compensation Committee, or its delegate, in its sole discretion, deems appropriate. Section 3.11 ADJUSTMENT FOR PREPAYMENT. With respect to any Participant who received a prepayment of benefits under Section 3.10 above, the benefits due upon Retirement, separation or death under Sections 3.1, 3.2, 3.3, 3.4 or 3.5, or a subsequent prepayment of benefits due under Section 3.10, shall be adjusted to reflect the prepayment of benefits in the following manner: (a) The monthly benefit payable under the applicable section shall be calculated first without regard to prepayment, under a life only form of payment. (b) The offset for each prepayment shall be calculated based on a lump sum future value of the amount of the prepayment. Such amount will be calculated using the time period from the stated date as of which the prepayment was calculated to the date of the Participant's retirement, separation, subsequent payment date, or death, and an annual interest rate equal to 66.2% of the immediate annuity interest rate used to calculate the lump sum value of such prepayment, on the after-tax value of the prepayment. The after-tax value of the prepayment shall be based on an effective annual tax rate of 33.8%. This same rate shall be used to compute a before-tax value for offset purposes. The resulting lump sum future value is to be converted to a life annuity figure using the 1983 Group Annuity Mortality table for males. (c) The result in (b) above shall be subtracted from (a) above after both figures have been adjusted for the appropriate form of benefit selected by the Participant (or spouse, in the event of the Participant's death). The result shall be the additional benefit remaining, if any, to be paid from this Supplemental Plan. In the event of multiple prepayments for such a Participant, the offset for each prepayment shall be calculated separately and applied to the benefit in (a) above in the order in which paid. In the event the amount (or amounts in the event of multiple payments) determined in (b) above is equal to the amount determined in (a) above, no additional benefits shall be payable under this Supplemental Plan. If the amount (or amounts in the event of multiple payments) determined in (b) above is greater than the amount determined in (a) above, the Company shall be entitled to recover the amount of any excess prepayments from the Participant and may withhold and retain sums which would otherwise be payable to the Participant under any other nonqualified plan of the Company in satisfaction of the excess prepayment. Section 3.12 PARTICIPANTS FORMERLY ON LEAVE TO GENERAL MILLS RESTAURANTS, INC. Participants in this Plan (i) who were active participants in the Retirement Income Plan of General Mills, Inc. ("RIP") on "leave of absence status" to General Mills Restaurants, Inc. and (ii) whose leaves were canceled effective as of May 31, 1991, may be entitled to additional benefits under this Plan as described below. In addition to any benefits that such a Participant may be entitled to under the provisions of this Article III, this Plan shall also pay the difference, if any, between the total benefits the Participant is entitled to from the Base Plan in which he or she is participating at the time of termination and this Plan, and the total benefits the Participant would have been entitled to from the RIP and this Plan, had the Participant continued to participate in the RIP until the date of the Participant's termination of employment or Retirement. Section 3.13 PRESIDENTS OF GENERAL MILLS RESTAURANTS, INC. Participants in this Plan who were employed as Presidents of a General Mills Restaurants, Inc. division as of May 31, 1994, were not eligible for any benefit accrual under the terms of the Base Plan in which they participated for the period from January 1, 1989 through May 31, 1994. Benefits shall accrued under the terms of this Plan equal to the entire benefit which would have accrued to such individuals under the applicable Base Plan for this period. The form and timing of such payments shall be subject to all provisions of this Plan. ARTICLE IV PLAN ADMINISTRATION Section 4.1 COMPENSATION COMMITTEE. The Supplemental Plan shall be administered by the Compensation Committee, and the Compensation Committee shall have full authority to interpret the Supplemental Plan. Such interpretations of the Compensation Committee shall be final and binding on all parties, including the Participants, their beneficiaries, surviving spouses and the Company. Section 4.2 DELEGATED DUTIES. The Compensation Committee shall have the authority to delegate the duties and responsibilities of administering the Supplemental Plan, maintaining records, issuing such rules and regulations as it deems appropriate, and making the payments hereunder to such employees or agents of the Company as it deems proper. Section 4.3 AMENDMENT AND TERMINATION. The Board, or if specifically delegated, its delegate, may amend, modify or terminate the Supplemental Plan at any time, provided, however, that no such amendment, modification or termination shall adversely affect any accrued benefit under the Supplemental Plan to which a Participant, or the Participant's Beneficiary, is entitled under Article III prior to the date of such amendment or termination, and in which such Participant, or the Participant's Beneficiary, would have been vested if such benefit had been provided under the applicable Base Plan, unless the Participant, or the Participant's Beneficiary, becomes entitled to an amount equal to the cash value of such benefit under another plan, program or practice adopted by the Company. Notwithstanding the above, no amendment, modification, or termination which would affect benefits accrued under this Supplemental Plan prior to such amendment, modification or termination may occur after a Change in Control without the written consent of a majority of the Participants determined as of the day before such Change in Control. Each year the Compensation Committee shall notify, in writing, those individuals who have any accrued benefits under the Supplemental Plan. Section 4.4 PAYMENTS. The Company will pay all benefits arising under this Supplemental Plan and all costs, charges and expenses relating thereto. The benefits payable under this Supplemental Plan to each Participant shall not be greater that what would have been paid in the aggregate under the Base Plan (i) in the absence of federal limitations on benefit amounts, (ii) if amounts deferred had been paid to the Participant when earned, and (iii) with respect to Section 3.5, the Participant had actually been eligible for Early Retirement under the Base Plan. Section 4.5 ARBITRATION. (a) Any controversy or claim arising out of or relating to this Plan, or any alleged breach of the terms or conditions contained herein, shall be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association (the "AAA") as such rules may be modified herein. (b) An award rendered in connection with an arbitration pursuant to this Section shall be final and binding and, judgment upon such an award may be entered and enforced in any court of competent jurisdiction. (c) The forum for arbitration under this Plan shall be Minneapolis, Minnesota and the governing law for such arbitration shall be laws of the State of Minnesota. (d) Arbitration under this Section shall be conducted by a single arbitrator selected jointly by the Company and the Participant (the "Complainant"). If within thirty (30) days after a demand for arbitration is made, the Company and the Complainant are unable to agree on a single arbitrator, three arbitrators shall be appointed. Each party shall select one arbitrator and those two arbitrators shall then select a third neutral arbitrator which thirty (30) days after their appointment. In connection with the selection of the third arbitrator, consideration shall be given to familiarity with executive compensation plans and experience in dispute resolution between parties, as a judge or otherwise. If the arbitrators selected by the parties cannot agree on the third arbitrator, they shall discuss the qualifications of such third arbitrator with the AAA prior to selection of such arbitrator, which selection shall be in accordance with the Commercial Arbitration Rules of the AAA. (e) If an arbitrator cannot continue to serve, a successor to an arbitrator selected by a party shall be also selected by the same party, and a successor to a neutral arbitrator shall be selected as specified in subsection (d) of this Section. A full rehearing will be held only if the neutral arbitrator is unable to continue to serve or if the remaining arbitrators unanimously agree that such a rehearing is appropriate. (f) The arbitrator or arbitrators shall be guided, but not bound, by the Federal Rules of Evidence and by the procedural rules, including discovery provisions, of the Federal Rules of Civil Procedure. Any discovery shall be limited to information directly relevant to the controversy or claim in arbitration. (g) The parties shall each be responsible for their own costs and expenses, except for the fees and expenses of the arbitrators, which shall be shared equally by the Company and the Complainant. Section 4.6 NON-ASSIGNABILITY OF BENEFITS. Neither any benefit payable hereunder nor the right to receive any future benefit payable under the Supplemental Plan may be anticipated, alienated, sold, transferred, assigned, pledged, encumbered, or subjected to any charge or legal process, and if any attempt is made to do so, or a person eligible for any benefits becomes bankrupt, the interest under the Supplemental Plan of the person affected may be terminated by the Compensation Committee which, in its sole discretion, may cause the same to be held or applied for the benefit of one or more of the dependents of such person or make any other disposition of such benefits that it deems appropriate. Section 4.7 APPLICABLE LAW. All questions pertaining to the construction, validity and effect of the Supplemental Plan shall be determined in accordance with the laws of the United States and the laws of the State applicable to the Base Plan covering the Participant. Section 4.8 SUPPLEMENTAL BENEFITS TRUST. The Company has established a Supplemental Benefits Trust with Norwest Bank Minneapolis, N.A. as Trustee to hold assets of the Company under certain circumstances as a reserve for the discharge of the Company's obligations under the Supplemental Plan and certain other plans of deferred compensation of the Company. In the event of a Change in Control as defined in Section 2.3 hereof, the Company shall be obligated to immediately contribute such amounts to the Trust as may be necessary to fully fund all benefits payable under the Supplemental Plan. Any Participant of the Supplemental Plan shall have the right to demand and secure specific performance of this provision. The Company may fund the Trust in the event of the occurrence of a Potential Change in Control as determined by the Finance Committee of the Board. All assets held in the Trust remain subject only to the claims of the Company's general creditors whose claims against the Company are not satisfied because of the Company's bankruptcy or insolvency (as those terms are defined in the Trust Agreement). No Participant has any preferred claim on, or beneficial ownership interest in, any assets of the Trust before the assets are paid to the Participant and all rights created under the Trust, as under the Supplemental Plan, are unsecured contractual claims of the Participant against the Company. EX-10.7 5 EXECUTIVE SURVIVOR INCOME PLAN EXHIBIT 10.7 EXECUTIVE SURVIVOR INCOME PLAN OF GENERAL MILLS AMENDED AND RESTATED AUGUST 1, 1999 EXECUTIVE SURVIVOR INCOME PLAN OF GENERAL MILLS ARTICLE I-DEFINITIONS 1.01 "Administrator" shall mean the Minor Amendment Committee. 1.02 "Company" shall mean General Mills, Inc. and its subsidiaries. 1.03 "Dependent" shall mean surviving unmarried children of the Participant (including legally adopted, step-children and children of the Participant's Domestic Partner) less than age twenty-two (22) provided they (i) attend school full-time or reside with Participant, and (ii) depended upon the Participant for support and maintenance; and surviving unmarried children of the Participant (including legally adopted and step-children) age twenty-two (22) or older provided they (i) are totally disabled or attending school full-time, and (ii) depended upon the Participant for support and maintenance. 1.04 "Earnable Compensation" shall mean all compensation for services paid to a Participant of the Plan including salary, bonuses, commissions, Deferred Cash Awards as accrued under the General Mills, Inc. Deferred Compensation Plan (excluding interest thereon) and all other special payments made as compensation for services as determined by the Administrator, excluding the Company Stock Option Plans. 1.05 "Final Average Earnings" shall mean the greater of the amounts determined under (a) and (b) below: (a) The average of the five highest full calendar years of Earnable Compensation received by an Employee prior to the Determination Date, with the result divided by 12. If the Employee has less than sixty months of Earnable Compensation, Final Average Earnings shall mean the average of all Earnable Compensation received by such Employee prior to the Determination Date, stated on a monthly basis. (b) Beginning with the sum of the five highest full calendar years of Earnable Compensation received by the Employee prior to the Determination Date (the "selected years"), add the Earnable Compensation received by the Employee during the calendar year in which the Determination Date occurs; and subtract the product of (A) the Earnable Compensation received during the lowest year of the selected years and (B) the fractional Period of Service in the Participant's final year of employment, measured from January 1 through the Determination Date. Divide the resulting number by 60. For the purposes of this Section, any calendar year in which a Participant has no Earnable Compensation shall be disregarded when calculating Final Average Earnings. 1.06 "Participant" shall mean any employee of the Company who is a Participant of the Plan at the date of his or her death. 1.07 "Plan" shall mean the Executive Survivor Income Plan of General Mills, Inc. 1.08 "Surviving Spouse" shall mean the then living spouse (excluding a legally separated spouse) of the Participant, or a Domestic Partner for which the Participant has a valid Domestic Partner Statement on file with the Company (Domestic Partner). ARTICLE II-BENEFITS 2.01 SURVIVING SPOUSE'S BENEFIT Upon the death of a Participant of the Plan, the Surviving Spouse shall be entitled to receive a monthly benefit equal to one-twelfth (1/12) of twenty-five percent (25%) of the Participant's Final Average Earnings. 2.02 SURVIVING SPOUSE'S BENEFIT PAYMENT Upon receipt of written proof of the death of the Participant satisfactory to the Plan Administrator, the Surviving Spouse's benefit shall become payable as of the first day of the calendar month next following the date of death of the Participant and the last payment shall be made as of the first day of the calendar month in which the Surviving Spouse's death occurs. This benefit shall continue to be payable in the event the Surviving Spouse remarries. 2.03 DEPENDENT'S BENEFIT In the event there is no Surviving Spouse of the Participant or in the event the Surviving Spouse thereafter dies and there are one or more Dependents, a monthly benefit equal to one-twelfth (1/12) of twelve and one-half percent (12 1/2%) of the Participant's Final Average Earnings shall be paid to Participant's Dependents, apportioned equally among such Dependents, so long as they qualify as dependents as defined herein. Any adjustment in the benefit caused by the change in the number of Dependents as determined by the Administrator shall take effective immediately. 2.04 DEPENDENT'S BENEFITS PAYMENT Upon receipt of written proof of the status of persons as Dependents satisfactory to the Plan Administrator, and where such has not previously been furnished written proof of the death of the Participant, the Dependent's benefits shall become payable as of the first day of the calendar month next following the death of the Participant if there is no Surviving Spouse or as of the first day of the calendar month next following the death of the Surviving Spouse. 2.05 BENEFIT REDUCTION Any benefit payable hereunder shall be reduced by amounts payable under all other Company-paid survivor income benefit plans, including qualified and nonqualified pension plans, international retirement plans and Company-paid individual life insurance policies. Any amounts payable from Company-paid defined contribution plans shall be restated to a monthly benefit basis. Amounts payable under Company-paid group life insurance policies shall not reduce benefits payable hereunder. 2.06 PAYMENT TO TRUSTS A Participant may, upon written notice to the Administrator, direct that the benefits payable hereunder be paid to a trust, provided that at the time of such designation, the Administrator shall be furnished a copy of the trust instrument for review and approval. The trust instrument must provide that the benefits payable hereunder shall accrue to the Surviving Spouse or Dependents to the same extent and manner as if the said benefits were paid in accordance with this Plan. Payments of benefits to such trust shall discharge the Company from all liability or obligation to the extent of the amount so paid. 2.07 MINORITY OR INCOMPETENCY PAYMENT If any benefit is payable to a minor or to a person otherwise incapable of giving a valid release for any payment due, and until a claim is made by a duly appointed guardian or committee of such person, payment may be made to such person or to any person or institution appearing to the Administrator to have assumed the custody and principal support of such person, and the liability of the Company shall be discharged to the extent of the amount so paid. ARTICLE III - ADMINISTRATION OF THE PLAN 3.01 ADMINISTRATOR The Plan shall be supervised by the Administrator, who shall have the authority to construe and interpret the Plan. Interpretations and decisions of the Administrator shall be final and binding on all parties, including the Company and the Participants. 3.02 DELEGATED DUTIES The Administrator shall delegate to the Benefits Department the duties and responsibilities of maintaining records, issuing such rules and regulations as it deems appropriate, and directing and making the payment of benefits provided hereunder. 3.03 DESIGNATION AND TERMINATION OF PARTICIPANT STATUS The Administrator shall designate by written instrument those employees chosen to be Participants in the Plan, which shall include participants in the General Mills, Inc. Executive Incentive Plan. Participants may be added or deleted at any time at the discretion of the Administrator. 3.04 AMENDMENT AND TERMINATION OF PLAN The Company may amend, modify or terminate the Plan and all benefits hereunder at any time. 3.05 NON-ASSIGNABILITY OF BENEFIT Except to the extent required by law and other than as provided herein, the benefits payable hereunder or the right to receive future benefits under the Plan may not be anticipated, alienated, sold, transferred, assign, pledged, encumbered, or subjected to any charge or legal process, and if a person eligible for any benefits becomes bankrupt, the interest under the Plan of the person affected may be terminated by the Administrator, who, in his or her sole discretion, may cause the same to be held or applied for the benefit of one or more of the Dependents of such person or make any other disposition of such benefits as he or she deems appropriate. 3.06 APPLICABLE LAW All questions pertaining to the construction, validity and effect of the Plan shall be determined in accordance with the laws of the United States and the laws of the State of Minnesota. 3.07 EFFECTIVE DATE This Plan became effective as of January 1, 1980. EX-10.9 6 SUPPLEMENTAL SAVINGS PLAN EXHIBIT 10.9 SUPPLEMENTAL SAVINGS PLAN OF GENERAL MILLS, INC. Working Copy Restated as of January 1, 1989 With Certain Provisions Effective as of January, 1992 Further Amended as of November, 1991, December, 1992, and August, 1993 SUPPLEMENTAL SAVINGS PLAN OF GENERAL MILLS, INC. The Supplemental Savings Plan of General Mills, Inc., a non-qualified deferred compensation plan for the exclusive benefit of its employees, is hereby amended and restated as of January 1, 1989, with certain provisions effective as of January 1, 1992, pursuant to authorization of the Board of Directors of General Mills, Inc. ARTICLE I INTRODUCTION Section 1.1 Name of Plan. The name of the Plan is the "Supplemental Savings Plan of General Mills, Inc." It is also referred to as the "Supplemental Savings Plan" or the "Plan." Section 1.2 Effective Date. The effective date of the Plan is July 25, 1983. Section 1.3 Purpose. The purposes of the Supplemental Savings Plan are to: (i) provide a means by which a Participant may, under certain circumstances, be credited with benefits which, in the absence of restrictions imposed by Code Sections 401(a)(17), 401(k), 401(m) or 415, would be provided as Company Contributions under a Base Plan; and (ii) provide a means by which certain individuals, who are otherwise eligible to participate in this Plan, may be credited with amounts set forth under individual arrangements which the Minor Amendment Committee has approved for inclusion in this Plan. ARTICLE II DEFINITIONS Section 2.1 Account shall mean a Participant's individual account, as described in Section 3.2 of this Plan. Section 2.2 Base Plan shall mean a defined contribution plan sponsored by the Company, which is qualified under the provisions of Code Section 401, including the Voluntary Investment Plan of General Mills, Inc. (VIP), the Profit Sharing & Savings Plan for General Mills Restaurants, Inc. (PSSP), the General Mills, Inc. Employee Stock Ownership Plan (ESOP), the Retirement Savings Plan of General Mills, Inc. (RSP), and such other defined contribution plans as have been declared by the Board to be covered by this Plan. Section 2.3 Beneficiary shall mean the beneficiary or beneficiaries designated by the Participant in writing to receive the balance, if any, remaining in the Participant's Account upon the Participant's death. Section 2.4 Board shall mean the Board of Directors of General Mills, Inc. Section 2.5 Change in Control shall mean the occurrence of any of the following events: (a) any person (including a group as defined in Section 13(d)(3) of the Securities Exchange Act of 1934) becoming, directly or indirectly, the beneficial owner of twenty percent (20%) or more of the shares of stock of General Mills, Inc. entitled to vote for the election of directors; (b) as a result of or in connection with any cash tender offer, exchange offer, merger or other business combination, sale of assets or contested election, or combination of the foregoing, the persons who were directors of the Company just prior to such event shall cease to constitute a majority of the Company's Board of Directors; or (c) the stockholders of the Company approve an agreement providing for a transaction in which either the Company will cease to be an independent publicly-owned corporation or a sale or other disposition of all or substantially all of the assets of the Company occurs. Section 2.6 Code shall mean the Internal Revenue Code of 1986, as amended from time to time. Section 2.7 Company shall mean General Mills, Inc., and any of its subsidiaries or affiliated business entities authorized to participate in a Base Plan by the Board, or its delegate. Section 2.8 Company Contribution shall mean any contribution or other addition to be made or allocated by the Company under a Base Plan, other than a contribution made pursuant to a Participant's election to make contributions under Code Sections 401(k) or 401(m). Section 2.9 ERISA shall mean the Employee Retirement Income Security Act of 1974, as it may be amended from time to time. Section 2.10 Limitation Year shall mean the calendar year. Section 2.11 Minor Amendment Committee shall mean the Minor Amendment Committee appointed by the Compensation Committee of the Board. Section 2.12 Participant shall mean an employee who is eligible to participate in a formal non-qualified deferred compensation program adopted by the Company and who participates in this Supplemental Savings Plan pursuant to Article III. Section 2.13 Defined Terms. Capitalized terms which are not defined herein shall have the meaning ascribed to them in the relevant Base Plan. ARTICLE III PARTICIPATION Section 3.1 Participation. An employee described in Section 2.12 will participate in this Plan if: (a) as a result of the application of Code Section 415, no additional contributions can be made to the Base Plan for the remainder of the applicable Limitation Year, or as a result of the application of Code Section 401(a)(17), or the application of the nondiscrimination testing limitations imposed by Code Sections 401(k) and 401(m), he or she cannot make any further Participant contributions to the Base Plan for the remainder of the Plan Year for the Base Plan; or (b) an individual deferred compensation agreement exists with respect to the employee, and the Minor Amendment Committee approves the inclusion of the amounts to be credited under such agreement as "Company Contributions" under the terms of this Plan. Once credited under this Plan, such amounts shall be subject to all provisions of this Plan. Section 3.2 Establishment of Supplemental Savings Plan Accounts. The Company shall establish an Account for each Participant to which amounts shall be credited in accordance with Section 3.3. Such amounts shall be credited to Participants' Accounts under this Plan as bookkeeping entries only. Section 3.3 Crediting of Company Contributions. Company Contributions may be credited to a Participant's Account under the following circumstances: (a) A Participant shall be credited with amounts under this Plan equal to the additional Company Contributions that would have been made to the Base Plan with respect to such Participant for the remainder of the Plan Year or Limitation Year, as appropriate, as if the restrictions described in Section 3.1 did not apply. Such amounts shall be credited to such Participant's Account under this Plan as of the last day of the month coincident with or next following the date the additional Company Contributions would have been made to the Base Plan if the restrictions described in Section 3.1 did not apply. Such credits shall be based on the rate of total contributions elected by the Participant under the Base Plan as in effect for the period in which the applicable restriction first applies, but not more than the maximum percentage of Earnable Compensation with respect to which Company Contributions may be made pursuant to the Base Plan as in effect for the period without regard to any limitations on Company Contributions which may be imposed under the Base Plan in order to comply with the applicable limitations. In no event will amounts be credited under this Plan with respect to any Participant if the Participant is able to make any additional contributions under the Base Plan without violating: (a) the limitations of Code Section 401(a)(17); (b) the limitations of Code Section 415; or (c) the application of the nondiscrimination limitations under Code Sections 401(k) and 401(m). In no event shall a Participant be credited with Contributions under a Base Plan and this Plan during a given period that would exceed the Contributions that would have been made to the Base Plan in the absence of the restrictions imposed by Code Sections 401(a)(17), 401(k), 401(m) and 415. (b) Under the terms of an individual agreement, the amount of Company Contributions shall be determined at the time the Minor Amendment Committee approves the inclusion of such amounts as Company Contributions under this Plan. Section 3.4 Changes in Amounts Credited to a Supplemental Savings Plan Account. Amounts credited to a Participant's Supplemental Savings Plan Account shall be treated as if invested in the Fixed Income Fund of the VIP, unless the Participant has specifically requested, in writing, that the contribution be attributed to a different fund, or combination of funds otherwise available from time to time under the VIP. Effective as of January 1, 1992, the fund elections available for Accounts under this Plan shall be the Fixed Income Fund, the Equity Fund, the International Fund and the U. S. Treasury Fund of the VIP. Participants who had previously elected to have a portion of their Account under this Plan credited as if in the Company Stock Fund shall be given an opportunity to make a written election to have such amounts credited as if in any combination of the Fixed Fund, Equity Fund, U. S. Treasury Fund or International Fund for periods beginning January 1, 1992. In the absence of a written election from a Participant with amounts credited under the Company Stock Fund as of December 31, 1991, such amounts shall be credited under this Plan as if the Participant elected to have such amounts credited in the Fixed Income Fund for periods beginning on and after January 1, 1992. Transfers of amounts already credited to a Participant's Supplemental Savings Plan Account shall be permitted as of the first day of any month, provided a written request is received by the Minor Amendment Committee, or its delegate, on or before the last business day of the preceding month. Section 3.5 Distribution of Amounts Credited to a Supplemental Savings Plan Account. Amounts credited to a Participant's Supplemental Savings Plan Account shall be available for distribution only at such times as set forth in this Section. (a) Hardship Withdrawals. If an active Participant withdraws 100% of the account balance available for withdrawal under all Base Plans in which he or she participates, such Participant may request a hardship withdrawal under this Plan, by filing such a request in writing with the Minor Amendment Committee. The Minor Amendment Committee, in its sole discretion, may approve such a request if it finds that the Participant has incurred a severe financial hardship occasioned by an emergency, including, but not limited to, illness, disability or personal injury sustained by the Participant or a member of the Participant's immediate family. If such a request is approved, the Participant shall receive amounts reasonably necessary to alleviate the financial hardship from the value of such Participant's Supplemental Savings Plan Account, effective as of the first day of the month following the approval of such hardship withdrawal by the Minor Amendment Committee. (b) Death. In the event of the death of a Participant prior to the date a full distribution has been made from the Participant's Supplemental Savings Plan Account, the Company shall make distribution of the balance in such Account to the Participant's Beneficiary, effective as of the January 1 coincident with or next following the date of the Participant's death. (c) Termination and Retirement. Unless an effective "Participant Election," described below, has been filed with the Minor Amendment Committee, the Company shall make distribution of the amount credited to a Participant's Supplemental Savings Plan Account to the Participant, in a single sum, as soon as practical after the January 1 coincident with or next following the Participant's last day of employment with the Company. A Participant may elect a later distribution date and/or distribution in installments by filing a Participant Election with the Minor Amendment Committee, specifying the date and form of distribution of his or her Supplemental Savings Plan Account. Such election shall be effective provided all of the following requirements are met: (1) the Participant Election is filed with the Minor Amendment Committee at least one year prior to the date the distribution would otherwise be made; (2) unless the date of the initial distribution from this Plan pursuant to the Participant Election is during the same calendar year as the date of distribution would otherwise have been made in the absence of such Participant election, the date of the initial distribution from this Plan pursuant to the Participant Election is at least one year after the date the distribution would otherwise have been made in the absence of such Participant Election; and (3) the form of distribution is specified as either a single sum payment, or annual installment payments, for a specified period of time, not to exceed ten years. A retired or terminated Participant (or Beneficiary of a deceased Participant) may, at any time prior or subsequent to the commencement of payments under this Plan, elect in writing to have his or her form of payment of all amounts due under this Plan changed to an immediate single sum distribution which shall be paid within one (1) business day of receipt by the Company of such request; provided that the amount of any such single sum distribution shall be reduced by an amount equal to the product of (X) the total single sum distribution otherwise payable (based on the value of the account as of the first day of the month in which the lump-sum amount is paid, adjusted by a pro-rata portion of the rate of return for the month in which the lump-sum is paid, determined by multiplying the actual rate of return for such month by a fraction, the numerator of which is the number of days in the month prior to the date of payment, and the denominator of which is the number of days in the month), and (Y) the rate set forth in Statistical Release H.15(519), or any successor publication, as published by the Board of Governors of the Federal Reserve System for one-year U.S. Treasury notes under the heading "Treasury Constant Maturities" for the first day of the calendar month in which the request for a single sum distribution is received by the Company. Notwithstanding any other provisions of this Plan to the contrary, the Minor Amendment Committee, may, in its sole discretion, direct that payments be made before such payments are otherwise due if, for any reason (including, but not limited to, a change in the tax or revenue laws of the United States of America, a published revenue ruling or similar announcement issued by the Internal Revenue Service, a regulation issued by the Secretary of the Treasury or his delegate, or a decision by a court of competent jurisdiction involving a Participant or Beneficiary), it believes that a Participant or Beneficiary has recognized or will recognize income for federal income tax purposes with respect to amounts that are or will be payable under the Plan before they are to be paid. In making this determination, the Minor Amendment Committee shall take into account the hardship that would be imposed on the Participant or Beneficiary by the payment of federal income taxes under such circumstances. All distributions under this Plan shall be in cash paid by check. Section 3.6 No Forfeitures of Amounts in a Supplemental Savings Plan Account. All credited amounts in the Plan shall be fully vested. The Participant shall not forfeit any amount credited to his or her Supplemental Savings Plan Account even though such amount would have been forfeited if such amount had been a Company Contribution under the Base Plan to which it was attributable. Section 3.7 Non-Assignability of Interests. The interests herein and the right to receive distributions under this Plan may not be anticipated, alienated, sold, transferred, assigned, pledged, encumbered, or subjected to any charge or legal process, and if any attempt is made to do so, or a Participant becomes bankrupt, the interests of the Participant under the Plan may be terminated by the Minor Amendment Committee, which, in its sole discretion, may cause the same to be held or applied for the benefit of one or more of the dependents of such Participant or make any other disposition of such interests that it deems appropriate. Notwithstanding the foregoing, in the event a Participant has received an overpayment from the Supplemental Retirement Plan of General Mills, Inc. and had failed to repay such amounts upon written demand of the Company, the Company shall be authorized and empowered, at the discretion of the Company, to deduct such amount from the Participant's Deferred Accounts. Section 3.8 Supplemental Benefits Trust. The Company has established a Supplemental Benefits Trust with Norwest Bank Minneapolis, N.A. as Trustee to hold assets of the Company under certain circumstances as a reserve for the discharge of the Company's obligations under the Plan and certain other plans of deferred compensation of the Company. In the event of a Change in Control as defined in Section 2.5 hereof, the Company shall be obligated to immediately contribute such amounts to the Trust as may be necessary to fully fund all benefits payable under the Plan. Any Participant of the Plan shall have the right to demand and secure specific performance of this provision. The Company may fund the Trust in the event of the occurrence of a Potential Change in Control as determined by the Finance Committee of the Board. All assets held in the Trust remain subject only to the claims of the Company's general creditors whose claims against the Company are not satisfied because of the Company's bankruptcy or insolvency (as those terms are defined in the Trust Agreement). No Participant has any preferred claim on, or beneficial ownership interest in, any assets of the Trust before the assets are paid to the Participant and all rights created under the Trust, as under the Plan, are unsecured contractual claims of the Participant against the Company. ARTICLE IV PLAN ADMINISTRATION Section 4.1 Administration. The Plan shall be administered by the Minor Amendment Committee. The Minor Amendment Committee shall have the authority to interpret the Plan and any such interpretation shall be final and binding on all parties. The Minor Amendment Committee shall have the authority to delegate the duties and responsibilities of maintaining records, issuing such regulations as it deems appropriate, and making distributions hereunder. The Board, or if specifically delegated, its delegate, may amend or terminate the Plan at any time, provided that no such amendment or termination shall adversely affect the amounts credited to a Supplemental Savings Plan Account before the time of such amendment or termination unless the Participant becomes entitled to a benefit equal in value to such amount under another plan or practice adopted by the Company, and provided, further, that the Plan may not be amended with respect to benefits accrued under this Plan prior to such amendment after a Change in Control without the written consent of a majority of Participants determined as of the day before such Change in Control. The Company will pay for all distributions made pursuant to the Plan and for all costs, charges and expenses relating to the administration of the Plan. Section 4.2 Applicable Law. All questions pertaining to the construction, validity and effect of the Plan shall be determined in accordance with the laws of the United States of America and the laws of the State applicable to the Base Plan covering the Participant. Section 4.3 Arbitration. (a) Any controversy or claim arising out of or relating to this Plan, or any alleged breach of the terms or conditions contained herein, shall be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association (the "AAA") as such rules may be modified herein. (b) An award rendered in connection with an arbitration pursuant to this Section shall be final and binding and, judgment upon such an award may be entered and enforced in any court of competent jurisdiction. (c) The forum for arbitration under this Plan shall be Minneapolis, Minnesota and the governing law for such arbitration shall be laws of the State of Minnesota. (d) Arbitration under this Section shall be conducted by a single arbitrator selected jointly by the Company and the Participant or Beneficiary, as applicable (the "Complainant"). If within thirty (30) days after a demand for arbitration is made, the Company and the Complainant are unable to agree on a single arbitrator, three arbitrators shall be appointed. Each party shall select one arbitrator and those two arbitrators shall then select a third neutral arbitrator which thirty (30) days after their appointment. In connection with the selection of the third arbitrator, consideration shall be given to familiarity with executive compensation plans and experience in dispute resolution between parties, as a judge or otherwise. If the arbitrators selected by the parties cannot agree on the third arbitrator, they shall discuss the qualifications of such third arbitrator with the AAA prior to selection of such arbitrator, which selection shall be in accordance with the Commercial Arbitration Rules of the AAA. (e) If an arbitrator cannot continue to serve, a successor to an arbitrator selected by a party shall be also selected by the same party, and a successor to a neutral arbitrator shall be selected as specified in subsection (d) of this Section. A full rehearing will be held only if the neutral arbitrator is unable to continue to serve or if the remaining arbitrators unanimously agree that such a rehearing is appropriate. (f) The arbitrator or arbitrators shall be guided, but not bound, by the Federal Rules of Evidence and by the procedural rules, including discovery provisions, of the Federal Rules of Civil Procedure. Any discovery shall be limited to information directly relevant to the controversy or claim in arbitration. (g) The parties shall each be responsible for their own costs and expenses, except for the fees and expenses of the arbitrators, which shall be shared equally by the Company and the Complainant. EX-10.10 7 1996 COMPENSATION PLAN FOR NON-EMP DIRECTORS EXHIBIT 10.10 GENERAL MILLS, INC. 1996 COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS As Amended Through June 28, 1999 GENERAL MILLS, INC. 1996 COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS PART I GENERAL PROVISIONS A. PURPOSE The purpose of the General Mills, Inc. 1996 Compensation Plan for Non-Employee Directors (the "Plan") is to provide a compensation program which will attract and retain qualified individuals not employed by General Mills, Inc. or its subsidiaries (the "Company") to serve on the Board of Directors of the Company (the "Board") and to further align the interests of non-employee directors with those of the stockholders by providing that a portion of compensation will be linked directly to increases in stockholder value. B. EFFECTIVE DATE, DURATION OF PLAN AND TRANSITION RIGHTS This Plan shall become effective as of September 30, 1996, subject to the approval of the Plan by the stockholders. The Plan will terminate on September 30, 2001 or such earlier date as determined by the Board or the Compensation Committee of the Board (the "Committee"); provided that no such termination shall affect rights earned or accrued under the Plan prior to the date of termination. This Plan supersedes and replaces the General Mills, Inc. Compensation Plan for Non-Employee Directors, effective as of January 1, 1979 (the "1979 Plan"), the General Mills, Inc. Retirement Plan for Non-Employee Directors, effective as of April 28, 1986 (the "1986 Plan") and the General Mills Stock Plan for Non-Employee Directors, effective as of September 17, 1990 (the "1990 Plan"). Participant rights accrued as of September 30, 1996 under the 1979 Plan and the 1990 Plan shall remain in effect but no new rights or benefits shall accrue pursuant to such plans. The 1986 Plan was terminated in February 1996. Participants who have accrued rights under the 1986 Plan shall receive a one time grant of Stock Units ("Stock Units") representing the right to receive shares of General Mills, Inc. Common Stock ($.10 per value) ("Common Stock") equal to the value as of September 30, 1996 of the participant's accrued benefit under the 1986 Plan. The value of each Stock Unit shall be deemed equal to the mean of the high and low price of shares of Common Stock on the New York Exchange on September 30, 1996. Common Stock issued in respect of Stock Units granted in lieu of accrued benefits under the 1986 Plan shall be distributed commencing on the director's retirement from the Board, on the date or dates elected by the director at least one year prior to the date of his or her retirement from the Board. In the absence of such an election, such Common Stock shall be issued in ten substantially equal annual installments on the January 1 of each year following the year in which the participant ceases to be a director. Each participant awarded Stock Units shall receive, upon distribution, one share of Common Stock for each Stock Unit awarded, and the Company shall issue to and register in the name of each such participant a certificate for that number of shares of Common Stock. Participants receiving Stock Units pursuant to this Part I, Section B. shall have the same rights, protections and limitations as those provided participants receiving Stock Units pursuant to Part III, Section B.3. and Section C.1. hereof. C. PARTICIPATION Each member of the Board who is not an employee of the Company at the date compensation is earned or accrued shall be eligible to participate in the Plan. D. COMMON STOCK SUBJECT TO THE PLAN Common Stock to be issued under this Plan may be made available from the authorized but unissued Common Stock, shares of Common Stock held in the treasury, or Common Stock purchased on the open market or otherwise. Subject to the provisions of the next succeeding paragraph, the maximum aggregate number of shares authorized to be issued under the Plan shall be 250,000. In the event that the Committee determines that 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 or event affects the Common Stock such that an adjustment is appropriate to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee may, in its sole discretion and in such manner as it may deem equitable, adjust any or all of (i) the number of shares of Common Stock subject to the Plan, (ii) the number of shares of Common Stock subject to outstanding awards under the Plan, and (iii) the grant or exercise price with respect to any option and, if deemed appropriate, make provision for a cash payment to the holder of an outstanding option; provided, that the number of shares of Common Stock subject to any option denominated in Common Stock shall always be a whole number. PART II ANNUAL RETAINER AND MEETING FEES A. COMPENSATION STRUCTURE 1. Each non-employee director shall be entitled to receive an annual retainer and meeting fees as shall be determined from time to time by the Board. 2. Each non-employee director of the Company may elect by written notice to the Company on or before each annual stockholders' meeting to participate in the compensation alternative provisions of the Plan. Any combination of the alternatives -- Cash, Deferred Cash and/or Common Stock -- may be elected, provided the aggregate of the alternatives elected equals one hundred percent of the non-employee director's compensation at the time of the election. 3. The election shall remain in effect for a one-year period which shall begin the day of the annual stockholders' meeting and terminate the day before the succeeding annual stockholders' meeting (hereinafter "Plan Year"). 4. The Plan Year shall include four plan quarters (hereinafter "Plan Quarters"). Plan quarters shall correspond to the Company's fiscal quarters. 5. A director elected to the Board at a time other than the annual stockholders' meeting may elect, by written notice to the Company before such director's term begins, to participate in the compensation alternatives for the remainder of that Plan Year, and elections for succeeding years shall be on the same basis as other directors. 6. Periodically, the Company shall supply to each participant an account statement of participation under the Plan. B. CASH ALTERNATIVE 1. Each non-employee director who elects to participate under the cash compensation provision of the Plan shall be paid all or the specified percentage of his or her compensation for the Plan Year in cash, and such cash payment shall be made as of the end of each Plan Quarter. 2. If a participant dies during a Plan Year, the balance of the amount due to the date of the participant's death shall be payable in full to such participant's designated beneficiary, or, if none, the estate as soon as practicable following the date of death. C. DEFERRED CASH ALTERNATIVE 1. Each non-employee director may elect to have all or a specified percentage of his or her compensation for the Plan Year deferred until the participant ceases to be a director. 2. For each director who has made this deferred cash election, the Company shall establish a deferred compensation account and shall credit such account at the end of each plan quarter for the compensation due. Interest shall be credited to each such account monthly based on the following rates as specified by the Committee from time to time: a. the rate of return as from time to time earned by the Fixed Income Fund of the Voluntary Investment Plan of General Mills, Inc. (VIP); or b. the rate of return as from time to time earned by the Equity Fund of the VIP; or c. any other rates of return of other funds or portfolios established under a qualified benefit plan maintained by the Company which the Minor Amendment Committee, or its delegate, in its discretion, may from time to time establish. 3. Distribution of the participant's deferred compensation account shall be as follows: a. at the time, and in the form of payment, elected by the participant at the time of deferral; or b. in the absence of an election at the time of deferral, in ten substantially equal annual installments beginning on January 1 of each year following the year in which the participant ceases to be a director; provided, however, that for compensation earned in Plan Years commencing after December 9, 1996, distributions must be made or commenced by the later of (i) the date the participant attains age 70 and (ii) five years after the director's retirement from the Board. 4. In the event of the termination of a participant from Board service other than by retirement, the Committee may in its sole discretion require that distribution of all amounts allocated to a participant's deferred compensation account be accelerated and distributed as of the first business day of the calendar year next following termination. 5. The Company has established a Supplemental Benefits Trust with Norwest Bank Minnesota, N.A. as Trustee to hold assets of the company under certain circumstances as a reserve for the discharge of the Company's obligations as to deferred cash compensation under the Plan and certain other plans of deferred compensation of the Company. In the event of a Change in Control as defined in Part IV hereinbelow, the Company shall be obligated to immediately contribute such amounts to the Trust as may be necessary to fully fund all cash benefits payable under the Plan. Any participant of the Plan shall have the right to demand and secure specific performance of this provision. All assets held in the trust remain subject only to the claims of the Company's general creditors whose claims against the Company are not satisfied because of the Company's bankruptcy or insolvency (as those terms are defined in the Trust Agreement). No participant has any preferred claim on, or beneficial ownership interest in, any assets of the Trust before the assets are paid to the participant and all rights created under the Trust, as under the Plan, are unsecured contractual claims of the participant against the Company. D. GMI COMMON STOCK ALTERNATIVE 1. Each participant may elect to receive all or a specified percentage of his or her compensation in shares of Common Stock, which will be issued at the end of each Plan Quarter. 2. The Company shall ensure that an adequate number of shares of Common Stock are available for distribution to those participants making this election. 3. Only whole numbers of shares will be issued, with any fractional share amounts paid in cash. 4. For purposes of computing the number of shares earned each Plan Quarter, the value of each share shall be equal to the mean of the high and low price of shares of Common Stock on the New York Stock Exchange on the third Business Day preceding the last day of each Plan Quarter. For the purposes of this Plan, "Business Day" shall mean a day on which the New York Stock Exchange is open for trading. 5. If a participant dies during a Plan Year, the balance of the amount due to the date of the participant's death shall be payable in full to the participant's designated beneficiary, or, if none, to the participant's estate, in cash, as soon as practicable following the date of death. PART III STOCK COMPENSATION A. NON-QUALIFIED STOCK OPTIONS 1. Grant of Options. Each non-employee director on the effective date of the Plan (or, if first elected after the effective date of the Plan, on the date the non-employee director is first elected) shall be awarded an option (an "Option") to purchase 2,500 shares of Common Stock. As of the close of business on each successive annual stockholders' meeting date after the date of the original award, each non-employee director re-elected to the Board shall be granted an additional Option to purchase 2,500 shares of Common Stock (or, beginning September 27, 1999, an Option to purchase 5,000 shares of Common Stock). All Options granted under the Plan shall be non-statutory options not entitled to special tax treatment under Section 422 of the Internal Revenue Code of 1986, as amended. 2. Option Exercise Price. The per share price to be paid by the non-employee director at the time an option is exercised shall be 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 for the Common Stock on the New York Stock Exchange on the relevant date or, if the New York Stock Exchange is closed on that date, on the last preceding date on which the Exchange was open for trading. 3. Term of Option. Each Option shall expire ten (10) years from the date of grant. 4. Exercise and Vesting of Option. Each Option will vest on the date of the annual stockholders' meeting next following the date the Option is granted. If, for any reason, a non-employee director ceases to serve on the Board prior to the date an Option vests, such Option shall be forfeited and all further rights of the non-employee director to or with respect to such Option shall terminate. If a participant should die while employed by the Company, any vested Option 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 and any unvested Options shall vest and become exercisable in a proportionate amount, based on the full months of service completed during the vesting period of the Option from the date of grant to the date of death. 5. Method of Exercise and Tax Obligations. Each notice of exercise shall be accompanied by the full purchase price of the shares being purchased. Such payment may be made in cash, check, shares of Common Stock valued using the Fair Market Value as of the exercise date or a combination thereof. The Company may also require payment of the amount of any federal, state or local withholding tax attributable to the exercise of an Option or the delivery of shares of Common Stock. 6. Non-transferability. Except as provided by rule adopted by the Committee, an Option shall be non-assignable and non-transferable by a non-employee director other than by will or the laws of descent and distribution. A non-employee director shall forfeit any Option assigned or transferred, voluntarily or involuntarily, other than as permitted under this subsection. B. DEFERRAL OF STOCK OPTION GAINS Under the Plan, Participants may defer receipt of the net shares of Common Stock to be issued upon the stock-for-stock exercise of an Option issued hereunder, as well as dividend equivalents on the net shares. 1. Option Gain Deferral Election. A participant can elect to defer receipt of Net Shares (defined below) of Common Stock resulting from a stock-for-stock exercise of an exercisable Option issued to the participant by completing and submitting to the Company an irrevocable stock option deferral election at least six months in advance of exercising the Option (which exercise must be done on or prior to the expiration of the Option) and, on or prior to the exercise date, delivering personally-owned shares equal in value to the Option exercise price on the date of the exercise. "Net Shares" means the difference between the number of shares of Common Stock subject to the Option exercise and the number of shares of Common Stock delivered to satisfy the Option exercise price. A participant may not revoke an Option gain deferral election after it is received by the Company. A participant may choose to defer receipt of all or only a portion of the Net Shares to be received upon exercise of an Option. If only a portion of the Net Shares is deferred, the balance will be issued at the time of exercise. 2. Distribution of Deferred Common Stock. At the time of a participant's election to defer receipt of Common Stock issuable upon an Option exercise or upon the election to receive Stock Units as provided in Part III, Section C.1. a participant must also select a distribution date and a form of distribution. The distribution date may be any date that is at least one year subsequent to either the exercise date for the related Option or the date of grant in the case of Stock Units granted under Part III, Section C.1. but the distribution must be made or commenced by the later of (i) the date the participant attains age 70 and (ii) five year after the date of the director's retirement from the Board. A participant may elect to have deferred Common Stock distributed in a single payment or in substantially equal annual installments for a period not to exceed ten (10) years, or in another form requested by the Participant, in writing, and approved by the Committee. In the absence of an election, Common Stock issued in respect of Stock Units shall be distributed in ten substantially equal annual installments beginning on January 1 of each year following the year in which the participant ceases to be a director. Common Stock issuable under a single Option grant or pursuant to a single grant under Part III, Section C.1. shall have the same distribution date and form of distribution. Notwithstanding the above, the following provisions shall apply: a. If an Option as to which a participant has made an Option gain deferral election terminates prior to the exercise date selected by the participant, or if the participant dies or fails to deliver personally-owned shares in payment of the exercise price, then the deferral election shall not become effective. b. In the event of the termination of a participant from Board service other than by retirement, the Committee may, in its sole discretion, require that distribution of all Stock Units allocated to a participant's Deferred Stock Unit Accounts (as defined in Part III, Section B.3.a. below) be accelerated and distributed as of the first business day of the calendar year next following the date of termination. c. At the time elected by the participant for distribution of Common Stock attributable to allocations under the participant's Deferred Stock Unit Accounts, the Company shall cause to be issued to the Participant, within three (3) days of the date of distribution, shares of Common Stock equal to the number of Stock Units credited to the Deferred Stock Unit Account and cash equal to any dividend equivalent amounts which had not been used to "purchase" additional Stock Units as provided below. Prior to distribution and pursuant to any rules the Committee may adopt, a Participant may authorize the Company to withhold a portion of the shares of Common Stock to be distributed for the payment of all federal, state, local and foreign withholding taxes required to be collected in respect of the distribution. 3. Deferred Stock Unit Accounts and Dividend Equivalents. a. A deferred stock unit account ("Deferred Stock Unit Account") will be established for each Option grant covered by a participant election to defer the receipt of Common Stock under Part III, Section B.1. above and, for each Net Share deferred, a Stock Unit will be credited to the Deferred Stock Unit Account as of the date of the Option exercise. A Deferred Stock Unit Account will also be established each time a participant elects to receive Stock Units pursuant to Part III, Section C.1. hereof. Participants may make an election to receive dividend equivalents on Stock Units in cash or reinvest such amount, and any change to such election shall become effective six months after the date of the change. If the amounts are reinvested, on each dividend payment date for the Company's Common Stock, the Company will credit each Deferred Stock Unit Account with an amount equal to the dividends paid by the Company on the number of shares of Common Stock equal to the number of Stock Units in the Deferred Stock Unit Account. Dividend equivalent amounts credited to each Deferred Stock Unit Account shall be used to "purchase" additional Stock Units for the Deferred Stock Unit Account at a price equal to the mean of the high and low price of the Common Stock on the New York Stock Exchange on the dividend date. No fractional Stock Units will be credited. The Committee may, in its sole discretion, direct either that all dividend equivalent amounts be paid currently or all such amounts be reinvented if, for any reason, such Committee believes it is in the best interest of the Company to do so. If the participant fails to make an election, the dividend equivalent amounts shall be reinvested. Periodically, each participant will receive a statement of the number of Stock Units in his or her Deferred Stock Unit Account(s). b. Participants who elect under the Plan to defer the receipt of Common Stock issuable upon the exercise of Options or elect to receive Stock Units under Part III, Section C.1. below will have no rights as stockholders of the Company with respect to allocations made to their Deferred Stock Unit Account(s), except the right to receive dividend equivalent allocations under Part III, Section B.3.a. above. Stock Units may not be sold, transferred, assigned, pledged or otherwise encumbered or disposed. C. RESTRICTED STOCK AND STOCK UNITS 1. Awards. Until September 27, 1999, on the effective date of the Plan (or, if a non-employee director is first elected after the effective date of the Plan, on the date the non-employee director is first elected) and at the close of business on each successive annual stockholders' meeting date, each non-employee director may elect to receive either (i) an award of five hundred (500) shares of Restricted Stock subject to vesting and restricted as described in subsection 2 hereof (the "Restricted Stock") or (ii) an award of five hundred (500)Stock Units, subject to vesting as provided in subsection 2. Only non-employee directors re-elected to the Board shall be entitled to a grant under this Section III. C.1. of Restricted Stock or Stock Units awarded at the close of business on an annual meeting date after the date of the original grant to the non-employee director. Beginning September 27, 1999, only Stock Units and not Restricted Stock will be awarded under the Plan. 2. Vesting of and Restrictions on Restricted Stock and Stock Units. A participant's interest in the Restricted Stock and Stock Units shall vest on the date of the annual stockholders' meeting next following the date of the award of the Restricted Stock or Stock Units (the "Restricted Period"). If, for any reason, a non-employee director ceases to serve on the Board prior to the date the non-employee director's interest in a grant of Restricted Stock or Stock Units vests, such Restricted Stock and Stock Units shall be forfeited and all further rights of the non-employee director to or with respect to such Restricted Stock or Stock Units shall terminate. A participant who dies prior to the vesting of Restricted Stock or Stock Units shall vest in a proportionate number of shares of Restricted Stock or Stock Units, based on the full months of service completed during the vesting period of the Restricted Stock or Stock Units from the date of grant to the date of death. Restricted Stock may not be sold, transferred, assigned, pledged or otherwise encumbered or disposed until the Restricted Period has expired and Stock Units may not be sold, transferred, assigned, pledged or otherwise encumbered or disposed until such time as share certificates for Common Stock are issued to the participants. 3. Distribution of Stock Units. a. Each participant electing the award of Stock Units under Part III, Section C.1. above must select a date of distribution and form of distribution as provided under Part III, Section B.2. The participant may also elect to have dividend equivalents payable on Stock Units paid currently or reinvested in Stock Units as provided under Part III, Section B.3. 4. Other Terms and Conditions. Any shares of Restricted Stock granted under the Plan may be evidenced in such manner as the Committee deems appropriate, including, without limitation, book-entry registration or issuance of stock certificates, and may be held in escrow. Each participant granted 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. The Company may require payment of the amount of any federal, state or local withholding tax attributable to the constructive or actual delivery of shares of Common Stock pursuant to the terms of this Agreement. D. GENERAL PROVISIONS FOR DEFERRED CASH, OPTION GAINS AND RSU's The following provisions shall apply to the deferral of cash compensation described in Part II, Section C hereof, the deferral of receipt of Common Stock issued upon exercise of Options described in Part III, Section B hereof and the treatment of Stock Units granted under Part III, Section C hereof. 1. A participant may, at any time prior or subsequent to the commencement of benefit payments or distribution of Common Stock in respect of Stock Units under this Plan, elect in writing to have his or her form of distribution under this Plan changed to an immediate single distribution which shall be made within one (1) business day of receipt by the Company of such request in the case of deferred cash and three (3) business days in the case of Common Stock; provided that the cash amount or number of shares of Common Stock subject to such single distribution shall be reduced by an amount or number of shares of Common Stock equal to the product of (X) the rate for set forth in Statistical Release H.15(519), or any successor publication, as published by the Board of Governors of the Federal Reserve System for one-year U.S. Treasury notes under the heading "Treasury Constant Maturities" for the first day of the calendar month in which the request for a single sum distribution is received by the Company and (Y) either (i) as to a cash distribution, the total single sum distribution otherwise payable (based on the value of the account as of the first day of the month in which the single sum amount is paid, adjusted by a pro-rata portion of the specified rate of return for the prior month in which the single sum is paid, determined by multiplying the actual rate of return for such prior month by a fraction, the numerator of which is the number of days in the month in which the request is received prior to the date of payment, and the denominator of which is the number of days in the month), or (ii) as to a distribution of Common Stock in respect of Stock Units, the number of Stock Units held on behalf of the participant multiplied by the mean of the high and low price of shares of Common Stock on the New York Stock Exchange on the date of the request or, if the date of the request is not a Business Day, on the Business Day preceding the date of the request. 2. In the event of a severe financial hardship occasioned by an emergency, including, but not limited to, illness, disability or personal injury sustained by the participant or a member of the participant's immediate family, a participant may apply to receive a distribution, including a distribution of Common Stock in respect of Stock Units, earlier than initially elected. The Committee may, in its sole discretion, either approve or deny the request. The determination made by the Committee will be final and binding on all parties. If the request is granted, the distributions will be accelerated only to the extent reasonably necessary to alleviate the financial hardship. 3. If the death of a participant occurs before a full distribution of deferred cash amounts or Common Stock in respect of Stock Units is made, a single distribution shall be made to the beneficiary designated by the participant to receive such amounts. This distribution shall be made as soon as practical following notification that death has occurred. In the absence of any such designation, the distribution shall be made to the personal representative, executor or administrator of the participant's estate. 4. As to all previous and future Plan years, and subject to the last sentence of the first paragraph of Part III, Section B.2. hereof, a participant who (a) has elected a distribution date and distribution in either a single distribution or substantially equal installments and (b) is not within twelve (12) months of the date that such deferred amount, deferred Common Stock or the first installment thereof would be distributed under this Plan, shall be permitted to make no more than two amendments to the initial election to defer distributions such that his or her distribution date is either in the same calendar year as the date of the distribution which would have been made in the absence of such election amendment(s) or is at least one year after the date of the distribution which would have been made in the absence of such election amendment(s). A participant satisfying the conditions set forth in the preceding sentence may also amend such election so that his or her form of distribution is changed to substantially equal annual installments for a period not to exceed ten (10) years or is changed to a single distribution. 5. Notwithstanding any other provision of this Plan to the contrary, the Committee, by majority approval, may, in its sole discretion, direct that distributions be made before such distributions are otherwise due if, for any reason (including, but not limited to, a change in the tax or revenue laws of the United States of America, a published ruling or similar announcement issued by the Internal Revenue Service, a regulation issued by the Secretary of the Treasury or his or her delegate, or a decision by a court of competent jurisdiction involving a participant or beneficiary), it believes that a participant or beneficiary has recognized or will recognize income for federal income tax purposes with respect to distributions that are or will be payable to such participants under the Plan before they are paid to him. In making this determination, the Committee shall take into account the hardship that would be imposed on the participant or beneficiary by the payment of federal income taxes under such circumstances. E. CHANGE OF CONTROL Stock Options granted under the Plan will become immediately exercisable, restrictions on the Restricted Stock will lapse and Common Stock and dividend equivalents to be issued in respect of Stock Units will be immediately distributed upon the occurrence of a "Change of Control" as defined in Part IV hereinbelow. PART IV ADMINISTRATION The Plan shall be administered by the Committee. The Committee shall have full power to interpret the Plan, formulate additional details and regulations for carrying out the Plan and amend or modify the Plan as from time to time it deems proper and in the best interests of the Company, provided that after a "Change in Control" no amendment, modification of or action to terminate the Plan may be made which would affect compensation earned or accrued prior to such amendment, modification or termination without the written consent of a majority of participants determined as of the day before a "Change in Control." Any decision or interpretation adopted by the Committee shall be final and conclusive. A "Change of Control" means: 1. The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (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 Company Voting Securities"); provided, however, that for purposes of this subsection (1), 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 (3) below; and provided, further, that if any Person's beneficial ownership of the Outstanding Company 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 Company Voting Securities; or 2. Individuals who, as of the date hereof, constitute the Board (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 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 3. The approval by the shareholders of the Company of a reorganization, merger, consolidation, 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 shareholders, 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 Company 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 Company 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 4. Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. PART V ADDITIONAL PROVISIONS A. GOVERNING LAW The validity, construction and effect of the Plan and any such actions taken under or relating to the Plan shall be determined in accordance with the laws of the State of Delaware and applicable Federal law. B. NOTICES Unless otherwise notified, all notices under this Plan shall be sent in writing to the Company, attention Corporate Compensation, P.O. Box 1113, Minneapolis, Minnesota 55440. All correspondence to the participants shall be sent to the address which is their recorded address as listed on the election forms. Effective as of September 30, 1996 As amended December 9, 1996 As amended April 2, 1998 As amended June 22, 1998 As amended June 28, 1999 EX-10.13 8 SUPP. BENEFITS TRUST AGMT. 2/9/87 RESTATED 9/26/88 EXHIBIT 10.13 GENERAL MILLS, INC. SUPPLEMENTAL BENEFITS TRUST TRUST AGREEMENT This TRUST AGREEMENT, amended and restated as of September 26, 1988, is between General Mills, Inc. (the "Grantor") and Norwest Bank Minnesota, N.A. (formerly known as Norwest Bank Minneapolis, N.A.) (the "Trustee"). 1. Purpose. The purpose of this trust (the "Trust"), originally established on February 9, 1987, is to provide a vehicle to (a) hold assets of the Grantor as a reserve for the discharge of the Grantor's obligations to certain individuals (the "Beneficiaries") entitled to receive benefits under the Supplemental Savings Plan of General Mills, Inc., amended and restated as of January 1, 1986, and any other plan of deferred compensation that the Grantor so designates in writing to the Trustee, including those plans designated in Exhibit A attached hereto and made a part hereof (the "Plans"), and (b) invest, reinvest, disburse and distribute those assets and the earnings thereon as provided hereunder and in the Plans. 2. Trust Corpus. The Grantor hereby transfers to the Trustee and the Trustee hereby accepts and agrees to hold, in trust, the sum of Ten Dollars ($10.00) plus such cash and/or property, if any, transferred to the Trustee by the Grantor or on behalf of the Grantor pursuant to obligations incurred under any or all of the Plans and the earnings thereon, and such cash and/or property, together with the earnings thereon and together with any other cash or property received by the Trustee pursuant to Section 8(a) of this Trust Agreement, shall constitute the trust estate and shall be held, managed and distributed as hereinafter provided. The Grantor shall execute any and all instruments necessary to vest the Trustee with full title to the property hereby transferred. 3. Grantor Trust. The Trust is intended to be a trust of which the Grantor is treated as the owner for federal income tax purposes in accordance with the provisions of Sections 671 through 679 of the Internal Revenue Code of 1986, as amended (the "Code"). If the Trustee, in its sole discretion, deems it necessary or advisable for the Grantor and/or the Trustee to undertake or refrain from undertaking any actions (including, but not limited to, making or refraining from making any elections or filings) in order to ensure that the Grantor is at all times treated as the owner of the Trust for federal income tax purposes, the Grantor and/or the Trustee will undertake or refrain from undertaking (as the case may be) such actions. The Grantor hereby irrevocably authorizes the Trustee to be its attorney-in-fact for the purpose of performing any act which the Trustee, in its sole discretion, deems necessary or advisable in order to accomplish the purposes and the intent of this Section 3. The Trustee shall be fully protected in acting or refraining from acting in accordance with the provisions of this Section 3. 4. Irrevocability of Trust. The Trust shall be irrevocable and may not be altered or amended in any substantive respect, or revoked or terminated by the Grantor in whole or in part, without the express written consent of a majority of the Beneficiaries of the Trust; provided, however, that the Trust may be amended, as may be necessary either (i) to obtain a favorable ruling from the Internal Revenue Service with respect to the tax consequences of the establishment and settlement of the Trust, or (ii) to make nonsubstantive changes, which have no effect upon the amount of any Beneficiary's benefits, the time of receipt of benefits, the identity of any recipient of benefits, or the reversion of any assets to the Grantor prior to the Trustee's satisfaction of all the Trustee's obligations hereunder; provided, further, that in the event of a "Change of Control" as defined in Section 12.4 of the Retirement Income Plan of General Mills, Inc. (hereinafter referred to as a "Change in Control"), the Trust may not be altered or amended in any substantive respect, or revoked or terminated by the Grantor's successor unless a majority of the Beneficiaries, determined as of the day before such Change in Control, agree in writing to such an alteration, amendment, revocation or termination. 5. Investment of Trust Assets. (a) Subject to the provisions of paragraph (b) below, until the Trustee has distributed all of the assets of the Trust in accordance with the terms hereof, the Trustee shall invest and reinvest such assets (without regard to any state law limiting the investment powers of fiduciaries) in such securities and other property as the Trustee deems advisable, considering the probable income (including capital appreciation potential) from any such investment, the probable safety of the assets of the Trust and, where appropriate, the rate of return at which the assets would have been invested on behalf of each Beneficiary under any applicable qualified defined contribution plan maintained by the Grantor. Within the limitations of the foregoing, the Trustee is specifically authorized to acquire, for cash or on credit, every kind of property, real, personal or mixed, and to make every kind of investment, specifically including, but not limited to, corporate and governmental obligations of every kind, preferred or common stocks, securities of any regulated investment company or trust, interests in common trust funds now or hereafter established by a corporate trustee, and property in which the Trustee owns an undivided interest in any other trust capacity. The Trustee is expressly authorized and empowered to purchase such insurance in its own name (and with itself as the beneficiary) as it shall determine to be necessary or advisable to advance best the purposes of the Trust and the interests of the Beneficiaries. (b) The Trustee shall invest and reinvest the assets of the Trust in accordance with such investment objectives, guidelines, restrictions or directions as the Grantor may furnish to the Trustee at the time of the execution of the Trust or at any later date; provided, however, that if there is a Change in Control the Trust's investment objectives, guidelines, restrictions or directions may not be changed by the Grantor's successor unless a majority of the Beneficiaries, determined as of the day before such Change in Control, agree, in writing, to such a change. 6. Distribution of Trust Assets. (a) Subject to the provisions of paragraph (b) below, at such time as a Beneficiary is entitled to a payment under any of the Plans, he shall be entitled to receive from the Trust (i) an amount in cash equal to the amount to which he is entitled under the Plan or Plans at such time, less (ii) any payments previously made to him by the Grantor with respect to such amount pursuant to the terms of the Plans. The commencement of payments from the Trust shall be conditioned on the Trustee's prior receipt of a written instrument from the Beneficiary in a form satisfactory to the Trustee containing representations as to (A) the amount to which the Beneficiary is entitled under the Plans, (B) the fact that he has requested the payment of such amount from the Grantor pursuant to the terms of the Plans, (C) the amount, if any, he has received from the Grantor under the Plans with respect to such amount, and (D) the amount to be paid him by the Trust (i.e., the difference between (A) and (C) above). All payments to a Beneficiary from the Trust shall be made in accordance with the provisions of the applicable Plan. The Trustee shall be fully protected in making any payment in accordance with the provisions of this paragraph. (b) The Trustee shall make or commence payment to the Beneficiary in accordance with his representations not later than 30 business days after its receipt thereof; provided, however, that before the Trustee makes or commences any such payment and not later than 7 business days after its receipt of the Beneficiary's representations, the Trustee shall request in writing the Grantor's agreement that the Beneficiary's representations are accurate with respect to the amount, fact, and time of payment to him. The Trustee shall enclose with such request a copy of the Beneficiary's representations and written advice to the Grantor that it must respond to the Trustee's request on or before the 20th business day (which date shall be set forth in such written advice) after the Beneficiary furnished such representations to the Trustee. If the Grantor, in a writing delivered to the Trustee, agrees with the Beneficiary's representations in all respects, or if the Grantor does not respond to the Trustee's request by the 20th day deadline, the Trustee shall make payment in accordance with the Beneficiary's representations. If the Grantor advises the Trustee in writing on or before the 20th day deadline that it does not agree with any or all of the Beneficiary's representations, the Trustee immediately shall take whatever steps it in its sole discretion, deems appropriate, including, but not limited to, a review of any notice furnished by the Grantor pursuant to paragraph (e) hereof, to attempt to resolve the difference(s) between the Grantor and the Beneficiary. If, however, the Trustee is unable to resolve such difference(s) to its satisfaction within 60 business days after its receipt of the Beneficiary's representations, the Trustee shall make payment at such time and in such form and manner as is allowed under the Plans as of the date first stated above and as the Trustee, in its sole discretion, selects. The Trustee shall be fully protected in making or refraining from making any payment in accordance with the provisions of this paragraph. (c) Notwithstanding any other provision of the Trust Agreement to the contrary, the Trustee shall make payments hereunder before such payments are otherwise due if it determines, based on a change in the tax or revenue laws of the United States of America, a published ruling or similar announcement issued by the Internal Revenue Service, a regulation issued by the Secretary of the Treasury or his delegate, or a decision by a court of competent jurisdiction involving a Beneficiary, or a closing agreement made under Code Section 7121 that is approved by the Internal Revenue Service and involves a Beneficiary, that a Beneficiary has recognized or will recognize income for federal income tax purposes with respect to amounts that are or will be payable to him under the Plans before they are paid to him. (d) Unless (contemporaneously with his submission of the written instrument referred to in paragraph (a) hereof) a Beneficiary furnishes documentation in form and substance satisfactory to the Trustee that no withholding is required with respect to a payment to be made to him from the Trust, the Trustee may deduct from any such payment any federal, state or local taxes required by law to be withheld by the Trustee. (e) The Trustee shall provide the Grantor with written confirmation of the fact and time of any commencement of payments hereunder within 10 business days after any payments commence to a beneficiary. The Grantor shall notify the Trustee in the same manner of any payments it commences to make to a Beneficiary pursuant to the Plans. (f) The Trustee shall be fully protected in making or refraining from making any payment or any calculations in accordance with the provisions of this Section 6. 7. Termination of the Trust and Reversion of Trust Assets. The Trust shall terminate upon the first to occur of (i) the payment by the Grantor of all amounts due the Beneficiaries under each of the Plans and the receipt by the Trustee of a valid release to that effect from each of the Beneficiaries with respect to payments made to him, or (ii) the twenty-first anniversary of the death of the last survivor of the Beneficiaries who are in being on the date of the execution of this Trust Agreement. Upon termination of the Trust, any and all assets remaining in the Trust, after the payment to the Beneficiaries of all amounts to which they are entitled and after payment of the expenses and compensation in Sections 10 and 15(i) of this Trust Agreement, shall revert to the Grantor and the Trustee shall promptly take such action as shall be necessary to transfer any such assets to the Grantor. Notwithstanding the above, the Grantor shall be obligated to take whatever steps are necessary to ensure that the Trust is not terminated for a period of five (5) years following a Change in Control as of the date of the execution of this Trust Agreement, such steps to include, but not being limited to, the transfer to the Trustee of cash or other assets pursuant to the provisions of Section 8(a) hereof. 8. Powers of the Trustee. To carry out the purposes of the Trust and subject to any limitations herein expressed, the Trustee is vested with the following powers until final distribution, in addition to any now or hereafter conferred by law affecting the trust or estate created hereunder. In exercising such powers, the Trustee shall act in a manner reasonable and equitable in view of the interests of the Beneficiaries and in a manner in which persons of ordinary prudence, diligence, discretion and judgment would act in the management of their own affairs (a) Receive and Retain Property. To receive and retain any property received at the inception of the Trust or at any other time, whether or not such property is unproductive of income or is property in which the Trustee is personally interested or in which the Trustee owns an undivided interest in any other trust capacity. (b) Dispose of, Develop, and Abandon Assets. To dispose of an asset, for cash or on credit, at public or private sale and, in connection with any sale or disposition, to give such warranties and indemnifications as the Trustee shall determine; to manage, develop, improve, exchange, partition, change the character of or abandon a Trust asset or any interest therein. (c) Borrow and Encumber. To borrow money for any Trust purpose upon such terms and conditions as may be determined by the Trustee; to obligate the Trust or any part thereof by mortgage, deed of trust, pledge or otherwise, for a term within or extending beyond the term of the Trust. (d) Lease. To enter for any purpose into a lease as lessor or lessee, with or without an option to purchase or renew, for a term. (e) Grant or Acquire Options. To grant or acquire options and rights of first refusal involving the sale or purchase of any Trust assets, including the power to write covered call options listed on any securities exchange. (f) Powers Respecting Securities. To have all the rights, powers, privileges and responsibilities of an owner of securities, including, without limiting the foregoing, the power to vote, to give general or limited proxies, to pay calls, assessments, and other sums; to assent to, or to oppose, corporate sales or other acts; to participate in, or to oppose, any voting trusts, pooling agreements, foreclosures, reorganizations, consolidations, mergers and liquidations, and, in connection therewith, to give warranties and indemnifications and to deposit securities with and transfer title to any protective or other committee; to exchange, exercise or sell stock subscription or conversion rights; and, regardless of any limitations elsewhere in this instrument relative to investments by the Trustee, to accept and retain as an investment hereunder any securities received through the exercise of any of the foregoing powers. (g) Use of Nominee. To hold securities or other property in the name of the Trustee, in the name of a nominee of the Trustee, or in the name of a custodian (or its nominee) selected by the Trustee, with or without disclosure of the Trust, the Trustee being responsible for the acts of such custodian or nominee affecting such property. (h) Advance Money. To advance money for the protection of the Trust, and for all expenses, losses and liabilities sustained or incurred in the administration of the Trust or because of the holding or ownership of any Trust assets, for which advances, with interest, the Trustee has a lien on the Trust assets as against the Beneficiaries. (i) Pay, Contest or Settle Claims. To pay, contest or settle any claim by or against the Trust by compromise, arbitration or otherwise; to release, in whole or in part, any claim belonging to the Trust to the extent that the claim is uncollectible. Notwithstanding the foregoing, the Trustee may only pay or settle a claim asserted against the Trust by the Grantor if it is compelled to do so by a final order of a court of competent jurisdiction. (j) Litigate. To prosecute or defend actions, claims or proceedings for the protection of Trust assets and of the Trustee in the performance of its duties. (k) Employ Advisers and Agents. To employ persons, corporations or associations, including attorneys, auditors, investment advisers or agents, even if they are associated with the Trustee, to advise or assist the Trustee in the performance of its administrative duties; to act without independent investigation upon their recommendations. (l) Use Custodian. If no bank or trust company is acting as Trustee hereunder, the Trustee shall appoint a bank or trust company to act as custodian (the "Custodian") for securities and any other Trust assets. Any such appointment shall terminate when a bank or trust company begins to serve as Trustee hereunder. The Custodian shall keep the deposited property, collect and receive the income and principal, and hold, invest, disburse or otherwise dispose of the property or its proceeds (specifically including selling and purchasing securities, and delivering securities sold and receiving securities purchased) upon the order of the Trustee. (m) Execute Documents. To execute and deliver all instruments which will accomplish or facilitate the exercise of the powers vested in the Trustee. (n) Grant of Powers Limited. The Trustee is expressly prohibited from exercising any powers vested in it primarily for the benefit of the Grantor rather than for the benefit of the Beneficiaries. The Trustee shall not have the power to purchase, exchange, or otherwise deal with or dispose of the assets of the Trust for less than adequate and full consideration in money or money's worth. (o) Deposit Assets. To deposit Trust assets in commercial, savings or savings and loan accounts (including such accounts in a corporate Trustee's banking department) and to keep such portion of the Trust assets in cash or cash balances as the Trustee may, from time to time, deem to be in the best interests of the Trust, without liability for interest thereon. 9. Resignation of Trustee and Appointment of Successor Trustee. Each Trustee shall have the right to resign upon 30 days' written notice to the Grantor, during which time the Grantor shall appoint a "Qualified Successor Trustee." If no Qualified Successor Trustee accepts such appointment, the resigning Trustee shall petition a court of competent jurisdiction for the appointment of a "Qualified Successor Trustee." For this purpose, a "Qualified Successor Trustee" may be an individual or a corporation but may not be the Grantor, any person who would be a "related or subordinate party" to the Grantor within the meaning of Section 672(c) of the Code or a corporation that would be a member of an "affiliated group" of corporations including the Grantor within the meaning of Section 1504(a) of the Code if the words "80 percent" wherever they appear in that section were replaced by the words "50 percent." Upon the written acceptance by the Qualified Successor Trustee of the trust and upon approval of the resigning Trustee's final account by those entitled thereto, the resigning Trustee shall be discharged. 10. Trustee Compensation. The Trustee shall be entitled to receive as compensation for its services hereunder the compensation (a) as negotiated and agreed to by the Grantor and the Trustee, or (b) if not negotiated or if the parties are unable to reach agreement, as allowed a trustee under the laws of the State of Minnesota in effect at the time such compensation is payable. Such compensation shall be paid by the Grantor; provided, however, that to the extent such compensation is not paid by the Grantor, subject to the provisions of Section 15(i) hereof, it shall be charged against and paid from the Trust and the Grantor shall reimburse the Trust for any such payment made from the Trust within 30 days of its receipt from the Trustee of written notice of such payment. 11. Trustee's Consent to Act and Indemnification of the Trustee. The Trustee hereby grants and consents to act as Trustee hereunder. The Grantor agrees to indemnify the Trustee and hold it harmless from and against all claims, liabilities, legal fees and expenses that may be asserted against it, otherwise than on account of the Trustee's own negligence or willful misconduct (as found by a final judgment of a court of competent jurisdiction) by reason of the Trustee's taking or refraining from taking any action in connection with the Trust, whether or not the Trustee is a party to a legal proceeding or otherwise. 12. Prohibition Against Assignment. No Beneficiary shall have any preferred claim on, or any beneficial ownership interest in, any assets of the Trust before such assets are paid to the Beneficiary as provided in Section 6, and all rights created under the Trust and the Plans shall be unsecured contractual rights of the Beneficiary against the Grantor. No part of, or claim against, the assets of the Trust may be assigned, anticipated, alienated, encumbered, garnished, attached or in any other manner disposed of by any of the Beneficiaries, and no such part or claim shall be subject to any legal process or claims of creditors of any of the Beneficiaries. 13. Annual Accounting. The Trustee shall keep accurate and detailed accounts of all investments, receipts and disbursements and other transactions hereunder, and, within ninety days following the close of each calendar year, and within ninety days after the Trustee's resignation or termination of the Trust as provided herein, the Trustee shall render a written account of its administration of the Trust to the Grantor by submitting a record of receipts, investments, disbursements, distributions, gains, losses, assets on hand at the end of the accounting period and other pertinent information, including a description of all securities and investments purchased and sold during such calendar year. Written approval of an account shall, as to all matters shown in the account, be binding upon the Grantor and shall forever release and discharge the Trustee from any liability or accountability. The Grantor will be deemed to have given his written approval if he does not object in writing to the Trustee within one hundred and twenty days after the date of receipt of such account from the Trustee. The Trustee shall be entitled at any time to institute an action in a court of competent jurisdiction for a judicial settlement of its account. 14. Notices. Any notice or instructions required under any of the provisions of this Trust Agreement shall be deemed effectively given only if such notice is in writing and is delivered personally or by certified or registered mail, return receipt requested and postage prepaid, addressed to the addresses as set forth below of the parties hereto. The address of the parties are as follows: (i) The Grantor: General Mills, Inc. Post Office Box 1113 Number One General Mills Boulevard Minneapolis, MN 55440 Attention: Treasurer (ii) The Trustee: Norwest Bank Minnesota, N.A. 6th and Marquette Avenue Minneapolis, MN 55479-0069 Attention: Administrative Officer The Grantor or Trustee may at any time change the address to which notices are to be sent to it by giving written notice thereof in the manner provided above. 15. Miscellaneous Provisions. (a) This Trust Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota applicable to contracts made and to be performed therein and the Trustee shall not be required to account in any court other than one of the courts of such state. (b) All section headings herein have been inserted for convenience of reference only and shall in no way modify, restrict or affect the meaning or interpretation of any of the terms or provisions of this Trust Agreement. (c) This Trust Agreement is intended as a complete and exclusive statement of the agreement of the parties hereto, supersedes all previous agreements or understandings among them and may not be modified or terminated orally. (d) The term "Trustee" shall include any successor Trustee. (e) If a Trustee or Custodian hereunder is a bank or trust company, any corporation resulting from any merger, consolidation or conversion to which such bank or trust company may be a party, or any corporation otherwise succeeding generally to all or substantially all of the assets or business of such bank or trust company, shall be the successor to it as Trustee or custodian hereunder, as the case may be without the execution of any instrument or any further action on the part of any party hereto. (f) If any provision of this Trust Agreement shall be invalid and unenforceable, the remaining provisions hereof shall subsist and be carried into effect. (g) The Plans are by this reference expressly incorporated herein and made a part hereof with the same force and effect as if fully set forth at length. As of the date first stated above, the terms of the Plans are as set forth in Exhibit A attached hereto. (h) The assets of the Trust shall be subject only to the claims of the Grantor's general creditors in the event of the Grantor's bankruptcy or insolvency. The Grantor shall be considered "bankrupt" or "insolvent" if the Grantor is (A) unable to pay its debts when due or (B) engaged as a debtor in a proceeding under the Bankruptcy Code, 11 U.S.C. Section 101 et seq. The Board of Directors and the chief executive officer of the Grantor must notify the Trustee of the Grantor's bankruptcy or insolvency within three (3) days following the occurrence of such event. Upon receipt of such a notice, or, upon receipt of a written allegation from a person or entity claiming to be a creditor of the Grantor that the Grantor is bankrupt or insolvent, the Trustee shall discontinue payments to Beneficiaries. The Trustee shall, as soon as practicable after receipt of such notice or written allegation, determine whether the Grantor is bankrupt or insolvent. If the Trustee determines, based on such notice, written allegation, or such other information as it deems appropriate, that the Grantor is bankrupt or insolvent, the Trustee shall hold the assets of the Trust for the benefit of the Grantor's general creditors, and deliver any undistributed assets to satisfy the claims of such creditors as a court of competent jurisdiction may direct. The Trustee shall resume payments to Beneficiaries only after it has determined that the Grantor is not bankrupt or insolvent, is no longer bankrupt or insolvent (if the Trustee determined that the Grantor was bankrupt or insolvent), pursuant to an order of a court of competent jurisdiction. Unless the Trustee has actual knowledge of the Grantor's bankruptcy or insolvency, the Trustee shall have no duty to inquire whether the Grantor is bankrupt or insolvent. The Trustee may in all events rely on such evidence concerning the Grantor's solvency as may be furnished to the Trustee which will give the Trustee a reasonable basis for making a determination concerning the Grantor's solvency. If the Trustee discontinues payment of benefits from the Trust pursuant to this Section 15(h) and subsequently resumes such payments, the first payment following such discontinuance shall include the aggregate amount of all payments which would have been made to each Beneficiary (together with interest) during the period of such discontinuance, less the aggregate amount of payments made to the Beneficiary by the Grantor in lieu of the payments provided for hereunder during any such period of discontinuance. (i) Any and all taxes, expenses (including, but not limited to, the Trustee's compensation) and costs of litigation relating to or concerning the adoption, administration and termination of the Trust shall be borne and promptly paid by the Grantor; provided, however, that, to the extent such taxes, expenses and costs relating to the Trust are due and owing and (A) are not paid by the Grantor, and (B) do not in the aggregate exceed $1,000, they shall be charged against and paid from the Trust, and the Grantor shall reimburse the Trust for any such payment made from the Trust within 30 days of its receipt from the Trustee of written notice of such payment. (j) Any reference hereunder to a Beneficiary shall expressly be deemed to include, where relevant, the beneficiaries of a Beneficiary duly appointed under the terms of the Plans. A Beneficiary shall cease to have such status once any and all amounts due such Beneficiary under the Plan have been satisfied. (k) Any reference hereunder to the Grantor shall expressly be deemed to include the Grantor's successor and assigns. (l) Whenever used herein, and to the extent appropriate, the masculine, feminine or neuter gender shall include the other two genders, the singular shall include the plural and the plural shall include the singular. IN WITNESS WHEREOF, the parties hereto have executed this amended and restated TRUST AGREEMENT as of this 26th day of September, 1988. GRANTOR: GENERAL MILLS, INC. Attest: /s/ Ivy S. Bernhardson By: /s/ C. L. Whitehill Name: Ivy S. Bernhardson Name: C. L. Whitehill Title: Assistant Secretary Title: Senior Vice President TRUSTEE: NORWEST BANK MINNESOTA, N.A. Attest: /s/ Gary R. Porter By: /s/ Jill Greene Name: Gary R. Porter Name: Jill Greene Title: Vice President Title: Asst. Vice President EXHIBIT A A. Deferred Compensation Plan, Amended and Restated as of January 1, 1986. B. Executive Incentive and Estate Building Program, Amended and Restated as of June 1, 1986. C. Supplemental Retirement Plan of General Mills,Inc., Amended and Restated effective as of January 1, 1986. D. Supplemental Savings Plan of General Mills, Inc., Amended and Restated effective as of January 1, 1986. EX-10.14 9 SUPPLEMENTAL BENEFITS TRUST AGMT. DTD 9/26/88 EXHIBIT 10.14 GENERAL MILLS, INC. SUPPLEMENTAL BENEFITS TRUST TRUST AGREEMENT This TRUST AGREEMENT is made as of September 26, 1988, is between General Mills, Inc. (the "Grantor") and Norwest Bank Minnesota, N.A. (the "Trustee"). 1. PURPOSE. The purpose of this trust (the "Trust") is to provide a vehicle to (a) hold assets of the Grantor as a reserve for the discharge of the Grantor's obligations to certain individuals (the "Beneficiaries") entitled to receive benefits under the General Mills, Inc. Compensation Plan for Non-Employee Directors and the General Mills, Inc. Retirement Plan for Non-Employee Directors and any other plan of deferred compensation that the Grantor so designates in writing to the Trustee (the "Plans"), and (b) invest, reinvest, disburse and distribute those assets and the earnings thereon as provided hereunder and in the Plans. 2. TRUST CORPUS. The Grantor hereby transfers to the Trustee and the Trustee hereby accepts and agrees to hold, in trust, the sum of Ten Dollars ($10.00) plus such cash and/or property, if any, transferred to the Trustee by the Grantor or on behalf of the Grantor pursuant to obligations incurred under any or all of the Plans and the earnings thereon, and such cash and/or property, together with the earnings thereon and together with any other cash or property received by the Trustee pursuant to Section 8(a) of this Trust Agreement, shall constitute the trust estate and shall be held, managed and distributed as hereinafter provided. The Grantor shall execute any and all instruments necessary to vest the Trustee with full title to the property hereby transferred. 3. GRANTOR TRUST. The Trust is intended to be a trust of which the Grantor is treated as the owner for federal income tax purposes in accordance with the provisions of Sections 671 through 679 of the Internal Revenue Code of 1986, as amended (the "Code"). If the Trustee, in its sole discretion, deems it necessary or advisable for the Grantor and/or the Trustee to undertake or refrain from undertaking any actions (including, but not limited to, making or refraining from making any elections or filings) in order to ensure that the Grantor is at all times treated as the owner of the Trust for federal income tax purposes, the Grantor and/or the Trustee will undertake or refrain from undertaking (as the case may be) such actions. The Grantor hereby irrevocably authorizes the Trustee to be its attorney-in-fact for the purpose of performing any act which the Trustee, in its sole discretion, deems necessary or advisable in order to accomplish the purposes and the intent of this Section 3. The Trustee shall be fully protected in acting or refraining from acting in accordance with the provisions of this Section 3. 4. IRREVOCABILITY OF TRUST. The Trust shall be irrevocable and may not be altered or amended in any substantive respect, or revoked or terminated by the Grantor in whole or in part, without the express written consent of a majority of the Beneficiaries of the Trust; provided, however, that the Trust may be amended, as may be necessary either (i) to obtain a favorable ruling from the Internal Revenue Service with respect to the tax consequences of the establishment and settlement of the Trust, or (ii) to make nonsubstantive changes, which have no effect upon the amount of any Beneficiary's benefits, the time of receipt of benefits, the identity of any recipient of benefits, or the reversion of any assets to the Grantor prior to the Trustee's satisfaction of all the Trustee's obligations hereunder; provided, further, that in the event of a "Change of Control" as defined in Section 2.2 of the General Mills, Inc. Retirement Plan for Non-Employee Directors (hereinafter referred to as a "Change in Control"), the Trust may not be altered or amended in any substantive respect, or revoked or terminated by the Grantor's successor unless a majority of the Beneficiaries, determined as of the day before such Change in Control, agree in writing to such an alteration, amendment, revocation or termination. 5. INVESTMENT OF TRUST ASSETS. (a) Subject to the provisions of paragraph (b) below, until the Trustee has distributed all of the assets of the Trust in accordance with the terms hereof, the Trustee shall invest and reinvest such assets (without regard to any state law limiting the investment powers of fiduciaries) in such securities and other property as the Trustee deems advisable, considering the probable income (including capital appreciation potential) from any such investment, the probable safety of the assets of the Trust and, where appropriate, the rate of return at which the assets would have been invested on behalf of each Beneficiary under any applicable qualified defined contribution plan maintained by the Grantor. Within the limitations of the foregoing, the Trustee is specifically authorized to acquire, for cash or on credit, every kind of property, real, personal or mixed, and to make every kind of investment, specifically including, but not limited to, corporate and governmental obligations of every kind, preferred or common stocks, securities of any regulated investment company or trust, interests in common trust funds now or hereafter established by a corporate trustee, and property in which the Trustee owns an undivided interest in any other trust capacity. The Trustee is expressly authorized and empowered to purchase such insurance in its own name (and with itself as the beneficiary) as it shall determine to be necessary or advisable to advance best the purposes of the Trust and the interests of the Beneficiaries. (b) The Trustee shall invest and reinvest the assets of the Trust in accordance with such investment objectives, guidelines, restrictions or directions as the Grantor may furnish to the Trustee at the time of the execution of the Trust or at any later date; provided, however, that if there is a Change in Control the Trust's investment objectives, guidelines, restrictions or directions may not be changed by the Grantor's successor unless a majority of the Beneficiaries, determined as of the day before such Change in Control, agree, in writing, to such a change. 6. Distribution of Trust Assets. (a) Subject to the provisions of paragraph (b) below, at such time as a Beneficiary is entitled to a payment under any of the Plans, he shall be entitled to receive from the Trust (i) an amount in cash equal to the amount to which he is entitled under the Plan or Plans at such time, less (ii) any payments previously made to him by the Grantor with respect to such amount pursuant to the terms of the Plans. The commencement of payments from the Trust shall be conditioned on the Trustee's prior receipt of a written instrument from the Beneficiary in a form satisfactory to the Trustee containing representations as to (A) the amount to which the Beneficiary is entitled under the Plans, (B) the fact that he has requested the payment of such amount from the Grantor pursuant to the terms of the Plans, (C) the amount, if any, he has received from the Grantor under the Plans with respect to such amount, and (D) the amount to be paid him by the Trust (i.e., the difference between (A) and (C) above). All payments to a Beneficiary from the Trust shall be made in accordance with the provisions of the applicable Plan. The Trustee shall be fully protected in making any payment in accordance with the provisions of this paragraph. (b) The Trustee shall make or commence payment to the Beneficiary in accordance with his representations not later than 30 business days after its receipt thereof; provided, however, that before the Trustee makes or commences any such payment and not later than 7 business days after its receipt of the Beneficiary's representations, the Trustee shall request in writing the Grantor's agreement that the Beneficiary's representations are accurate with respect to the amount, fact, and time of payment to him. The Trustee shall enclose with such request a copy of the Beneficiary's representations and written advice to the Grantor that it must respond to the Trustee's request on or before the 20th business day (which date shall be set forth in such written advice) after the Beneficiary furnished such representations to the Trustee. If the Grantor, in a writing delivered to the Trustee, agrees with the Beneficiary's representations in all respects, or if the Grantor does not respond to the Trustee's request by the 20th day deadline, the Trustee shall make payment in accordance with the Beneficiary's representations. If the Grantor advises the Trustee in writing on or before the 20th day deadline that it does not agree with any or all of the Beneficiary's representations, the Trustee immediately shall take whatever steps it in its sole discretion, deems appropriate, including, but not limited to, a review of any notice furnished by the Grantor pursuant to paragraph (e) hereof, to attempt to resolve the difference(s) between the Grantor and the Beneficiary. If, however, the Trustee is unable to resolve such difference(s) to its satisfaction within 60 business days after its receipt of the Beneficiary's representations, the Trustee shall make payment at such time and in such form and manner as is allowed under the Plans as of the date first stated above and as the Trustee, in its sole discretion, selects. The Trustee shall be fully protected in making or refraining from making any payment in accordance with the provisions of this paragraph. (c) Notwithstanding any other provision of the Trust Agreement to the contrary, the Trustee shall make payments hereunder before such payments are otherwise due if it determines, based on a change in the tax or revenue laws of the United States of America, a published ruling or similar announcement issued by the Internal Revenue Service, a regulation issued by the Secretary of the Treasury or his delegate, or a decision by a court of competent jurisdiction involving a Beneficiary, or a closing agreement made under Code Section 7121 that is approved by the Internal Revenue Service and involves a Beneficiary, that a Beneficiary has recognized or will recognize income for federal income tax purposes with respect to amounts that are or will be payable to him under the Plans before they are paid to him. (d) Unless (contemporaneously with his submission of the written instrument referred to in paragraph (a) hereof) a Beneficiary furnishes documentation in form and substance satisfactory to the Trustee that no withholding is required with respect to a payment to be made to him from the Trust, the Trustee may deduct from any such payment any federal, state or local taxes required by law to be withheld by the Trustee (e) The Trustee shall provide the Grantor with written confirmation of the fact and time of any commencement of payments hereunder within 10 business days after any payments commence to a beneficiary. The Grantor shall notify the Trustee in the same manner of any payments it commences to make to a Beneficiary pursuant to the Plans. (f) The Trustee shall be fully protected in making or refraining from making any payment or any calculations in accordance with the provisions of this Section 6. 7. Termination of the Trust and Reversion of Trust Assets. The Trust shall terminate upon the first to occur of (i) the payment by the Grantor of all amounts due the Beneficiaries under each of the Plans and the receipt by the Trustee of a valid release to that effect from each of the Beneficiaries with respect to payments made to him, or (ii) the twenty-first anniversary of the death of the last survivor of the Beneficiaries who are in being on the date of the execution of this Trust Agreement. Upon termination of the Trust, any and all assets remaining in the Trust, after the payment to the Beneficiaries of all amounts to which they are entitled and after payment of the expenses and compensation in Sections 10 and 15(i) of this Trust Agreement, shall revert to the Grantor and the Trustee shall promptly take such action as shall be necessary to transfer any such assets to the Grantor. Notwithstanding the above, the Grantor shall be obligated to take whatever steps are necessary to ensure that the Trust is not terminated for a period of five (5) years following a Change in Control as of the date of the execution of this Trust Agreement, such steps to include, but not being limited to, the transfer to the Trustee of cash or other assets pursuant to the provisions of Section 8(a) hereof. 8. Powers of the Trustee. To carry out the purposes of the Trust and subject to any limitations herein expressed, the Trustee is vested with the following powers until final distribution, in addition to any now or hereafter conferred by law affecting the trust or estate created hereunder. In exercising such powers, the Trustee shall act in a manner reasonable and equitable in view of the interests of the Beneficiaries and in a manner in which persons of ordinary prudence, diligence, discretion and judgment would act in the management of their own affairs. (a) Receive and Retain Property. To receive and retain any property received at the inception of the Trust or at any other time, whether or not such property is unproductive of income or is property in which the Trustee is personally interested or in which the Trustee owns an undivided interest in any other trust capacity. (b) Dispose of, Develop, and Abandon Assets. To dispose of an asset, for cash or on credit, at public or private sale and, in connection with any sale or disposition, to give such warranties and indemnifications as the Trustee shall determine; to manage, develop, improve, exchange, partition, change the character of or abandon a Trust asset or any interest therein. (c) Borrow and Encumber. To borrow money for any Trust purpose upon such terms and conditions as may be determined by the Trustee; to obligate the Trust or any part thereof by mortgage, deed of trust, pledge or otherwise, for a term within or extending beyond the term of the Trust. (d) Lease. To enter for any purpose into a lease as lessor or lessee, with or without an option to purchase or renew, for a term. (e) Grant or Acquire Options. To grant or acquire options and rights of first refusal involving the sale or purchase of any Trust assets, including the power to write covered call options listed on any securities exchange. (f) Powers Respecting Securities. To have all the rights, powers, privileges and responsibilities of an owner of securities, including, without limiting the foregoing, the power to vote, to give general or limited proxies, to pay calls, assessments, and other sums; to assent to, or to oppose, corporate sales or other acts; to participate in, or to oppose, any voting trusts, pooling agreements, foreclosures, reorganizations, consolidations, mergers and liquidations, and, in connection therewith, to give warranties and indemnifications and to deposit securities with and transfer title to any protective or other committee; to exchange, exercise or sell stock subscription or conversion rights; and, regardless of any limitations elsewhere in this instrument relative to investments by the Trustee, to accept and retain as an investment hereunder any securities received through the exercise of any of the foregoing powers. (g) Use of Nominee. To hold securities or other property in the name of the Trustee, in the name of a nominee of the Trustee, or in the name of a custodian (or its nominee) selected by the Trustee, with or without disclosure of the Trust, the Trustee being responsible for the acts of such custodian or nominee affecting such property. (h) Advance Money. To advance money for the protection of the Trust, and for all expenses, losses and liabilities sustained or incurred in the administration of the Trust or because of the holding or ownership of any Trust assets, for which advances, with interest, the Trustee has a lien on the Trust assets as against the Beneficiaries. (i) Pay, Contest or Settle Claims. To pay, contest or settle any claim by or against the Trust by compromise, arbitration or otherwise; to release, in whole or in part, any claim belonging to the Trust to the extent that the claim is uncollectible. Notwithstanding the foregoing, the Trustee may only pay or settle a claim asserted against the Trust by the Grantor if it is compelled to do so by a final order of a court of competent jurisdiction. (j) Litigate. To prosecute or defend actions, claims or proceedings for the protection of Trust assets and of the Trustee in the performance of its duties. (k) Employ Advisers and Agents. To employ persons, corporations or associations, including attorneys, auditors, investment advisers or agents, even if they are associated with the Trustee, to advise or assist the Trustee in the performance of its administrative duties; to act without independent investigation upon their recommendations. (l) Use Custodian. If no bank or trust company is acting as Trustee hereunder, the Trustee shall appoint a bank or trust company to act as custodian (the "Custodian") for securities and any other Trust assets. Any such appointment shall terminate when a bank or trust company begins to serve as Trustee hereunder. The Custodian shall keep the deposited property, collect and receive the income and principal, and hold, invest, disburse or otherwise dispose of the property or its proceeds (specifically including selling and purchasing securities, and delivering securities sold and receiving securities purchased) upon the order of the Trustee. (m) Execute Documents. To execute and deliver all instruments which will accomplish or facilitate the exercise of the powers vested in the Trustee. (n) Grant of Powers Limited. The Trustee is expressly prohibited from exercising any powers vested in it primarily for the benefit of the Grantor rather than for the benefit of the Beneficiaries. The Trustee shall not have the power to purchase, exchange, or otherwise deal with or dispose of the assets of the Trust for less than adequate and full consideration in money or money's worth. (o) Deposit Assets. To deposit Trust assets in commercial, savings or savings and loan accounts (including such accounts in a corporate Trustee's banking department) and to keep such portion of the Trust assets in cash or cash balances as the Trustee may, from time to time, deem to be in the best interests of the Trust, without liability for interest thereon. 9. Resignation of Trustee and Appointment of Successor Trustee. Each Trustee shall have the right to resign upon 30 days' written notice to the Grantor, during which time the Grantor shall appoint a "Qualified Successor Trustee." If no Qualified Successor Trustee accepts such appointment, the resigning Trustee shall petition a court of competent jurisdiction for the appointment of a "Qualified Successor Trustee." For this purpose, a "Qualified Successor Trustee" may be an individual or a corporation but may not be the Grantor, any person who would be a "related or subordinate party" to the Grantor within the meaning of Section 672(c) of the Code or a corporation that would be a member of an "affiliated group" of corporations including the Grantor within the meaning of Section 1504(a) of the Code if the words "80 percent" wherever they appear in that section were replaced by the words "50 percent." Upon the written acceptance by the Qualified Successor Trustee of the trust and upon approval of the resigning Trustee's final account by those entitled thereto, the resigning Trustee shall be discharged. 10. Trustee Compensation. The Trustee shall be entitled to receive as compensation for its services hereunder the compensation (a) as negotiated and agreed to by the Grantor and the Trustee, or (b) if not negotiated or if the parties are unable to reach agreement, as allowed a trustee under the laws of the State of Minnesota in effect at the time such compensation is payable. Such compensation shall be paid by the Grantor; provided, however, that to the extent such compensation is not paid by the Grantor, subject to the provisions of Section 15(i) hereof, it shall be charged against and paid from the Trust and the Grantor shall reimburse the Trust for any such payment made from the Trust within 30 days of its receipt from the Trustee of written notice of such payment. 11. Trustee's Consent to Act and Indemnification of the Trustee. The Trustee hereby grants and consents to act as Trustee hereunder. The Grantor agrees to indemnify the Trustee and hold it harmless from and against all claims, liabilities, legal fees and expenses that may be asserted against it, otherwise than on account of the Trustee's own negligence or willful misconduct (as found by a final judgment of a court of competent jurisdiction) by reason of the Trustee's taking or refraining from taking any action in connection with the Trust, whether or not the Trustee is a party to a legal proceeding or otherwise. 12. Prohibition Against Assignment. No Beneficiary shall have any preferred claim on, or any beneficial ownership interest in, any assets of the Trust before such assets are paid to the Beneficiary as provided in Section 6, and all rights created under the Trust and the Plans shall be unsecured contractual rights of the Beneficiary against the Grantor. No part of, or claim against, the assets of the Trust may be assigned, anticipated, alienated, encumbered, garnished, attached or in any other manner disposed of by any of the Beneficiaries, and no such part or claim shall be subject to any legal process or claims of creditors of any of the Beneficiaries. 13. Annual Accounting. The Trustee shall keep accurate and detailed accounts of all investments, receipts and disbursements and other transactions hereunder, and, within ninety days following the close of each calendar year, and within ninety days after the Trustee's resignation or termination of the Trust as provided herein, the Trustee shall render a written account of its administration of the Trust to the Grantor by submitting a record of receipts, investments, disbursements, distributions, gains, losses, assets on hand at the end of the accounting period and other pertinent information, including a description of all securities and investments purchased and sold during such calendar year. Written approval of an account shall, as to all matters shown in the account, be binding upon the Grantor and shall forever release and discharge the Trustee from any liability or accountability. The Grantor will be deemed to have given his written approval if he does not object in writing to the Trustee within one hundred and twenty days after the date of receipt of such account from the Trustee. The Trustee shall be entitled at any time to institute an action in a court of competent jurisdiction for a judicial settlement of its account. 14. Notices. Any notice or instructions required under any of the provisions of this Trust Agreement shall be deemed effectively given only if such notice is in writing and is delivered personally or by certified or registered mail, return receipt requested and postage prepaid, addressed to the addresses as set forth below of the parties hereto. The address of the parties are as follows: (i) The Grantor: General Mills, Inc. Post Office Box 1113 Number One General Mills Boulevard Minneapolis, MN 55440 Attention: Treasurer (ii) The Trustee: Norwest Bank Minnesota, N.A. 6th and Marquette Avenue Minneapolis, MN 55479-0069 Attention: Administrative Officer The Grantor or Trustee may at any time change the address to which notices are to be sent to it by giving written notice thereof in the manner provided above. 15. Miscellaneous Provisions. (a) This Trust Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota applicable to contracts made and to be performed therein and the Trustee shall not be required to account in any court other than one of the courts of such state. (b) All section headings herein have been inserted for convenience of reference only and shall in no way modify, restrict or affect the meaning or interpretation of any of the terms or provisions of this Trust Agreement. (c) This Trust Agreement is intended as a complete and exclusive statement of the agreement of the parties hereto, supersedes all previous agreements or understandings among them and may not be modified or terminated orally. (d) The term "Trustee" shall include any successor Trustee. (e) If a Trustee or Custodian hereunder is a bank or trust company, any corporation resulting from any merger, consolidation or conversion to which such bank or trust company may be a party, or any corporation otherwise succeeding generally to all or substantially all of the assets or business of such bank or trust company, shall be the successor to it as Trustee or custodian hereunder, as the case may be without the execution of any instrument or any further action on the part of any party hereto. (f) If any provision of this Trust Agreement shall be invalid and unenforceable, the remaining provisions hereof shall subsist and be carried into effect. (g) The Plans are by this reference expressly incorporated herein and made a part hereof with the same force and effect as if fully set forth at length. As of the date first stated above, the terms of the Plans are as set forth in Exhibit A attached hereto. (h) The assets of the Trust shall be subject only to the claims of the Grantor's general creditors in the event of the Grantor's bankruptcy or insolvency. The Grantor shall be considered "bankrupt" or "insolvent" if the Grantor is (A) unable to pay its debts when due or (B) engaged as a debtor in a proceeding under the Bankruptcy Code, 11 U.S.C. Section 101 et seq. The Board of Directors and the chief executive officer of the Grantor must notify the Trustee of the Grantor's bankruptcy or insolvency within three (3) days following the occurrence of such event. Upon receipt of such a notice, or, upon receipt of a written allegation from a person or entity claiming to be a creditor of the Grantor that the Grantor is bankrupt or insolvent, the Trustee shall discontinue payments to Beneficiaries. The Trustee shall, as soon as practicable after receipt of such notice or written allegation, determine whether the Grantor is bankrupt or insolvent. If the Trustee determines, based on such notice, written allegation, or such other information as it deems appropriate, that the Grantor is bankrupt or insolvent, the Trustee shall hold the assets of the Trust for the benefit of the Grantor's general creditors, and deliver any undistributed assets to satisfy the claims of such creditors as a court of competent jurisdiction may direct. The Trustee shall resume payments to Beneficiaries only after it has determined that the Grantor is not bankrupt or insolvent, is no longer bankrupt or insolvent (if the Trustee determined that the Grantor was bankrupt or insolvent), pursuant to an order of a court of competent jurisdiction. Unless the Trustee has actual knowledge of the Grantor's bankruptcy or insolvency, the Trustee shall have no duty to inquire whether the Grantor is bankrupt or insolvent. The Trustee may in all events rely on such evidence concerning the Grantor's solvency as may be furnished to the Trustee which will give the Trustee a reasonable basis for making a determination concerning the Grantor's solvency. If the Trustee discontinues payment of benefits from the Trust pursuant to this Section 15(h) and subsequently resumes such payments, the first payment following such discontinuance shall include the aggregate amount of all payments which would have been made to each Beneficiary (together with interest) during the period of such discontinuance, less the aggregate amount of payments made to the Beneficiary by the Grantor in lieu of the payments provided for hereunder during any such period of discontinuance. (i) Any and all taxes, expenses (including, but not limited to, the Trustee's compensation) and costs of litigation relating to or concerning the adoption, administration and termination of the Trust shall be borne and promptly paid by the Grantor; provided, however, that, to the extent such taxes, expenses and costs relating to the Trust are due and owing and (A) are not paid by the Grantor, and (B) do not in the aggregate exceed $1,000, they shall be charged against and paid from the Trust, and the Grantor shall reimburse the Trust for any such payment made from the Trust within 30 days of its receipt from the Trustee of written notice of such payment. (j) Any reference hereunder to a Beneficiary shall expressly be deemed to include, where relevant, the beneficiaries of a Beneficiary duly appointed under the terms of the Plans. A Beneficiary shall cease to have such status once any and all amounts due such Beneficiary under the Plan have been satisfied. (k) Any reference hereunder to the Grantor shall expressly be deemed to include the Grantor's successor and assigns. (l) Whenever used herein, and to the extent appropriate, the masculine, feminine or neuter gender shall include the other two genders, the singular shall include the plural and the plural shall include the singular. IN WITNESS WHEREOF, the parties hereto have executed this TRUST AGREEMENT as of this 26th day of September, 1988. GRANTOR: GENERAL MILLS, INC. Attest: /s/ Ivy S. Bernhardson By: /s/ C. L. Whitehill Name: Ivy S. Bernhardson Name: C. L. Whitehill Title: Assistant Secretary Title: Senior Vice President TRUSTEE: NORWEST BANK MINNESOTA, N.A. Attest: /s/ Gary R. Porter By: /s/ Jill Greene Name: Gary R. Porter Name: Jill Greene Title: Vice President Title: Assistant Vice President EX-10.17 10 1990 SALARY REPLACEMENT STOCK OPTION PLAN EXHIBIT 10.17 GENERAL MILLS, INC. 1990 SALARY REPLACEMENT STOCK OPTION PLAN As Amended Through June 27, 1994 GENERAL MILLS, INC. 1990 SALARY REPLACEMENT STOCK OPTION PLAN 1. PURPOSE OF THE PLAN The purpose of the General Mills, Inc. 1990 Salary Replacement Stock Option Plan (the "Plan") is to give key employees of General Mills, Inc. (the "Company") and its subsidiaries who are primarily responsible for the management of the business of the Company the opportunity to receive stock option grants in lieu of salary increases, and, as to employees who are not subject to Section 16 of the 1934 Act (each as hereinafter defined), an opportunity to receive stock option grants in lieu of certain other compensation and employee benefits thereby encouraging focus on the growth and profitability of the Company and its Common Stock. 2. EFFECTIVE DATE OF PLAN This Plan shall become effective as of September 17, 1990, subject to the approval of the stockholders of the Company at the Annual Meeting on September 17, 1990. 3. ADMINISTRATION OF THE PLAN The Plan shall be administered by the Compensation Committee (the "Committee"). The Committee shall be made up of non-management members of the Board of Directors (the "Board") appointed in accordance with the Company's Certificate of Incorporation. The Committee shall have authority to adopt rules and regulations for carrying out the purpose of the Plan, select the employees to whom grants will be made ("Optionees"), the number of shares to be optioned and interpret, construe and implement the provisions of the Plan; provided that if at any time Rule 16b-3 or any successor rule ("Rule 16b-3") under the Securities Exchange Act of 1934, as amended (the "1934 Act"), so permits without adversely affecting the ability of the Plan to comply with the conditions for exemption from Section 16 of the 1934 Act (or any successor provisions) provided by Rule 16b-3, the Committee may delegate the administration of the Plan in whole or in part, on such terms and conditions, and to such person or persons as it may determine in its discretion, as it relates to persons not subject to Section 16 of the 1934 Act, or any successor provision. Decisions of the Committee (or its delegate as permitted herein) shall be final, conclusive and binding upon all parties, including the Company, stockholders and Optionees. 4. COMMON STOCK SUBJECT TO THE PLAN The shares of "Common Stock" of the Company ($.10 par value) to be issued upon the exercise of a non-qualified option to purchase Common Stock granted hereunder (an "Option") may be made available from the authorized but unissued Common Stock, shares of Common Stock held in the treasury, or Common Stock purchased on the open market or otherwise. Approval of the Plan by the stockholders of the Company shall constitute authorization to use such shares for the Plan, subject to the discretion of the Board or as such discretion may be delegated to the Committee. Subject to the provisions of the next succeeding paragraph, the maximum aggregate number of shares originally authorized under the Plan for which Options could be granted under the Plan shall was 3,000,000 shares. As of June 1, 1992, and subject to the provisions of the next succeeding paragraph, there remain 4,493,000 shares authorized to be issued under the Plan (as adjusted for stock splits). If an Option granted under the Plan is terminated without having been exercised in full, the unpurchased or forfeited shares or rights to receive shares shall become available for grant to other employees. The number of shares of Common Stock subject to the Plan, the outstanding Salary Stock Options, and the exercise price per share of outstanding Options may be appropriately adjusted by the Committee in the event that: (i) the number of outstanding shares of Common Stock of the Company shall be changed by reason of split-ups, combinations or reclassifications of shares; (ii) any stock dividends are distributed to the holders of Common Stock of the Company; or (iii)the Common Stock of the Company is converted into or exchanged for other shares as a result of any merger or consolidation (including a sale of assets) or other recapitalization. 5. ELIGIBLE PERSONS Only persons who are officers or key employees of the Company or a subsidiary shall be eligible to receive grants under the Plan. No grant shall be made to any member of the Committee or any other non-employee director. 6. PURCHASE PRICE OF SALARY STOCK OPTIONS The purchase price for each share of Common Stock issuable under an Option shall not be less than 100 percent of the Fair Market Value of the Shares of Common Stock of the Company subject to such option on the date of grant. "Fair Market Value" as used in the Plan shall equal the mean of the high and low price of the Common Stock on the New York Stock Exchange on the applicable date. 7. OPTION TERM The term of each Option grant as determined by the Committee shall not exceed ten (10) years and one (1) month from the date of that grant and shall expire as of the last day of the designated term, unless terminated earlier under the provisions of the Plan. 8. OPTION TYPE Option grants will be Non-Qualified Stock Options governed by Section 83 of the Internal Revenue Code of 1986, as amended (the "Code") or any successor provision. 9. NON-TRANSFERABILITY OF OPTIONS No Option granted under this Plan shall be transferable by the Optionee otherwise than by the Optionee's Last Will and Testament or by the laws of descent and distribution. An Optionee shall forfeit any Option assigned or transferred, voluntarily or involuntarily, other than as permitted under this Section. Each Option shall be exercised during the Optionee's lifetime only by the Optionee or his or her guardian or legal representative. 10. EXERCISE OF OPTIONS Except as provided in Sections 12, 13 and 14, each Option shall be vested and may be exercised in accordance with such terms and conditions as may be determined by the Committee for grants to officers or executives and by the Chief Executive Officer of the Company for grants to other management participants. Subject to the provision of this Section 10, each Option may be exercised in whole or, from time to time, in part with respect to the number of then exercisable shares in any sequence desired by the Optionee without regard to the date of grant of stock options under other plans of the Company. An Optionee exercising an 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. At the time of purchase, the Optionee shall tender the full purchase price of the shares purchased. Until such payment has been made and a certificate or certificates for the shares purchased has been issued in the Optionee's name, the Optionee shall possess no stockholder rights with respect to any such shares. Payment of such purchase price shall be made to the Company, 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 delivery of shares of Common Stock owned by the Optionee; or (iii) by a combination of (i) and (ii) above. For determining 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. 11. WITHHOLDING TAXES ON OPTION EXERCISE Each Optionee shall deliver to the Company cash in an amount equal to all federal, state and local withholding taxes required to be collected by the Company in respect of the exercise of an Option, and until such payment is made, the Company may, in its discretion, retain all or a portion of the shares to be issued. Notwithstanding the foregoing, to the extent permitted by law and pursuant to such rules as the Committee may adopt, an Optionee may authorize the Company to satisfy any such withholding requirement by directing the Company to withhold from any shares to be issued such number of shares as shall be sufficient to satisfy the withholding obligation. 12. EXERCISE OF OPTIONS IN EVENT OF CERTAIN CHANGES OF CONTROL Each outstanding Option shall become immediately and fully exercisable for a period of six (6) months following the date of the following occurrences, each constituting a "Change of Control": (i) if any person (including a group as defined in Section 13(d)(3) of the 1934 Act) becomes, directly or indirectly, the beneficial owner of twenty (20) percent or more of the shares of the Company entitled to vote for the election of directors; (ii) as a result of or in connection with any cash tender offer, exchange offer, merger or other business combination, sale of assets or contested election, or combination of the foregoing, the persons who were Directors of the Company just prior to such event cease to constitute a majority of the Company's Board of Directors; or (iii)the stockholders of the Company approve an agreement providing for a transaction in which the Company will cease to be an independent publicly-owned corporation or a sale or other disposition of all or substantially all of the assets of the Company occurs. After such six (6) month period the normal option exercise provisions of the Plan shall govern. In the event an Optionee is terminated as an employee of the Company or a Subsidiary within two (2) years of any of the events specified in (i), (ii) or (iii), all outstanding Stock Options at that date of termination shall become immediately exercisable for a period of three (3) months. 13. TERMINATION OF EMPLOYMENT OR LEAVE OF ABSENCE OF AN OPTIONEE (a) Normal Termination If the Optionee's employment by the Company or a subsidiary terminates for any reason other than as specified in subsections (b), (c), (d) or (e), the Options shall terminate three (3) months after such termination. If the employment by the Company or a subsidiary of an Optionee, other than an Optionee subject to Section 16 of the 1934 Act, is terminated for the convenience of the Company, as determined by the Committee, and, at the time of termination the sum of the Optionee's age and service with the Company equals or exceeds 70, the Committee, in its sole discretion, may permit any Option previously granted to the Optionee under the Plan to be exercised to the full extent that such Option could have been exercised by such Optionee immediately prior to the Optionee's termination and may permit such Option to remain exercisable until the expiration of the Option in accordance with its original term. (b) Death If the termination of employment is due to the Optionee's death, the Options may be exercised as provided in Section 14. (c) Retirement If the termination of employment is due to the Optionee's retirement, the Optionee thereafter may exercise an Option within the period remaining under the original term of the Option. (d) 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, may determine that all outstanding Options granted more than one (1) year prior to the date of such termination shall immediately become exercisable for a period of three (3) years after the date of such termination, subject to the provisions of Section 7. (e) Leave of Absence Unless the Committee shall otherwise determine, if an Optionee is placed on an unpaid leave of absence, such Optionee's Options shall terminate at the expiration of the unpaid leave of absence. If an Optionee is placed on an unpaid leave of absence, retires during such leave, and the Committee had decided not to terminate the Optionee's right to exercise an Option at the date of the inception of said leave of absence, then such Optionee may exercise an Option in accordance with subsection (c). 14. DEATH OF OPTIONEE If an Optionee should die while employed by the Company or a subsidiary or after retirement, any Option previously granted to the Optionee under this Plan may be exercised by the person designated in such Optionee's Last Will and Testament or, in the absence of such designation, by the Optionee's estate, to the full extent that such Option could have been exercised by such Optionee immediately prior to the Optionee's death, subject to the original term of the Option. 15. AMENDMENTS TO THE PLAN The Plan may be terminated, modified, or amended by the Board of Directors of the Company. Subject to the approval of the Board of Directors, the Committee may at any time terminate, modify or suspend the operation of the Plan, provided that no such amendment, alteration or discontinuation shall be made without the approval of the stockholders of the Company: (i) if such approval is necessary to comply with any legal, tax or regulatory requirement, including any approval requirement which is a prerequisite for exemptive relief from Section 16(b) of the 1934 Act; or (ii) to materially increase the number of shares which may be issued under the Plan or materially modify the requirements as to eligibility for participating in the Plan. The Board of Directors shall have authority to cause the Company to take any action related to the Plan which may be required to comply with the provisions of the Securities Act of 1933, as amended, the 1934 Act, and the rules and regulations prescribed by the Securities and Exchange Commission. Any such action shall be at the expense of the Company. No termination, modification, suspension or amendment of the Plan shall alter or impair the rights of any Optionee pursuant to a prior grant, without the consent of the Optionee. 16. 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 laws of any foreign jurisdiction, to key employees of the Company who are subject to such laws and who are eligible to receive Option grants under the Plan. 17. DURATION OF THE PLAN Grants may be made under the Plan until September 30, 1995. 18. NOTICE All notices and communications to the Company 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 If by Telex: 170360 Gen Mills If by Facsimile: (612) 540-4925 19. SECTION 16 OFFICERS With respect to persons subject to Section 16 of the 1934 Act, transactions under the Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the 1934 Act. To the extent any provision of the Plan or action by the Committee fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee. Effective as of September 17, 1990 As amended effective June 1, 1992 As amended effective June 27, 1994 EX-12 11 STATEMENT OF RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12 GENERAL MILLS, INC. RATIO OF EARNINGS TO FIXED CHARGES
Fiscal Year Ended -------------------------------------------------- May 30, May 31, May 25, May 26, May 28, 1999 1998 1997 1996 1995 ---- ---- ---- ---- ---- Ratio of Earnings to Fixed Charges.....6.67 5.63 6.54 6.94 4.10
For purposes of computing the ratio of earnings to fixed charges, earnings represent pretax income from continuing operations, plus pretax earnings or losses of joint ventures, plus fixed charges (net of capitalized interest). Fixed charges represent interest (whether expensed or capitalized) and one-third (the proportion deemed representative of the interest factor) of rents of continuing operations. EX-13 12 1999 ANNUAL REPORT TO STOCKHOLDERS (ONLY PORTIONS) EXHIBIT 13 MANAGEMENT'S DISCUSSION AND ANALYSIS General Mills' overarching business goal is to generate superior financial returns for our shareholders over the long term. We believe the key to creating shareholder value is to deliver a combination of good earnings growth, high returns on invested capital, and strong cash flows. Our specific financial objectives are to: o Achieve consistent, low double-digit growth in earnings per share. o Generate a minimum 25 percent return on invested capital. o Return cash generated in excess of capital-investment needs to shareholders through dividends and share repurchases. o Maintain financial strength that warrants an "A" bond rating. This section of the annual report discusses our performance against these goals, including recent earnings growth and returns, cash flows, financial position and risk management. RESULTS OF OPERATIONS - 1999 VS. 1998 General Mills achieved record financial performance in fiscal 1999. Despite difficult comparisons with a 53-week fiscal year in 1998, reported sales grew 4 percent to reach $6.25 billion. Earnings after tax grew 9 percent before unusual items to $566.8 million. Earnings per share grew 12 percent before unusual items to $3.70 basic and $3.60 diluted. The 1999 sales increase reflected broad-based growth in domestic unit volumes, which rose 3 percent before acquisitions. Lloyd's Barbeque Company, a refrigerated entree business acquired Jan. 15, 1999, and the Farmhouse Foods pasta and rice side-dish business, acquired Feb. 10, 1999, each contributed incremental volume. U.S. FOODS UNIT VOLUME ----------- 1995 1996 1997 1998 1999 -4% +7% +4% +8% +3% Big G cereal sales grew to $2.47 billion and annual unit volume increased 1 percent to set a new record. These results reflected strong performance from Big G's established brands, particularly those supported by specific consumer health messages, including Cheerios, Total and several brands recently fortified with calcium. Cereal industry pound volume in ACNielsen-measured outlets declined 1 percent for the year, but grew slightly in the second half. Big G outpaced the market, increasing its pound share to a record 25.6 percent, and growing its share of category dollar sales to a record 31.2 percent. In the fourth quarter, new Honey Nut Chex cereal expanded from 20 percent of the U.S. to national distribution, and Big G launched Sunrise organic cereal and NesQuik cereal nationwide. Combined unit volume for domestic non-cereal operations rose 5 percent in 1999. Yogurt volume grew at a double-digit pace for the third consecutive year, led by good gains from each of Yoplait's established product lines and strong initial performance from new Yoplait Go-Gurt. This portable yogurt in a tube entered distribution in western states during the summer of 1998. In June 1999, Go-Gurt availability was expanded to the Northeast and Mid-Atlantic regions, and we expect to complete national distribution later in this calendar year. Snacks volume growth included gains of 15 percent for Chex Mix, 8 percent for Pop Secret microwave popcorn, and 8 percent for fruit snacks. Combined unit volume for Betty Crocker baking, side dish and dinner mix products grew 1 percent, led by the growing line of pouch mixes and a new five-item line of Chicken Helper dinner mixes introduced in January 1999. Foodservice volume declined 2 percent in total, reflecting lower baking mix volume, but cereal, snacks and cup yogurt all posted volume gains. International operations posted good unit volume growth in 1999, but after-tax earnings declined to $2.7 million from $15.1 million a year earlier. This decline was due to three factors: negative foreign exchange effects on Canadian results; difficult economic conditions in Russia, Brazil and the ASEAN countries; and costs associated with actions by Snack Ventures Europe (SVE) to divest the BN cookie business and acquire certain United Biscuit snack operations. In Canada, cereal volume grew 7 percent and pound market share reached a record 17.2 percent, as General Mills reclaimed the No. 2 market position. Cereal Partners Worldwide (CPW), the company's joint venture with Nestle, recorded 6 percent volume growth for the 12 months included in fiscal 1999 results. Annual sales for CPW reached $849 million and the venture increased its combined market share to 19 percent. Total volume for Snack Ventures Europe was down 1 percent, reflecting the BN divestiture, but volume for continuing businesses was up 6 percent. Productivity gains, operating leverage created by unit volume growth, and favorable raw material costs combined to reduce cost of goods sold to 41.5 percent of sales in 1999, down from 42.1 percent in the prior year. Selling, general and administrative expense was unchanged as a percent of sales, at 42.2 percent. As a result, earnings before interest and taxes (EBIT) totaled 16.3 percent of sales in 1999, a margin improvement of 0.5 percentage points. EBIT MARGIN (percent) 1997 1998 1999 15.3 15.8 16.3 We generated this good operating earnings growth while improving our return on capital (ROC). Our ROC before unusual items increased from 23.9 percent last year to 25.0 percent in 1999, in line with our targeted objective. Our ROC ranks us well within the top decile of major U.S. companies on this measure. Net earnings for 1999 included a restructuring charge of 21 cents per diluted share, recorded in the second quarter. This charge was primarily related to streamlining supply-chain activities. These actions are expected to contribute cost savings beginning in fiscal 2000 of approximately 11 cents per share. Net after- tax earnings in fiscal 1998 included a second-quarter charge of 62 cents per diluted share primarily related to restructuring the company's North American cereal operations. Including these unusual items, diluted annual earnings per share were $3.40 in 1999 and $2.60 in 1998. Net interest expense totaled $119.4 million in 1999, compared to $117.2 million in the previous year. Given the acquisitions made during the second half of 1999, our continuing share repurchases and other investments, we expect somewhat higher net interest expense in fiscal 2000. The effective tax rate on earnings as reported was 35.9 percent in 1999 compared to 36.3 percent in 1998. Excluding the unusual items described above, our effective tax rate was 36.0 percent in 1999 and 37.0 percent in the previous year. We currently expect an effective tax rate of approximately 36 percent in fiscal 2000. 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. For a discussion of new accounting rules that take effect in future fiscal years, see Note One to the consolidated financial statements. 1998 COMPARED TO 1997 For the 53-week period ended May 31, 1998, reported sales grew 8 percent to $6.03 billion. Earnings after tax grew 10 percent to reach $522 million before unusual items. Diluted earnings per share also grew 10 percent, to $3.22 compared with $2.94 in the previous year. Domestic unit volume grew 8 percent in 1998, reflecting strong performance by established businesses, and contributions from the branded cereal and snacks businesses acquired from Ralcorp on Jan. 31, 1997. Big G cereals led U.S. performance, with volume up 1 percent excluding incremental volume from acquired brands, and up 8 percent in total. Convenience Foods volume grew 16 percent, with double-digit gains recorded by both the snacks business and by our Yoplait-Colombo yogurt operations. Excluding the incremental volume provided by Chex Mix, Convenience Foods volume was up 8 percent for the year. Betty Crocker baking, dinner and side-dish mix volume rose 2 percent, and Foodservice volume grew 6 percent. International volume, including our proportionate share of joint venture results, grew 15 percent in 1998. International earnings increased 35 percent to $15 million after tax, reflecting strong profit progress by CPW. Fiscal 1997 earnings before unusual items totaled $474.6 million and diluted earnings per share were $2.94. These results were essentially flat compared to 1996, due to three primary factors: price reductions taken by Big G cereals; lower-than-expected unit volume growth in the second half of the year; and a 5-cent per share reduction in earnings due to the acquisition of the Ralcorp cereal and snacks businesses. CASH FLOWS Sources and uses of cash in the past three years are shown in the table below. Over the past three years, General Mills' operations have generated more than $2 billion in cash. In 1999, cash flow from operations totaled $690.1 million. That was lower than last year's total, principally due to increased use of working capital associated with our surge of new product activity at year end. We currently expect cash flow from operations in 2000 to exceed the $775 million generated two years ago, in 1998, based on anticipated earnings growth and an expected positive impact from working capital. CASH SOURCES (USES) In Millions 1999 1998 1997 - ---------------------------------------------------------------------- From continuing operations $ 690.1 $ 775.3 $ 594.1 From discontinued operations (3.9) (5.8) (6.8) Fixed assets, net (269.1) (181.5) (159.9) Investments in businesses, intangibles and affiliates, net (151.5) (9.5) (42.0) Change in marketable securities 7.7 29.7 39.7 Other investments, net 38.0 (42.0) (23.4) Increase in outstanding debt - net 273.8 198.9 221.9 Common stock issued 92.8 92.5 60.5 Treasury stock purchases (340.7) (524.9) (361.8) Dividends paid (331.4) (336.3) (320.7) Other (8.3) (2.8) (9.4) - ----------------------------------------------------------------------- Decrease in cash and cash equivalents $ (2.5) $ (6.4) $ (7.8) - ----------------------------------------------------------------------- Capital investment spending for fixed assets and joint venture development totaled $299 million in 1999, compared with $211 million in the previous year. The higher level reflected investments to add capacity for several fast-growing businesses, including Chex cereal and snack mixes, fruit snacks and yogurt. Current plans call for fiscal 2000 capital investment at levels comparable to 1999. Shareholder dividends grew 2 percent in 1999 to $2.16 per share, a payout of 58 percent of earnings before unusual items. The company expects continued dividend growth over time, but at a rate slower than earnings growth until the payout ratio aligns with the food industry average. Today, that average is in the low to mid 40-percent range. Cash returned to shareholders through share repurchases totaled $340.7 million in 1999, representing 4.7 million shares. The goal of our ongoing share repurchase program is to achieve an average 1 to 2 percent annual reduction in shares outstanding, net of stock option exercises. Uses of Cash, Fiscal 1999 (dollars in millions) Funding Growth Capital Investments $299 Cash Returned to Shareholders Share Repurchases $341 Dividends 331 ---- $672 FINANCIAL CONDITION We intend to manage our businesses and financial ratios so as to maintain an "A" bond rating, which allows access to financing at reasonable costs. We believe that the most important measures of our financial strength are the ratios of fixed charge coverage and cash flow to debt. In fiscal 1999, fixed charge coverage excluding unusual items increased to 7.0 times. Cash flow to debt declined slightly to 33.6 percent, reflecting higher debt levels associated with our two acquisitions, higher working capital use, and share repurchases. General Mills' publicly issued long-term debt currently carries ratings of "A2" (Moody's Investors Services, Inc.) and "A+" (Standard & Poor's Corporation). Our commercial paper has ratings of "P-1" (Moody's) and "A-1" (Standard & Poor's) in the United States and "R-1 (middle)" in Canada (Dominion Bond Rating Service). FINANCIAL STRENGTH Fixed Charge Coverage Cash Flow to Debt --------------------- ----------------- 1998 1999 1998 1999 ---- ---- ---- ---- 6.8x 7.0x 34.6% 33.6% Our capital structure is shown in the table below. The book equity balance reflects the impact of the 1995 spin-off of our restaurant operations, which reduced stockholders' equity by $1.2 billion. Share repurchases made as part of our ongoing program were the primary reason 1999 stockholders' equity declined slightly from 1998 levels. Market value of stockholders' equity as of May 30, 1999, was $12.2 billion, as shown in the chart to the right. CAPITAL STRUCTURE In Millions May 30, 1999 May 31, 1998 - ---------------------------------------------------------------- Notes payable $ 524.4 $ 264.1 Current portion of long-term debt 90.5 153.2 Long-term debt 1,702.4 1,640.4 Deferred income taxes - tax leases 111.3 129.1 - ---------------------------------------------------------------- Total debt 2,428.6 2,186.8 Debt adjustments: Leases - debt equivalent 235.0 218.1 Marketable investments, at cost (96.5) (103.2) - ---------------------------------------------------------------- Adjusted debt 2,567.1 2,301.7 Stockholders' equity 164.2 190.2 - ---------------------------------------------------------------- Total capital $2,731.3 $2,491.9 - ---------------------------------------------------------------- The debt equivalent of our leases and deferred income taxes related to tax leases are both fixed-rate obligations. The accompanying table, when reviewed in conjunction with the capital structure table above, shows the composition of our debt structure including the impact of the use of derivative instruments. DEBT STRUCTURE Dollars in Millions May 30, 1999 May 31, 1998 - ----------------------------------------------------------- Floating-rate debt $ 984.5 39% $ 819.3 36% Fixed-rate debt 1,236.3 48% 1,135.2 49% Leases - debt equivalent 235.0 9% 218.1 9% Deferred income taxes - tax leases 111.3 4% 129.1 6% - ----------------------------------------------------------- Adjusted debt $2,567.1 100% $2,301.7 100% - ----------------------------------------------------------- Total Capitalization (dollars in billions) May 25, 1997 May 31, 1998 May 30, 1999 ------------ ------------ ------------ Equity (Market Value) $10.2 $10.6 $12.2 Adjusted Debt 2.1 2.3 2.6 ------ ------ ------ $12.3 $12.9 $14.8 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 during fiscal 1999. Bank credit lines are maintained to ensure availability of short-term funds on an as-needed basis. As of May 30, 1999, we had fee-paid credit lines of $755 million. Our domestic shelf registration statement permits us to issue up to $782 million net proceeds in unsecured debt securities. The shelf registration authorizes a medium-term note program that provides additional flexibility in quickly accessing the debt markets. MARKET RISK MANAGEMENT Our company is exposed to market risks 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 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 various European currencies and the Canadian dollar against the U.S. dollar. COMMODITIES - Certain raw materials used in our products are exposed to commodity price changes. We manage this risk through an integrated set of financial instruments, including purchase orders, non-cancelable contracts, futures contracts, futures options and swaps. Our primary commodity price exposures are to cereal grains, sugar, 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 or earnings 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 variance/co-variance value at risk (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. For interest rate and foreign exchange rate market factors, the data were drawn from the JP Morgan RiskMetrics(TM) data set. The calculations are not intended to represent actual losses in fair value or pre-tax earnings that we expect to incur. The model does not consider favorable changes in market rates. 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 our 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 or pre-tax earnings for our interest rate, foreign currency, and commodity market-risk sensitive instruments outstanding on May 30, 1999. The figures were calculated using the VAR methodology described above. Fair Value Impact - ------------------------------------------------------------- At Average At In Millions 5/30/99 during 1999 5/31/98 - ------------------------------------------------------------- Interest rate instruments $6.8 $6.9 $5.3 Foreign exchange rate instruments 0.8 1.1 0.6 Commodity instruments 1.1 1.1 1.5 - ------------------------------------------------------------- - ------------------------------------------------------------- Pre-tax Earnings Impact - ------------------------------------------------------------- At Average At In Millions 5/30/99 during 1999 5/31/98 - ------------------------------------------------------------- Interest rate instruments $0.3 $0.3 $0.2 Foreign exchange rate instruments 0.4 0.7 0.2 Commodity instruments 1.1 1.1 1.5 - ------------------------------------------------------------- YEAR 2000 We are devoting significant resources throughout the company to minimize the risk of potential disruption from year 2000 issues related to computers or other equipment with date-sensitive software and embedded chip systems. If we, or our significant customers, suppliers or other third parties fail to correct year 2000 issues, our ability to operate our businesses could be adversely affected. We have completed the assessment, inventory and classification of year 2000 issues on all of our information systems infrastructure and non-technical assets (e.g., plant production equipment). Information systems that were year 2000 deficient have been modified, upgraded or replaced and tested for compliance. Project plans anticipate that all non-technical assets (including production equipment) will be year 2000 compliant by September 1999. Based on assessments and testing to date, we do not expect the financial impact of addressing internal system year 2000 issues will be material to our financial position, results of operations or cash flows. Total costs are estimated to be approximately $26 million, of which about 90 percent has been incurred to date. We surveyed significant customers, suppliers and third parties critical to our business operations to determine their year 2000 compliance. Cross-functional planning teams were formed to assess risk and they have developed contingency plans that can be executed readily, in the event that any third party failure disrupts our operations. These contingency plans include identifying and securing alternate suppliers, adjusting manufacturing schedules, stockpiling of materials and equipment, contracting additional staff, procuring backup generators, and other measures considered appropriate by management. Additionally, we have established backup manual procedures similar to procedures already in place for our disaster recovery process. Our contingency plans will not guarantee that circumstances beyond our control will not adversely impact our operations. However, these plans will continue to be evaluated and modified through the year 2000 transition period as additional information becomes available. FORWARD-LOOKING STATEMENTS Our year 2000 compliance program is an ongoing process, and the risk assessments and timetable previously described are forward-looking statements that are subject to change. In addition, 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 views and assumptions. Actual results could differ materially from these current expectations, and from historical performance. In the case of our year 2000 planning, several factors could cause changes in our risk assessments or project timetable. Those factors include the timely ability to remedy all date-sensitive computer-related assets; the actions of third parties, such as public utilities; and the occurrence of broad-based systemic failures. With respect to our expectations for future company performance, actual results could differ as a consequence of numerous factors, including: competitive dynamics in the U.S. ready-to-eat cereal market; our unit volume growth rate and our sales mix; fluctuations in the cost and availability of supply-chain resources; currency rate fluctuations; and the effect of stock market conditions on our share repurchase activity. Our 1999 Form 10-K contains further discussion of these matters. 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 30, 1999 and May 31, 1998, 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 30, 1999. 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 generally accepted auditing standards. 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 30, 1999 and May 31, 1998, and the results of their operations and their cash flows for each of the fiscal years in the three-year period ended May 30, 1999 in conformity with generally accepted accounting principles. As discussed in Note Three to the consolidated financial statements, the Company adopted the provisions of the Financial Accounting Standards Board's Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," in fiscal 1997. /s/ KPMG LLP Minneapolis, Minnesota June 28, 1999 CONSOLIDATED STATEMENTS OF EARNINGS In Millions, Except per Share Data, Fiscal Year Ended May 30, 1999 May 31, 1998 May 25, 1997 - -------------------------------------------------------------------------------- Sales $6,246.1 $6,033.0 $5,609.3 Costs and Expenses: Cost of sales 2,593.5 2,537.9 2,474.8 Selling, general and administrative 2,634.9 2,544.9 2,275.6 Interest, net 119.4 117.2 100.5 Unusual items 51.6 166.4 48.4 - -------------------------------------------------------------------------------- Total Costs and Expenses 5,399.4 5,366.4 4,899.3 - -------------------------------------------------------------------------------- Earnings before Taxes and Earnings (Losses) from Joint Ventures 846.7 666.6 710.0 Income Taxes 304.0 241.9 258.3 Earnings (Losses) from Joint Ventures (8.2) (2.9) (6.3) - -------------------------------------------------------------------------------- Net Earnings $ 534.5 $ 421.8 $ 445.4 - -------------------------------------------------------------------------------- Earnings per Share - Basic $ 3.49 $ 2.67 $ 2.82 - -------------------------------------------------------------------------------- Average Number of Common Shares 153.2 158.1 158.2 - -------------------------------------------------------------------------------- Earnings per Share - Diluted $ 3.40 $ 2.60 $ 2.76 - -------------------------------------------------------------------------------- Average Number of Common Shares - Assuming Dilution 157.3 162.3 161.6 - -------------------------------------------------------------------------------- See accompanying notes to consolidated financial statements. [LOGO] CONSOLIDATED BALANCE SHEETS In Millions May 30, 1999 May 31, 1998 - -------------------------------------------------------------------------------- ASSETS Current Assets: Cash and cash equivalents $ 3.9 $ 6.4 Receivables, less allowance for doubtful Accounts of $4.7 in 1999 and $4.2 in 1998 490.6 395.1 Inventories 426.7 389.7 Prepaid expenses and other current assets 83.7 107.2 Deferred income taxes 97.6 136.9 - -------------------------------------------------------------------------------- Total Current Assets 1,102.5 1,035.3 Land, Buildings and Equipment at cost, net 1,294.7 1,186.3 Other Assets 1,743.5 1,639.8 - -------------------------------------------------------------------------------- Total Assets $4,140.7 $3,861.4 - -------------------------------------------------------------------------------- LIABILITIES AND EQUITY Current Liabilities: Accounts payable $ 647.4 $ 593.1 Current portion of long-term debt 90.5 153.2 Notes payable 524.4 264.1 Accrued taxes 135.0 148.5 Accrued payroll 138.6 129.7 Other current liabilities 164.4 155.1 - -------------------------------------------------------------------------------- Total Current Liabilities 1,700.3 1,443.7 Long-term Debt 1,702.4 1,640.4 Deferred Income Taxes 288.9 284.8 Deferred Income Taxes - Tax Leases 111.3 129.1 Other Liabilities 173.6 173.2 - -------------------------------------------------------------------------------- Total Liabilities 3,976.5 3,671.2 - -------------------------------------------------------------------------------- Stockholders' Equity: Cumulative preference stock, none issued - - Common stock, 204.2 shares issued 657.9 619.6 Retained earnings 1,827.4 1,622.8 Less common stock in treasury, at cost, shares of 52.2 in 1999 and 49.4 in 1998 (2,195.3) (1,935.7) Unearned compensation (68.9) (75.4) Accumulated other comprehensive income (56.9) (41.1) Total Stockholders' Equity 164.2 190.2 - -------------------------------------------------------------------------------- Total Liabilities and Equity $4,140.7 $3,861.4 - -------------------------------------------------------------------------------- See accompanying notes to consolidated financial statements. [LOGO] CONSOLIDATED STATEMENTS OF CASH FLOWS
In Millions, Fiscal Year Ended May 30, 1999 May 31, 1998 May 25, 1997 - ----------------------------------------------------------------------------------------------- Cash Flows - Operating Activities: Net earnings $ 534.5 $ 421.8 $ 445.4 Adjustments to reconcile net earnings to cash flow: Depreciation and amortization 194.2 194.9 182.8 Deferred income taxes 42.0 (29.3) 20.9 Change in current assets and liabilities, net of effects from businesses acquired (93.3) 54.5 (86.4) Unusual items 51.6 166.4 48.4 Other, net (38.9) (33.0) (17.0) - ----------------------------------------------------------------------------------------------- Cash provided by continuing operations 690.1 775.3 594.1 Cash used by discontinued operations (3.9) (5.8) (6.8) - ----------------------------------------------------------------------------------------------- Net Cash Provided by Operating Activities 686.2 769.5 587.3 - ----------------------------------------------------------------------------------------------- Cash Flows - Investment Activities: Purchases of land, buildings and equipment (280.9) (183.6) (162.5) Investments in businesses, intangibles and affiliates, net of investment returns and dividends (151.5) (9.5) (42.0) Purchases of marketable securities (11.5) (10.6) (8.0) Proceeds from sale of marketable securities 19.2 40.3 47.7 Proceeds from disposal of land, buildings and equipment 11.8 2.1 2.6 Proceeds from disposition of businesses - - 6.5 Other, net 38.0 (42.0) (29.9) Net Cash Used by Investment Activities (374.9) (203.3) (185.6) - ----------------------------------------------------------------------------------------------- Cash Flows - Financing Activities: Change in notes payable 260.0 63.9 312.7 Issuance of long-term debt 208.6 286.6 76.2 Payment of long-term debt (194.8) (151.6) (167.0) Common stock issued 92.8 92.5 60.5 Purchases of common stock for treasury (340.7) (524.9) (361.8) Dividends paid (331.4) (336.3) (320.7) Other, net (8.3) (2.8) (9.4) - ----------------------------------------------------------------------------------------------- Net Cash Used by Financing Activities (313.8) (572.6) (409.5) - ----------------------------------------------------------------------------------------------- (Decrease) in Cash and Cash Equivalents (2.5) (6.4) (7.8) Cash and Cash Equivalents - Beginning of Year 6.4 12.8 20.6 - ----------------------------------------------------------------------------------------------- Cash and Cash Equivalents - End of Year $ 3.9 $ 6.4 $ 12.8 - ----------------------------------------------------------------------------------------------- Cash Flow from Changes in Current Assets and Liabilities: Receivables $ (82.7) $ 23.7 $ (80.0) Inventories (28.7) (26.4) 45.0 Prepaid expenses and other current assets 9.2 1.6 2.5 Accounts payable 44.7 4.0 (27.8) Other current liabilities (35.8) 51.6 (26.1) - ----------------------------------------------------------------------------------------------- Change in Current Assets and Liabilities $ (93.3) $ 54.5 $ (86.4) - ----------------------------------------------------------------------------------------------- See accompanying notes to consolidated financial statements.
[LOGO] CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
$.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 26, 1996 204.2 $384.3 (45.2) $(1,367.4) $1,408.6 $(85.2) $(32.6) $307.7 - ------------------------------------------------------------------------------------------------------------------------------------ Comprehensive income: Net earnings 445.4 445.4 Other comprehensive income, net of tax: Unrealized losses on available-for-sale securities, net of reclassification of $.4 (.1) (.1) Foreign currency translation, net of reclassification of $(6.1) (2.3) (2.3) Minimum pension liability adjustment (1.9) (1.9) - ------------------------------------------------------------------------------------------------------------------------------------ Other comprehensive income (4.3) (4.3) ------------- Total comprehensive income 441.1 - ------------------------------------------------------------------------------------------------------------------------------------ Cash dividends declared ($2.03 per share), net of income taxes of $2.1 (318.6) (318.6) Shares issued in acquisition - 181.4 5.4 173.0 354.4 Stock compensation plans (includes income tax benefits of $25.6) - 9.3 1.7 57.4 66.7 Shares purchased (6.2) (368.0) (368.0) Put and call option premium/ settlements, net - 3.0 - 3.1 6.1 Unearned compensation related to restricted stock awards (7.9) (7.9) Earned compensation and other 13.1 13.1 - ------------------------------------------------------------------------------------------------------------------------------------ Balance at May 25, 1997 204.2 $578.0 (44.3) $(1,501.9) $1,535.4 $(80.0) $(36.9) $494.6 - ------------------------------------------------------------------------------------------------------------------------------------ Comprehensive Income: Net earnings 421.8 421.8 Other comprehensive income, net of tax: Unrealized gains on available-for-sale securities, net of reclassification of $.1 8.2 8.2 Foreign currency translation (9.5) (9.5) Minimum pension liability adjustment (2.9) (2.9) - ------------------------------------------------------------------------------------------------------------------------------------ Other comprehensive income (4.2) (4.2) --------------- Total comprehensive income 417.6 - ------------------------------------------------------------------------------------------------------------------------------------ Cash dividends declared ($2.12 per share), net of income taxes of $1.9 (334.4) (334.4) Stock compensation plans (includes income tax benefits of $39.2) - 29.3 2.4 83.9 113.2 Shares purchased (7.5) (518.7) (518.7) Put and call option premium/ settlements, net - 12.3 - 1.0 13.3 Unearned compensation related to restricted stock awards (7.3) (7.3) Earned compensation and other 11.9 11.9 - ------------------------------------------------------------------------------------------------------------------------------------ Balance at May 31, 1998 204.2 $619.6 (49.4) $(1,935.7) $1,622.8 $(75.4) $(41.1) $190.2 - ------------------------------------------------------------------------------------------------------------------------------------ Comprehensive Income: Net earnings 534.5 534.5 Other comprehensive income, net of tax: Unrealized losses on available-for-sale securities, net of reclassification of $.5 (3.2) (3.2) Foreign currency translation (11.0) (11.0) Minimum pension liability adjustment (1.6) (1.6) - ------------------------------------------------------------------------------------------------------------------------------------ Other comprehensive income (15.8) (15.8) ---------------- Total comprehensive income 518.7 - ------------------------------------------------------------------------------------------------------------------------------------ Cash dividends declared ($2.16 per share), net of income taxes of $1.5 (329.9) (329.9) Stock compensation plans (includes income tax benefits of $33.6) - 29.8 1.9 77.3 107.1 Shares purchased (4.7) (340.7) (340.7) Put and call option premium/ settlements, net - 8.5 - 3.8 12.3 Unearned compensation related to restricted stock awards (9.6) (9.6) Earned compensation and other 16.1 16.1 - ------------------------------------------------------------------------------------------------------------------------------------ Balance at May 30, 1999 204.2 $657.9 (52.2) $(2,195.3) $1,827.4 $(68.9) $(56.9) $164.2 - ------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The preparation of the Consolidated Financial Statements in conformity with generally accepted accounting principles requires us to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Certain prior years' amounts have been reclassified to conform with the current year presentation. (A) PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the following domestic and foreign operations: parent company and 100% owned subsidiaries, and General Mills' investment in and share of net earnings or losses of 20-50% owned companies, which are recorded on an equity basis. Our fiscal year ends on the last Sunday in May. Years 1999 and 1997 each consisted of 52 weeks and 1998 consisted of 53 weeks. (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 over three to 15 years. The charges for 1999, 1998 and 1997 were $171.6 million, $171.5 million and $168.6 million, respectively. Accelerated depreciation methods are generally 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. Certain domestic inventories are valued using the LIFO method, while other inventories are generally valued using the FIFO method. (D) INTANGIBLE ASSETS - Goodwill represents the difference between the purchase price of acquired companies and the related fair value of net assets acquired and accounted for by the purchase method of accounting. Goodwill is amortized on a straight-line basis over 40 years or less. Intangible assets include an amount that offsets a minimum liability recorded for a pension plan with assets less than accumulated benefits. The costs of patents, copyrights and other 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 associated 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 foreign operations, local currencies are considered the functional currency. Assets and liabilities are translated using the 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 Seven for a description of our accounting policies related to financial instruments. (H) RESEARCH AND DEVELOPMENT - All expenditures for research and development are charged against earnings in the year incurred. The charges for 1999, 1998 and 1997 were $70.0 million, $66.3 million and $61.4 million, respectively. (I) ADVERTISING COSTS - Advertising expense (including production and communication costs) for 1999, 1998 and 1997 was $348.3 million, $366.1 million and $306.5 million, respectively. Prepaid advertising costs (including syndication properties) of $21.9 million and $25.5 million were reported as assets at May 30, 1999 and May 31, 1998, respectively. We expense the production costs of advertising the first time that the advertising takes place. (J) STOCK-BASED COMPENSATION - We use the "intrinsic value-based 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. (K) EARNINGS PER SHARE - Basic 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 stock options). (L) STATEMENTS OF CASH FLOWS - For purposes of the statement of cash flows, we consider all investments purchased with an original maturity of three months or less to be cash equivalents. (M) NEW ACCOUNTING RULES - During 1999, we adopted SFAS No. 130, "Reporting Comprehensive Income," SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," and SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits." These standards revised related disclosures, but their adoption had no impact on our financial position, results of operations or cash flows. We adopted the American Institute of Certified Public Accountants Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." SOP 98-1 did not have a material impact on our financial position, results of operations or cash flows. During 1999, the Financial Accounting Standards Board (FASB) issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 will be effective for us in our fiscal 2002 and we are assessing its impact on our financial statements. 2. ACQUISITIONS On January 15, 1999, we acquired Lloyd's Barbeque Company, St. Paul, Minnesota, a producer of refrigerated entrees. On February 10, 1999, we acquired Farmhouse Foods Company, Union City, California, a West Coast marketer of rice and pasta side-dish mixes. The aggregate purchase price of these acquisitions, both of which were accounted for using the purchase method, totaled approximately $130 million. Goodwill of $113 million associated with these acquisitions is being amortized on a straight-line basis over 40 years. The results of the acquired businesses have been included in the consolidated financial statements since their respective acquisition dates. Our fiscal 1999 financial results would not have been materially different if we had made these acquisitions at the beginning of the fiscal year. On January 31, 1997, we acquired the branded ready-to-eat cereal and snack mix businesses of Ralcorp Holdings, Inc., including the CHEX and COOKIE CRISP brands. This acquisition included a Cincinnati, Ohio, manufacturing facility, and trademark and technology rights for the branded products in the Americas. The purchase price of $570 million involved the issuance of about $355 million in General Mills common stock (approximately 5.4 million shares) to Ralcorp shareholders and the assumption of about $215 million of Ralcorp public debt and accrued interest. This acquisition was accounted for using the purchase method of accounting. Goodwill of approximately $550 million is being amortized on a straight-line basis over 40 years. The results of the acquired businesses have been included in the consolidated financial statements since the acquisition date. 3. UNUSUAL ITEMS In 1999, we recorded restructuring charges of $51.6 million pretax, $32.3 million after tax ($.21 per diluted share), primarily related to streamlining manufacturing and distribution activities. These supply chain actions included consolidating manufacturing of certain products into fewer locations, and consolidating warehouse, distribution and sales activities across our packaged food, foodservice and milling operations. In addition, the 1999 charge included our share of restructuring costs for the Snack Ventures Europe (SVE) joint venture with PepsiCo to improve its manufacturing cost structure. Slightly more than half of the total charge reflects write-down of assets; the remaining cash portion is primarily related to severance and asset redeployment expenses. These restructuring activities will be substantially completed at the end of fiscal 2000. At May 30, 1999, there was a remaining reserve of $30.5 million. In 1998, we recorded a net charge of $166.4 million pre-tax, $100.2 million after tax ($.62 per diluted share). The charge was primarily related to shutting down one cereal system at our Lodi, California, facility and closing our two smallest cereal plants based in Chicago, Illinois, and Etobicoke, Ontario. In addition, our SVE joint venture recorded restructuring charges primarily related to production consolidation. We also recorded charges associated with restructuring our sales regions and our trade and promotion organization. These charges were partially offset by an insurance settlement from one of our carriers related to costs incurred in fiscal 1995 and 1996 (charged against fiscal 1994) from the improper use of a pesticide by an independent contractor in treating some of the Company's oat supplies. The net charge included approximately $147 million in non-cash items primarily related to asset write-offs and approximately $19 million of net cash outflows, primarily related to disposal of assets, severance costs and the receipt of an insurance settlement. These restructuring activities were substantially completed in fiscal 1999 and there has been no adjustment to the original reserve. At May 30, 1999, there was a remaining reserve of $14.1 million. In 1997, we adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The initial, non-cash charge upon adoption of SFAS No. 121 was $48.4 million pre-tax, $29.2 million after tax ($.18 per diluted share). The charge represented a reduction in the carrying amounts of certain impaired assets to their estimated fair value, determined on the basis of estimated cash flows or net realizable value. The impairments related to assets not currently in use, assets significantly underutilized and assets with limited planned future use. [LOGO] 4. INVESTMENTS IN JOINT VENTURES We have a 50% equity interest in Cereal Partners Worldwide (CPW), our joint venture with Nestle that manufactures and markets ready-to-eat cereals outside North America. We have a 40.5% equity interest in Snack Ventures Europe, our joint venture with PepsiCo that manufactures and markets snack foods in continental Europe. In late fiscal 1999, decisions were made to end the International Dessert Partners (IDP) joint venture with Bestfoods for baking mixes and desserts in Latin America, and the snack joint venture in China with Want Want Holdings Ltd., called Tong Want, which had not yet begun operating. These decisions will not have a material impact on our financial position, results of operations or cash flows. 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 in this note reflects the joint ventures on a 100% basis.) We also receive royalty income from 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. Including all these factors, and excluding the impact of fiscal 1999 and 1998 SVE restructuring charges, which are included in unusual items, the effect on our net income related to the joint ventures was a charge of $8.2 million, $2.9 million and $6.3 million in 1999, 1998 and 1997, respectively. Our cumulative investment in these joint ventures (including our share of earnings and losses) was $189.4 million, $214.3 million and $234.6 million at the end of 1999, 1998 and 1997, respectively. We made aggregate investments in the joint ventures of $18.3 million, $6.8 million (net of a $20.9 million loan repayment) and $46.5 million in 1999, 1998 and 1997, respectively. We received aggregate dividends from the joint ventures of $1.6 million, $.9 million and $7.5 million in 1999, 1998 and 1997, respectively. Summary combined financial information for the joint ventures on a 100% basis follows. Since we record our share of CPW and IDP results on a two-month lag, their information is included as of and for the 12 months ended March 31. The SVE information is consistent with our May year-end. COMBINED FINANCIAL INFORMATION - JOINT VENTURES - 100% BASIS In Millions, Fiscal Year .......... 1999 1998 1997 - -------------------------------------------------------------------------------- Sales ............................. $ 1,833.5 $ 1,732.5 $ 1,627.6 Gross Profit ...................... 981.8 907.7 843.5 Earnings (losses) before Taxes .................... (13.2) 20.1 (7.3) Earnings (losses) after Taxes ..................... (35.0) (6.3) (24.7) ================================================================================ In Millions .................................. May 30, 1999 May 31, 1998 - -------------------------------------------------------------------------------- Current Assets ............................... $ 473.8 $ 432.4 Non-current Assets ........................... 738.1 675.6 Current Liabilities .......................... 703.6 609.0 Non-current Liabilities ...................... 36.2 47.6 ================================================================================ Our proportionate share of the sales of the joint ventures was $826.3 million, $780.7 million and $728.2 million for 1999, 1998 and 1997, respectively. 5. BALANCE SHEET INFORMATION The components of certain balance sheet accounts are as follows: In Millions .................................. May 30, 1999 May 31, 1998 - -------------------------------------------------------------------------------- Land, Buildings and Equipment: Land ...................................... $ 16.0 $ 17.8 Buildings ................................. 542.3 539.9 Equipment ................................. 1,912.5 1,790.4 Construction in progress .................. 248.1 140.9 - -------------------------------------------------------------------------------- Total land, buildings and equipment ...................... 2,718.9 2,489.0 Less accumulated depreciation ........................... (1,424.2) (1,302.7) - -------------------------------------------------------------------------------- Net land, buildings and equipment ...................... $ 1,294.7 $ 1,186.3 ================================================================================ Other Assets: Prepaid pension ........................... $ 528.1 $ 471.8 Marketable securities, at market ............................. 144.6 142.1 Investments in and advances to affiliates ................ 180.8 201.9 Net intangible assets, primarily goodwill .................... 722.0 630.4 Miscellaneous ............................. 168.0 193.6 - -------------------------------------------------------------------------------- Total other assets .................. $ 1,743.5 $ 1,639.8 ================================================================================ Accumulated amortization included in net intangible assets was $85.1 million and $62.7 million at May 30, 1999, and May 31, 1998, respectively. As of May 30, 1999, a comparison of cost and market values of our marketable securities (all of which are debt securities and considered available-for-sale) was as follows: Market Gross Gross In Millions Cost Value Gain Loss - ---------------------------------------------------------------- Total marketable securities $96.5 $144.6 $48.1 $-- ================================================================ Realized gains from sales of marketable securities were $.9 million, $.1 million and $.6 million in 1999, 1998 and 1997, respectively. In addition, realized losses from purchases of our related debt (see Note Nine) were $.8 million and $.9 million in 1999 and 1997, 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: In Millions ................................... Cost Market Value - ------------------------------------------------------------------------------- Under one year (current) ...................... $ -- $ -- From 1 to 3 years ............................. 1.9 1.9 From 4 to 7 years ............................. 34.4 47.0 Over 7 years .................................. 60.2 95.7 - ------------------------------------------------------------------------------- Totals .................................. $96.5 $144.6 =============================================================================== 6. INVENTORIES The components of inventories are as follows: In Millions .................................. May 30, 1999 May 31, 1998 - -------------------------------------------------------------------------------- Raw materials, work in process and supplies ................... $ 100.8 $ 83.3 Finished goods ............................... 286.2 262.5 Grain 73.7 ................................... 83.0 Reserve for LIFO valuation method ....................... (34.0) (39.1) - -------------------------------------------------------------------------------- Total inventories ...................... $ 426.7 $ 389.7 ================================================================================ At May 30, 1999 and May 31, 1998, respectively, inventories of $254.5 million and $221.4 million were valued at LIFO. The impact of LIFO accounting increased 1999, 1998 and 1997 earnings by $.02, $.03 and $.03 per diluted share, respectively. 7. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT Most of our financial instruments are recorded on the balance sheet. A few (known as "derivatives") are off-balance-sheet items. Derivatives are financial instruments whose value is derived from one or more underlying financial instruments. Examples of such underlying instruments are currencies, equities, commodities and interest rates. The carrying amount and fair value (based on current market quotes and interest rates) of our financial instruments at the balance-sheet dates are as follows: May 30, 1999 May 31, 1998 - -------------------------------------------------------------------------------- Carrying Fair Carrying Fair In Millions Amount Value Amount Value - -------------------------------------------------------------------------------- Assets: Cash and cash equivalents ........ $ 3.9 $ 3.9 $ 6.4 $ 6.4 Receivables ................ 490.6 490.6 395.1 395.1 Marketable securities ...... 144.6 144.6 156.8 156.8 Liabilities: Accounts payable ........... 647.4 647.4 593.1 593.1 Debt ....................... 2,317.3 2,406.6 2,057.7 2,180.1 Derivatives relating to: Marketable securities ...... -- -- (.1) (.1) Debt ....................... -- 26.6 -- 19.2 Commodities ................ -- (3.2) -- (.4) Foreign currencies ......... -- (.4) -- 1.0 ================================================================================ 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. The effectiveness of the derivative as a hedge is based on changes in its 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 exposure of the Company through its use of derivatives. We enter into interest rate swap, foreign exchange, and commodity swap agreements with a diversified group of highly rated financial institutions. Commodity futures transactions are entered into through various regulated exchanges. These transactions expose the Company to credit risk to the extent that the instruments have a positive fair value, but we do not 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. [LOGO] (1) INTEREST RATE RISK MANAGEMENT - We use interest rate swaps to hedge and/or lower financing costs, to adjust our floating- and fixed-rate debt positions, and to lock in a positive interest rate spread between certain assets and liabilities. An interest rate swap used in conjunction with a debt financing may allow the Company to create fixed- or floating-rate financing at a lower cost than with stand-alone financing. Generally, under interest rate swaps, the Company agrees with a counterparty to exchange the difference between fixed-rate and floating-rate interest amounts calculated by reference to an agreed notional principal amount. 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 2000 to 2023. May 30, 1999 May 31, 1998 - -------------------------------------------------------------------------------- Dollars in Millions Asset Liability Asset Liability - -------------------------------------------------------------------------------- Pay floating swaps - notional amount ................ - $ 70.0 -- $118.3 Average receive rate ......... - 6.1% -- 5.9% Average pay rate ............. - 4.8% -- 5.4% Pay fixed swaps - notional amount ................ - $216.5 $14.3 $116.5 Average receive rate ......... - 4.9% 5.5% 5.6% Average pay rate ............. - 5.2% 7.1% 5.8% ================================================================================ 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. The Company uses interest rate options and cap agreements primarily to reduce the impact of interest rate changes on its floating-rate debt, as well as to hedge the value of call options contained in long-term debt issued by the Company in earlier periods. In return for an upfront payment, an interest rate swap option grants the purchaser the right to receive (pay) the fixed rate interest amount in an interest rate swap. In return for an upfront payment, a cap agreement entitles the purchaser to receive the amount, if any, by which an agreed upon floating rate index exceeds the cap interest rate. At May 30, 1999, we had no interest rate options outstanding. (2) FOREIGN-CURRENCY EXPOSURE - We are exposed to potential losses from foreign currency fluctuations affecting net investments and earnings denominated in foreign currencies. We selectively hedge the potential effect of these foreign currency fluctuations related to operating activities and net investments in foreign operations by entering into foreign exchange contracts with highly rated financial institutions. Realized and unrealized gains and losses on hedges of firm commitments are included in the cost basis of the asset being hedged and are recognized as the asset is expensed through cost of goods sold or depreciation. Realized and unrealized gains and losses on contracts that hedge other operating activities are recognized currently in net earnings. Realized and unrealized gains and losses on contracts that hedge net investments are recognized in Accumulated Other Comprehensive Income in Stockholders' Equity. The components of our net balance sheet exposure by geographic region are as follows: In Millions May 30, 1999 May 31, 1998 - -------------------------------------------------------- Europe $130.9 $140.1 North/South America 28.5 28.5 Asia 1.0 1.5 - -------------------------------------------------------- Total exposure $160.4 $170.1 ======================================================== At May 30, 1999, we had forward and option contracts maturing in 2000 to sell $83.4 million of foreign currencies. The fair value of these contracts is based on third-party quotes and was immaterial at May 30, 1999. (3) COMMODITIES - The Company uses an integrated set of financial instruments in its commodity purchasing cycle, including purchase orders, noncancelable contracts, futures contracts, futures options and swaps. Except as described below, these instruments are all used to manage purchase prices and inventory values as practical for the Company's production needs. All futures contracts and futures options are exchange-based instruments with ready liquidity and determinable market values. Unrealized gains and losses are recorded monthly and deferred until the production flows through cost of goods sold. The net gains and losses deferred and expensed are immaterial. At May 30, 1999 and May 31, 1998, the aggregate fair value of our ingredient and energy derivatives position was $153.0 million and $156.7 million, respectively. [LOGO] The Company also has a grain-merchandising operation, which uses cash contracts, futures contracts and futures options. 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 operations was material to the Company's overall results. 8. NOTES PAYABLE The components of notes payable and their respective weighted average interest rates at the end of the periods are as follows: May 30, 1999 May 31, 1998 - ------------------------------------------------------------------------------- Weighted Weighted Average Average Notes Interest Notes Interest Dollars in Millions Payable Rate Payable Rate - ------------------------------------------------------------------------------- U.S. commercial paper ............. $ 652.9 4.9% $ 428.2 5.5% Canadian commercial paper ........................... 22.8 4.6 20.4 5.0 Euro commercial paper ............. 158.9 4.0 -- -- Financial institutions ............ 169.8 4.8 295.5 5.2 Amounts reclassified to long-term debt .............. (480.0) -- (480.0) -- - ------------------------------------------------------------------------------- Total notes payable ........ $ 524.4 $ 264.1 =============================================================================== 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 30, 1999, we had $755.0 million fee-paid lines and $63.5 million uncommitted, no-fee lines available in the U.S. and Canada. In addition, we had foreign no-fee lines of $66.8 million, all of which are unused. We have a revolving credit agreement expiring in January 2002 covering the fee-paid credit lines that provides 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. 9. LONG-TERM DEBT In Millions May 30, 1999 May 31, 1998 - ------------------------------------------------------------------------------ Medium-term notes, 4.7% to 9.1%, due 1999 to 2078 ................... $ 1,005.6 $ 997.6 Zero coupon notes, yield 11.1%, $273.8 due August 15, 2013 ............... 59.4 54.3 8.2% ESOP loan guaranty, due through June 30, 2007 ................ 49.0 57.7 7.0% notes due September 15, 2004 ....................... 160.9 163.0 Zero coupon notes, yield 11.7%, $63.4 due August 15, 2004 ................ 35.1 31.8 Notes payable, reclassified .................. 480.0 480.0 Other ........................................ 2.9 9.2 - ------------------------------------------------------------------------------ 1,792.9 1,793.6 Less amounts due within one year ................................. (90.5) (153.2) - ------------------------------------------------------------------------------ Total long-term debt ................... $ 1,702.4 $ 1,640.4 ============================================================================== See Note Seven for a description of related interest rate derivative instruments. As of May 30, 1999, our debt shelf registration permits the issuance of up to $782.0 million net proceeds in unsecured debt securities to reduce short-term debt and for other general corporate purposes, and includes a medium-term note program that allows us to issue debt quickly for selected amounts, rates and maturities. In 1999, we issued $199.7 million of debt under our medium-term note program with maturities varying from five to 80 years and interest rates from 4.7% to 6.3%. In 1998, $268.0 million of debt was issued under this program with maturities from one to 25 years and interest rates from 5.1% to 5.8%. 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) $90.5, $62.8, $47.9, $96.6 and $81.2 in 2000, 2001, 2002, 2003 and 2004, respectively. 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 securities. These investments are intended to provide the funds for the payment of principal and interest for the zero coupon notes due August 15, 2004, and 2013. [LOGO] 10. STOCKHOLDERS' EQUITY Cumulative preference stock of 5.0 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 one-hundredth 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, in which case 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 $240 per right. The rights are redeemable by the Board at any time prior to the acquisition of 20 percent or more of the outstanding common stock. The rights expire on February 1, 2006. At May 30, 1999, there were 152.0 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 shares held in treasury shall not exceed 60.0 million. Through private transactions in fiscal 1999 and 1998 that are a part of our stock repurchase program, we issued put options and purchased call options related to our common stock. In 1999 and 1998, we issued put options for 8.5 million and 6.8 million shares for $25.8 million and $12.7 million in premiums paid to the Company, respectively. As of May 30, 1999, put options for 4.8 million shares remain outstanding at exercise prices ranging from $74.00 to $80.25 per share with exercise dates from June 4, 1999 to May 15, 2000. In 1999, we purchased call options for 2.0 million shares for $11.5 million in premiums paid by the Company. As of May 30, 1999, call options for 2.0 million shares remain outstanding at exercise prices ranging from $62.38 to $85.50 per share with exercise dates from September 10, 1999 to August 15, 2000. The following table provides detail of activity within Accumulated Other Comprehensive Income in Stockholders' Equity: Minimum Accumulated Foreign Unrealized Pension Other Currency Gain on Liability Comprehensive In Millions Items Securities Adjustment Income - -------------------------------------------------------------------------------- Balance May 26, 1996 $(56.6) $24.8 $ (.8) $(32.6) - -------------------------------------------------------------------------------- Pre-tax change (2.3) (.2) (3.2) (5.7) Tax benefit .1 1.3 1.4 Balance, May 25, 1997 (58.9) 24.7 (2.7) (36.9) - -------------------------------------------------------------------------------- Pre-tax change (9.5) 13.4 (4.8) (.9) Tax (expense) benefit (5.2) 1.9 (3.3) Balance, May 31, 1998 (68.4) 32.9 (5.6) (41.1) - -------------------------------------------------------------------------------- Pre-tax change (12.2) (5.3) (2.6) (20.1) Tax benefit 1.2 2.1 1.0 4.3 - -------------------------------------------------------------------------------- May 30, 1999 $(79.4) $29.7 $(7.2) $(56.9) ================================================================================ 11. STOCK PLANS A total of 10,595,205 shares (including 6,700,000 shares for senior management options, 3,755,168 shares for salary replacement options, and 140,037 shares for non-employee directors) are available for grants under our 1995 salary replacement, 1996 director and 1998 senior management stock plans through September 30, 2000, September 30, 2001, and October 1, 2003, respectively. An additional 1,670,350 shares, (including up to 403,700 shares of restricted stock) are available for grants under the 1998 employee plan, which has no specified duration. Under the 1998 senior management and employee plans, shares available for grant are reduced by shares issued, net of shares surrendered to the Company in stock-for-stock exercises. Options may be granted only at a price 100 percent of the fair market value on the date of grant. Options now outstanding include some granted under the 1988, 1990 and 1993 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. [LOGO] 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 and, up to 25 percent of the value of cash incentive awards, through the Executive Incentive Plan. Most 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 1996 plan allows each non-employee director to annually elect to receive either 500 shares of stock restricted for one year or 500 restricted stock units convertible to common stock at a date of the director's choosing following his or her one-year term. The 1990 plan also allowed grants of restricted stock to directors. In 1999, 1998 and 1997, grants of 150,972, 128,466 and 176,955 shares of restricted stock or units were made with weighted average values at grant of $67.06, $65.59 and $59.29 per share, respectively. On May 30, 1999, a total of 484,939 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 30, 1999, there were 630,132 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: Weighted Weighted Average Average Exercise Exercise Options Price Options Price Exercisable per Share Outstanding per Share - ------------------------------------------------------------------------------ Balance at May 26, 1996 ........ 11,315,131 $37.70 23,593,232 $ 44.46 Granted ............. 3,973,277 59.33 Exercised ........... (2,335,956) 31.74 Expired ............. (429,898) 51.84 - ------------------------------------------------------------------------------ Balance at May 25, 1997 ........ 11,949,600 42.53 24,800,655 47.91 Granted ............. 3,185,783 73.10 Exercised ........... (2,730,311) 31.92 Expired ............. (236,524) 52.51 - ------------------------------------------------------------------------------ Balance at May 31, 1998 ........ 12,044,170 47.63 25,019,603 52.82 Granted ............. 4,076,004 69.28 Exercised ........... (2,186,620) 39.63 Expired ............. (371,065) 58.91 - ------------------------------------------------------------------------------ Balance at May 30, 1999 ........... 12,116,034 $50.10 26,537,922 $ 56.35 ============================================================================== The following table provides information regarding options exercisable and outstanding as of May 30, 1999: Weighted Weighted Weighted Range of Average Average Average Exercise Exercise Exercise Remaining Price Options Price per Options Price per Contractual per Share Exercisable Share Outstanding Share Life (years) - -------------------------------------------------------------------------------- Under $40 1,561,725 $33.80 1,561,725 $33.80 .98 $40-$50 2,815,143 46.33 4,834,603 45.82 4.19 $50-$60 6,618,619 53.22 10,477,629 53.28 4.90 $60-$70 1,117,856 63.83 5,366,880 63.54 7.94 Over $70 2,691 75.80 4,297,085 74.89 9.02 - ------------------------------------------------------------------------------- 12,116,034 $50.10 26,537,922 $56.35 5.82 =============================================================================== Stock-based compensation expense related to restricted stock for 1999, 1998 and 1997 was $7.0 million, $6.0 million and $4.8 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 $513.1 million, $3.35 and $3.28, respectively, for 1999; $406.1 million, $2.57 and $2.52, respectively, for 1998; and $435.2 million, $2.75 and $2.71, respectively, for 1997. These pro forma amounts are not likely to be representative of the difference between the two methods in future years, because many of our options require employee service over periods longer than three years for full vesting. The weighted average fair values at grant date of the options granted in 1999, 1998 and 1997 were estimated as $12.57, $16.59 and $11.76, respectively, using the Black-Scholes option-pricing model with the following weighted average assumptions: 1999 1998 1997 - ---------------------------------------------------------------------------- Risk-free interest rate 5.2% 6.1% 6.5% Expected life 7 years 7 years 7 years Expected volatility 18% 18% 18% Expected dividend growth rate 8% 8% 8% ============================================================================ The Black-Scholes model requires the input of highly subjective assumptions and may not necessarily 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 1999 1998 1997 - ------------------------------------------------------------------------------ Net Earnings ............................... $ 534.5 $ 421.8 $ 445.4 - ------------------------------------------------------------------------------ Average number of common shares - basic EPS ...................... 153.2 158.1 158.2 - ------------------------------------------------------------------------------ Incremental share effect from: Stock options ........................... 4.0 4.1 3.4 Restricted stock, stock rights and puts ............................... .1 .1 -- - ------------------------------------------------------------------------------ Average number of common shares - diluted EPS .................... 157.3 162.3 161.6 ============================================================================== 13. INTEREST EXPENSE The components of net interest expense are as follows: In Millions, Fiscal Year 1999 1998 1997 - -------------------------------------------------------------------- Interest expense $133.6 $130.3 $115.7 Capitalized interest (2.7) (.7) (1.1) Interest income (11.5) (12.4) (14.1) - -------------------------------------------------------------------- Interest expense, net $119.4 $117.2 $100.5 ==================================================================== During 1999, 1998 and 1997, we paid interest (net of amount capitalized) of $130.1 million, $117.2 million and $103.6 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. [LOGO] 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 1999 1998 1999 1998 - ----------------------------------------------------------------------------- FAIR VALUE OF PLAN ASSETS Beginning fair value $1,384.6 $1,193.8 $194.7 $161.2 Actual return on assets 89.1 230.2 26.3 34.0 Company contributions 4.3 27.6 9.5 9.8 Plan participant contributions - - 2.1 2.1 Benefits paid from plan assets (60.9) (67.0) (14.0) (12.4) - ----------------------------------------------------------------------------- Ending Fair Value $1,417.1 $1,384.6 $218.6 $194.7 ============================================================================= PROJECTED BENEFIT OBLIGATION Beginning obligations $ 951.5 $ 782.7 $221.6 $182.3 Service cost 19.4 14.7 6.4 4.5 Interest cost 64.6 62.4 16.0 14.4 Plan participant contributions - - 2.2 2.1 Actuarial loss (gain) (18.3) 152.6 (0.2) 24.8 Acquisitions - - - 1.5 Curtailment loss - 6.1 - 4.3 Actual benefits paid (60.9) (67.0) (14.5) (12.3) - ----------------------------------------------------------------------------- Ending Obligations $ 956.3 $ 951.5 $231.5 $221.6 ============================================================================= FUNDED STATUS OF PLANS $ 460.8 $ 433.1 $ (12.9) $ (26.9) Unrecognized actuarial loss 53.0 51.2 6.3 12.8 Unrecognized prior service credits 45.1 35.9 (7.0) (9.3) Unrecognized transition (asset) obligations (47.5) (61.9) - - ----------------------------------------------------------------------------- Net Amount Recognized $ 511.4 $ 458.3 $ (13.6) $ (23.4) ============================================================================= AMOUNTS RECOGNIZED ON BALANCE SHEET Prepaid asset $ 528.1 $ 471.8 $ 58.7 $ 50.8 Accrued liability (31.3) (26.8) (72.3) (74.2) Intangible asset 2.9 4.2 Minimum liability adjustment in equity 11.7 9.1 - ----------------------------------------------------------------------------- Net $ 511.4 $ 458.3 $ (13.6) $ (23.4) ============================================================================= Plans with obligations in excess of plan assets: Postretirement Pension Plans Benefit Plans - -------------------------------------------------------------------------- In Millions 1999 1998 1999 1998 - -------------------------------------------------------------------------- Accumulated benefit obligation $ 31.3 $ 26.8 $125.3 $116.1 Plan assets at fair value - - 31.4 24.9 ========================================================================== Assumptions as of year-end are: Postretirement Pension Plans Benefit Plans - ----------------------------------------------------------------------------- In Millions 1999 1998 1999 1998 - ----------------------------------------------------------------------------- Discount rate 7.5% 7.0% 7.5% 7.0% 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 - - 6.9% 6.7% - ----------------------------------------------------------------------------- The annual increase in cost of postretirement benefits is assumed to decrease gradually in future years, reaching an ultimate rate of 4.8% in the year 2007. Components of net benefit (income) or expense each year is as follows: Postretirement Pension Plans Benefit Plans - ---------------------------------------------------------------------------- In Millions 1999 1998 1997 1999 1998 1997 - ---------------------------------------------------------------------------- Service cost ...... $ 19.4 $ 14.7 $ 14.3 $ 6.4 $ 4.5 $ 4.6 Interest cost ..... 64.6 62.4 59.0 16.0 14.4 14.2 Expected return on plan assets . (127.9) (114.5) (103.1) (19.4) (16.1) (13.5) Amortization of transition asset (14.4) (14.4) (14.5) -- -- -- Amortization of (gains) losses . 4.4 .7 4.1 1.5 .2 .6 Amortization of prior service cost ........... 4.9 5.0 4.0 (2.2) (2.3) (2.3) Settlement or curtailment (gains) losses . -- 6.1 -- -- 4.3 -- - --------------------------------------------------------------------------- Net (Income) Expense ........ $(49.0) $ (40.0) $(36.2) $ 2.3 $ 5.0 $ 3.6 =========================================================================== The settlement or curtailment losses were recorded in fiscal 1998 as part of the restructuring charge described in Note Three. Assumed health-care cost trend rates have a significant effect on the amounts reported for the postretirement benefit plans. If the health-care cost trend rate increased by one percentage point in each future year, the aggregate of the service and interest cost components of postretirement expense would increase for 1999 by $3.3 million and the postretirement accumulated benefit obligation as of May 30, 1999 would increase by $28.4 million. If the health-care cost trend rate decreased by one percentage point in each future year, the aggregate of the service and interest cost components of postretirement expense would decrease for 1999 by $2.9 million and the postretirement accumulated benefit obligation as of May 30, 1999 would decrease by $25.1 million. The General Mills Savings Plan is a defined contribution plan that covers our salaried and non-union employees. It had net assets of $1,003.4 million at May 30, 1999, and $876.2 million at May 31, 1998. This plan is a 401(k) savings plan that includes several investment funds and an Employee Stock Ownership Plan (ESOP). The ESOP's only assets are Company common stock and temporary cash balances. Expense recognized in 1999, 1998 and 1997 was $6.2 million, $4.9 million and $3.2 million, respectively. The ESOP's share of this expense was $5.7 million, $4.5 million and $2.7 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 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 Nine. 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 1999, 1998 and 1997, the ESOP incurred interest expense of $4.5 million, $5.3 million and $5.7 million, respectively. The ESOP used dividends of $8.6 million, $9.4 million and $8.1 million, along with Company contributions of $5.6 million, $4.4 million and $2.7 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 May 30, 1999 May 31, 1998 - ------------------------------------------------------------------------------ Unreleased shares .......................... 1,540,197 1,873,000 Committed to be allocated .................. 24,726 19,000 Allocated to participants .................. 2,464,786 2,329,000 - ------------------------------------------------------------------------------ Total shares ............................ 4,029,709 4,221,000 ============================================================================== 15. PROFIT-SHARING PLAN The Executive Incentive Plan provides incentives to key individuals 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, and these awards are based on performance against pre-established goals approved by the Committee. Profit-sharing expense was $9.0 million, $6.7 million and $4.5 million in 1999, 1998 and 1997, respectively. 16. INCOME TAXES The components of earnings before income taxes and earnings (losses) of joint ventures and the income taxes thereon are as follows: In Millions, Fiscal Year 1999 1998 1997 - ------------------------------------------------------------------------ Earnings before income taxes: U.S. $825.4 $688.1 $698.5 Foreign 21.3 (21.5) 11.5 - ------------------------------------------------------------------------ Total earnings before income taxes $846.7 $666.6 $710.0 - ------------------------------------------------------------------------ Income taxes: Current: Federal $238.9 $242.8 $208.2 State and local 21.5 31.0 25.7 Foreign 1.6 (2.6) 3.5 - ------------------------------------------------------------------------ Total current 262.0 271.2 237.4 - ------------------------------------------------------------------------ Deferred: Federal 32.1 (17.1) 17.1 State and local 7.3 (3.3) 3.9 Foreign 2.6 (8.9) (.1) - ------------------------------------------------------------------------- Total deferred 42.0 (29.3) 20.9 - ------------------------------------------------------------------------ Total income taxes $304.0 $241.9 $258.3 ======================================================================== During 1999, 1998 and 1997, we paid income taxes of $248.6 million, $185.6 million and $230.3 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 1999, 1998 and 1997 operations were increased by approximately $20 million, $16 million and $16 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 1999 1998 1997 - ---------------------------------------------------------------------------- U.S. statutory rate 35.0% 35.0% 35.0% - ---------------------------------------------------------------------------- State and local income taxes, net of federal tax benefits 2.2 2.7 2.7 Other, net (1.3) (1.4) (1.3) - ---------------------------------------------------------------------------- Effective income tax rate 35.9% 36.3% 36.4% ============================================================================ The tax effects of temporary differences that give rise to deferred tax assets and liabilities are as follows: In Millions May 30, 1999 May 31, 1998 - ----------------------------------------------------------------------------- Accrued liabilities .............................. $ 81.0 $ 112.5 Unusual charges .................................. 15.2 18.2 Compensation and employee benefits .............................. 70.6 58.2 Disposition liabilities .......................... 8.6 9.2 Foreign tax loss carryforward .................... -- 4.1 Other ............................................ 13.6 14.3 - ----------------------------------------------------------------------------- Gross deferred tax assets ................... 189.0 216.5 - ----------------------------------------------------------------------------- Depreciation ..................................... 124.1 122.5 Prepaid pension asset ............................ 206.0 185.3 Intangible assets ................................ 2.7 1.8 Other ............................................ 42.5 44.5 - ----------------------------------------------------------------------------- Gross deferred tax liabilities .............. 375.3 354.1 - ----------------------------------------------------------------------------- Valuation allowance .............................. 5.0 10.3 - ----------------------------------------------------------------------------- Net deferred tax liability .................. $ 191.3 $ 147.9 ============================================================================= We have not recognized a deferred tax liability for unremitted earnings of $80.7 million from our foreign operations because we do not expect those earnings to become taxable to us in the foreseeable future. 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 1999 1998 1997 - ---------------------------------------------------------------------- Warehouse space $23.0 $20.9 $17.6 Equipment 8.4 8.2 7.1 Other 6.2 5.8 4.8 - ---------------------------------------------------------------------- Total rent expense $37.6 $34.9 $29.5 ====================================================================== 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. Noncancelable future lease commitments are (in millions) $33.0 in 2000, $29.9 in 2001, $17.9 in 2002, $7.4 in 2003, $2.7 in 2004 and $.5 after 2004, with a cumulative total of $91.4. We are contingently liable under guaranties and comfort letters for $71.6 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. 18. BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION We operate exclusively in the consumer foods industry, with multiple operating segments organized generally by product categories. Under our supply chain organization, substantially all manufacturing, warehouse, distribution and sales activities are integrated across our operations in order to maximize efficiency, productivity and deliver significant cost savings. As a result, balance sheet and certain profit and loss information is not maintained nor available by operating segment. Consistent with our organization and the criteria outlined in SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," we have aggregated our operating segments into one reportable segment. The following table provides net sales information for our primary product categories: In Millions, Fiscal Year ................ 1999 1998 1997 - -------------------------------------------------------------------------- Product Categories: Cereals ............................. $2,474.1 $2,421.0 $2,187.8 Mix Products/Flour .................. 1,688.8 1,672.5 1,665.3 Convenience Foods ................... 1,397.4 1,244.8 1,081.6 Foodservice & Other ................. 412.2 417.3 400.1 International (incl. export)........ 273.6 277.4 274.5 - -------------------------------------------------------------------------- Total ........................... $6,246.1 $6,033.0 $5,609.3 ========================================================================== The following table provides financial information by geographic area: In Millions, Fiscal Year ................ 1999 1998 1997 - -------------------------------------------------------------------------------- Net sales U.S.A ............................... $ 5,972.5 $ 5,755.6 $ 5,334.8 International (incl. export) ........ 273.6 277.4 274.5 - -------------------------------------------------------------------------------- Consolidated Total .............. $ 6,246.1 $ 6,033.0 $ 5,609.3 ================================================================================ Long-lived assets U.S.A ............................... $ 1,292.7 $ 1,184.6 $ 1,262.1 International ....................... 2.0 1.7 17.3 - -------------------------------------------------------------------------------- Consolidated Total .............. $ 1,294.7 $ 1,186.3 $ 1,279.4 ================================================================================ The foreign sales reflected above were primarily made by our Canadian subsidiary. Our proportionate share of the joint ventures' sales (not shown above) was $826.3 million, $780.7 million and $728.2 million for 1999, 1998 and 1997, respectively. Please refer to Note Four for information regarding the sales, earnings and assets of our joint ventures. 19. QUARTERLY DATA (UNAUDITED) Summarized quarterly data for 1999 and 1998 follows:
First Quarter Second Quarter Third Quarter Fourth Quarter In Millions, Except per Share -------------------------------------------------------------------------------------- and Market Price Amounts 1999 1998 1999 1998 1999 1998 1999 1998 - --------------------------------------------------------------------------------------------------------------------- Sales $1,473.1 $1,416.5 $1,677.4 $1,638.3 $1,495.1 $1,424.7 $1,600.5 $1,553.5 Gross profit 889.4 834.8 978.4 947.9 876.3 837.0 908.5 875.4 Net earnings 145.0 134.3(b) 143.6(a) 64.6(b) 141.1 131.1 104.8 91.8 Net earnings per share - Basic .94 .84 .94 .41 .92 .83 .69 .59 Net earnings per share - Diluted .92 .82 .92 .40 .89 .81 .67 .57 Dividends per share. .53 .53 .53 .53 .55 .53 .55 .53 Market price of common stock: High 72 1/4 71 1/2 75 7/8 75 7/16 84 11/16 78 1/4 81 1/2 76 1/16 Low 59 3/16 60 64 1/16 63 3/8 73 5/16 69 9/16 72 1/2 66 7/16 ===================================================================================================================== (a) Included an after-tax loss of $32.3 million ($.21 per diluted share) in the second quarter for unusual items described in Note Three. (b) Included an after-tax loss of $.1 million in the first quarter and $100.1 million ($.62 per diluted share) in the second quarter for unusual items described in Note Three.
[LOGO] ELEVEN YEAR FINANCIAL SUMMARY
In Millions, May 30, May 31, May 25, May 26, May 28, Except per Share Data 1999 1998 1997 1996 1995 - ---------------------------------------------------------------------------------------------------------- FINANCIAL RESULTS Net earnings per share-Basic (b) $3.49 $2.67 $2.82 $3.00 $2.33 Net earnings per share-Diluted 3.40 2.60 2.76 2.94 2.29 Continuing operations earnings per share - Basic 3.49 2.67 2.82 3.00 1.64 Continuing operations earnings per share - Diluted 3.40 2.60 2.76 2.94 1.62 Return on average equity (b) 301.6% 123.2% 111.0% 212.3% 52.0% Dividends per share 2.16 2.12 2.03 1.91 1.88 Sales 6,246 6,033 5,609 5,416 5,027 Costs and expenses: Cost of sales 2,593 2,538 2,475 2,396 2,285 Selling, general and administrative 2,635 2,545 2,275 2,160 2,038 Interest, net 119 117 101 101 101 Unusual expenses (income) 52 166 48 - 183 Total costs and expenses 5,399 5,366 4,899 4,657 4,607 Earnings from continuing operations before taxes and earnings (losses) of joint ventures 847 667 710 759 420 Income taxes 304 242 259 280 153 Earnings (losses) of joint ventures (8) (3) (6) (3) (7) Earnings from continuing operations 535 422 445 476 260 Discontinued operations after taxes(b) - - - - 107 Accounting changes - - - - - Net earnings (b) 535 422 445 476 367 Earnings from continuing operations as a percent of sales 8.6% 7.0% 7.9% 8.8% 5.2% Average common shares outstanding: Basic 153 158 158 159 158 Diluted 157 162 162 162 160 - ---------------------------------------------------------------------------------------------------------- FINANCIAL POSITION Total assets 4,141 3,861 3,902 3,295 3,358 Land, buildings and equipment, net 1,295 1,186 1,279 1,312 1,457 Working capital at year end (598) (408) (281) (197) (324) Long-term debt, excluding current portion 1,702 1,640 1,530 1,221 1,401 Stockholders' equity 164 190 495 308 141 Stockholders' equity per share 1.08 1.23 3.09 1.94 .89 - ---------------------------------------------------------------------------------------------------------- OTHER STATISTICS Total dividends 331 336 321 304 297 Gross capital expenditures 281 184 163 129 157 Research and development 70 66 61 60 60 Advertising media expenditures 348 366 306 320 324 Wages, salaries and employee benefits 636 608 564 541 538 Number of employees (actual) 10,664 10,228 10,200 9,790 9,882 Common stock price range (a): High 84 11/16 78 1/4 68 3/4 60 1/2 63 3/4 Low 59 3/16 60 52 50 49 3/8 Close 80 3/8 68 1/4 64 1/4 58 1/4 60 5/8 ========================================================================================================== Amounts presented in this summary have been restated to include continuing operations only. (a) Prices shown prior to 1996, indicated in the box above, are before the spin-off of our former restaurant operations. The closing prices on May 26, 1995 of the two common stocks on a when-issued basis were $49 7/8 for General Mills and $10 7/8 for Darden Restaurants. (b) Years prior to 1996 include discontinued operations.
EX-21 13 LIST OF SUBSIDIARIES OF GENERAL MILLS, INC. EXHIBIT 21 GENERAL MILLS, INC. SUBSIDIARIES (as of August 1, 1999)
Percentage Country or of Voting State in Which Securities Each Subsidiary Owned Was Organized (Note 1) COLOMBO, INC. Delaware 100 C.P.A. CEREAL PARTNERS HANDELSGESELLSCHAFT m.b.H. (Note 10) Austria 50 C.P.D. CEREAL PARTNERS DEUTSCHLAND VERWALTUNGSGESSELSCHAFT m.b.H (Note 2) Germany 50 CPW MEXICO S.A. de C.V. Mexico 50 CPW S.A. (Note 13) Switzerland 50 CPW-CI LIMITED Cayman Islands 50 FYL CORP. California 100 GENERAL MILLS (BVI) LTD. British Virgin Islands 100 CPW SINGAPORE (PTE.) LTD. Singapore 50 GENERAL MILLS CONTINENTAL, INC. (Note 11) Delaware 100 CEREALES PARTNERS L.L.C. Delaware 50 GENERAL MILLS DIRECT MARKETING, INC. Delaware 100 GENERAL MILLS EUROPE LIMITED England 100 C.P. HELLAS EEIG Greece 50 GENERAL MILLS FINANCE, INC. Delaware 100 GENERAL MILLS FRANCE S.A. France 100 GMSNACKS, SCA (Note 3) France 43.29 Snack Ventures Europe, SCA (Note 4) Belgium 40.49 Snack Ventures S.A. Spain 100 Matutano, S.A. Portugal 100 Snack Ventures Inversions, S.L. Spain 100 Smiths Food Group B.V. The Netherlands 100 SVE Italia S.r.L. Italy 100 Tasty Foods S.A. Greece 100 GENERAL MILLS HOLDING B.V. (Note 5) The Netherlands 100 CEREAL PARTNERS FRANCE B.V. (Note 6) The Netherlands 100 GENERAL MILLS ESPANA B.V. (Note 7) The Netherlands 100 GENERAL MILLS HOLLAND B.V. The Netherlands 100 GENERAL MILLS NETHERLANDS B.V. (Note 15) The Netherlands 70 General Mills Snacks Holding B.V. The Netherlands 100 GENERAL MILLS INTERNATIONAL LIMITED (Note 11) Delaware 100 Bimaler S.A. Uruguay 50 Cereal Partners Czech Republic, s.r.o. Czech Republic 50 Cereal Partners Hungaria Ltd. Hungary 50 Cereales Partners L.L.C. Delaware 50 Cereal Partners Slovak Republic, s.r.o. Slovak Republic 50 CPW do Brasil Ltda. Brazil 50 CPW Trinidad & Tobago, Ltd. Trinidad 50 General Mills Asia Pte. Ltd. Singapore 100 CPW Philippines, Inc. Philippines 50 General Mills do Brasil Ltda. (Note 16) Brazil 99 International Dessert Partners SRLtda. Peru 50 SVE (Hungary) Trading and Manufacturing Limited Hungary 40.5 General Mills Maarssen B.V. The Netherlands 100 GENERAL MILLS MAURITIUS, INC. Mauritius 100 Nanjing General Mills Want Want Ltd. People's Republic of 50 China GENERAL MILLS MISSOURI, INC. Missouri 100 CHEX INC. Delaware 100 GENERAL MILLS OPERATIONS, INC. (Note 14) Delaware 97.8 GENERAL MILLS PRODUCTS CORP. Delaware 100 INMOBILIARIA SELENE, S.A. DE C.V. Mexico 100 GENERAL MILLS CANADA, INC. (Note 8) Canada 100 GENERAL MILLS SALES, INC. Delaware 100 INTERNATIONAL DESSERT PARTNERS L.L.C. Delaware 50 GENERAL MILLS SERVICES, INC. Delaware 100 GOLD MEDAL INSURANCE CO. (Note 9) Minnesota 100 LLOYD'S FOOD PRODUCTS, INC. Maryland 100 Lloyd's Barbeque Company Minnesota 100 MILLS MEDIA, INC. Minnesota 100 NESTLE ASEAN PHILIPPINES, INC. (Note 12) The Philippines 30 POPCORN DISTRIBUTORS, INC. Delaware 100 TONG WANT Taiwan 50 TORUN-PACIFIC SP. Z O.O. Poland 50 YOPLAIT USA, INC. Delaware 100
Notes to list of subsidiaries: 1. Except where noted, the percentage of ownership refers to the total ownership by the indicated parent corporation. 2. General Mills, Inc. also owns a 50% ownership interest in a partnership organized under the laws of Germany. 3. General Mills Holland B.V. owns a 29.34% interest in GMSNACKS, SCA, General Mills Holding B.V. owns a 26.25% interest in GMSNACKS, SCA, and General Mills Products Corp. owns a 1.12% interest in GMSNACKS, SCA. 4. General Mills Holding B.V. owns a .01% interest in Snack Ventures Europe, SCA. 5. General Mills Holding B.V. and General Mills, Inc. together own a 100% interest in a Belgian partnership, General Mills Belgium, SNC, which also has a 50% interest in a partnership organized under the laws of Portugal. 6. Cereal Partners France B.V., General Mills, Inc. and General Mills France S.A. own a 100% interest in a French partnership, GMEAF SNC, which owns a 50% interest in a partnership organized under the laws of France. 7. General Mills Espana B.V. owns a 50% interest in a partnership organized under the laws of Spain. 8. General Mills Canada, Inc. and General Mills Products Corp. together own a 100% interest in a Canadian partnership, General Mills North America Affiliates, which owns a 50% interest in a partnership organized under the laws of the United Kingdom. 9. Eighty-one percent of the voting securities are owned by General Mills, Inc. and 19% of the voting securities are owned by General Mills Canada, Inc. 10. General Mills, Inc. also owns a 50% ownership interest in a partnership organized under the laws of Austria. 11. General Mills Continental, Inc. and General Mills International Limited together own a 100% interest in a Chilean partnership, General Mills Continental, Inc. y Compania, which owns a 50% interest in Cereales C.P.W. Chile Limitada, a corporation organized under the laws of Chile; as well as a 100% interest in a Mexican variable capital general partnership known as General Mills International y Compania S. en N.C. de C.V. 12. The 30% ownership interest of General Mills, Inc. in Nestle Asea is held in trust by Nestle, S.A. 13. General Mills, Inc. also owns a 50% ownership interest in a partnership organized under the laws of Switzerland. 14. Chex Inc. owns the other 2.20% ownership interest in General Mills Operations, Inc. General Mills Operations, Inc. also owns a 50% ownership interest in a partnership organized under the laws of the state of Montana; and a 50% ownership interest in a limited liability company organized under the laws of the state of North Dakota. 15. General Mills Holland B.V. owns a 30% ownership interest in General Mills Netherlands B.V. 16. General Mills Continental, Inc. owns a 1% ownership interest in General Mills do Brasil Ltda. EX-23 14 CONSENT OF AUDITORS (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 (Nos. 2-49637 and 333-76741) 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 and 333-32509, 333-65311 and 333-65313) on Form S-8 of General Mills, Inc. of our reports dated June 28, 1999, relating to the consolidated balance sheets of General Mills, Inc. and subsidiaries as of May 30, 1999 and May 31, 1998 and the related consolidated statements of earnings, stockholders' equity, cash flows and related financial statement schedule for each of the fiscal years in the three-year period ended May 30, 1999, which reports are included or incorporated by reference in the May 30, 1999 annual report on Form 10-K of General Mills, Inc. Our report covering the basic consolidated financial statements refers to changes in the method of accounting in fiscal 1997 for impairment of long-lived assets and for long-lived assets to be disposed of. /s/ KPMG LLP Minneapolis, Minnesota August 23, 1999 EX-27 15 FDS, '99 FORM 10-K, PERIOD ENDED 5/30/99
5 This schedule contains summary financial information extracted from our Form 10-K for the fiscal year ended May 30, 1999, and is qualified in its entirety by reference to such financial statements. 12-MOS MAY-30-1999 JUN-1-1998 MAY-30-1999 3,900,000 0 495,346,000 (4,746,000) 426,700,000 1,102,500,000 2,718,900,000 (1,424,200,000) 4,140,700,000 1,700,300,000 1,702,400,000 0 0 657,900,000 (493,700,000) 4,140,700,000 6,246,100,000 6,246,100,000 2,593,500,000 2,593,500,000 0 631,000 119,400,000 846,700,000 304,000,000 534,500,000 0 0 0 534,500,000 3.49 3.40
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